PowerPoints slides :People Express
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Team3PEXPresentation.pptxTeam 3 People’s Express
People Express Strategy: Overview
Overall Strategy & Financial Results
External Analysis
Internal Analysis
Conclusion
Presenter:
People Express Strategy: Overall Strategy & Financial Results
Our Competitive Position in the airline Industry
In general our strategy was to develop and capture the following Strategic Position to achieve a Low Cost competitive Advantage:
Price Position – We wanted to set our price lower than the competitors as we wanted to be a less expensive alternative.
Target Service Scope – We wanted to set our scope of service at a level that was comparable to our competitors.
Service Quality – We wanted to maintain our service quality between .7 (competitors level) and .6 (rate we determined our customers would still be satisfied at our price position.
Growth Rate – We wanted to grow slowly to keep our competitors kind of unaware of us as competitors.
Presenter:
People Express Strategy: Overall Strategy & Financial Results
Our Overall Financial Result
$584 Million Market Value
Presenter:
People Express Strategy: Overall Strategy & Financial Results
In general our strategy by decision type was:
Aircraft Acquisitions - Acquire planes at a slow rate. We wanted minimal growth to avoid the competition from noticing us.
Peoples Fare - We wanted to be priced under the competitors, low cost strategy. Capture a piece of the market the competition was missing by higher price point.
Marketing Fraction - Market very little in first 5 years relying on word of mouth and last 5 years investing more to fill up our planes to get a better load factor.
Hiring - Hire for turnover and for more acquisitions of planes with an overall goal of having about 70 employees per plane.
Target Service Scope - Strategy here was to set it right at competitions level of scope, 1 , and beat them in other areas of our strategy.
Presenter: Matthew
People Express Strategy: Overall Strategy & Financial Results
Aircraft Acquisitions - Overall goal for aircraft acquisition was to have growth but very minimal to stay purposefully a small company compared to the competition.
Here we bought 1 plane in Year 1 Quarter 2 and 3. Quarter 4 we opted to not buy another plane. Year 2 Quarter 1 and 2 we bought 1 plane in each Quarter again.
Here we decided to wait to buy anymore planes till Year 5 Quarter 2 and 3, which we bought 3 planes in each Quarter.
Here we agreed that we had enough planes at this point to fly under the radar of the competitors so they would not lower their fares to put us out of business and at the same time still have a great market value.
Presenter: Matthew
People Express Strategy: Overall Strategy & Financial Results
Peoples Fare - Our goal was to be a low cost competitor. Being such we had our peoples fare set lower than the average competitors rate.
Here we slowly raised our peoples fare every quarter till we hit our target rate of .14 in Year 1 Quarter 4.
Here we started to see the competitors were starting to take notice of us and dropped their rate for peoples fare. As such, we responded with a price cut on our fares to .13 in Year 5 Quarter 3.
Here we left our peoples fare at the .13 rate, noticing the competition was lowering their fare but not to a level fast enough to take our target market of customers from us.
Presenter: Matthew
People Express Strategy: Overall Strategy & Financial Results
Marketing Fraction - Market very low rate first 5 years then last 5 years we adjusted or marketing rate to gain more customers.
Here we kept a low rate of marketing of about 5 million, mainly relying on word of mouth.
Here we decided that we needed to market more so we increased marketing to 12 million in Year 5 Quarter 2.
Here we continued to raise the total amount of marketing in hopes that we could gain a greater share of passengers/ plane.
Presenter: Matthew
People Express Strategy: Overall Strategy & Financial Results
Hiring - …(describe how you made your decisions over time)
Here we again anticipated growing our fleet by multiple aircrafts and so we decided to hire a large amount of employees.
Here we decided to hire quite a few new employees as we were anticipating expansion and growing our fleet.
Here we cut all hiring because we had an excess of employees and were not buying any aircrafts at that point in time
Presenter:
People Express Strategy: Overall Strategy & Financial Results
Target Service Scope - Our overall strategy here was pretty basic. We wanted to offer the same level of service as our competitors.
Here we set our service scope to 1 to match our competition and pushed forward with or strategy of offering the same scope of service for a low cost price.
Presenter: Matthew
People Express Strategy: Overall Strategy & Financial Results
Service Quality - Our strategy was to offer a level of service quality that was close to the competitions, that was fair for our customers considering our lower cost.
Here we had a quick drop off of our customer service quality which was to be expected. Directly corresponds with our purchasing of planes. We also hit our target level of customer service here ( .61 in Year 2 Quarter 2).
Here we had a period of non expansion. We were not buying planes nor hiring as many employees. Thus , this lead to a low rookie fraction of .03 which allowed our customer service to skyrocket to .84.
Here we expanded our fleet again in Year 5, which means more hiring, more rookies, worse customer service. Yet we get back to our target range of of service of .6 till the end.
Presenter: Matthew
External Analysis: How effective is our strategic position?
Price position – Our pricing strategy was effective for most of the game. We had the one hiccup where we had to drop our peoples fare from .14 down to .13 in Year 5 Quarter 3. That slight adjustment allowed us to be priced at a lower cost than the competition for the rest of the game, which was exactly our strategy. We never wanted to allow the competition to get our price point and effectively take all our business. Overall = Satisfactory!
Target Service Scope - We also believe we were satisfactory at setting our target service scope to 1. We believed there would be enough customers that were willing to have a bit worse customer service but get that same level of target service for a cheaper rate than the competition.
Service Quality - In terms of service quality we were not satisfactory as a strategic position, but we were willing to have a worse quality of service because we determined that price was more concerning to our customers than their level of customer service they were being provided.
Presenter: Matthew
External Analysis: How effective is our strategic position?
Price position: Our price position was effective the entire game. We wanted to be priced under the competitions price for fares. Year 5 Quarter 2 we dropped our fare to .13 to retain our price differential from the competitors. We decided we could keep that price point the rest of the game and keep our price differential.
Presenter: Matthew
External Analysis: How effective is our strategic position?
Target Service Scope position: Our strategic position of matching the competition at a service scope of 1 did indeed prove effective. We effectively offered our customers the same amenities for a cheaper price which proved to an effective way to grow our company and have a respectable market share at the end of the game.
Presenter: Matthew
External Analysis: How effective is our strategic position?
Service Quality position: Our service quality was not an effective strategic position for most of the game. Only from Year 3 to Year 5 Quarter 2 did we have a better position strategically than the competition. I'll say once again that this was completely a part of our strategy though to be under the competitors level of service quality so we could charge a cheaper rate for fares. In that sense, we were effective.
Presenter: Matthew
Internal Analysis:
Liquidity & Solvency – (…discuss overview satisfactory or not satisfactory)
Operating Efficiency - (…discuss overview satisfactory or not satisfactory)
Capital Structure - (…discuss overview satisfactory or not satisfactory)
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Internal Analysis: Liquidity & Solvency
Cash Flow Analysis: (At the end is it satisfactory or not satisfactory?
Why?)
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Internal Analysis: Operating Efficiency
Return on Assets: Satisfactory
Why?)
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Internal Analysis: Operating Efficiency
Return on Assets compared to the Market Value: (Is the market value driven more by ROA or the growth rate?
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Internal Analysis: Operating Efficiency
Return on Sales: Satisfactory
Why?)
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Internal Analysis: Operating Efficiency
Sales/Assets: Satisfactory
Why?)
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Internal Analysis: Operating Efficiency
Return on Assets impact: (Is ROA driven more by the ROS or Sales/Assets?)
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Internal Analysis: Operating Efficiency
Service Quality: Satisfactory
Why? Satisfactory because
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Internal Analysis: Operating Efficiency
Productivity: Satisfactory
Why?)
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Internal Analysis: Capital Structure
Financial Leverage: Satisfactory
Why?)
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Internal Analysis: Capital Structure
Leverage Safety: Satisfactory
Why?)
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Internal Analysis: Capital Structure
Balance Sheet: (At the end is it satisfactory or not satisfactory?
Why?)
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Overall Conclusion:
What are the top 2 tactics that worked well for the team?
1…
2…
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Overall Financial Conclusion:
Looking back, what was a strategy that you tried, but would not work out?
What is the most interesting thing the team learned from this project?
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