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Case Lelystad Airport

By Donald Rivera,2014-05-16 17:57
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5 Internal analysis 5. 6 External analysis 7. 7 SWOT-analysis 10. 8 Possible strategies 112. as a assignment on making a SWOT analysis

     Case Lelystad Airport

     Teacher’s notes

This case was written by Theo Soeteman and Maarten Eldermans, School of Economics,

    INHOLLAND University, The Netherlands, as a part of Leonardo da Vinci project “Moving

    towards the case method”

    It is intended to be used as the basis for class discussion rather than to illustrate

    either effective or ineffective handling of a management situation.

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Teacher’s notes Case Lelystad Airport

    1 Synopsis ..............................................................................................................................2 2 Objectives............................................................................................................................3 3 Teaching suggestions ...........................................................................................................4 4 Mission and market definition..............................................................................................5

    5 Internal analysis ...................................................................................................................6 6 External analysis ..................................................................................................................8 7 SWOT-analysis ................................................................................................................. 10 8 Possible strategies .............................................................................................................. 12 9 Retail marketing ................................................................................................................ 13 10 Local airport project ........................................................................................................ 14 1 Synopsis

Lelystad Airport is now active as an airport that provides services for General Aviation. This

    includes starting and landing facilities for airplanes and space for other companies to perform

    their activities. The need for ground space related to aeronautical activities is the need that

    Lelystad Airport fulfills. General aviation encompasses all aviation other than scheduled

    airline flights and military aviation. It includes everything from a privately-owned light

    single-engine aircraft to business jets, glider flights, parachuting, sight-seeing flights, crop-

    dusting, sport ballooning and many other aerial activities. The products (services) are starting

    and landing facilities, and the provision of space for other companies. The customers are

    aircraft owners and companies.

The competitive advantage of Lelystad Airport is that, because it is by far the largest airport

    for General Aviation in the Netherlands, many companies related to general aviation are

    based on or close to Lelystad Airport: aircraft maintenance, aircraft dealers, training schools,

    pilot supplies etc. The location is excellent: in the centre of the Netherlands, in an area that is

    not yet very densely populated.

Lelystad Airport wants to grow. The management has ideas how to grow: to attract low cost

    carriers, now using Schiphol Airport. Question: is this possible and how can the airport get

    revenues. The fact is: low cost carriers do not pay to much for landing rights. But they bring

    passengers. And delivering services to passengers can make the difference.

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2 Objectives

The overreaching teaching objective is a comprehensive strategic analysis and evaluation of a

    SME that has the ambition to enter new markets. The strategic analysis includes element from

    internal as well as external environment. Therefore, students should be able to perform:

    - Analysis of internal environment and identification of resource strengths and

    weaknesses (resources and capabilities analysis, identification of sources of

    competitive advantage);

    - Analysis of external environment and identification of opportunities and threats in

    each target market (broader market environment analysis and market forces analysis);

    - Evaluate the strategic fit among internal and external environment;

    - Designing complete growth strategy;

    - Market selection analysis;

    - Entry mode selection process;

    - Designing marketing programme.

    The case would suit all levels of business students, from undergraduate to postgraduate

    programmes. The case can be best used in International Business or International

    Marketing courses. However, the comprehensiveness of the case makes it suitable also for Strategic Management and Marketing Strategy courses. The case can also be used as an

    assessment assignment performed either by a group or individually.

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    3 Teaching suggestions

    The case can be used:

    1. as a introduction for a course in strategic management for undergraduates. Several

    aspects of strategic management can be made clear by examining the case. Teacher

    has to stress that students have to look for uncertainties and on the various decisions

    management has to make.

    2. as a assignment on making a SWOT analysis

    3. as a assignment on making a vife forces analysis

    4. as a retail marketing case. Students have to think about the various ways the airport

    can obtain revenues from passengers in the case that low cost carriers are usung the

    airport

    5. A full Strategic Management Case for undergraduates or graduates. The assignment

    could be:

    Mr. Oude Weernink (managing director) wants to have feedback on his ideas

    about Lelystad Airport and also wants to have an advice concerning the future

    evelopment of Lelystad Airport, based on an extensive strategic analysis.

    Write a report, also using the extra information provided in the *.pdf files, that

    covers the following topics:

    1. Mission and market definition

    2. Internal analysis (strengths and weaknesses in relation to competitors)

    3. External analysis: Macro environment (PEST-analysis) and analysis of the

    airport industry (Porter-model).

    4. SWOT analysis with alternative strategies

    5. Posible strategies and choice

    6. Planning and marketing

    See various chapters for discussion on this topics

6. as a project about local airport industry. Students have a example of an local airport

    and investigate an other local airport (in the neighborhood) to make a bench mark.

    See chapter: project local airport

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4 Mission and market definition

A mission statement and market definition provides an answer the question: what business are

    we in? What is the reason for existence?

The following components can be incorporated in the mission:

    1. The field of strategic activities (or market-definition) at present or in the future (what

    should our business be?). The important dimensions are products, customer(groups)

    and needs that are fulfilled.

    2. A broad indication of the desired position: a global long term objective

    3. The way in which the company distinguishes itself from its competitors

    4. Other philosophies toward society, employees, suppliers etc.

The first component is most essential in the mission: what needs are fulfilled for which

    customers with which products.

Lelystad Airport is now active as an airport that provides services for General Aviation. This

    includes starting and landing facilities for airplanes and space for other companies to perform

    their activities. The need for ground space related to aeronautical activities is the need that

    Lelystad Airport fulfills. General aviation encompasses all aviation other than scheduled

    airline flights and military aviation. It includes everything from a privately-owned light

    single-engine aircraft to business jets, glider flights, parachuting, sight-seeing flights, crop-

    dusting, sport ballooning and many other aerial activities. The products (services) are starting

    and landing facilities, and the provision of space for other companies. The customers are

    aircraft owners and companies.

The competitive advantage of Lelystad Airport is that, because it is by far the largest airport

    for General Aviation in the Netherlands, many companies related to general aviation are

    based on or close to Lelystad Airport: aircraft maintenance, aircraft dealers, training schools,

    pilot supplies etc. The location is excellent: in the centre of the Netherlands, in an area that is not yet very densely populated.

After the situation analysis (internal and external analysis) this mission will probably be re-

    evaluated.

Lelystad Airport wants to become active as a regional airport that offers services to budget

    (low cost) airlines and charters for A to B flights within Europe. New customers will be the

    airline operators and passengers that use airport facilities.

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5 Internal analysis

The internal analysis should provide insight in the strengths and weaknesses of the company.

    Note that a difference should be made between absolute and relative strengths and weaknesses.

    Relative means relative to competitors. In fact, an absolute weakness (e.g. marketing) could

    even be a relative strength if competitors perform poorer in this aspect.

The internal analyses can be done by means of a checklist with business functions such as:

    ? Innovation

    ? Production

    ? Finance

    ? Management and Organisation

    ? Marketing and sales

    ? Market position

This leads to the following strengths and weaknesses:

Strengths

Marketing

    ? Central location in the Netherlands, catchment area of over 7 million people within

    one hour by car.

    ? Location with possibilities to expand, not only in terms of runway(s), but also in terms

    of facilities for airlines

    ? Location offers best perspectives to grow in terms of noise-load. Market position

    ? Largest airport in the Netherlands for General Aviation

    ? 45 companies with aeronautical activities based on Lelystad Airport

    ? Business park developed in the close vicinity Production

    ? Facilities for ground-handling and check-in Finance

    ? Owner with financial resources, prepared to invest. Management and Organisation

    ? Flat organisation structure, easy to coordinate activities

Weaknesses

Production

    ? No traffic control present at Lelystad Airport

    ? No experience with passenger flights and handling. Market position

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    ? Lack of knowledge in the market of passengerflights

Management and Organisation

    ? Limited resources (personnel)

    ? No specialised staff departments

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6 External analysis

    The external analysis should provide the opportunities and threats. We divide the external analysis into 3 parts:

    1. Macro-environment

    2. Market factors

    3. Industrial structure

Macro-environment

We use a so called DESTEP analysis for the analysis of the macro-environment.

    Demographical factors: since the province of Flevoland is the youngest polder in the Netherlands, population is still growing. People are growing older in the Netherlands. Old people spend more time on holidays.

    Economic factors: economic activities are growing in the neighbourhood of Lelystad Airport. Business Parks are being developed. Space is relative cheap in this ‘new land’. Economically the Netherlands are doing well after a period of recession. Consumer confidence is increasing. This means that people will spend more money, for instance on holidays.

    Socio-cultural factors: people like to fly. Flying is cheap and safe. People fly more and more. Dutch people spend a lot of money on holydays.

    Technological factors: technology may play an important part in air traffic control, security and luggage handling.

    Ecological (environmental) factors: noise and air pollution are important factors for an airport. Dutch legislation is strict in this respect. The Dutch main port Schiphol Airport has reached its noise limits. Of course this is also a political factor.

    Political factors: Lelystad Airport heavily depends on political factors. For the expansion a new legal framework had to be created. This was established in May 2004 when a new

    ‘Planological Coredecision’ for the airports of Lelystad and Maastricht’ was put into action.

    This gives clarity about the limits to which Lelystad Airport can develop. But to be able to expand, Lelystad Airport has to get a new authorisation from the central government. Two

    ministries have to give their consent: the Ministry of Public Works and the Ministry of

    Environment. Airport charges is another item where the government is involved.

    The town of Lelystad would like to have an airport to stimulate economic growth in the

    region.

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Market factors

Market size

    Based on 2003 statistics, in the Netherlands 380.000 general aviation flights were made. 120.000 were made in Lelystad Airport. This means that Lelystad Airport has a market share of 30%. The second largest airport for general aviation in the Netherlands is Teuge. From this airport 50.000 flights were made. This market is decreasing.

    The size of the market for passenger flights by low-cost carriers and charters is unknown. European airline companies may be interested in flying from Lelystad airport. The catchment area is large, over 7 million people live within one-hour by car from the airport.

Market growth

    The market for general aviation is decreasing slightly. Market for A-B flights by low cost carriers is growing 5-6% each year.

Cyclic sensitivity

    The economic climate does not seem to effect this industry much. General aviation is probably more sensitive because it is expensive to own an aircraft. This may be the reason why this market is decreasing.

Industrial structure

The Airport industry

Competition

    Intensity of competition in the field of General Aviation is low. Lelystad is by far the largest airport in the Netherlands in this area.

    Competition is fierce for international European flights from A to B by low-cost airlines. Airports try to lure airlines with deductions on the airport charges. Several Dutch airports share the ambitions of Lelystad Airport, including Eelde, Rotterdam, Eindhoven and Maastricht.

    Some factors influence the competition: market size and ratio fixed/variable costs. The size of the market is still growing, this means that competition is less then in a market that decreases in size. Fixed costs are high: the investments in infrastructure have to be paid for. This may increase competition in the future.

Customers

    The customers in the case of General Aviation are the owners of small airplanes, training schools, hangars etc. Their bargaining power is small. The chance of these customers leaving Lelystad Airport is relatively small because so many related companies are based on Lelystad. They need Lelystad Airport.

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Bargaining power of low-cost airlines however is large. It is in their interest to keep landing

    charges and passenger handling charges as low as possible.

Suppliers

    The case does not give any information on this matter. Equipment such as traffic control

    systems and security systems are probably available on the market by more than a few

    suppliers.

Substitutes

    A substitute for flying within Europe could be the fast trains. These comprise no real threat.

Newcomers

    It is very hard to start a new airport because of many government regulations. It takes years

    and years to have the required permission.

Opportunities:

    ? Annual growths of air traffic (5%) especially low-cost airlines

    ? Low-cost airlines often prefer (cheap) regional airports

    ? Economic development in Flevoland (the province in which Lelystad is situated),

    growth of business investment twice as large as in the rest of the Netherlands

    ? Demographic growth in Flevoland

    ? Main-port Schiphol (Amsterdam Airport) is restrained in its growth by noise-

    restrictions

Threats:

    ? Opposition from local inhabitants and environmental groups

    ? General aviation decreases in size

    ? Severe security demands by the government

    ? Authorisation by the ministry of Public Works and the ministry of Environment may

    fail

    ? Bargaining position of low-cost carriers is strong

    ? Competition between airports is strong

7 SWOT-analysis

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