Comprehensive Analysis of Aurum Air: PESTEL, Porter, SWOT, Bowman’s Clock, VRIN Analysis

The paper has carried out a comprehensive analysis of Aurum Air, focusing on external and internal analysis. With the usage of tools like PESTEL, Porter, SWOT, Bowman’s Clock, VRIN analysis an overview has been provided to understand the potential risks, threats and the advantageous points of Auburn Air. The analysis will furthermore help in future investments and strategic implementation to foster its growth and make it survive under difficult market scenarios.

Running head: AIRLINE SIMULATION
Airline Simulation
Name of the Student:
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Author Note:

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Executive Summary
The paper has carried out a comprehensive analysis of Aurum Air, focusing on external and
internal analysis. With the usage of tools like PESTEL, Porter, SWOT, Bowman’s Clock, VRIN
analysis an overview has been provided to understand the potential risks, threats and the
advantageous points of Auburn Air. The analysis will furthermore help in future investments and
strategic implementation to foster its growth and make it survive under difficult market
scenarios. The conclusion and recommendations are given after a thorough analysis of Aurum’s
case study and U.S airline market as well.

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Table of Contents
Introduction......................................................................................................................................3
Strategic analysis.............................................................................................................................3
Outlook – Trends and Key Drivers in the Airline Industry.............................................................3
PESTEL Analysis............................................................................................................................3
Porter Five Forces............................................................................................................................5
Attractiveness of Industry................................................................................................................6
INTERNAL ANALYSIS.................................................................................................................7
Competitive Advantage – VRIN Analysis..................................................................................7
• Distinctiveness of the Firm............................................................................................................9
• CRITICAL EVALUATION OF BUSINESS STRATEGY AND PERFORMANCE.................9
STRATEGIC OPTIONS AND MODE OF ENTRY.....................................................................10
SWOT Analysis.............................................................................................................................11
Threats-..........................................................................................................................................12
Porter’s Generic Strategies............................................................................................................12
Ansoff Matrix................................................................................................................................14
Business and marketing strategy vs. Performance........................................................................15
Business Strategy- Bowman’s Strategic Clock.........................................................................15
Marketing Strategy – 4 P’s Framework.........................................................................................16

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Sustainability, Acceptability and Feasibility.................................................................................18
Scenario Analysis – End of Quarter 12.........................................................................................19
Conclusions and Recommendations..............................................................................................20

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Introduction
The airline industry is an unpredictable one and annually needs to invest a sumptuous
amount to ensure that it is not losing customers to other rival firms. There are a number of
factors that determine the growth and success rate of the aviation sector thereby promising it
good returns. Industry analysts use a number of tools like VRIN, PESTEL and SWOT to devise
strategies to enhance the growth of aviation sector. An understanding of the entire market is also
crucial before implementing any strategy.
Discussion
Outlook – Trends and Key Drivers in the Airline Industry
As the case study points, one of the key drivers of the sector are the steady growth in air
travelling since the global economic recession that took shape around 2008. Ever since, the
airline companies have striven to reduce operational costs and achieve best resource utilization.
As analysts have pointed, some of the major outlooks that would re-shape the airline industry are
rising number of passengers due to a globalized economy as well as revamping in cargo demand
which will elevate the business to a secured level. The other factors are intensification in the
entry of low-cost carriers which will therefore induce a change in the existing strategies of
Aurum Air. These factors will also consequent the airline companies in venturing into new
routes and new market acquisition. The industry will become more technology oriented in order
to cater to customer expectations (Ciliberto, Murry and Tamer 2016).

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PESTEL Analysis
Political factors- Aurum Air can be affected by the political scenario of the country, for instance
terrorist attacks which can influence the number of passenger and their choice of transport.
Consequently, Aurum Air has to shift the price of its tickets in order to sustain in the market,
invest a significant amount in promotional to induce the passengers in boarding Aurum Air
which ultimately falters their economic stability.
Economic Factors- the economic factors shed light on the nature and state of economy within
with the industry is operating and includes factors like interest rates, gross national product, labor
costs, fuel prices which have a massive impact on the economy of the airlines among others.
Fuel Costs- owing to the unpredictable nature, contract based fuel purchase or fuel hedging can
help Airlines from swinging towards a decline in profit rate. It can also increase the competitive
edge of Aurum Air by keeping it prepared to face periods of high fuel cost.
Technological Factors- Internet and online booking has paved the way for an increase in ticket
sales. As far as Airlines is concerned, approximately 75 percent of its sale was sold by online
booking. Airline has amassed profit due to the technological factors that has catered the
customers with convenient booking of air-tickets, flight information. An ease in communication
will help in the growth of air passengers and flight tickets. Airlines can further see a growth in
their sales by a strategic planning and advertising like investing more on promotional activities,
coupons and vouchers
Environmental Factors- The emissions of aircrafts are injurious to the quality of air that living
beings respire in. Aurum Air should therefore adopt to friendlier measures like green flying and
focus more on social responsibilities and CSR activities.

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Legal Factors- There are number of regulatory laws that Aurum Air has to deal with for
instance, the lease for owing planes, on which additional interests can surmount in case if the
planes are borrowed on loans. Leasing creates debts in the long run and eventually can hit the net
earnings and profit margins of Aurum Air. Aurum should check the financial data well before
entering into sumptuous leases and incurring loss.
Social Factors- Aurum Air needs to invest in innovation sector since with the rapid shifts in the
demand pattern of the consumers, they are ready to pay in order to avail competent services.
Aurum Air can invest in advertising strategy and render improved services after a careful
analysis of customer profile and their income pattern. Innovation should not be limited solely to
seating accommodation, entertainment or other such features but also in the sector of planning
new routes to make Aurum Air the most feasible options for passengers and maintain a
competitive edge in the industry. CSR activities will make Aurum Air an appealing choice to the
larger community within the context of which Aurum Air will be operating (Haimes 2015).
Porter Five Forces
Rivalry Among Sellers- Rivalry among sellers is strong as per market analysis for Aurum Air
and market has become saturated with different airlines competing to gain passengers. The rival
competitors are adding up more number of flights and routes in order to stay competitive. The
competition varies according to the type of market and coming up with inventive strategy is
necessary to cope up with the same.
Potential New Entrants- the threat of new entrants is moderate to strong as because of
deregulation there has been the entrance of a number of a number of commuter airlines. This has
stiffened the market competition and spoilt the passengers for choice with best flight tickets and

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services. The scenario is accentuated by high operating costs. As a result the U.S market is
populated by both regional and commuter airlines.
Threat of New Substitutes- Threat of new substitutes is strong in the market especially with the
advancement of technology and cheaper modes of transportation.
Supplier Bargaining Power- Supplier bargaining power is low because of the substantial number
of manufactures sprouting in the U.S market which has furthermore sped up the process of
buying and replacing an old aircraft. In this context, Aurum Air has the liberty to choose from a
variety of manufacturers to get the best quality equipments.
Buyer Bargaining Power- Bargaining power of buyer is high because of an ever-increasing
number of regional carriers, easy availability of flight tickets through online or agent services.
These come equipped with easier cancellation options sometimes with maximum or full refund.
Attractiveness of Industry
In order to systematically analyze the industry attractiveness of Aurum Air, Porter 5-
Forces tool has been used. The airline industry is neutrally attractive, as Aurum has a number of
rival competitors in that had come up with inventive strategies to attract new customers
(Ciliberto, Murry and Tamer 2016). Bargaining power of buyers is high due to which Aurum has
to continuously lower its ticket prices which often times fails to accommodate the rising
operational costs of the aircrafts. Furthermore, Aurum Air needs to expand and invest more in
promotional activities to gain prospective customers in the market. The power of suppliers is
weak as Auburn Air has a number of fixed assets in possession ranging from de-icing equipment
to computers. However, there is a high consumption rate of Aurum Air and therefore there is a
huge scope of expansion for Aurum Air. Aurum should invest in scheduling more number of

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flights and better service to cater to the growing number of customers. The airline market is
filled with well-renowned competitors but with innovation and CSR activities Aurum Air can
cater to the tourists and take ample benefits from the tourist sector that is believed to grow
exponentially with each passing year (Sengupta and Wiggins 2014). Aurum also is a an
advantageous position of devising innovative marketing campaign, compare from other
companies how much investment will be successful in bringing the highest yield and gradually
proceed to deal with new entrants in the market.
INTERNAL ANALYSIS
Competitive Advantage – VRIN Analysis
It is established that certain resources are particularly fundamental in strategically making
providing the business with a competitive edge. These resources can be identified by a VRIN
analysis-VRIN Analysis of the mentioned organization is done to determine if the resources of
the Airline have the ability to be the source of sustainable competitive advantage (Schroeder and
Kotlarsky 2015). In order to be the source of sustainable advantage, the resource must be
Valuable: which means the resources should have greater value in terms of benefits and costs
than the competitor organization.
Rare: This factor finds out whether the resource of the Airline is unique and has high demand
compared to the resources of the competitors.
Inimitable: This factor judges whether the resource is difficult to imitate or not.

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Non substitutable: This factor finds out whether the resources can be substituted or not.
Figure- VRIN Test
Source- Author

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• Distinctiveness of the Firm
In spite of the fact that AURUM AIR Company is a small airline organization, it is earning a
better amount of revenue than other small airline organization. The company has a good number
of fixed assets that includes airplanes, ground equipments, office facilities computers and
maintenance hangers.
The available aircraft of the mentioned company ranges from 19 passenger propjets to 50
passenger fanjets. In spite of the fact that the company still use some of its old equipments, brand
new aircrafts that includes fuel efficiency, nonflammable cabin materials and noise abatement
are also owned by AURUM AIR company. Considering the fact that the company owned a lots
of equipments like larger and more profitable airline organizations, AURUM AIR Airlines has a
large number of choices to choose from if they decide to expand their business.
• CRITICAL EVALUATION OF BUSINESS STRATEGY AND PERFORMANCE
Considering the fact that Aurum Air Airline I a small firm, last year the company had spent
2,500 dollar for promotional purpose and 2,500 dollar for advertising purposes. In spite of the
fact that the amount invested by the mentioned airline is minimal compared to its competitors,
the management of Aurum Air is expected to spent more on promotional purpose only after the
company starts to expands its business. Apart from that, Aurum Air does note have any sales
force due to its small size. However, it is really crucial for the company to invest on sale force
since it ensures the possibility of direct sales in a large volume to tour promoters and
corporations, in addition to increased sales. The performance of Aurum air needs to develop

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since the company is not enjoying good amount of revenue. The Airline is using Beechcraft
1900s and as a result is unable to attract consumer since there are better aircrafts from the
competitor airlines in the market.
STRATEGIC OPTIONS AND MODE OF ENTRY
Considering the fact the AURUM AIR Airlines serves five of the seven different types of
market, and the number of competitor in each of the market is 2, except market D, indicates that
the current service provided by Aurum Air Airline is not able to meet the requirements of the
consumers in these markets. However, the mentioned company has the opportunity to grow in
the five markets if it provides better service, more convenient flight and more convenient price.
This marketing strategy is important for Aurum Air since the risk of the markets getting
saturated with the entrance of more competitors is there.
Apart from serving the mentioned five markets, Aurum air Airline has the opportunity to
serve two new markets namely, foreign market and resort market. The foreign market will
provide the mentioned airline with the opportunity to compete in an international market and
become an international carrier. The route will go from mini-hub to a foreign city. There is a
major probability that the foreign city will have tourist trade as well as diversified industry and
hence Aurum Air needs to have cabin class aircrafts. Considering the fact that the company
currently deals with a large number of Beech crafts which contains only 19 seats, these beech
crafts needs to be replaced by cabin class aircrafts by Aurum Air, since the daily demand of seat
in foreign market is expected to be between 30 to 40 seats per day.
The resort market can be defined as recreational areas that are popular with people
residing in a specific region (Hussain, Al Nasser and Hussain 2015). In spite of the fact that

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currently resorts are served by charter flights, but Aurum Air can grab the market if they provide
service at a reasonable amount of fare. In addition, like the foreign consumers, resort consumers
also prefers cabin class aircrafts so here also the mentioned Airline will not be able to use beech
craft airlines since the daily demand of seat will be between 40 to 50 seats.
SWOT Analysis
Strengths-
Well-planned maintenance program- a planned maintenance by government agencies can
maximise aircraft performance and reduce the chances of unplanned high investments (Bazargan
2016). Furthermore, a through maintenance of the equipments has the potential to maintain the
perceived quality thereby increasing customer reliability on the service.
Weaknesses-
High Operational Costs- labor costs that include the capital invested in training and grooming
sessions of the employees drain a lot of wealth from Aurum Air. Therefore, the amount should
be regulated and invested in a careful manner so as to obtain highest level of efficiency from the
employees after their training period. Fuel costs account for a major part of Aurum Air’s
operational costs and sudden fluctuations in fuel costs can make the firm lose a huge sum of
money.
Opportunities-
Foreign Markets- serving in foreign markets will make the firm an international carrier and
increase its popularity (Rothaermel 2016). Aurum Air will get the chance to create new routes

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across the globe, attract foreign travellers. With new routes, innovative services Aurum Air can
forge new partnerships with international peers for cost-efficiency.
Scope of Innovation- Aurum Air is at an advantageous position to amplify its innovative sector
because of the availability of second-hand materials and equipments, the choice of expansion is
easier. Innovation will help Airlines to cater the customers, finest airline experience and in the
process develop a strong customer loyalty base.
Threats-
Deregulation- this can be a potential source of threat and can decline the rate of profit for the
industry (Tribe 2015). With the removal of economic regulations the airline sector can plunge
into a tough scenario with an increase in rival competition, frequent flyer programs, change in
fares and lack of product or service differentiation.
Porter’s Generic Strategies
Cost Leadership Strategy
The aim should be to become a low cost producer when Aurum Air should implement
steps like low fare with complementary services can keep a consistent flow of passengers, travel
agents for a better sell of air tickets, fleet upgrade and maintaining a low cost fleet would prove
advantageous even when customer flow shrinks. Other strategies can be adding fuel efficient
aircrafts to the fleet in order to maintain cost advantage (Rothaermel N2016). The ultimate goal
of Aurum Air should be to create more economic value in the market and operate in the market
efficiently and provide the best to the customers without plunging into debt.
Differentiation Strategy

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A firm needs to make its product unique and well distinctive from its rival competitors.
Understanding consumer psychology and profile is an important aspect to meet consumer
demands. A well-planned differential strategy can help Aurum Air in two ways by increasing
market share and create an effective entry barrier. Creating new flight routes after a careful
analysis of market can increase sale in tickets. Other methods in differentiation strategies are
strategic marketing and advertising, innovative services at a moderate fair price and creating
quality training programs for employees.
Focus
Segmentation strategy should be focused on markets where Aurum Air should operate
and cater to the specific needs and demand pattern of the customers. A change in the business
model after strategic analysis of market needs is also essential to stay competitive advantage.
Providing direct service to a hub city can be more convenient for passengers and this can
stimulate demand of Aurum Air. Based on the market and route, there should be more number of
scheduled flights to increase passenger loyalty. Apart from this improving the fleet which
includes pilots, cabin crew and management staff is a necessary attribute to position itself
uniquely in the market (Fine and Menictas 2015).

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Ansoff Matrix
Market Development- According to Ansoff existing products should be sold to new markets in
order to expand the business (Eyvrigh 2016). Aurum operates in seven different markets with
different characteristic trait of each market. Aurum Air has the opportunity of immense growth
in a diversified market with shifting demand patterns of the tourists. A swift collaboration with
hotels and tour operators can help Aurum to create promotion and deals for the customers
thereby increasing its sales. Extending new routes to the customers is one of the aspects of
market development.
Product Development- Involves the utilization of judicious measures to introduce new product
features in the market for instance incorporation of updated instruments, entertainment sources,
equipments fostering better communications and providing free wi-fi. Aurum Air should invest
in buying and branding to achieve market growth (Eyvrigh 2016).
Market Penetration- Any kind of firm strives to expand its market making use of its existing
products and services to create a niche for itself in the market. Aurum Air can easily achieve this
by introducing low ticket fares, investing in promotion and make the products looks distinct and
viable, protect the existing market share of Aurum Air and meeting competition by restructuring
the mature market.
Diversification- Aurum can gain potential markets and new customers by introducing new
products and services, which will also keep at bay new entrants and prevent market saturation.
Aurum Air can dominate the market being a low cost carrier and the routes should be high in
demand among the customers. Low cost airline strategy should be at par with meeting

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operational demands otherwise it may lead to a drop in profit rate. Acquiring spacious aircrafts
for specific aircrafts can appeal to those customers who are planning for a vacation.
Business and marketing strategy vs. Performance
Business Strategy- Bowman’s Strategic Clock
The model is based upon the notion that if the firm is providing the customers with
services and products that satiate their necessities and wants better than its competitor, the firm
gains a competitive advantage on the market (Suki 2014). The strategy clock has eight options in
total, the first two options concern low price which will help Aurum Air sell no frills products to
cut operational costs, expansion in fleets. Low price strategy can only compete with its
competitors by keeping the pries low margin. Aurum Air can become a prospective low-cost
carrier, a trend that will slowly begin to dominate the U.S market. In position 3, there is an
intermediary strategy between low cost and product differentiation, in this case the goal of
Aurum should be to convince the customers of the innovativeness of Aurum’s services making
them an obvious choice over rival competitors. The differentiation strategy in position 4 strives
to provide customers with the highest level of added value (Bazargan 2016). Aurum Air can
achieve this by improving its brand image, hiring an efficient sales personnel, offering discounts
on packaged vacations to the customers, packages to travel agents for circulating air tickets
(Belobaba, Odoni and Barnhart 2015). Aurum Air furthermore needs to invest in print media and
advertising to offer added value to customers.
Focused Differentiation, in point 5 of Bowman’s Clock, Aurum Air should think beyond the
traditional marketing ideas and come up with inventive ideas like providing packaged freight
services and ski resorts will provide them with an opportunity to maintain a good relation with its

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customers. Personalisation should be on the agenda of Aurum Air to maintain its competitive
edge in the market. In point 6 with increased price Aurum can create a different class of
customers simply by increasing the price of different services without adding value to it.
However, Aurum has great scope in this avenue especially in foreign market, where it can cater
to a more diversified taste as well as providing luxurious accommodations for vacationers.
Marketing Strategy – 4 P’s Framework
Product
Aurum Air provides luxurious services to its customers and plans to incorporate spacious
aircraft that can cater to the customers with innovative services. Aurum furthermore has plans to
develop its cargo business in the upcoming years.
Figure- Bowman’s Strategic Clock
Source- (Bazargan 2016)

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Price
Fare per mile tickets which are usually used to offer discounts and fare packages to keep
the customers hooked to flights and services of Aurum Air. This strategy has provided immense
opportunity to offer attractive coupons and travel packages at frequent intervals of time. The
quality of service is consistent with the price of tickets and therefore, in this regard Aurum has
strategic advantage in the market over others, for maintaining consistency and efficient crew.

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Place
Aurum Air sells its tickets through online sites, travel agents and other advertising
personnel who are responsible for the selling of 75 percent of air tickets. Aurum is massively
successful in selling their tickets due to the promotional plans and travel packages they offer to
the agents. Aurum also will expand its pre-existing routes to make the service available to a large
number of people who look for quality flying experience.
Promotion
Aurum Air invests on promotions and advertising to influence the way their customers
perceive and accept their services. However, Aurum Air needs to invest more in billboards or
print media, internet advertising, generate more traffic in its homepage to reinforce its brand
image. Participation on social media platforms like Facebook, LinkedIn and Twitter will help the
brand reach to the wider section of people who rely vastly on social media for reviews and
shopping (Borenstein and Rose 2014). In order to expand its market and gain prospective
customers, Aurum plans to invest more by hiring salesperson
Sustainability, Acceptability and Feasibility
Sustainability- Aurum Air operates in a highly competitive environment, however, it can
increase its competitiveness by focusing more on product innovation and development,
advertising, taking advantage of the market that is yet unoccupied, leasing new luxurious
aircrafts. Aurum Air can implement these plans into real life with the help of huge capital
investment that they can attain through loans on short-term credit. Acquiring new aircrafts will
help them to cater in new markets and provide services to a growing number of passengers along
with their tastes. Getting access to new markets will only pave their way for business expansion.

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Feasibility- Acquiring loans will help Aurum Air in borrowing luxurious aircrafts without any
hurdles. As it is the market will provide Aurum with the potential to grow and become renowned
among its rival firms only when Aurum’s strategic planning will be able to accommodate the
market trends. Since Aurum Air has a substantial amount of cash flow implementing innovation
will not affect their profit margin but will aid them in operating in a diversified market.
Acceptability- Customers have high probability to invest in luxurious services in order to enjoy
pleasant flying experience (Borenstein and Rose 2014). Aurum Air can build a strong customer
base if it maintains a healthy relationship with its customers through frequent discount, travel
packages, promotional activities and advertising it can also have high returns on proper
implementation of growth strategy.
Scenario Analysis – End of Quarter 12
Convenient Substitutes- From the case study it is apparent that technological aspects like
videoconferencing are slowly replacing costlier alternatives like air travelling (Zou et al. 2014).
Therefore the aviation industry is being forced to come up with cheaper tickets and better
customer-oriented policies.
Economic Growth- economic growth will accelerate the average passenger traffic with a 5.3
percent growth which will give the airline companies an advantageous point (Anderson et al.
2017).
Increase in Fuel Prices- increase in fuel prices will increase the operational cost and therefore
Aurum needs to adopt methods like fuel hedging and high ticket process with good services.

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Rising Environmental Concerns- nowadays, there are a number of bans and restriction from
NGOs and corporate responsibility and therefore Aurum Air has to adopt friendlier measures like
buying latest engines that are designed to produce lesser carbon emissions.
Increasing Number of Rival Competitors- primarily is the result of deregulation and this will
stiffen the competitive edge of aviation sector. Product innovation and implementing new
security technologies can keep the flow of customers steady without major operational
hindrances.
Conclusions and Recommendations
Aurum Air should refrain from risky acquisition of a number of luxurious aircraft without due
market analysis as it can put it into massive debt. It should start with second hand leasing in
order to operate the aircrafts in newer markets (D. Banker, Mashruwala and Tripathy 2014).
The airline sector invests a lot in publicity and marketing and Aurum Air needs more investment
in this sector (Choi, Lee and Olson 2015). This is especially since deregulation creates the
chance of free entry of number of low-costs regional carriers. Aurum Air needs product
differentiation to respond effectively to market segmentation and maintain a strong customer
loyalty base.
Proper networking and management to maintain connectivity between hub points, adjustments of
schedules and production planning on a daily basis, crew planning and maintaining punctuality.
Aurum Air should be careful with price setting as a higher rate can repulse the leisure travellers
and can propel them to choose other modes of transport or airline company. The ticket price

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range should appeal to the passengers’ willingness to pay and equal the quality of services that
the crew is providing the passengers with.

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