Topic: Strategic Analysis of Biman Bangladesh

Airlines Ltd.

Course Name: Strategic Management

Course Code: MGT - 489
Sec– 07

Submitted to:

Name
Ameer Yousuf Khan (AYK) Faculty Member,
North South University

Submitted by:

Name ID #
Saif Ahmed 102 0789 030
Rehan Habib 102 0122 030
S. M. Ishrak Rahman 102 0360 030
Ashikur Rahman 102 0202 030
Khawaja Shahzan Ehsan 101 0993 030
MD. Afzal Hossain 093 0745 030
 Date of Submission: 26nd August – 2014
Letter of Transmittal
Ameer Yousuf Khan
Lecturer,
School of Business
North South University
Bashundhara, Dhaka

Subject: Letter of Transmittal

Dear Sir,
It is our great pleasure to submit our Project Report as a part of our MGT-489 (Strategic
Management) course BBA program on The Strategic Analysis of Biman Bangladesh Limited.
We are fortunate enough that we have got to know about the strategic issues of the country’s
international airlines. Also, we are immensely thankful to you for allowing us to conduct the
rigorous project work in a preferred group with students.

We tried our best to show our skill, knowledge and understanding of the topics covered in class.
Finally, we would like to assure that we will remain standby for any clarification, explanation as
and when required.

Thank you in advance for your kind assistance.

Sincerely yours,
Rehan Habib 1020122030 …………………………..

S. M. Ishrak Rahman 1020360030 …………………………..

Saif Ahmed 1020789030 …………………………..

Ashikur Rahman 1020202030 …………………………..

MD. Afzal Hossain 0930745030 …………………………..

Khawaja Shahzan 1010993030 …………………………..

Acknowledgement I

With regard to the project paper, we would like to thank each and every one who offered help,

guideline and support whenever required.

First and foremost, we would like to express gratitude to our most honorable course instructor

Mr. Ameer Yousuf Khan for his support and guidance. Without him, we could not visualize the

project. His valuable advice, guidelines and continuous monitoring have made this task possible.

We also would like to add a few hearty words to our friends and relatives who helped us in

numerous ways to make this task a successful one.

We are proud to submit the report on time. We have thoroughly enjoyed working for the project

paper and hope it will be appreciated.

Executive Summary
II
Airlines Industry is one of the most profitable industries in the world. A significant amount of

profit has been realized each and every year by the big airlines of the world. Biman Bangladesh

Airlines is dissimilar to that fact. It is not generating profit, in fact, it is running on huge loss and

depite big investment from government Biman is not well settled yet. Although, some recent

figures show positive effect in the near future, still, the amount of loss is quite a big in number

that it has put in a big question as to whether Biman should be existed or not.

In this project, we have firstly derived the Competitive Advantage and then measured its degree

of sustainability. Next we moved onto the next four tools taken from strategic management. And

they are: SWOT, PEST, PORTER Five Forces, and Value chain. It is to be noted that these four

tools have been discussed in-depth so that both the picture of the state of condition in Biman and

the reason can be measured. Next, we also discussed the Financial Analysis (Profit/Loss Graph),

the life cycle, Diversification and besides that the control of management linking the culture

issues has been also discussed. Finally, we ended up the project with some valueable

recommendations for Biman Bangladesh Airlines.

The main objective of this report is to discuss a few Strategic Management issues with the

reasons of their occurance (the in-depth analysis). In addition, deriving the competitive
advantage that Biman can exercise on if it is sustainable along with other tools and discussion

about Biman Bangladesh Airlines would pave the way of finding out their strategic blunders.

Strategic Coherance
III

Vision: To protect Biman Bangladesh

Airlines ltd. in the aviation market as a
world-class airline

Mission: To provide Safe, Reliable, Efficient

and Economical air transport services and
to satisfy customer’s exceptions while
earning sustainable profit and continuing to
be a caring employer.

Strategic objective: To provide and develop

Safe, Efficient, Adequate, Economical and
properly coordinated air transport services,
internal as well as international.
1
 EXISTING COMPETITIVE
ADVANTAGE
OF
BIMAN BANGLADESH LIMITED
(With its sustainability)
Competitive Advantage
Today, airlines industry is one of the most important industries, because it is supporting the
internationalization and globalization objectives for many industries and businesses around the
globe. This need creates big pressure of this industry by increasing investments and driving
invention and innovation forward in order to create the competitive advantages.

Biman Bangladesh Airlines Limited was founded as the national flag carrier in 1972,
immediately following the country's independence, and remained wholly government-owned
until July 2007, when it was transformed into Bangladesh's largest public limited company.

Since then, Biman Bangladesh Airlines Limited has focused its efforts on reducing costs and
modernizing its fleet, with the goal of re-establishing its status as a reliable on-time carrier, and
transforming itself into the 'recognized leading carrier of choice for all Bangladesh domestic and
international air travel'. Bangladesh’s domestic and regional international markets are becoming
increasingly competitive as the country’s private airline sector continues to expand rapidly.
There are now three privately owned airlines operating in Bangladesh with two more preparing
to launch operations. 

Competition has intensified on the main domestic routes as well on some of Bangladesh’s largest
international routes. Some international routes now have three Bangladeshi carriers, including
government-owned Biman Bangladesh, with the prospect of one or two more entering in the near
term. The growth of the private airline sector in Bangladesh comes as Biman Bangladesh
attempts a turnaround and pursues expansion. The current Biman business plan includes
increased focus on the domestic market but Biman would arguably be better off focusing on the
international market, in particular medium and long-haul routes which are unlikely to see local
competition.

3
Cost leadership

Bangladesh Biman has always strive to provide safe, reliable, efficient and economical air
transport services to its customers and so adopted cost leadership strategy from the very
beginning. They charge comparatively low price than other competitors in the market and
because of being a govt. subsidized firm it is still in the business while accounting for losses year
after year. Low customer quality including ticket confirmation problem, long waiting hours,
delays, water dripping from air conditioning unit, etc became everyday complaint from
customers.

After Kevin Steele joined as CEO of Biman, he took various steps in order to maintain this cost
leadership strategy as other companies were efficient enough to provide low cost to customers.
Steps include:

 Shorten waiting-list

Earlier, Biman used to keep 50 passengers on waiting list. For each passenger, the airline
has to pay $7 to a company for using its “global distribution system” (GDS). Kevin
Steele came up with the idea to cut the waiting list from 50 to 15 passengers. As a result
it could save $245 on GDS charge every flight. For the whole year, it means saving $1.5
million a year.

 Saving fuel cost

During winter time, some Dhaka-Chittagong flights are often diverted to Yangon due to
foggy weather. This is why each flight has to carry extra fuel for Yangon flight. For this
every flight had to carry excess fuel weighing 1,000 liter. Moreover, to carry this 1,000
liter extra load, each flight has to burn about 200 liter equivalent of fuel. This extra fuel
costs money. So Steele has equipped the Sylhet airport with fuel trucks so that aircraft
can land in Sylhet instead of Yangon in case of foggy weather. This would save another
$2 million a year!

4
  New Aircrafts

The Biman managing director has urged to see 16 aircrafts (currently 8) within two years
provided all of them are fuel-efficient. Biman has Boeing 777s, 737-800s and Airbus
A310s but the Airbus is fuel inefficient, and would be phased out in two years.

 E-customers service

A service will be initiated where passengers can throw their feedback and service rating.
Moreover, staff that can surpass their targets will get extra bonuses.

 Revenue Management System

Steele would introduce a revenue management system that would help give priority to
passengers on priority routes. For example, fare from Kuala Lumpur to Jeddah is $900
while from Dhaka to Jeddah it is $850. So flying passengers from Kuala Lumpur to
Jeddah is not profitable. When the new revenue management system will be in place,
Dhaka-Jeddah passengers will get priority. Biman can save $20 million from this.

Differentiation Strategy

In order to be competitive in the airline industry, Biman has also adopted differentiation strategy.
Biman’s website was re-launched in late 2013 with new features such as seat selection and meal
choices available through the portal. Passengers will now have the opportunity to bid for
upgrades on long-haul flights or an empty adjacent seat through a partnership with OptionTown.
Advance payment of excess baggage fees will be available online in the near future as well. All
of these are avenues to improve the passenger experience and increase ancillary revenue
channels. That’s a win for both the carrier and the customer. According to Biman’s new
promotion they have started a new option through which customers can now travel at any
German point on Deutsche Bahn (DB)/German Rail on very special rates connecting to/from our
Frankfurt flights with immediate effect.

5
 Sustainability in Question

Previously Biman was fully a government-owned organization but after its transformation to
public limited company, all the shares are still occupied by the Govt. This organization is
consecutively making losses and is supported by the Govt. However, hopes started to seem
bright as Kevin Steele led the company to give a professional outlook and the latest financial
figure shows Biman is on the verge of coming out of the loss making era. It will be a tough
challenge for Biman to utilize on its resources and be competitive as others have pushed
themselves too far and Biman is lagging behind. Also, the history suggests the same that Biman
has been in losses since 2007. It is true that the amount of losses have reduced in the recent
years, but there is no certainty that biman would be coming out of the trap of huge loss, which
has been following a trend.

Apparently, it can be said that Biman Bangladesh Airlines, having a trend in loss, which is quite
a huge number, is struggling and due to many factors such as less efficient strategic
management, corruption- they do not poss any sustainable competitive advantage.

6
 SOME TOOLS
OF
STRATEGIC MANAGEMENT
 SWOT Analysis
STRENGTH
 The experienced employees which is truly a superior vigor of Biman Bangladesh
Airlines Ltd. to lead the market. These resourceful manpower are mostly experienced in
the field rather that the literary experts of present days.
 It has huge financial support from the government of Bangladesh.
 Biman is the only one organization that provides ground service for all foreign airlines
in Bangladesh.
 Being the national flag carrier, Biman bears the symbol of our independence and
sovereignty which is definitely strength of the advertising of Biman.
 Huge operational investment.
 All of the departments of Biman Bangladesh Airlines Ltd. are at one building that is
Balaka. This helps to take any important decision quickly.

WEAKNESS
 The foremost weakness of Biman is the mismanagement. The management of Biman
could never worked independently since the government owned type of organization with
having inevitable government influence in almost each and every corporate aspects of
this organization and always there was pressure from outside to consider personal
interest.
 Even from the very initial period Biman could not be able to recruit the right
professional person for the right place to achieve its desired objectives only for this
unavoidable government influence. As an end result, Biman has reached at this
measurable stage with aging fleet and burden of debts.
 Promotional team does not give emphasis on the brand development of Biman to create
demand and interest on public mind.
 Lack of marketing strategy to create new customer, market, and customer support
service.

7
  Simultaneously, considering the global standard of International Airlines, Biman is
lagging behind. The staffs are not provided with modern technologies like computer,
internet facilities etc. Thus, information flow and faster customer services are not ensured
from the part of employees.
 Lack of modern machinery to provide better service to the customer in ground service.
 Less innovation in managing the quality of service and promoting service among its
customers.
 Unsatisfactory promotion system that results the dissatisfaction among employees.

OPPORTUNITY
 There are few competitors in the domestic market so that it has huge opportunity to
make profit from domestic market.
 The size of market in Bangladesh is around 3.5 million and 100 thousand tons of cargo
which is a quite large aviation to operate for Biman.
 Large number of customer in domestic and international routes.
 The market is based on labor traffic, retuning residents, business travelers, medical
purpose and tourists. The cargo market based on RMG, leather goods, medicine,
perishables. The labor passengers have an extreme attraction for the national flag carrier
for its home like hospitality. The returning residents also prefer national carrier for home
essence.
 In terms of cargo, the perishables are mostly dependent on Biman services and also
demanded for the RMG. In fact Biman has over flow demand for cargo from Bangladesh.

THREATS
 The prime threat is considered the free entry for mega carriers like Saudia, Gulf, Etihad,
Emirates etc. Presently, about 25 carriers are operating from Bangladesh. Those carriers
are mostly modern and have a good financial strength and experience in this line. It
 would be very tough for Biman to survive in the market if Biman does not take necessary
action immediately to restructure the Brand.
 Local private carriers are also doing well to be threat for Biman.
 Lots of competitors in the international market as well as some better alternatives of
Biman in domestic airlines market.
8
 Corruption and irregularities in leasing process of Biman leads excess payment of US$
50 million (estimated) in last five years.
 Rising of fuel price is also another threat for Biman.

SWOT In-Depth
We can clearly observe that, Biman Bangladesh Airlines gets huge financial support from the
Bangladesh government which is its prime strength. Hence, the company invested enormous
money in operational sector. With this strength Biman could be a giant in airline industry in
Bangladesh. The key two factors that turn its strengths into weakness are ‘mismanagement’ and
‘corruption’. Only because of these two reasons Biman’s other weaknesses and threats arise. If
Biman can handle mismanagement and corruption properly, depressing outcomes like; lack of
marketing strategy, unhealthy promotional structure, weak recruiting division, fragile motivation
program etc. will turn into strengths in the future.
For implementing a sound management system, Biman should improve its HR department
significantly. Moreover, it should focus more on Strategic Human Resource Management
(SHRM) to eliminate its strategic difficulties and to be a market leader in airline industry. For
executing this, Biman does not need to worry about money because the company has
government behind it. All that can be done by Biman is to prepare a master plan which includes
strategic implications with sustainable development. In addition, it needs to concentrate on
strong intellectual assets that can monitor overall working process and implement the company’s
goal.
 PEST In-Depth
9

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T.
is a short form for the Political, Economic, Social, and Technological factors of the external
macro-environment. Such external factors usually are beyond the firms control and sometimes
present themselves as threats.

POLITICAL FACTORS

In Bangladesh, one can never over-look the political factors which influence each and every
industry existing in the country. It is true that the political interference has to be present
everywhere. Given below are a few of the political factors with respect to the airline industry:

The airline industry is very susceptible to changes in the political environment as it has a
great bearing on the travel habits of its customers. An unstable political environment
causes uncertainty in the minds of the air travelers, regarding travelling to a particular
country. Overall Bangladesh’s recent political environment has been largely unstable due
to controversial election and continued tension with border areas of Bangladesh. Random
riots and the government’s inability to control the situation have also led to an increase in
the instability of the political arena. More riots mean less passengers for Biman and that
is a bad thing. So the airline organization will always want the country to remain stable
politically or it will be adverse business for them.

The most significant international political event has occurred in September 11, 2001.
The event occurring on September had special significance for the airline industry since
airplanes were involved. Recent accidents or incidents of Malaysia Airlines also create a
great impact on airline industry. The immediate results were a huge drop in air traffic due
 to safety & security concerns of the people. As a result, international airlines are greatly
affected by trade relations that their country has with others. As Bangladesh is a Muslim
country, the 9/11 attack had negative impact on us and also on the airline carrying these

people. They were checked for illegal possession more frequently over there and it
affected their business adversely as less people were willing to go there by plane.

In Bangladesh, the airlines also suffer from archaic laws applying only to them such as
the retirement age of the pursers and hostesses, the labor regulations which make the
management less flexible in taking decision due to the presence of strong union, and the
heavy control and interference of the government. This affects the quality of the service
delivery and therefore, these airlines have to think of innovative service marketing ideas
to circumvent their problems and compete with the private operators.

ECONOMIC FACTORS

Business cycles have a wide reaching impact on the airline industry. During recession, domestic
airline is considered a luxury and therefore spending on air travel is cut which leads to reduced
prices. During prosperity phase people like to travel in planes and prices increase. But
Bangladesh being a poor country and the as the buying capability of people in general is less,
plane travel is considered a luxury no matter what the economic situation is. So Biman always
has to consider this income standard of people and set ticket price accordingly which can never
be high and out of reach for general people.

Inflation is always a rising problem and inrease in ticket price accordingly may not sit
well with the minimum income people in Bangladesh. So, the high level of inflation is
definitely a thing to worry for Biman in Bangladesh.

After the September 11 incidents, the world economy plunged into global recession due
to the depressed sentiment of consumers. The loss of income for airlines led to higher
operational costs not only due to low demand but also due to higher insurance costs,
which increased after the WTC (World Trade Center) bombing. This prompted the
 industry to lay off employees, which further fuelled the recession as spending decreased
due to the rise in unemployment. Even the carriers was deeply affected as many flights
were cancelled due to internal (employee relations) as well as external problems. This has

also affected Biman indirectly as it meant less business for them and more layoffs. So this
type of unexpected economic crisis can have deep negative effects on the airline industry
and also Biman.

SOCIAL FACTORS

The changing travel habits of people have very wide implications for the airline industry. In a
country like Bangladesh, there are people from varied income groups. The airlines have to
recognize these individuals and should serve them accordingly.

Biman Bangladesh needs to focus on their clientele which are mostly low income clients
and their habits in order to keep them satisfied. The destination, kind of food etc. all has
to be chosen carefully in accordance with the tastes of their major clientele. Especially,
since Bangladesh is a land of extremes, there are people from various religions and castes
and every individual travelling by the airline would expect customization to the greatest
possible extent. For example, since Bangladesh is a Muslim country, they cannot serve
pork which is really popular in western world. They also have to be cautious in serving
beef, since a large portion of Bangladesh people are Hindus. So this type of social
boundaries must be carefully noted and respected by Biman.

For example, South West Airlines occupies a solid position in the minds of the US air
travelers as a reliable and convenient, fun, low fare, and no frills airline. The major
element of its success was the augmented marketing mix which it used very effectively.
What South West did was it made the environment inside the plane very consumer
friendly. The crew neither has any uniform nor does it serve any lavish foods, which
indirectly reduces the costs and makes the consumers feel comfortable.
So keeping the social factors in mind, Biman Bangladesh has to come up with strategies that will
not test our socially acceptable limits and make profit at the same time.

TECHNOLOGICAL FACTORS
12

The increasing use of the Internet has provided many opportunities to airlines. For instance, in
India Air Sahara has introduced a service, through the internet wherein the unoccupied seats are
auctioned one week prior to the departure.
Biman Bangladesh has also recently started taking advantage of technological
developments and it now provides many internet based services to its customer such as
online ticket booking, updated flight information and handling of customer complaints.

Other sort of technological breakthroughs like significant increase in internet speeds, new
improved model of planes (means Biman will have the option to provide better planes),
improvement in autopilot system (cut down on pilot costs) etc may have significant
effects on Biman.

Another addition that Biman has put in place is in the ticket purchasing system
 The Porter’s Five Forces
In-Depth Analysis
13

  The Airline industry provides a very unique service to its customers. It transports people with a
high level of convenience and efficiency that cannot be provided by any other industry or
substitute. Airline companies pride themselves on the way they treat their customer during the
flight. They have things such as food, drinks, entertainment, and a welcoming staff. The service of
transportation is provided in other industries but the airline surpasses all of them when it comes to
timeliness. The geographic scope of the airline industry is at a global level. Some firms are able to
fly their planes all over the world while others focus on smaller geographic areas. Biman
Bangladesh Air line has both types of flight such as international and national.

According to Porter’s a company can face five types of challenge in an industry. These challenges
are called Porter’s five forces. These are:

  

The five forces model is one way to answer the first basic question in strategic management; “Why
are some industries more attractive than others?” This model shows the five forces that shape
industry competition; threat of new entrants, bargaining power of buyers, threat of substitutes,
bargaining power of suppliers, and competitors.
In order to analyze the Biman Bangladesh airline industry we have look at each of these forces.
BARGAINING POWER OF BUYERS 
14
The airline industry is made up of two groups of buyers. First, there are individual flyers. They
buy plane tickets for a number of reasons that can be personal or business related. This group is
extremely diverse. The second group of buyers; travel agencies and online portals. This buyer
group works as a middle man between the airlines and the flyers and they work with multiple
airline firms in order to give customers the best flight possible

 There are low switching costs between airlines because many people choose the flight based on
where they are going and the cost at the time. This is Each customer needs a lot of important
information. They need to know the details of what is provided during the flight. Buyers need to
understand the timing of the flight and the safety aspects of flying in general. The service provided
is unique. Some airlines focus on cost, while others focus service quality.

Biman Bangladesh is notable for disruptions to its flight schedule and poor customer service In
2007, Biman faced strong criticism from major international airports including London Heathrow
Airport and Dubai International Airport for its failure to maintain flight schedules. They provide
low quality of service and often face schedule problem. On the other hand, customer switching
cost is low and customer have available other choices. Customer loyalty is low for the Biman
Bangladesh Limited and customer have clear information about Biman Bangladesh poor Financial
condition (they face lose in all year). So the bargaining power of customer is high.

Bargaining power of buyer is High because

service quality is Low

Schedule problem
Safety problem
Poor Financial condition
BARGAINING POWER OF SUPPLIERS
15

In this case, the major suppliers are the airplane manufacturers. The top two manufacturers in the
world currently are Boeing and Airbus. In this industry the inputs are extremely standardized.
Airline companies only seem to differentiate with amenities. The planes are very similar.
Airline companies cannot easily switch suppliers. Most firms have long term contracts with their
suppliers. Planes are such high capital products that firms probably make long term loan
agreements and have more favorable credit terms when they don’t switch companies. It is difficult
to enter into the plane manufacturing industry because of the capital needed to enter. The amount
of money and expertise needed to make even one plane is around 200 million dollars. For this
reason there are very few suppliers in the airline industry. Airline firms are growing all over the
world and choice of buyer is limited. So the bargaining power of supplier is higher. Biman
Bangladesh Ltd buys the entire plane from Boeing with a favorable long term loan.

THREAT OF NEW ENTRANTS

 
Threat of new entrants is another major aspect of the five forces. This aspect has a low threat for
the airline industry. So it presents low threat for Biman Bangladesh Airline also. However, There
are two aspects that do raise the threat level. First, there are extremely low switching costs.
Second, there are no proprietary products or services involved. 

Even with these two aspects the industry still has a very low threat overall. Existing firms have a
large cost advantage. This industry requires a large amount of capital and without a strong
customer base there will be little to no profit in the first few years. Existing firms can and will use
their high capital to retaliate against newer firms with whatever means necessary such as lowering
prices and taking a loss 

Although there are low switching costs between brands, consumers tend to only chose well-known
names. Airline tickets are expensive so people do not want to give that money to firms they don’t
trust. There is also a huge safety aspect involved and most consumers feel safer with firms that
have been around for a long period of time. This industry requires plane and flying experience

which also lowers the threat of entry. When firms decide to enter the market they first have to
become licensed which can take about a year. After that they are constantly being regulated by
several organizations such as the Federal Aviation Administration and the Department of
Transportation. The time and money spend to solely open an airline company is enough to prevent
most people from entering the industry.

Although Biman Bangladesh committed lose in every year but threat of new entrant is low for
them. The political condition and corruption create new types of restriction to enter in the industry.

THREAT OF SUBSTITUTES

After looking at the threat of entry it is important to also consider the threat of substitutes. This
industry has a high substitute risk level. Consumers of Biman Bangladesh can choose other form
of transportation such as a car, bus, train, or boat to get to their destination. These are cheaper than
Air ticket in Bangladesh. Switching cost is lower.

Some means of transportation can be more costly than a plane ticket. The main cost is time. Planes
are by far the fastest form of transportation available. Airlines surpass all other forms of
transportation when it comes to cost, convenience, and sometimes service. Consumers do
sometimes choose other methods for various reasons such as cost if they are not traveling very far
which raises the risk. Although Biman Bangladesh Air Line customer pay higher amount of
money but they always face poor quality service, late schedule and safety problem. So the threat of
substitute is higher.

RIVALRY AMONG EXISTING PLAYERS

 The last area of the five forces is the rivalry among existing players. The rivalry in the airline
industry in Bangladesh is very intense for many reasons. The industry is currently very stagnant. It
seems to be in the mature stage of the business cycle. The number of competitors stays the same in
the long run and it doesn’t seem to be under or over capacitated. The fixed costs are extremely

high in this industry. This makes it hard to leave the industry because they are probably in long
term loan agreements in order to stay in business. The products involved or the planes are highly
complex which also heightens the competition.  The major competitor of Biman Bangladesh
Airline are given below

Biman Bangladesh Airlines – Competitors

Airline Competitors Notes

United Airways Bangladesh direct 17 shared routes (37%)

Regent Airways weak 8 shared routes (17%)

Jet Airways weak 4 shared routes (9%)

Saudi Arabian Airlines weak 4 shared routes (9%)

Flydubai weak 3 shared routes (7%)

Qatar Airways weak 18 shared destinations (39%)

The competition is lessened by the brand identities of different firms. The competition is base on
service and cost. Rivalry of existing players is high in Bangladesh. In Bangladesh Biman
Bangladesh is the first Air company but nowadays it incurred loss of 545 core money in 2011 to
2012. Because of low quality service and late flight schedule. They continuously lose their
customer. Biman Bangladesh fray is almost similar to their competitor but they provide low
quality service to their customer and delay almost every flight. This is the opportunity of their
competitor. So the threat of rivalry is higher on here.

Here, we have attempted to come out with a comparison of the fare between Biman Bangladesh
and other different competitor in the industry company

Company name Destination Fray

 Novo Air Dhaka to Chittagong one way 5,790

Regent Airway Dhaka to Chittagong one way 4,500

18
United Airways Dhaka to Chittagong one way 4,500

US-Bangla Airlines Dhaka to Chittagong one way 4000

Biman Bangladesh Airlines Dhaka to Chittagong one way 4500

After looking at the Five Forces Model firms should make dealing with the competition their main
priority.
 An In-Depth Analysis of
The Value Chain 19

Value Chain Analysis describes the

activities that take place in a business
and relates them to an analysis of the
competitive strength of the business.
Influential work by Michael Porter
suggested that the activities of a
business could be grouped under two
headings:

(1) Primary Activities- those that are directly concerned with creating and delivering a product
or service. Biman Bangladesh LTD is a service base organization.

(2) Support Activities- they are not directly involved in production or providing service, may
increase effectiveness or efficiency (e.g. human resource management) in the process or
production or service. It is rare for a business to undertake all primary and support activities.

Primary Value Chain Activities of Biman Bangladesh Airlines

Inbound Outbound Marketing
> Operations > > > Service
Logistics Logistics & Sales

Primary Activities

Inbound logistics

All those activities concerned with receiving and storing externally sourced materials. For Biman
Bangladesh airlines inbound logistics are Route selection, Passenger service system, Yield

20
Management system, Fuel, Flight scheduling, Crew scheduling, Facilities planning, Aircraft
maintenance

The major problems faced by Biman Bangladesh Airline regarding inbound logistics are flight
scheduling and passenger service System. They have sufficient manpower and government
subsidiary but they fail to provide good service to their customer.

Operations

It is the value-creating activities that transform the inputs into the final product or service. Biman
Bangladesh Airlines opration includes Ticket counter operation, Gate operation, Aircraft
operation, On board service, Baggage Handling service, Ticket offices

They have enough manpower and government subsidiary to run their operation but most of the
employees are attached with corruption in this sector that is the main reason why they fail to
provide good service to their customer. Starting from the Check-In point and till the Take-off,
mismanagement is clearly visible with Biman;s operation. The severe problem is found in
Baggage Handling service. All most every day passenger complains about their missing Bags or
valuable items.

Outbound logistics

It is the activities required to send the finished product to the customer, including Rental car and
Hotel reservation system, Flights connections

Biman Bangladesh Airlines provide opportunity for their customer to Rental car and Hotel
reservation system.

Marketing & Sales

These are those activities associated with getting or attracting buyers to purchase the product,
including channel selection, advertising, pricing, etc.
 Again, these two facts are the obstacles in the process of Advertising and Promotion for Biman.
They are:

21
 Advertising: No broadcast Advertisement is available for Biman Bangladesh Airline.
 Advantage Program: No advertisement camping was occur in past or still do not bring
the concentration of top management about its necessary.
 Travel Agent Programs: very few in numbers.

As a matter of fact that In the past, Biman did not realize the necessary of marketing in their
service. But nowadays competition is increasing in the industry and a good number of
newcomers have already stepped in. Thus in reply, Biman has started various kinds of
Advertising and Promotions for more ticket selling and thus revenue. They are constantly
attracting customer through discounts on special occasions like Eid-ul-Fitr and Eid-ul-Azha.
They have some other facilties and coupons for the purpose of attracting customer. In reality,
these are not suffucient to come out from the veil of losses as their sales are continuously
decreasing for their poor service quality.

Service

It is the activities, which are considered to maintain and enhance the value of the service
rendered. It is more clearly said customer support towards, which customer establishes their trust
and faith on the company or brand. For Example: Lost Baggage service, Complaint Follow up

Biman Bangladesh provides poor service to their customer, but recently they try to develop it-
According to the CEO of Biman Bangladesh Airlines

“It is vital for the future of Biman that we focus on the needs of our customers. One of the most
important was to do this is by actively seeking feedback from our customers, on how we can
improve”

Bangladesh Biman tries to focus on services, such as:

 - Deliver baggage on time.
- Support an increase in the baggage liability limit.
- Provide prompt ticket refunds.

- Properly accommodate disabled and special needs of passengers. 22

- Meet customers’ essential needs during long, on-aircraft delays.
- Disclose travel itinerary, cancellation policies, frequent flyer rules, and aircraft configuration.
- Be more responsive to customer complaints.
- Focusing on the Training for personnel who assist passengers with disabilities and children.

Any or all of these primary activities may be vital in developing a competitive advantage.

Support Activities

The primary value chain activities described above are facilitated by support activities. Porter
identified four generic categories of support activities, the details of which are industry-specific.

Procurement

The function of purchasing raw materials and other inputs used in the value-creating activities.
Such as Information technology and communication. In a recent press conference by the Prime
Minister Sheikh Hasina it was proclaimed that Biman will be added by new Aeroplanes with
double capacity.

Technology Development – includes research and development, process automation, and other
technology development used to support the value-chain activities.

Most Recent technological developments are:

Online booking system, Online ticket cancellation system, Yield Management system, In flight
system, Flight Scheduling system, Market Research, Product Development System, Baggage
tracking system.

23
Human Resource Management

It is the activities associated with recruiting, developing, and compensating employees. Biman
Bangladesh Airlines Human resource activities are: Flight route and yield analyst training, pilot
training, baggage handling training, agent trainin, in flight training

This program is developing recently by Biman Bangladesh and customer will enjoy the benefit
of this program in near future.

Firm Infrastructure

This includes activities such as finance, legal, quality management, community affair etc that
serve the entire value chain; it does not account for each individual activities, in fact, it is helpful
for the overall Value Chain.

Support activities often are viewed as “overhead”, but some firms successfully have used them to
develop a competitive advantage, for example, to develop a cost advantage through innovative
management of information systems.
 24

Evaluating Firm
Performance
(Financial Ratio Analysis)
Evaluating Firm Performance
(Financial Analysis)
Due to certain limitations, coming out with the
latest Financial Analysis of Biman Bangladesh
was difficult and time consuming. Therefore, in
this part of Financial Analysis, we have taken
into account two things:
1. The overall Profit/Loss from 2007-2014;
2. The Source Wise Contribution in the
Revenue (particularly 2012-13)
Firstly, in this first part of the financial analysis, an overall picture of the Profit/Loss curve
(2007-2014) has been shown.

It is clearly visible that in 2007-08, 2008-09 Biman Bangladesh made a profit of 6cr and 15cr
respectively. Although this is considered to be scanty with respect to the profits other
international flights are making. Stepping the next year shows some horrible downfall of Biman
Bangladesh Airlines, which streched until 2011-12. This is with no doubt that there were some
strategical changes that have caused Biman to accept this amount of losses. This picture becomes
clearer when the existance of the loss curve along the years in the graph is taken into light.

Although Biman is yet to climb out of years of suffering losses, the national flag carrier is
expected to reduce its annual losses by 38.86% from the previous year as a result of improved
punctuality and enhanced customer service.

According to the officials at the Biman Bangladesh Airlines- ‘ the carrier would be able to

overcome the massive losses suffered during the months of political unrest ahead
of January’s parliamentary polls, and end the fiscal year with an estimated loss of
Tk118 crore, much lower than the previous fiscal losses of Tk193 crore’.

Secondly, Bangladesh has an aviation market of about 3.5 million passengers in respect of
passenger travel and about 10 million tons in respect of cargo .The market is expanding rapidly.

Biman, being the national carrier used to carry loin portion of this market but due to the different 25
cause Biman has lost its reputation and carrying less portion of the market. The different charts
in this page will show the performance of Biman in terms of source wise contribution in the
overall revenue.

Sources wise Contribution:

Source wise Contribution

Source Year 2012‐20013 (BDT in Lac)

Passenger 185241.00
Cargo 30257.00
Ex‐Baggage 3918.00
Total 219416.00
 Figure 3: Revenue Earning Region Wise

In spite of all the problems with political unrest and losses in November and December 2013,
Biman still expects to make its [improved] loss target for 2013-14, and be fully profitable in
2014-15.

Intellectual Capital
26
The difference between a firm’s market value and book value is its intellectual capital. It is a
measure of the value of a firm’s intangible assets. Reputation, employee loyalty and
commitment, customer relationships, company values, brand names, and the experience and
skills of employees etc make up intellectual capital.

 Human capital: It is the value that the employees of a business provide

through the application of skills, know-how and expertise. Human capital is an
organization’s combined human capability for solving business problems and exploiting
its Intellectual Property.
For Biman, this human capital is a very weak point for them. Nepotism is one of the barriers
for not getting right human resources. Because of favoritism, right people are not getting
promotion whereas incapable candidates are placed at the higher positions.
Biman does not recruit any staff directly (i.e. from external qualified candidates) in officer
level. Maximum of them are promoted from lower positions. As a result, the scope of getting
quality staff for Biman becomes lower. Hence in all directorates external efficient candidates
are deprived, no competitive environment among the staff prevails, the existing staff remains
reluctant as they feel that they will be promoted somehow. The promotions that occur are
mostly executed through political lobby, which also deter internal competitions.
So lack of proper skill, trained people and knowledge is hurting Biman hard and has a
negative impact on its intellectual capital.

 Structural capital: It is the supportive non-physical infrastructure, processes and

databases of the organization that enable human capital to function. Structural capital
includes processes, patents, and trademarks, as well as the organization’s image,
 organization, information system, and proprietary software and databases.
The organizational image has been hit hard by the recent failures and financial losses.
Biman in doing very bad financially and its service is also not up to the mark which in
turn is hurting its structural capital.

Considering the global standard of International airlines, Biman is lagging behind. The staffs are
not provided with modern technologies like modern computers, internet facilities etc. Therefore,
information flow, faster customer services are not ensured from the part of employees.

27

 Relational/social capital: It is the network of relationships that individuals

have throughout the organization. It consists of things such as customer relationships,
supplier relationships, trademarks and trade names (which have value only by virtue of
customer relationships) licenses, and franchises. The value of the relationships a business
maintains with its customers and suppliers is also referred as goodwill, but often poorly
booked in corporate accounts. Teaming with co-workers and its customers to provide
services that are better than what can do individually is the motto of Biman and they actually
follow it. People actually have a strong bond inside the organization mainly because they are
recruited through personal connections.

Form an overall point of view; it’s quite evident that Biman’s intellectual capital is not a much
desired one. It has a damaged brand image and an infrastructure that is totally unable to repair
this damage. So, their market value is very low and people don’t rate Biman to be a top
organization. This perception hits their market value and Biman needs drastic overhaul in their
organization to change it.
Organizational life
cycle
Organizational life cycle refers
to the stages of introduction,
growth, maturity, and decline
28
that occur over the life of an
organization. It is important to
identify which at stage of the cycle an organization currently is to further its potential.

Considering Bangladesh Biman, it is clear that currently, it is in the growth stage. This growth
actually started after 2012. It is the result of a turnaround strategy by the new managing
director Kevin Steele since his appointment in 2013. Since his takeover, he has been solely
focused in turning Biman from loss project to a profitable one and done it successfully so far.

Since its inauguration in 1972, Biman Bangladesh has always been hit with negative adversaries.
Since its inception, it has continuously incurred debt and financial lows. Before 203 it
continually saw its debt increasing and had been on a steep decline. It saw the sight of little profit
in years 2007 and 2008 which was their mature part in life cycle.
After 2012 with the appointment of Steele, things turned around. Biman Bangladesh Airlines
claimed that it has cut its loss by around $50 million (around BDT 387 crore) in the 2012-13
fiscal year. Before this, Biman had lost around $75 million (around BDT 606 crore) in 2011-12

29
fiscal year. The results for 2012-13 show that losses have come down to around $25 million
[around BDT 193 crore]. Biman brought its losses down to around BDT 77 crore in 2014 and the
negative image of Biman is also vanishing. Now Biman is hoping to have profit for the first time
in a long time in the following year.

People now know Biman as a reliable airline and its growing fast, with passenger number
increasing every year. New agreement with a communications company, better revenue flow
especially from cargo, a new revenue integrity system, cost saving by reducing passengers on
waiting list, and better measurement of flight loads has helped Biman cut its losses and grow
fast. So turnaround strategy has worked wonderfully for Biman and it has taken them out of
the declining stage and into the growth stage again.

Diversification
The Biman Flight Catering Center (BFCC) and Biman Poultry Complex (BPC) are two small
operations relative to the airline operations of the parent company, but they are also profitable
and represent some of the diversification which has been successful for Biman in the past several
years. BFCC has the capacity of producing 8500 meals a day and is providing cuisine not only to
Biman but also to Saudia, Etihad, Malaysia Airlines, Thai Airways, Emirates, Dragon Air and
China Southern Airlines. Biman Poultry Complex, a subsidiary of Biman was formed in 1976
and was put into operation in November 1980 to create a profit earning concern to augment the
cash flow of Biman.
Strategic control 30

Strategic control is the process of monitoring and correcting a firm’s strategy and performance.
There are two approaches to strategic control: traditional and contemporary approach. As per the
definition and concept, Biman Bangladesh Airlines follows traditional approach to strategic
control. That is, strategies are formulated and top management set goals, strategies are
implemented and performance is measured against the predetermined goal set. As a result, this
process typically involves lengthy time lags often tied to a firm’s annual planning cycle and is
more appropriate when the environment is stable and relatively simple.

Management Hierarchy:

Position At Present
Managing Director & CEO A M Mosaddique Ahmed
Director Customer Service Mohammed Abdullah Al Hasan
Director Engineering & Material Mohammed Abdullah Al Hasan
Management
Director Flight Operation Capt. Ishrat Ahmed
Director Finance A.S.M Monjur Emam
Director Planning Md. Belayet Hossain
Director Marketing & Sales Mohammad Shah Newaz
Director Administration Rajpati Sarkar
Organizational culture 31

Organizational culture is a system of shared values and beliefs that shape a company’s people,
organizational structures, and control systems to produce behavioral norms. Biman strives to
focus on offering lowest cost to its customers as well as better customer service. But
surprisingly, there are factors that have led the company to follow backward route where others
are heading forward. Those include:

 Bureaucracy: Bureaucracy is required for an organization for operational purpose but too
much bureaucracy consumes lot of time to complete a simple task. Biman is very much
bureaucratic which makes delay in providing service to its customers as well as internal
cross functional departments; as a result slowing the whole process.

 Corruption: Corruption in different sectors of Biman is another significant barrier that is

making it difficult for the organization to break away from loss making ways. Incidents
of corruption are evident in purchase and leasing of aircraft, store and purchase of spare
parts, in the tender process and in ticketing and reconfirmation.

 Lack of Authority and Accountability of the Executive Body: The Board is not
accountable to a higher authority because the Minister of Aviation, who is the designated
chief of the organization, is the Chairman of the Board himself. Therefore, the Board is
neither directly accountable to any other body, nor is it under obligation to report to any
other authority for its activities and performance. This existing hierarchy creates problem
in delegating the duties for the Managing Director, CEO of Biman.

 Lack of proper planning and organizing: Biman Bangladesh Airlines is suffering from
lack of proper planning. Therefore, the organization is falling short of organizing the
company as a whole. The management of Biman can’t lead the company to proper
direction for which mishap often takes place and as a result, Biman is losing crores of
money every year.
 32
 Nepotism in recruiting resources: Nepotism is another barrier for not getting right
resources. Because of favoritism, right people are not getting promotion whereas
incapable candidates are placed at the higher positions. In connection to this, trade union
is becoming stronger day by day.

 Technological disadvantage: Considering the global standard of International Airlines,

Biman is lagging behind. The staffs are not provided with modern technologies like
Computer, internet facilities etc. Therefore, information flow, faster customer services are
not ensured from the part of employees.

 Paperwork: Paperless office is a demanding condition for Biman although the company
has partially become online services provider. For better performance and saving working
hour, Biman should implement at least computerized operational system within the
company so that huge paper work can be reduced. Above all, the efficient manpower of
Biman is handling the tasks very smoothly within the huge competitive market.
 Recommendation 33

To help Biman move out from its old-fashioned way of management, to accommodate the future
opportunities and to avert the current crisis and threats, it is extremely essential for Biman to
undertake the following steps set forth as recommendations.

 The dilemmas in the governance system of Biman need to be settled down through
bringing in necessary changes in the Ordinance.

 Experts on commercial airline and aviation industry must be included as members in the
Board of Directors.

 Biman should not be exploited in the name of national interest. It should not operate
unprofitable flights.

 Biman should develop and adopt a coping strategy addressing the market need. Leasing
will reduce immediate capital requirements and will allow Biman to have flexibility in
capacity which means that the airlines can scale-up or scale-down available seat capacity
according to the market trend.

 Biman should consider closing down the loss-making routes and divert the flights entirely
to the profit-making ones.

 Recruitment, transfer, and promotion on political consideration must be stopped. Biman

must go all out to introduce e-ticketing, e-reservation, and e-procurement of spare parts.

 In-flight service must be improved. Steps may be undertaken to ensure full complement
of cabin crew, professionalism among the cabin crew, and provision of proper flight crew
training to ensure that quality service can be rendered by the cabin crew at all times.

34
 Conclusion

Therefore, it can be concluded that Biman Bangladesh lacks behind its competitors because of
the following reasons:

 Transitional form of HR Department: The Human Resource Department of Biman

Bangladesh Airlines Limited is in transitional form because it was fully Bangladesh
Government controlled organization previously and government had autonomy on this
organization.

 Internal Policy: Biman has no obligatory policy to recruit and select from internal or
external sources.

 Complexity in Recruitment & Selection Process: Government quota system and other
rules and regulations have made recruitment and selection processes more complex. 

 Image of Biman: Some people has positive where others have mostly negative attitude
toward Biman Bangladesh Airlines Ltd because of its corruption and poor customer
service.
 Lack of Market Research and campaigns: Biman unlike other firms don’t go for
advertising and so customers are not well aware of their promotional activities at all. As a
result other firms are grabbing this opportunity and Biman is suffering from losses for
years.

If these five points can be taken into account for improvement, then Bangladesh Biman
Airlines would be much in a safer position within a very short time period.

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