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The Australian airline industry is very competitive and the entry of a new low-
cost carrier, the Tiger Airways has changed the industry environment and has pushed
intense as Tiger Airways, positioned as a low cost, low fare, no frills airline enter the
picture.
Tiger Airways
Partners LLC with 24 percent share, Irelandia Investment Limited (Ryan Family) with
16 percent share and Temasek Holdings Pte Ltd with 11 percent share.
The success of Tiger Airways is due to its close adherence to the proven low
cost carrier business model patterned from RyanAir. This model allows the airline to
aircraft type to reduce maintenance and operational costs, focusing on short haul
existing cost conscious but time insensitive business and leisure markets, accepting
competition from incumbent carriers. To be competitive, labor cost, food and ticket
Target Markets
There are different target markets that Tiger Airways intends to attract. First is
the up market leisure traveller and then the cost-conscious business travellers and
domestic travellers.
Tiger Airways creates both tangible and psychological brand values that are
highlighted in the company’s advertisements and website. Tiger Airways sells on the
Pricing
Air travellers are now given greater choice in terms of choosing which airline to travel
with, and at what price. The lowest price possible has been set by Tiger Airways and
judging from the overwhelming demand, it is apparent that the market is full of
price/budget conscious travellers. This has forced the pricing structure of the full
Airways began flights from Singapore to Perth and Darwin. This announcement was
met with different from different incumbents such as Jetstar and Virgin Blue.
Low cost carriers such as Tiger Airways pose a threat to traditional full service
airlines, since full service carriers cannot compete on price and, when given a choice,
most consumers will opt for low price over other amenities. Some of the routes flown
by Tiger Airways are also flown by the established airlines. This can lead to a severe
price war. Because of the intense competition, big airlines create their own low-cost
Strategic Development
Strategy is an area of management that is concerned with the general direction and
long-term policy of the business as distinct from short-term tactics and day to day
operations. The strategy of business is defined as the long term objectives and the
general means by which the business intends to achieve them (Karami 2007).
Andrews (1986) defines strategy as a pattern of decisions which represent the unity,
in its environment and give the firm its identity, its power to mobilize its strengths,
and its likelihood of success in the market place. There are different strategy
development framework that will be used in this paper is the one devised by Johnson
and Scholes (1993). According to these authors, a company can approach strategy
planning.
and beliefs of management over time and which may eventually permeate a
whole organization.
managers, individuals and groups bargain and trade their interests and
information.
Visionary View – strategy is dominated by one individual, or sometimes a small
group, who have a particular vision where the organization can and should be.
The company has a logical incremental view and command view. The airline industry
is highly competitive and there are great environmental and customer pressures of
every airline. The company tries to adapt to the changes in the external environment
in a step-by-step approach.
Over the years, with its aggressive strategies and campaigns, the airline became not
Tiger Airways is one of the largest and most successful low-cost carriers in Asia
Pacific. According to Michael Porter (1980; 1985), in order for a firm to maintain a
sustainable competitive advantage, it must follow one of the three generic strategies.
1. Low-Cost – involves the sacrifice of some quality, fashion and even product
innovation in order to keep costs low – the lowest in the industry (cited in Proctor
2000, p. 175).
The firm exemplifies most of the characteristics of a cost focus strategy. In order to
keep the costs down, the airline maintains a no frills strategy. No frills is a direct
approach to low cost which removes all frills and extras from a product or service.
The goal is to generate a cost advantage that is sustainable for one of two reasons.
First, competitors cannot easily stop offering services that their customers expect.
Second, competitors’ operations and facilities have been designed for such services
In the airline industry where the market is highly saturated, the rivalry between
existing airlines is one of the strongest forces. Tiger Airways as a new entrant poses
as a threat to established low-cost carriers such as Jetstar and Virgin Blue. The
competition in the budget sector is very high as all airlines has the same ‘no frills’
philosophy. Price is the major differentiating factor in the low-cost carrier market, an
In the low-cost carrier market, airlines are competing for the same market segment.
The bargaining power of the consumers is increasing as the supply exceeds the
demands. The consumers are price sensitive. One of the challenges that Tiger Airways
must face is the lack of customer loyalty in the low-cost carrier arena where
passengers easily switch to airlines that offer lower fares. Buyers have no loyalty in
low cost airlines such as Tiger Airways as the trip is purchased according to price.
Suppliers offer fuel, labour, and airport and security services – all with changing
prices. Changes in the prices of supplier’s products and services affect the rates of
Tiger Airways’ fares. Tiger Airways has no influence of fuel price. Tiger Airways
intense price war, a new entrant will find it almost impossible to offer rates that are
lower than Tiger Airways’. The airline industry is highly capital intensive. New
entrants are challenged by expensive aircrafts, high cost of operation and war for
talents. New entrants also find it very hard to look for suitable airport as airport slots
References
Johnson, G and Scholes, K 1993, Exploring Corporate Strategy Text and Cases,