Garuda Indonesia

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       University of the East-Caloocan

                             Samson Road, Caloocan City, 1412 Metro Manila

Case Analysis:

GARUDA INDONESIA

Santos, Maricar                                                      Prof. Shyla Atienza        

Tengson, Camille                    BMG 114 / BSAct 4H / TTh 3 - 4:30 pm

Tria, Angelica

Viñas, Christine Grace

Yumul, Eliza Ruth

1. Statement of the Problem

• The continuation of the predecessor’s policies or the implementation of a new set of policies

1. Statement of Objectives

1. To have a better understanding about the power and relationships of those who comprise the airline company.
2. To analyze the internal and external factors that has an impact on the success of Garuda Indonesia in improving its performance.
3. To rebuild its reputation among its customers in the industry

1. Areas of Consideration (SWOT Analysis)

• Strengths

1. Various kinds of aircrafts accommodate the needs of passengers according to demand, landing trip condition, distance and flight operation.
2. Desire for business expansion and growth
3. Shorter flying time due to more direct routes
4. Successor’s experience acquired during his involvement from the predecessor’s management team

• Weaknesses

1. Poor problem solving that lead to financial loss
2. Low quality of services offered to customers due to budgetary constraints
3. Garuda lacked the system that could produce friendliness and courtesy to passengers on the part of the cabin attendants.
4. Overall system weakness

• Opportunities

1. Monopolization in the domestic market
2. Increased demand for air transportation due to the geographic structure of Indonesia.
3. Indonesia's increasing attractiveness as a destination

• Threats

1.  Unanticipated events within Indonesia, such as ruination in telecommunication lines, electrical power stoppages, etc.
2. Competitors offering quality services at a lower cost
3. Interference of government in running the company
4. Bad publicity or bad reputation, as it is known to be on the least among the Asia’s popular airlines in reference to its services

1. Alternative Courses of Action

1. Continuation of the predecessor’s policies

Advantages:

• Persistent financial assistance from the government
• The company continues to earn profit
• Cooperation with other int'l airlines to better utilize the training centers

Disadvantages:

• Involvement of the government
• It will take time to recover all the costs incurred for the training centers
• Expansions in domestic flights have been quite neglected

1. Modify the old and adopt new effective policies

Advantages:

• May lead to effective operation management
• Probable signs of business recovery
• Improvement in the services offered
• Renew the image of the Garuda Indonesia.

Disadvantages:

• Authorization from the government
• Time constraints in implementation and evaluation whether the policy has been effective
• New and additional costs to be incurred

1. Transition from state-owned to privately owned enterprise

Advantages:

• Planning and the decision-making will be easier compared those with government intervention

• Full capacity to manage business risk and problem solving
• Independence may attract potential investors
• Probable fund source

Disadvantages:

• Change in organizational structure
• No benefits to receive from the government
• Intense competition in the market
• Time to raise enough funds

1. Selection of Alternatives

        All alternative courses of action mentioned above are effective means to solve the central problem but the transition from state-owned to privately owned enterprise is the action which is most appropriate for the company to build its own operation. This will aid the acquisition of capital needed for the improvement of the airline’s operations. This will indicate independence and will enhance working spirit in managing its own operation. Controlling its own operations will push the company to reach success and will boost its competence in the industry. Its own effective operation management will be the best action to have a good status in the market.

1. Conclusion

        Assessing the alternatives furthermore, the best course of action is the, transition from state-owned to privately owned enterprise, because of the following reasons: First, it gives more assurance than the other alternatives. In implementing new policies there might be a slow growth rate and ineffective implementation that could result to low operational output. Implementing new policies requires testing before being fully implemented which may take a long period. In addition, in implementing the policies from previous administration, it may not be as effective as before since there are new challenges being faced by the airline. Moreover, in case of amending such, the effects it will bring to the operation might not be effective. Second, in privatizing the airline company it will exceed its potential in the airline industry without anxiety about the interference of the government. Its main objective will be about its own growth. They can now enforce decisions for itself for the advancement of the company. Third, implementation of the culture of good corporate governance will be there, indicates that the company is not only a profit seeking enterprise but building itself to be an ethically responsible company. Most importantly, the business will have a room for improvement to its system and services that will be the reason to survive in the increasingly fierce competition in the industry.