Академический Документы
Профессиональный Документы
Культура Документы
Introduction
Examination context
Topic List
1 Industries, companies, markets and
technologies
2 Porter's Five Forces approach
3 Product life cycles and international activities
4 Industry segments and strategic groups
Summary and Self-test
Answers to Self-test
Answers to Interactive questions
© The Institute of Chartered Accountants in England and Wales, March 2009 113
Business strategy
Introduction
Practical significance
The competitive pressures of the industry affect the level of profitability of the business as a whole. The
stage of the industry in its lifecycle affects cash flows and the competitive challenges the industry members
face.
Understanding how these stand and how they may develop within the strategic horizon is essential to a
management team that wishes to deliver competitive success.
Working context
The management approaches you will encounter will differ between firms according to the stage they are in
the industry lifecycle. The 'new economy' firm will base its financial decisions on the future potential it sees.
It will be scaling up for growth. The 'mature' firm will be seeking to extract value from what it owns already.
Syllabus links
This chapter covers some of the same objectives as Chapter 3 through the use of additional models. Some
of the models covered here will be familiar to you from section 6 of the Business and Finance syllabus.
114 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Examination content
Exam requirements
This chapter looks at techniques such as Porter's Five Forces and life cycle analysis. Applying the
appropriate models to the scenario in the exam will help you understand the wider context in which the
organisation is operating and the factors that are likely to impact on business performance.
© The Institute of Chartered Accountants in England and Wales, March 2009 115
Business strategy
Section overview
Strategic analysis requires management to consider the competitive forces in the organisation's
industry, although defining the industry can be difficult in practice.
Industries pass through life cycles that will affect current performance and prospects.
Definition
Industry: A group of organisations supplying a market offering similar products using similar technologies
to provide customer benefits.
The present section considers the application of life cycles at a higher level, that of the industry as a whole.
The stages of the industry life cycle are:
Introduction –newly invented product or service is made available for purchase
Growth –a period of rapid expansion of demand or activity as the industry finds a market
Maturity –a relatively stable period of time where there is little change in sales volumes year to year
but competition between firms intensifies
Decline –a falling off in activity levels as firms leave the industry and the industry ceases to exist or is
absorbed into some other industry.
SALES 1930s
VOLUME
Gramophone records
TIME
116 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
SALES 1960s
VOLUME
Gramophone records
Sheet music
1
/4 inch tapes
TIME
SALES 1980s
VOLUME
Gramophone records
8 track cassettes
Cassette tapes
Video cassettes (VCR)
TIME
SALES 2000s
VOLUME
DVD
(VCR)
MP3/MP4
Video on demand
TIME
© The Institute of Chartered Accountants in England and Wales, March 2009 117
Business strategy
Cash flow
Management must pursue different strategies at each stage:
Introduction stage
Support product despite poor current financial results
Review investment programme periodically in light of success of launch (e.g. delay or bring forward
capacity increases)
Monitor success of rival technologies and competitor products
118 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
© The Institute of Chartered Accountants in England and Wales, March 2009 119
Business strategy
Maturity phase
Maximise current financial returns from product
Leverage the existing customer database to gain additional incomes (e.g. mobile phone operators
seeking to earn from content management)
Engage in integration activities with rivals (e.g. mergers, mutual agreements on competition)
Ensure successor industries are ready for launch to pick up market
Decline phase
Evaluate exit barriers and identify the optimum time to leave the industry (e.g. leases ending, need for
renewal investment)
Seek potential exit strategy (e.g. buyer for business, firms willing to buy licenses etc)
Section overview
One of the most influential models used in strategic analysis to assess the state of competition in an
industry.
Long term profitability determined by the extent of competitive rivalry and pressure on an industry.
By considering the strength of each force and the implications for the organisation, management can
develop strategies to cope.
Like all models of analysis it has limitations particularly in industries that are rapidly changing.
Source: adapted from Porter M, Competitive Strategy (1980) New York: Free Press
Porter claims that the intensity of the fifth force, competitive rivalry, is driven by the intensity of the other
four forces. If these other forces are driving profitability down the firms in the industry will compete more
intensely to restore their own profits.
120 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Barrier to entry
© The Institute of Chartered Accountants in England and Wales, March 2009 121
Business strategy
Confectionery
The UK confectionery market is dominated by three organisations - Mars, Nestlé and Cadbury –each with
large shares of the market. Some smaller organisations survive, but there are significant barriers to entry,
which include:
(a) The minimum efficient size, particularly in the chocolate sector, needed to adequately compete
(b) The advertising expenditure needed to establish brand awareness in a market where advertising spend
is huge
(c) The need to penetrate the supermarket distribution network
(d) The experience of the main competitors in production and marketing.
Soft drinks
The traditional soft-drinks supplier Morgan is based in Southwold, a small town on the Suffolk coast. Within
the surrounding area it has held a near monopoly for years, with a sufficiently strong competitive position
to withstand the pressure from the large national manufacturers. This is not solely on account of the quality
of its product.
Drinks manufacturing is subject to considerable economies of scale in manufacture. However, distributing
drinks over large distances adds considerably to the cost, since most of the cargo is water. Morgan’ s base in
Southwold is sufficiently remote that the production cost disadvantage it suffers from its relatively small
scale is offset by its relatively low distribution costs. Major suppliers, based for example in London, find the
cost of transporting bottled and canned drinks all the way to the edge of Suffolk to be too high to make it
an attractive market for them.
Morgan is thus able to enjoy virtual market dominance in its own area, in spite of being a very small player
in the industry as a whole.
New e-commerce entrants into markets such as CDs and books (e.g. amazon.com) have threatened
traditional retailers. The Internet is good at providing information based services at low cost so new
entrants delivering information such as share prices have had a significant impact.
122 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
© The Institute of Chartered Accountants in England and Wales, March 2009 123
Business strategy
124 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
© The Institute of Chartered Accountants in England and Wales, March 2009 125
Business strategy
Rivalry is intensified when firms are competing for a greater market share
Market growth
in a total market where growth is slow or stagnant.
Cost structure High fixed costs may lead a company to compete on price, as in the short
run any contribution from sales is better than none at all.
Switching Suppliers will compete if buyers switch easily (e.g. Coke vs Pepsi).
Capacity A supplier might need to achieve a substantial increase in output capacity,
in order to obtain reductions in unit costs.
Uncertainty When one firm is not sure what another is up to, there is a tendency to
respond to the uncertainty by formulating a more competitive strategy.
Strategic importance If success is a prime strategic objective, firms will be likely to act very
competitively to meet their targets.
Exit barriers These make it difficult for an existing supplier to leave the industry.
Non-current (fixed) assets with a low break-up value (e.g. there may be
no other use for them, or they may be old)
The cost of redundancy payments to employees
If the firm is a division or subsidiary of a larger enterprise, the effect of
withdrawal on the other operations within the group
126 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
© The Institute of Chartered Accountants in England and Wales, March 2009 127
Business strategy
Positioning view and not resource-based: assumes profitability will be determined by dealing
better with the five forces i.e. outside-in. Individual business', strategic decision-makers should focus
on product-market strategy. This ignores competence building for innovation to enter new industries.
Assumes management are required to maximise shareholders' wealth: In some countries,
companies pursue market share objectives instead, as has been the case in Japan, traditionally, and
South Korea, where large groups, with easy access to credit (and in the 1980s in Japan almost zero
cost of capital) did not overtly pursue profit objectives.
Ignores potential for collaboration to raise profitability: The model underplays the potential
for collaboration (e.g. supply chain collaboration) to build long-term relationships with suppliers,
customers or distributors, joint ventures, to avoid substitutes, and so on.
Dynamic industries: The model is less useful in industries that are rapidly changing as it is difficult to
predict how the forces may change. Dynamic industries may require a greater focus on risk
management.
Primary industries
Competitive forces tend to be stronger in primary industries for the following reasons:
Undifferentiated products: this leads to competition upon price (commodity competition)
Large number of producers
High level of fixed or sunk costs (e.g. a crop in a field will rot if not sold so any price is better than
none)
Lack of alternative products available to produce (e.g. monoculture)
This reduces the levels of profit available to the producers.
Examples include commodities such as tea, coffee and cocoa, timber, vegetables and meat.
Firms engaged in primary industries may adopt the following strategies to raise their profits:
Form collective marketing bodies to improve bargaining strength against the buyers, e.g. farmer co-
operatives, Association of Oil Producing and Exporting Countries (OPEC)
Create brand differentiation for their products or for the produce of their country e.g. Appellation
d'origine contrôlée (French wine).
Seek to set up value-adding processing activities to improve the value of the commodity.
128 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Secondary industries
Profits will tend to be greater than in many primary industries due to:
The possibility of greater differentiation in processing and manufacture owing to the application of
design or branding
Lower number of producers
Potential to use capital equipment to make alternative products
However, in many secondary industries the power of the five forces is sufficient to reduce profitability to
bare long-run minimum levels. High exit barriers in the form of writing off capital equipment and paying
redundancy and other costs on the cessation of business may cause firms to continue in loss-making
industries for many years.
Tertiary industries
In some tertiary industries high degrees of differentiation allow high profitability. Examples include
accounting and business services, football and entertainment and some retailing.
Other tertiary industries feature intense competition and low profitability, e.g. logistics and parcel delivery,
office cleaning, call centre services.
© The Institute of Chartered Accountants in England and Wales, March 2009 129
Business strategy
Even the biggest manufacturers rely on the supermarkets to get their products to the consumer. And to do
that they have to agree forward contracts with the retailers, whose logistics systems demand tight
specifications, delivery times and margins.
These corporations now divide the world into three segments: the rich economies of western Europe and
North America; the rapidly catching-up economies such as Thailand and Hungary; and the developing world
markets such as India, Brazil and China. Again, Tesco provides a useful illustration of this global push. It is
organised into three divisions: UK and Ireland; central Europe; and the Far East.'
Source: Guardian Unlimited website
Section overview
Global firms recognise that markets develop at different rates.
These differences in stage of development mean that products can be managed differently across the
world.
International business must consider many markets simultaneously, with a view to implementing a global
introduction and manufacture. The financial returns to an investment may depend on the roll-out of this
strategy.
130 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Solution
The product life cycle for a film can be characterised as:
Introduction: Premiere and advance screenings
Growth: General release to major cinemas
Maturity: DVD release
Scheduled television programming
Sequels and prequels
Declines: Sold as multi-package DVD or to television stations.
The international product life cycle for Hollywood films has tended to be
Phase I – to US Market
Phase 2 – to other Anglophone countries (e.g. UK, Eire, Australia)
Phase 3 – dubbed for non-Anglophone countries for mass release
© The Institute of Chartered Accountants in England and Wales, March 2009 131
Business strategy
Phase 3. Overseas producers compete in export markets. The costs of the UK producers
begin to fall as they gain economies of scale and experience. They may also enjoy lower costs of
labour, materials etc than the US firms. The UK firms now start to compete with the US producers in
third-party export markets such as, say, Greece or Brazil.
Phase 4. Overseas producers compete in the firm's domestic market. The UK firms become
so competitive, due to their lower production costs that they start to compete with the US firms in
the US domestic market. The cycle is now complete.
Section overview
Returning to concepts of an industry it is possible to see segments or strategic groups within the
same industry.
Competitive strategy should be based on choosing the right segments for the organisation to operate
in, and achieving success in each chosen segment by defending the firm's position there.
132 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
© The Institute of Chartered Accountants in England and Wales, March 2009 133
Business strategy
134 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Level of economic For example, the lack of a fixed line telecommunications network in
development, Africa may encourage take-up of mobile telecommunications.
infrastructure and so on.
Cultural similarities (e.g. It is easy to overestimate the similarities between two countries that
for intellectual property, might be assumed because they speak the same language. For
common language). example, despite the common use of English, there are distinct
cultural differences between the US and the UK.
Member of economic Economic groupings such as the EU have tariff barriers for some
groupings (e.g. a strategy external goods. They may have common product standards which
for the EU). must be adhered to.
Similar market or This suggests similar marketing mixes may be appropriate to more
regulatory structures. than ones market. American credit card companies have expanded
in the UK because UK consumers use credit cards. German
consumers tend not to use credit cards as frequently.
Inter-market timing Certain markets have similar demand patterns for similar goods but
differences: life cycles. that one leads and the other lags. For example, it is assumed that
Internet penetration will rise in the developed world, but that the
US will lead, and other countries will follow as innovations spread.
If countries are deemed to be similar, then it may be possible to use one country to 'predict' the behaviour
of another.
© The Institute of Chartered Accountants in England and Wales, March 2009 135
Business strategy
Summary
136 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Self-test
Answer the following questions.
1 Mr Mavers runs a small newspaper and sweet shop in the centre of a large city. Will his customers
exert a high or low bargaining power over him? Justify your answer.
2 'Large companies often exert a high bargaining power over their suppliers.' What type of suppliers will
the following have?
(a) A large, mid-price chain of clothes shops
(b) A large top division football club.
Discuss the quotation above in the context of these two businesses.
3 'Audit fees for Bangladesh companies have fallen by 20% in real terms over the last ten years.' Given
the intensity of competition within the industry, why do accountancy firms not withdraw from audit
and focus their efforts instead on more profitable areas of work?
4 Horsley Foods Inc
Horsley Foods Inc was incorporated in 1891 and is currently established as a leading producer,
distributor and retailer of foodstuffs in the USA. It produces its own chocolate which is a brand leader
in the USA and recently it has shown interest in expanding its activity to Britain. The project is still
very much at the drawing-board stage and you have been engaged as a management consultant to
assist in the assessment of its viability and the construction of a strategic plan to achieve its objective.
The chairman's view
Your initial interview with the chairman, Hank Langford, took place two months ago. The chairman
was optimistic about the venture as the following summary of his comments shows. 'We're a big
player in the US but you can't stand still in this game. We've got to spread our wings and I want to see
us playing around the globe. Europe is our first target and establishing in Britain gets us our foot in the
door with the single European Market opening the way to the rest.
Our big strength is our chocolate –a lot of our success in the US is based on cracking the chocolate
market there. We sell all sorts of branded chocolates. And your big vice is chocolate! Did you know
that you Brits are the second largest consumers of chocolate in Europe, behind the Swiss? Last year
you ate 8.8 kg per head.
So taking our chocolates into Britain as the first step makes strategic sense.' Prior to writing your
preliminary report you undertake some investigation into the nature of the UK chocolate market.
The products of the chocolate industry
The UK chocolate industry produces three main categories of chocolate.
'Blocks' which are generally moulded blocks of chocolate with or without any additional
ingredients. These products are sold in standard sizes and are distributed mainly through grocery
outlets.
'Countlines' which are chocolate products sold by count rather than by weight, e.g. Snickers,
Kit-Kat and Smarties. These, unlike block chocolates, have a wide range of products which are
distinct from each other in size, shape and weight, tend to have a strong brand image and are
distributed mainly through non-grocery outlets such as newsagents and kiosks.
'Boxed chocolates' which are individually branded products, such as Black Magic, and are
mostly sold as gifts, about 80% in holiday periods such as Christmas and Easter. During these
periods they are mostly sold through grocery outlets, while over the rest of the year sales are
mainly through non-grocery outlets.
© The Institute of Chartered Accountants in England and Wales, March 2009 137
Business strategy
138 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
5 Lumber Ltd
Lumber is a Bangladesh-based juice-making company whose origins are in farming. It has well
established brand names and farming remains at the core of its business. Over the years the company
has expanded its operations in products closely associated with fruit juice and its by-product pectin.
The company has also expanded abroad by acquisition.
Structure
The company is structured along divisional lines of responsibility split into three key operating
sections.
The Bangladesh drinks division, responsible for the production and sale of fruit juice in
Bangladesh, and the wholesale distribution of other drinks in Bangladesh.
The Overseas drinks division, responsible for fruit juice operations in Asia, Australia and the
USA, and fruit juice and associated exports from Bangladesh.
The Pectin division, responsible for the citrus and apple pectin production and their sales in
Bangladesh and overseas, and also responsible for pectin operations in Brazil and the Bahamas.
Each division of the company has a divisional board with its own managing director, financial director
and other functional directors. The three divisions report to the main board of the company based in
Jamalpur.
The company is an independent drinks company with more than half the equity controlled by the
Lumber family. Lumber Ltd is a firm advocate of industrial participation and has a central corporate
aim 'the satisfaction of the needs of the shareholders, customers and employees'. The stated strategic
aim of the group is to achieve sustained growth through the progressive development of the business
and its brands, and to maintain leadership in all of its key activities. A further aim is to stay
independent from the large drinks groups that dominate the market. Lumber believes that success can
only be achieved if every employee understands and supports the objectives that the company strives
to achieve, and through consultation with its employees it hopes to build co-operative team spirit.
The Bangladesh drinks division
In order to halt a recent decline in the sales of fruit juice, the company has launched a number of new
brands, including “Special Quality”for the premium end of the market catering for home consumption,
and Woodbow 1080, a premium brand to be distributed through the restaurant trade. Both of these
have been extensively supported by promotion and advertising. The restaurant trade in fruit juice is
believed to have reached its optimum level. Lumber still believes in the fruit juice market and has plans
to expand its extraction capacity in Jamalpur using more locally-grown fruit.
Soft drinks
Lumber has developed a range of soft drinks to cater for the Bangladesh market. Most of the Lumber
brands are in the premium sector and are based around apple juice. More recently Lumber has been
developing other juices to increase its range, orange and lemon being the two most important.
Carbonated and still juice markets are growing and Lumber has an agency in Bangladesh for the French
‘
Perrier’range of mineral waters and these brands play an important role in the Lumber business.
Wines, spirits and other drinks
The wines and spirits business made progress in 20X5/X6 after a slow start. The market is very
competitive and in some cases showing little sign of growth. Lumber is represented by agency
businesses in whisky, French brandy, French champagne and other liqueurs. Lumber is also the
marketing company for Domecq sherry. The sherry market showed a decline of 2 per cent last year
and margins are under severe pressure. Lumber imports a Caribbean beer under the brand Red Stripe.
This brand is slowly making progress, using Dhaka as the first area to be covered.
Requirement
As an outside management consultant, write a report to the managing director examining separately
the competitive nature of the fruit juice and 'other drinks' industries as faced by Lumber Ltd.
(20 marks)
© The Institute of Chartered Accountants in England and Wales, March 2009 139
Business strategy
140 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Answers to Self-test
© The Institute of Chartered Accountants in England and Wales, March 2009 141
Business strategy
142 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
© The Institute of Chartered Accountants in England and Wales, March 2009 143
Business strategy
5 Lumber Ltd
Report
To Managing director
From A Consultant
Date Today
Subject Lumber Ltd –Competitive position of drinks business
1 Terms of reference
As requested the following report analyses the competitive nature of the drinks industry. It
covers Lumber's relationships with suppliers, buyers and competitors, and the potential threats
from new entrants and substitute products.
2 Introduction
Within its drinks operations Lumber is involved in several products and markets. These can be
categorised as fruit juice, soft drinks and imported alcoholic drinks, for home and overseas sales.
This report will analyse the competitive nature of Lumber's industry, first within the fruit juice
market and then its other business activities.
3 Fruit juice operations
Fruit juice is Lumber's core business, the firm being involved in manufacture and distribution on
an international basis.
3.1 Suppliers
Industry profitability can be threatened by the presence of powerful suppliers. Although
little information is available on suppliers to the fruit juice business, the following points
should be noted.
Fruit growers in the Jamalpur region are likely to be the most important suppliers.
Suppliers are likely to be small in relation to Lumber Ltd.
Within the region, alternative sources of supply are likely to exist.
In conclusion, powerful suppliers are unlikely to prove a threat.
3.2 Buyers
Powerful buyers can also pressurise industry profit margins. The major buyers of Lumber's
fruit juice appear to be the Bangladesh restaurant trade, supermarkets and retail food
chains. Details on fruit juice sales overseas are sketchy but sales are likely to be made to
similar businesses. The following points should be noted.
Some purchasers may be much larger than Lumber.
Few switching costs exist.
Buyers' profit margins are likely to be low.
Backward integration by restaurant chains is possible.
There does appear to be a threat from powerful buyers. Lumber's major protection
here is the strength of its brand names, which could dissuade buyers from switching.
3.3 Substitutes
Fruit juice is a traditional product and substitutes could come in many forms. These include
the following.
Other soft drinks.
Home-made alternatives in periods of recession.
The recent decline in fruit juice sales is of concern and more details are required as to
whether this is a market trend, representing a switch away from the drinking of fruit juice. If
144 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
the switch is towards other alternative products Lumber has some protection due to its
other operations.
457
3.4 New entrants
New entrants to an industry can make that industry more competitive by price cutting,
promotional activities to build market share and bidding-up the costs of factors of
production. Barriers to entry to an industry protect against new entrants. Barriers to entry
to fruit juice manufacturing and distribution include the following.
Economies of scale –Lumber believes it is operating at an optimal level in the
production of fruit juice; this could be high enough to deter new entrants.
Product differentiation –through its existing brand names.
Access to distribution channels –Lumber has established relationships with the
restaurant and retail trades; it is also building up a world-wide distribution network.
Whether these barriers would be sufficient to deter a new entrant is open to question. The
industry has a low technology level and capital requirements are likely to be small.
However, if fruit juice consumption is falling the existence of excess capacity might deter
new entrants because of the fear of a price war with existing producers.
3.5 Competitors
Little information is available on Lumber's competitors. However, the company appears
relatively small as compared to the large drinks groups that dominate the market. A
thorough analysis of other fruit juice manufacturers is therefore required. The following
points are worthy of note.
Decline in fruit juice sales is likely to increase competition.
Current advertising campaigns by Lumber and innovation in fruit juice production
could be a sign of increased competition.
4 Conclusion
The major potential threats to Lumber appear to come from
Suppliers of goods through agency agreements
The highly competitive nature of its markets
A decline in sales in several markets
The major advantages held by the firm are
Its brand name
Its established relationships with distribution channels
Its manufacturing capabilities
These factors should be considered in designing a strategy for the drinks business.
© The Institute of Chartered Accountants in England and Wales, March 2009 145
Business strategy
146 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
cars has been discovered but in the future, with the move towards green ideas, it may be
that petrol will be replaced as the fuel for cars.
(v) Supplier
The fact that Gizmo is supplied by only one company may cause future problems with
quality and price flexibility if the market price fluctuates.
(vi) Social attitudes
Consumers may turn towards public transport as being more environmentally friendly.
© The Institute of Chartered Accountants in England and Wales, March 2009 147
Business strategy
148 © The Institute of Chartered Accountants in England and Wales, March 2009
THE INDUSTRY AND MARKET ENVIRONMENT 4
Restoring profitability
Consolidation of airline industry to reduce capacity.
Operate alliances to rationalise competition and benefit from economies of scale (ground handling, fuel
purchase etc).
Oppose increasing take off and landing slots or greater competition.
Reduce fixed costs, e.g. by outsourcing, use of operating leases, better capacity planning.
Differentiate service to gain higher yield per passenger.
© The Institute of Chartered Accountants in England and Wales, March 2009 149
Business strategy
150 © The Institute of Chartered Accountants in England and Wales, March 2009