Table of Contents

1. Introduction.......................................................................................................................................1
2. Analysis of External and Internal Environment.............................................................................2
2.1. PESTEL analysis.......................................................................................................................2
2.1.1. Political Environment........................................................................................................2
2.1.2. Economic Environment.....................................................................................................2
2.1.3. Technological Environment..............................................................................................2
2.1.4. Legal Environment............................................................................................................2
2.1.5. Socio-cultural Environment..............................................................................................3
2.2. Porter's Five Force Model.........................................................................................................3
2.2.1. Threats of New Entry........................................................................................................3
2.2.2. Rivalry within the industry:..............................................................................................3
2.2.3. Supplier Power...................................................................................................................4
2.2.4. Bargaining Power of Buyers.............................................................................................4
2.2.5. Threats of Substitutes........................................................................................................4
3. Analysis of Internal Environment....................................................................................................4
3.1. Value Chain Analysis.................................................................................................................4
3.1.1. Primary Activities:.............................................................................................................5
3.1.2. Supportive Activities..........................................................................................................6
3.2. Core Competencies in Nepal Airline Corporation..................................................................7
3.3. Core competencies to Sustain Competitive Advantages.........................................................9
4. TOWS Matrix....................................................................................................................................9
5. Conclusion........................................................................................................................................12
References................................................................................................................................................13
 1. Introduction
The Royal Nepal Airlines Company (RNAC) was formerly known as Created by the enactment
of the Nepal Airlines Company on 1 July 1958 act 2019 with the aim of offering air travel
services with one Douglas DC-3 to be the first airline in Nepal. It is also built as the flagship
Airways of Nepal and is a sign of heritage to the region. It is an airway corporation owned by the
nation. It has been the most open airline in the nation for over 50 years of serving the public. Its
head office is in Kantipath, Kathmandu, and its main base is Tribhuvan International Airport
(TIA), Kathmandu, in the Nepal Airlines Corporation (NAC) Building. Its services were initially
limited to Simara, Pokhara, Biratnagar and cities such as Patna, Calcutta and Delhi in India.

Pilatus Porter STOL aircraft joined the fleet in 1961 and 12-seater aircraft were added in 1963.
Chinese harvesters Fong Shou-2 were brought into service, opening up more distant roads from
the empire. Nepal has launched the Fokker Friendship F027 into the age of turboprops. It
transported 44 passengers in service from 1966 to 1970 and operated to NAC's international
destinations. In those days, a lot of pride was attached to travelling in a Fokker. In 1970, RNAC
acquired the first Hawker Siddley HS-748, followed by Twin Otters in 1971. The 44-seater
aircraft were used in domestic and foreign industries.

With the induction of a Boeing 727 in 1972, the country became the proud possessor of a jet
aircraft carrier which remained in service until 1993. The first of the two B757s from Nepal
Airlines arrived in 1987. They helped Nepal to make its presence known on the international
aviation scene by flying long-haul routes and showing the national flag at world airports. Four
medium-haul jets operating to 12 international destinations and seven turboprops serving 20
domestic airfields were run by RNAC in 1990. The trajectory of an airline that used to be
considered one of the best in South Asia closely correlates with the recent history of the region.
Soon after the return of independence in 1990, the slide started when politicians interfered with
kickback management and bribery.

The airlines' names have been changed from Royal Nepal Airlines to Nepal Airlines in 2006
after the cut down of the authority of the king by the parliament. NAC altered its livery in 2013.
Introduced in 1987, red and blue bars on the tail of the aircraft and the name Nepal Airlines in
blue feature the previous livery. It also depicts the ethnicity of Nepal, faith, national color and

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the Hindu Deity. Akash Bhairav's icon, a Hindu god known as the guardian of the heavens, has
remained unchanged and other designs have been altered. The change in livery was meant to
send a message of change and, of course, to enhance our services in the midst of increasing
derogatory messages regarding the NAC.[ CITATION Kum16 \l 1033 ]

2. Analysis of External and Internal Environment

2.1. PESTEL analysis
In their market setting, every organization survives. The transition in policy and tactics will
contribute to some change in the macro-environment variables. Nepal Airlines will face severe
difficulties in an insecure country like Nepal. PESTEL can be used to predict potential future
political, socio-cultural, financial, legal and technical developments and to propose that Nepal
Airlines identify key strategic factors for reform. The following diagram usually acts as a market
climate.[ CITATION Ger08 \l 1033 ]

2.1.1. Political Environment: For Nepal Airlines, the change in the market climate can be
very deadly. The political climate in the airline industry is not stable, resulting in
instability. Bad governance and corruption within the company will impact the
strategy and activity of the airline.
2.1.2. Economic Environment: While Nepal's economy is constant, the average revenue is
growing enough that airlines can have good chances in the future, but fuel costs are
rising, which can be expensive for passengers.
2.1.3. Technological Environment: Proper safety controls at large airports and a shortage
of advanced airport infrastructure may be a major concern. Another international
airport in Nepal is increasingly in demand, which could be good news for Nepal
Airlines that it may prepare to increase its service.
2.1.4. Legal Environment: As the Nepal government does not favor the national carrier,
Nepal airlines face severe hurdles and foreign airlines are attracted. While the
government of Nepal supports the domestic sector by lowering taxes, for a long time
there has been no change in airline law because the government of Nepal has no
interest in change. As more and more people work in Arab countries, it is difficult for

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 Nepal's government to purchase airplanes. He has to call for foreign aid and
supporters from time to time. The aircraft sector itself has been blamed and
blacklisted in the EU for bad safety records.
2.1.5. Socio-cultural Environment: Since the geographical position of Nepal is not ideal
for secure airports, aircraft safety checks are not carried out over time. Nepalese are
getting more familiar with air travel with the development of the air transport
industry, and use it more frequently than ever, as can be seen in the continuous
growth of domestic air transport over the last 5 years.

2.2. Porter's Five Force Model

The model of the five forces was invented by M. Porter is a commonly used framework for
analyzing an industry's competitive environment. Porter stated here that there are five driving
forces that are relevant to influencing the position of a company in the industry. It evaluates the
industry's attractiveness and also figures out the company's position within the industry. In
addition, it also points out whether or not the industry is attractive and helps the company decide
whether it will compete in the market.

2.2.1. Threats of New Entry: This applies to those prospective businesses that have not
entered the market but can do so if they want to. Existing companies try to discourage
potential entrants from entering the market as more rivals would be able to enter the
market. It is more difficult for the current players to enjoy it. The risk of entry
depends on the barriers to entry and the attractiveness of the sector.

Internationally, new airliners are coming to the market in Nepal. Turkish Airlines and
Srilankan Airlines joined the company recently. This boosts Nepal Airlines'
competition. In order to gain market share, Turkey has already offered reduced ticket
prices.

2.2.2. Rivalry within the industry: Owing to the fact that there are so many service
providers, the rivalry within the airline industry is very intense. There are many
airlines that travel the same route and fight for the same clients. Airline demand in

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 Nepal is increasing. There has always been intense rivalry within the market. For
Nepal Airlines to stay competitive, the shortage of more planes is a big concern.
2.2.3. Supplier Power: Power in the type of price and quality of materials remains with the
suppliers. Suppliers may lift the price of their products and services or lower the
quality. The airline industry primarily has two aircraft suppliers, namely Boeing and
Airbus which is highly costly for Nepal. Owing to the fact that there are tons of
airlines and the suppliers can only generate so much, the market for their planes is
very strong. The influence of suppliers is also very strong and they have a tight hold
on the market. In addition, the price of oil is one of the main cost drivers for all of the
following a cost focus approach.
2.2.4. Bargaining Power of Buyers: The bargaining power of customers is strong in the
airline industry and is rising when there are loads of airlines to choose from and there
are hardly any switching costs. In addition, there are several travel agencies, and even
intermediaries will now purchase tickets online for passengers. They do not
necessarily have to stick to one carrier, therefore, and this enhances the customers'
control which a major challenge for NAC.
2.2.5. Threats of Substitutes: This threat has nothing to do with the sector in which a
company is active; it comes from outside the industry. Although there are not many
substitutes for international flights, it is still possible to travel to India by bus or train.
The choice for domestic consumers is to travel by coach, bus or taxi. [ CITATION
Kha15 \l 1033 ]

3. Analysis of Internal Environment

3.1. Value Chain Analysis: Examination of the supply chain describes the level
of actions conducted at various stages to produce a good (Porter, 1980). Like every
corporate organization, there are also numerous practices in the airline sector. Its
operation level is also served by Nepal airlines. It has reduced its expenditures by using a
single fleet of aircraft. The value chain measurement model of the porter is seen below:

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Source: http://www.dissertationhomework.com/essays/aviation/nepal-airlines

3.1.1. Primary Activities: The VC consists of primary activities which explicitly add value
to the final product and support activities which indirectly add value. They can be
divided into five major areas: logistics inbound, activities, logistics outbound,
marketing and distribution, and support. Both of these main tasks is correlated with
support activities that help enhance their performance or effectiveness. The list of
primary activity are follows:
 Inbound Logistic: Refers to materials purchased from the manufacturers of the
company and to be used for the production of the finished product.
The compilation of correct details from its vendors by Nepal Airlines. Key tasks also
include managing adequate supplies of commodities.

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  Operations: The primary activity of the aviation industry is service provision. The
regular running of trains, the distribution of check-in services to passengers, the
administration of ticket reservations, and customer services are a set of activities.
 Outbound Activities: Warehousing and distribution and sending ready goods to
consumers are all about outbound operations. Nepal Airlines offers exemplary
passenger support, hotel booking and baggage service.
NAC mainly uses its online operations as its ticketing process is entirely online and
customers can get their ticket books online and can even print their boarding card from
their homes, as customers are the company's key preference, NAC uses general electric
engine for their customer protection.
 Sales and Marketing: Marketing must ensure that the item is geared at the right category
of consumers. The marketing mix is used to create an optimal approach, and any strategic
advantage is easily conveyed by the advertising mix to the target audience.
Nepalese airlines do marketing series. Any examples of this are TV advertisements and
newspapers. Few charities and educational programs, such as marketing, are still funded.
It gives promotion to regular clients and student discounts from time to time.
 Service: Now it is a difficult job to keep a customer for a day, so this Nepal airline
provides the customer with numerous types of facilities, such as if the flight is delayed by
more than three hours, so a e-gift voucher is provided, passengers can also pre-book their
checked luggage at a cheaper cost, and customers can also book hotels, hostels, car rental
and medical services online.

3.1.2. Supportive Activities: Although primary activities explicitly add value to the
manufacturing process, they are not inherently more important than support activities.
Competitive advantage today comes largely from technical advances or developments
in business models or processes.
 Firm Infrastructure: Each company wants to ensure that its budgets, legal framework
and management structure perform effectively and continue to advance the
organization. Inefficient infrastructure could cost money, effect the credibility of the
business and even leave it vulnerable to fines and penalties.

6
 It supports the general structure of an organization, its culture and control systems. It
has high expert people in control management and has effective communication.
 Human Resource Management: The company would have to recruit, educate and
cultivate the best employees for the company to be successful. If they are to stick with
the company and contribute value, workers would have to be encouraged and paid the
'market rate'. Workers are the strategic edge in the business sector, such as the airline
industry, as consumers purchase a service delivered by employees; there is no
commodity for the consumer to take away from them.
To minimize operating expenses, Nepal Airlines hires local and specialist employees.
It also trains employees, pilots and all personnel and improves their careers.
 Technology Development: In today's technologically oriented world, the use of
technology to achieve a competitive edge is very significant. Technology can be used
in many areas, including manufacturing to minimize prices, thereby adding
profitability, innovation and development to produce new goods and the internet so
that consumers have access to the business 24/7.
Nepal Airlines is not investing in research and development and has no modified
control systems. It must spend more in the upgrade of modern technology and carry
out more aircraft mechanical tests.
 Procurement: This department must import the company's raw materials to get the
best price for doing so. The sourcing challenge is to deliver the highest possible
product available (on the market) for their budget.
"Recently, NAC grounded all six Chinese aircraft it had been using for domestic
flights, citing a major loss. Consequently, only two Twin Otters are left in the
national flag carrier's fleet, which is not necessary to fly domestic flights." [ CITATION
Hin20 \l 1033 ]

3.2. Core Competencies in Nepal Airline Corporation

Core competency is the defining strength of an enterprise, offering the framework on which the
corporation can expand, exploit new opportunities and provide value to consumers. The core

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competency of a corporation, whether current rivals or new entries in its market, is not readily
repeated by other organizations.

A business should hold more than one core competency. Core competencies, which are often
referred to as core skills or distinctive competencies, help companies build a sustainable
competitive edge.[ CITATION Marnd \l 1033 ]

 Leadership: Leadership is important for guiding the members of the team to accomplish
corporate goals. Collective leadership is the executive body that decides and provides
direction for the general management of NAC, that is. the board of directors. The
leadership is to be done by the competent manager or the person who has airline business
experience. The aviation industry is dynamic and delicate. When taking the call, the
public sector executive board such as NAC should be farsighted so that the shifting
situation can be treated tactfully.
 Entrepreneurial Marketing:" Entrepreneurial marketing is a spirit, an orientation, as
well as a process of searching for opportunities and beginning and growing projects that
generate perceived consumer value through encounters, especially through the use of
ingenuity, imagination, sales, business immersion, networking or versatility." [ CITATION
Ger10 \l 1033 ]
Reliability, punctuality, service efficiency, consumer strength and networking are the
established aspects of entrepreneurial marketing that have been introduced in NAC.
These variables are. NAC's entrepreneurial marketing efforts are the advertising method,
price discrimination, coordinated contact, constructive strategy, risk minimization,
reputation of national flag carriers and resource leverage.
NAC has practiced numerous advertising schemes such as price discounting, seasonal
sales and image of national flag carrier. Casual and integrated contact, social network via
face-book and twitter. It takes a constructive approach by visiting the sales agents and
holding daily meetings with them to sell the seats.
 Motivated Employees: One of the most important core competencies in Nepal airline is
motivated employee. NAC has been providing preparation, incentives and gratitude
appropriately to inspire the workers.

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  Availability of Aircrafts: At present, NAC has 4 aircraft for international flights,
including two Boeings (757) and two Airbuses (320). Two airbuses have been purchased
in recent years after a delay, ensuring 98 percent reliability and 99 percent punctuality on
the flight. As they were purchased 30 years ago, older aircraft (Boeings) have high
maintenance costs. Repairing parts must be shipped from overseas and will take 2-3 days
to finish. Indigo, a private Indian airline, puts the order at a period of 100 aircraft. 15-20
aircraft are purchased last year by Thai Airways. Singapore Airlines has been flying
aircraft for 5 years to minimize their maintenance costs. Businesses of airlines prosper
from flying the aircraft. NAC does not have an adequate number of aircraft, which is an
aviation industry requirement. It's not fair to say that the walk ahead tightens both thighs. [
CITATION Shr19 \l 1033 ]  

3.3. Core competencies to Sustain Competitive Advantages

According to Porter (1980, 1985), some of the basic choices presented by many firms are the
scope of the market in which the company will serve and how the company will perform in the
chosen markets. With reduced costs or increased sales, companies may gain greater profitability
in market competition. By separating their goods and services from those of rivals and by low
prices, competitive advantage can be gained. Instead of concentrating on a small target market,
companies such as Nepal Airlines should target their goods with a broad aim. (1980-Porter)

Looking at Nepal Airlines, the company's main market is the Middle East and Asian nations. It
demonstrates that in order to compete in the industry and make more money, the organization
needs to extend its service globally. That said, Nepal Airlines must have a well-structured plan
that leaves the business with a good competitive position in this process. There are two ways to
succeed in a chosen market; Cost Base Superiority and Differentiation, which are their rivals.
This approach implies that to charge higher prices or lower the quality lower the price, business
must have better quality of their goods. Companies in a competent industry cannot have inferior
quality goods and higher costs.

It is up to the board of directors to determine which business is going forward. Companies such
as Nepal Airlines would find it more difficult for more entrants in the industry to go through the
Differentiation Approach. Compared to other carriers, they don't have enough resources to

9
provide better service, and it would also be difficult to create exclusive offerings. There for cost
base leadership would be available to Nepal airlines.

4. TOWS Matrix
An audit of external risks and opportunities starts with TOWS Matrix. Such scrutiny offers a
consistent picture and tends to implement long-term policies. After that, a business's internal
strengths and weaknesses are taken into account. The internal research is intertwined with
external analysis in the next step to formulate a plan.

TOWS Research goes well beyond traditional SWOT Analysis and allows companies in the
ever-changing competitive environment to stay one step ahead. In the development of amazing
ideas in relation to fruitful marketing campaigns, decision-making, threat security, prospects,
declining risks, addressing vulnerabilities and knowledge of possible shortcomings, the TOWS
Matrix will also help.[ CITATION Oin19 \l 1033 ]

Internal Factors

Strength Weakness
 National Flag  Weak financial
External Carrier Nepal Condition
Factor  NAC has both  Mismanagement
domestic and  Lack of its own
international maintenance
operation
 Strong brand
representing
Nepal
 Value in the
mind of
customer
 Updated

10
 Technology

Opportunity Strength/Opportunity Weakness/Opportunity

 Large  The new  They should search
International technology gives into code sharing
Market NAC an because of
 Good incentive to limitations on
opportunities at practice visiting new
tourism sector differentiated destinations partner
 To link up with pricing to hunt for a new
other major techniques in destination.
Asian Airline order to improve
companies the new market
 The non-  Strong brand
pretended benefits the
domestic market tourism sector.
Threats Strength/Threats Weakness/Threats
 Political  Threats such as  Improve service
Instability competitiveness, and make
 Poor safety increasing petrol differences from
condition costs, competitors
 Competitors unfavorable
 Fuel hike price weather patterns,

 Lower worker political

commitment interference, and

civil strife may
be mitigated by
optimizing the
reputation of the
brand and
injecting further
productive funds

11
There are several ways in which NAC can enhance its efficiency. Through drawing up long-term
plans and properly putting the strategy into action, NAC will accomplish its common objective.
NAC is high in technology and good human resources and has good expertise in the efficient
service of airlines. Nepal Airlines needs to concentrate its efforts on the following key activities
in order to make Nepal Airlines efficient enough to compute effectively and place it on the road
of growth and profitability.[ CITATION Rubnd \l 1033 ] The following suggestion is formulated on
the basis of the above analysis:

a) By delivering air travel at a fair price, NAC would raise its brand image and establish a
good public partnership.
b) By organizing on-time flights and performance, NAC should do its best to gain passenger
confidence.
c) NAC should formulate long-term plans and properly execute the strategy in order to
accomplish the shared purpose.
d) To be a good competitor in this current industry, NAC should buy new aircraft.
e) Without halting the trip, NAC should adopt the company model of "FLYING TO WIN
CUSTOMERS" so that it can be profitable for the organization to gain the conviction and
pride of the company
f) A cost-effective framework should be implemented by NAC and the extension of flight
operations should be expanded.

5. Conclusion
The dynamism of the airline industry calls for continuous competitive solutions an order to
create competitive advantage, competition. This highly sensitive industry faces the threat of
suppliers' product creativity, delicate image that can be tarnished "overnight," strong consumers,
hostile rivals from strategic partnerships & defense of bankruptcy and increased labor, fuel and
security measures costs. They have learned that they have to adapt their way of business and
continue to offer proactive offerings by becoming closer to consumers and researching their
needs, all the attempts airlines create to address the various obstacles they face. A carrier's
effectiveness can be measured not just by how well they can respond to these threats
strategically, but also by how easily they react to these rapidly shifting forces.
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