Harvard Case - Royal Bhutan Airlines - Drukair
"Royal Bhutan Airlines - Drukair" Harvard business case study is written by Ron Mulholland. It deals with the challenges in the field of Marketing. The case study is 14 page(s) long and it was first published on : Aug 10, 2012
At Fern Fort University, we recommend Drukair pursue a strategic growth strategy focused on leveraging its unique brand positioning and expanding its international presence. This strategy involves a multi-pronged approach encompassing targeted market segmentation, innovative product development, strategic partnerships, and a robust digital marketing campaign. By implementing these recommendations, Drukair can achieve sustainable growth, enhance brand equity, and solidify its position as a leading airline in the South Asian market.
2. Background
Drukair, the national airline of Bhutan, faces a challenging environment. Despite its unique brand identity and strong cultural ties, the airline struggles with limited resources, intense competition, and a small domestic market. The case study highlights Drukair's desire to expand its international presence, increase revenue, and improve its financial performance. The main protagonist of the case is the airline's management team, seeking a strategic roadmap to navigate the challenges of growth and international expansion.
3. Analysis of the Case Study
To analyze Drukair's situation, we employ a combination of frameworks:
- SWOT Analysis:
- Strengths: Unique brand identity, strong cultural ties, government support, access to a growing tourism market, and potential for niche routes.
- Weaknesses: Limited resources, small domestic market, lack of international experience, outdated fleet, and limited marketing budget.
- Opportunities: Growing tourism in Bhutan, expansion into new markets, strategic partnerships, and leveraging technology for operational efficiency.
- Threats: Intense competition from established airlines, rising fuel costs, economic instability, and potential regulatory hurdles.
- PESTEL Analysis:
- Political: Bhutan's stable political environment and government support for Drukair present opportunities.
- Economic: The global economic slowdown and rising fuel prices pose challenges.
- Social: Growing interest in sustainable tourism and cultural experiences creates a niche market for Drukair.
- Technological: Advancements in aircraft technology and digital marketing offer opportunities for efficiency and market reach.
- Environmental: Drukair's commitment to sustainability aligns with global trends.
- Legal: Navigating international aviation regulations and competition laws is crucial for expansion.
- Porter's Five Forces:
- Threat of New Entrants: High barriers to entry due to regulatory requirements and capital investment.
- Bargaining Power of Suppliers: Limited bargaining power due to the global nature of the aviation industry.
- Bargaining Power of Buyers: High bargaining power due to the availability of alternative airlines and price sensitivity.
- Threat of Substitutes: Limited substitutes for air travel, but alternative modes of transportation exist.
- Rivalry Among Existing Competitors: High rivalry due to the presence of established airlines with extensive networks and resources.
4. Recommendations
To achieve sustainable growth, Drukair should implement the following recommendations:
1. Targeted Market Segmentation:
- Segment 1: Luxury Travelers - Focus on high-spending tourists seeking unique cultural experiences and sustainable travel.
- Segment 2: Adventure Travelers - Target travelers interested in trekking, hiking, and exploring Bhutan's natural beauty.
- Segment 3: Business Travelers - Develop business-class offerings and cater to the needs of corporate clients.
2. Innovative Product Development:
- Develop niche routes: Offer unique flight itineraries connecting Bhutan to emerging markets in Southeast Asia and the Middle East.
- Enhance onboard experience: Introduce culturally-themed amenities, inflight entertainment, and local cuisine to enhance the travel experience.
- Partner with local businesses: Collaborate with tour operators, hotels, and other businesses to offer integrated travel packages.
3. Strategic Partnerships:
- Code-sharing agreements: Partner with established airlines to expand reach and offer seamless connections.
- Joint marketing initiatives: Collaborate with tourism boards and travel agencies to promote Bhutan as a destination.
- Technology partnerships: Partner with travel technology companies to improve online booking systems and customer service.
4. Robust Digital Marketing Campaign:
- Develop a strong online presence: Create a user-friendly website, optimize for search engines, and leverage social media platforms.
- Content marketing: Develop engaging content showcasing Bhutan's culture, landscapes, and unique travel experiences.
- Targeted advertising: Utilize digital advertising platforms to reach specific target markets.
- Influencer marketing: Partner with travel bloggers and influencers to promote Drukair and Bhutan as a destination.
5. Pricing Strategy:
- Value-based pricing: Focus on providing a premium experience and justifying higher prices through unique offerings.
- Dynamic pricing: Utilize data analytics to adjust prices based on demand and competition.
- Promotional offers: Offer limited-time discounts and special packages to attract new customers.
6. Operational Efficiency:
- Fleet modernization: Invest in fuel-efficient aircraft to reduce operating costs and enhance sustainability.
- Optimize route network: Analyze data to identify profitable routes and optimize flight schedules.
- Implement technology solutions: Leverage AI and machine learning to automate processes, improve efficiency, and enhance customer service.
7. Brand Management:
- Strengthen brand positioning: Reinforce Drukair's unique brand identity as the 'Airline of Happiness' and emphasize its commitment to sustainable tourism.
- Develop a strong brand voice: Create consistent messaging across all marketing channels.
- Build brand loyalty: Implement customer loyalty programs and reward frequent flyers.
5. Basis of Recommendations
These recommendations consider the following factors:
- Core competencies and consistency with mission: Building on Drukair's unique brand identity, cultural ties, and government support.
- External customers and internal clients: Meeting the needs of diverse traveler segments while motivating employees and stakeholders.
- Competitors: Differentiating Drukair from established airlines by offering unique experiences and leveraging niche markets.
- Attractiveness ' quantitative measures: Focusing on profitability, revenue growth, and market share expansion.
6. Conclusion
By implementing these recommendations, Drukair can achieve sustainable growth, solidify its position as a leading airline in the South Asian market, and enhance its brand equity. The airline's unique brand positioning, coupled with a strategic focus on niche markets, innovative product development, and a robust digital marketing campaign, will enable Drukair to navigate the challenges of competition and achieve its growth objectives.
7. Discussion
Alternative options include a more conservative approach focused solely on domestic market expansion or a more aggressive strategy involving mergers and acquisitions. However, these options carry higher risks and may not be feasible given Drukair's current resources and capabilities.
Key assumptions include the continued growth of tourism in Bhutan, the availability of necessary funding for investment, and the successful implementation of marketing and operational strategies.
8. Next Steps
Drukair should implement these recommendations in a phased approach:
Phase 1 (Year 1):
- Conduct market research to validate target market segments.
- Develop a comprehensive digital marketing strategy.
- Implement a pilot program for niche routes and new product offerings.
- Initiate discussions with potential partners for code-sharing agreements.
Phase 2 (Year 2):
- Launch the digital marketing campaign and expand online presence.
- Introduce new product offerings and expand the route network.
- Finalize strategic partnerships and implement joint marketing initiatives.
Phase 3 (Year 3):
- Evaluate the success of the strategy and make adjustments as needed.
- Explore opportunities for fleet modernization and operational efficiency improvements.
- Continue to invest in brand management and customer relationship management.
By following this roadmap, Drukair can achieve its growth objectives and solidify its position as a leading player in the South Asian aviation market.
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Case Description
The chief executive officer of Royal Bhutan Airlines (Drukair) is concerned about growth and the seasonality of demand for Bhutan's national airline. The Kingdom of Bhutan, with a population of approximately 700,000, is located east of Nepal between India and China (Tibet). It has recently embarked on a program of modernization, including a move to democracy and promotion of tourism. The tourism initiative is described as "high value, low volume," meaning that tourists must contract with a local tourist operator and pay minimum daily tariffs. Drukair has witnessed a steady growth in passengers, which is correlated closely with tourist visits, mostly from the West and Japan. Tourist tickets are booked by in-country tour operators; there are no Internet bookings at the time of the case.The CEO is wondering what can be done to improve overall business. He is considering interlining, the practice of joining with other airlines, in order to give passengers the opportunity to book tickets from their home countries. Marketing for growth is also a concern, and as Drukair is the only carrier in Bhutan, the CEO wonders if he should be promoting tourism in the country as part of his marketing plan.
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