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Corporate Wars of Survival

PIA should deal with the issue of overstaffing. As per statistics, PIA has an average of 700 employees per aircraft, which is believed to be way beyond logic.

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Corporate Wars of Survival

“We didn’t do anything wrong, but somehow we lost”. – Stephen Elop

In the world of Corporate wars of survival, while the world was busy speculating the stock market and predicting the share prices, the corporate world witnessed the fall of a giant. The giant no one ever indicated would end up the way it did, from having a market value of $250 billion in 2000 to going bankrupt in 2013.

Here is the story of Nokia. The mobile phone manufacturing superpower left behind a legacy to learn from other failing corporate giants like PIA and Pakistan Steel Mills. Nokia, at its peak, had more than 50 per-cent of the market share worldwide with its feature phones. The company peaked in 2000 when its net worth reached $250 billion, but what Nokia’s corporate intelligence failed to realise was that their golden days were long gone.

What they failed to do was to adapt to change. The world was changing at a rapid pace, which Nokia missed up. While companies like Apple and Google were developing smartphones, Nokia was still busy selling its featured phones. It started corporate wars of survival for Nokia.

Soon enough, Android and IOS had developed a sustainable ecosystem which resulted in Nokia being secluded. It was now time to change. Nokia had to ditch its idea of reliable hardware and realise the fact that consumers want interactive software. Their reluctance to do so meant that Nokia would stay isolated for the next few years.

But for a giant like Nokia to fail in such a short time, there had to be various reasons. Although Nokia realised that it needs to take radical steps, it was going in the wrong direction. Nokia’s new CEO Stephen Elop decided to change Nokia phones’ operating systems and approached Google to adopt Android.

It has to been realised, may have proved to be a lifesaver. Nevertheless, talks broke up, and Nokia ended up opting for Microsoft to provide operating systems. But their idea of trying to create a monopoly by not adapting to the market trend proved fatal, and the downfall continued. Subsequently, in September 2013, Microsoft acquired Nokia for a mere $7.6 Billion.

Talking about Corporate blunders, even companies like Microsoft were on the verge of following the same trajectory as Nokia. When they acquired Nokia for a whopping $7.6 billion, they decided not to use the Nokia trademark and brand name for its mobile sets, such as the Microsoft Lumia handsets. Critics believe that Microsoft effectively paid $7.6 billion for a patent they never intended to use.

Thus, a questionable acquisition by Steve Ballmer, the CEO of Microsoft, meant that Microsoft was on the verge of crashing. Thanks to the corporate genius of Satya Nadella, the new CEO of Microsoft, he decided to write off Nokia and subsequently sold the Patent Rights of Nokia to HMD global. Had this decision not been made on a timely basis, Microsoft was on the path of self-destruction too.

But how do these examples apply to the likes of Pakistan International Airlines (PIA)? What needs to be understood is that the corporate world does not distinguish between the nature of the industry, and if the same mistakes are repeated, they will ultimately lead to the same conclusion.

PIA, which reported its net profit to be Rs 2.3 million in 2004, is now on the path of destruction with Rs’ latest annual net loss. Fifty-five million as of Dec 2019. The corporate planners at PIA need to realise that their golden days are long gone, and they need to fight for their survival.

They need to take radical steps to ensure this company’s going concerned once a market leader. Firstly, PIA should deal with the issue of overstaffing. As per statistics, PIA has 700 employees per aircraft, which I believe is way beyond logic. Air India, which operates at roughly 127 employees per aircraft, is a good comparison of the extent of overstaffing at PIA which ultimately leads to high operating costs.

In 2019 alone, PIA paid a hefty amount of Rs.13.8 million in salaries. To fix the fractured income statement, PIA should either increase its revenue or Decrease its expenses. PIA has been improving on the revenue side and has achieved year-on-year growth of around 30 per cent.

Nevertheless, critically analysing the financial position of PIA, the company has few options left in its bag to pull out tricks from. PIA should reduce its finance cost, which equals more than 50 per cent of the total loss. Finance cost alone costs around Rs.35 million. If mitigated, it can help reduce the deficit to acceptable levels.

Raising additional capital, either by rights issue or by issuing shares to the general public, can get the job done. Other than this, PIA can also focus on disposing of its unused assets, which shall help increase cash flow and reduce expenses such as asset depreciation.

But apart from trying to stir financial magic, PIA needs to change its style of operations. It should realise the fact that it is not the airline it once used to be. It was an airline where customers were willing to pay extra bucks to fly with. What needs to be done is something called positive branding.

It should take radical steps to improve its inflight services, after-sales services and customer care services. It needs to strengthen its ground staff and ensure its flights are on time. It should develop new, less competitive routes and ensure it operates at 100 per-cent capacity.

To conclude, PIA was a giant of the aviation industry, heading towards a corporate destruction path. Its financial advisers, corporate intelligence experts, and analysts should develop a viable plan to help save the company from the same fate as Nokia. It should be kept under consideration that it is easier to return to one’s former stature than making one from the grass-root level.

Written by Shehryar Hussain

Managed and Edited by Javeria Qadeer

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Currently working as the Editor and Head of the Commerce Department at the Hub Daily, Javeria holds 8 years of experience as a writer, proofreader/editor, and translator. She holds a degree in Economics and specializes in writing on economy, business, policymaking, and politics. She is an avid reader with hobbies like research, creative writing, listening to music, and swimming.

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