General Authority of Civil Aviation of Saudi Arabia

Overview

The General Authority of Civil Aviation of Saudi Arabia (GACA, Arabic: الهيئة العامة للطيران المدني‎) is an organization that regulates air transport services and enforces civil air regulations, air safety, and airworthiness standards. The General Authority of Civil Aviation (GACA) coordinates all regulatory functions by the International Civil Aviation Organization. Headquartered in Riyadh, the GACA used to be part of the former Presidency of Civil Aviation (PCA, مصلحة الطيران المدني).

Later, the institution was split into a civil department, which would become the GACA, and the Royal Saudi Air Force. In 1960, Saudi Arabian Airlines ceased to be part of the Presidency of Civil Aviation and three years later, became an independent public institution in 1963. Today, the GACA oversees four international and 23 domestic airports within the Kingdom. It is an ambitious organization that seeks to uphold the highest international standards of aviation and create a safe air travel environment.

This report addresses GACA strategy management about all relevant aspects such as current goals and objectives, the external and internal environment of the organization, and the organization’s intellectual assets. The second subsection discusses the strategy formulation on two levels: business-level and corporate-level. Lastly, the third subsection of this report is dedicated to the strategy implementation that encompasses informational control, behavioral control, and effective corporate governance.

Strategy analysis

This subsection discusses the strategy of the GACA: its current goals and objectives, the external and internal environment of the organization, and the organization’s intellectual assets.

Analyzing the center goals & objectives

Here I will outline the established goals within the organization’s mission and vision stemming from official documents and critically analyze and appraise each one of them.

Vision

“To create a safe and secure aviation environment by the most rigorous international safety standards, and build a modern airports system that offers consistently exceptional state-of-the-art service.”

The GACA seeks to take quality aviation in the Kingdom to the next level: it is guided by the highest international safety standards. The organization envisions the modernization of the current airport system and the creation of a safe aviation environment. The vision demonstrates the ambition of the GACA and its awareness of the changing needs and challenges of the aviation and air travel industry.

Mission

“To develop the air transport industry by the latest international standards, strengthen the position of the Kingdom as a globally influential player in civil aviation, achieve financial growth and sustainability, and enforce the relevant rules, regulations and procedures to ensure air transport safety and security.”

In its mission, the GACA showcases its intention to balance financial pursuits with the prioritization of safety and security as well as the maintenance and improvement of its international reputation. The organization demonstrates the awareness of the importance of the role that it is assigned by the Kingdom and its contribution to the country’s international image.

Strategic Objectives

At present, the GACA has clear objectives that are consistent with its mission and vision. The organization has developed a set of metrics to benchmark its progress against and steer its development in the right direction. The official website outlines the following objectives:

• To achieve financial independence and create investment opportunities in the air transport sector;
• To provide excellent service to pilgrims and other travelers in accordance with the most rigorous international standards;
• To develop the infrastructure for the air transport sector through the implementation of state-of-the-art technologies and systems;
• To establish procedures and practices that ensure safety and security;
• To become one of the main contributors to economic diversification in Saudi Arabia;
• To protect the environment by diminishing the negative effects of air travel.

External Environment Analysis

General External Environment Factors

Assessing the impact of the external environment on GACA operations requires taking a look at the key contributing factors. Therefore, it is only reasonable that GACA analyzes the following aspects:

• Political/Legal: Gaca needs to comply with Saudization, officially known as the Saudi nationalization scheme. Saudization requires Saudi organizations to prioritize Saudi residents in the hiring process on a quota basis. Currently, the Kingdom experiences a shortage of skills observed primarily in the technical field (engineering, architecture, information technology). Even if the GACA does not have enough qualified Saudi cadres, it cannot hire more international specialists than allowed.
• Sociocultural-Demographic: More Saudis than ever make tourism and traveling part of their lifestyle. In July and August 2019, two million local tourists traveled domestically, spending a total of SR 1.5 billion. Apart from that for the first time in its history, Saudi Arabia issued a tourist visa for foreigners. If this trend continues, the air travel industry will be experiencing more workload.
• Economic: Today, Saudi Arabia is an oil-based economy whose major activities are strictly controlled by the government. The petroleum sector generates around 87% of budget revenues and makes up 42% of the country’s GDP. Although the richness of natural resources has brought Saudi Arabia great wealth, now it struggles with youth unemployment and the underdevelopment of other sectors. The GACA seeks to become one of the main contributors to economic diversification efforts.
• Global: Given the terrorist attacks that have become more frequent in recent years, there is a lot of fear and anxiety associated with air travel. The GACA will have to do its best to showcase its efforts to uphold safety and security.
• Technological: To achieve its ambitious goals. The GACA needs to keep up with global technological development and implement state-of-the-art technologies.

Porter’s Five Forces Model Analysis

• The threat of new entrants: The threat of new entrants in the aviation industry of Saudi Arabia is extremely low. Firstly, the investment needed to enter the industry is extremely high, which creates an entrance hurdle. Secondly, in the Kingdom, aviation-related activities are strictly controlled by the government.
• Buyer’s bargaining power: Buyers have quite a big deal of bargaining power as they can switch to another provider if they wish to do so. Besides, even if they stick to one provider, they may still execute their bargaining power by choosing options that make the most sense to them and are aligned with their goals.
• Supplier’s bargaining power: The suppliers in the aviation industry include but are not limited to manufacturers, fuel suppliers, and labor suppliers. Their bargaining power is high, and switching costs are tangible. Because the aviation industry is responsible for safety and security, it is in its best interests to maintain relationships with trustworthy suppliers.
• The threat of substitutes: The aviation industry has quite a lot of substitutes. For instance, buyers can choose to travel by train, bus, or car. In recent years, Saudi Arabia has invested significantly into infrastructure development, which for example, enabled the creation of a high-speed railway. On the other hand, traveling by air is by far the fastest and most convenient, which means that switching to train, bus, or car might present some costs.
• Industry rivalry: The aviation industry in the Kingdom is in its mature stage. The GACA itself does not have any rivals as there are not going to be any other state organizations in charge of aviation in the foreseeable future. However, airlines that the GACA regulates do compete with each other based on price, convenience, loyalty programs, and other factors.

Internal Environment Analysis

Value-Chain Analysis

Value chain analysis is a tool that is used for assessing the internal activities of a firm to identify those that are adding the most value.

Primary activities:

• Inbound logistics: The GACA controls the workflow within its many departments, manages human resources, and makes plans in alignment with the set objectives.
• Operations: The organization issues and applies international and domestic air travel regulations.
• Outbound logistics: The GACA is responsible for the establishment, management, operation and maintenance of air navigation systems and their development. The institution regulates air traffic and authorizes transit and landing permits. Apart from that, as part of its outbound logistics, the GACA monitors inspect, and audits airlines and national and foreign international air transport in the Kingdom.
• Marketing & sales: The GACA’s Marketing department seeks to develop and solidify the institution’s corporate identity. Through a variety of communication channels such as printed materials, films, and online publications, the GACA reaches out to the community.
• Service: As part of its service, the GACA establishes, manages, operates, maintains, and develops civil airports. The institution supports civil airports with basic equipment and supervises the airport personnel.

Support activities:

• Firm infrastructure: The GACA has a transitional organizational structure with a variety of roles overseeing the company’s different activities and operations.
• Human resource management: The Human Resources department at the GACA is the primary facilitator in locating and retaining talent as well as creating capable technical and administrative cadres.
• Technology development: At present, the GACA has an Information Technology department that is one of the most important and advanced departments within its internal infrastructure. The Information Technology department develops various products and services to improve the workflow of the GACA. Currently, the Information Technology Department is making an effort to be transformed into Saudi Aviation Information Technology Company “SAVIT” to have more leverage.
• Procurement: Coordination, allocation, and distribution of both material and human resources; preparation of annual plans in alignment with established objectives; keeping contact with main partners and suppliers.

Resource-Based View (RBV) Analysis

The Resource-Based View (RBV) Analysis describes the three main types of resources: Tangible Resources, Intangible Resources, and Organizational Capabilities.

• Tangible Resources. Financially, the GACA receives direct support from the Kingdom, which makes the organization quite resourceful. Physically, the GACA oversees fourteen airports and has numerous offices across Saudi Arabia. Lastly, technologically, the institution is equipped with cutting-edge technologies whose implementation is enabled by capable technological and administrative manpower.
• Intangible Resources. The GACA has earned an excellent reputation in the region as well as the trust of its customers and partners. At the moment, the institution enjoys the opportunities presented by its strategic partnerships with other state organizations and aviation-related entities such as the Saudi Aviation Club.
• Organizational Capabilities. So far, the GACA has demonstrated an excellent ability to manage internal resources such as technology and people.

Firm Resources and Sustainable Competitive Advantages (VRIN)

Table 1. Firm Resources and Sustainable Competitive Advantages (VRIN): The case of the GACA.

SWOT Analysis

Table 2. SWOT analysis of the GACA.

Strategy formulation

Formulating the Business-level Strategies

Gaining a significant competitive advantage requires a thoughtful assessment of the GACA’s ability to contend with other local and international aviation institutions. This subsection describes three generic strategies that are useful for overcoming the five forces and unlocking the organization’s full potential. Generic strategies are addressed in two dimensions: competitive advantages and strategic targets.

Generic Strategies – Differentiation Focus

• GENERIC STRATEGIES – Differentiation is defined as a business strategy that focuses on making a product or a service distinguishable. For the GACA, differentiation may mean making air travel products and services outstandingly convenient, safe, and secure.
• MARKET GROWTH RATE – Large. With the expansion of the tourism sector and the maturation of the Kingdom as not only a religious but also a cultural destination, the GACA will enjoy more opportunities for developing the air travel industry.
• NUMBER OF SEGMENTS – Some. At present, the GACA focuses on engineering, management, administration, marketing, and air travel.
• INTENSITY OF COMPETITION – Medium. Within the Kingdom, the GACA does not have any contenders that could be seen as forces to be reckoned with. However, in the international arena, the institution needs to constantly compete with other aviation authorities.
• EMPHASIS ON PRODUCT DESIGN – High. Since one of the main functions of the authority is issuing regulations that will be implemented nationwide, it needs to pay close attention to product design.
• EMPHASIS ON PROCESS DESIGN – High. The process of implementing regulations from their conception to their actual enforcement is quite intricate, which requires an emphasis on process design.
• MAJOR FUNCTIONAL AREA(S) OF CONCERN – External environment. The success of operations in the aviation and air travel sectors is contingent on what is going in the outside world. For instance, the Middle East crisis of 2017 has hurt many industries, aviation included. At the moment, air travel is impeded by the COVID-19 outbreak, which renders the future of the sector and its recovery rate uncertain.
• OVERALL OBJECTIVE. The GACA’s overall objective is to continue being competitive in the international arena while balancing financial independence and profitability with upholding the highest standards of safety and security.

Formulating the Business-level Strategies

According to Porter, there are three distinct business-level strategies: cost leadership, differentiation, and focus. Companies that choose cost leadership as their method of gaining a competitive advantage seek to reduce operating costs. As a result, they are able to offer their customers low-priced products or services while maintaining a reasonable profit margin. As a business-level strategy, differentiation means winning the market share due to the unique characteristics of a product or service, often despite higher than usual prices. Focus strategies encompass methods of achieving one of the previous two goals within niche markets that broadly-focused market players cannot always reach.

For the GACA, the strategies that make the most sense are differentiation and cost leadership to a lesser degree. Lowering the prices excessively counters the GACA’s goal of reaching financial independence and profitability. Instead, the airlines that the GACA oversees offer a wide range of choices where customers with different purchasing power can find something that fits their expectations. As for differentiation, as mentioned above, differentiation in the GACA’s means making air travel products and services outstandingly convenient, safe, and secure. Another way in which the institution can communicate its values to customers is through the use of technologies.

For instance, the GACA can invest in online and mobile applications for airlines and the organization itself. Apart from that, it is possible to differentiate itself by building up a reputable image. The GACA might want to strengthen its social media presence and demonstrate to customers that it monitors reviews and complaints and responds promptly. In this case, customers will understand that the institution does not solely pursue financial goals but is actually committed to the creation of a safe and secure air travel environment.

Apart from that, it is worth noting that the GACA should not ignore the possibilities of starting partnerships with other organizations. This kind of business synergy can be mutually beneficial: it relieves the industry rivalry and at the same time, allows participants to unite their forces. At present, the GACA already has experience collaborating with other organizations. For example, in 2018, the General Authority of Civil Aviation (GACA) partnered with IT solutions provider SITA for the common purpose of the modernization of 26 airports across the country. In the same year, the GACA collaborated with Saudi Aviation Club (SAC) to work on the organization of the Saudi International Aviation Show together.

Strategy implementation and control

Conceiving business strategies and implementing them are two different things: the latter does not happen on its own and is not possible without adequate strategic control. Strategic control is defined as the process used by companies to regulate the formation and execution of strategic plans (“formulate strategies” and “implement strategies” in Image 3). It is considered to be a specialized form of management control that differs from other forms. It should be noted that the purpose of strategic control is not to answer the question as to whether the company has made any mistakes in the past, nor is it about glorifying past success. Instead, strategic control “grounds” the company to act here and now, considering long-term goals.

Information Control

Image 3 illustrates two main forms of strategic control: information and behavior. In the case of the GACA, information control means ongoing data collection for making decisions and steering the development of the organization in the right direction. As Saudi Arabia seeks to diversify its economy, more businesses than ever turn to big data analytics. The GACA might benefit from the best big data practices: data collection, storage, protection, and analysis for predictions and anomaly detection. Of special note is information security: since the GACA deals with matters that require utmost seriousness about safety, all data should be protected. In this sense, information control should take the form of restricting the number of people having access to information.

Behavior Control

Behavior control encompasses a set of practices, policies, and prescriptions that guide the actions and behavior of employees in a way that is aligned with the organization’s long-term goals. In the GACA’s case, behavior control may mean changes in the following aspects:

• Culture. It is important to promote a healthy work culture that rewards initiative and informal leadership. The GACA has enough qualified manpower to meet its goals, but poor management can waste the best cadres’ potential. To avert it, the institution needs to create an environment in which employees feel safe and valued and are not afraid to share their ideas.
• Reward. Employment at the GACA needs to be rewarding in more than one way. Remuneration can only motivate people so much; later, employees will need to feel that what they are doing is meaningful.
• Boundaries. At the same time, self-expression in the workplace should be balanced with restrictions that are based on the organization’s safety and security guidelines.

Strategic Leadership

Strategic leadership is defined as an organization’s capability to express a strategic vision as well as influence others to acquire that vision and make it a reality. Strategic management is organized and calculating; it enables the realization of long-term plans without letting the company be steered in the wrong direction. In the context of GACA, strategic leadership should have the following qualities:

• Transformational. Transformational leadership describes a framework in which followers have trust for leaders and are compelled to do more than what is asked of them. The transformational leadership style comprises four core dimensions: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration.
• Participative. Participative leadership, also known as democratic leadership, is a style that enables each team member to participate in the decision-making process. The premise of participative leadership is that it helps followers to feel more engaged in the management process. They may feel more committed and conscientious about common goals as well as motivated to work with more efficiency
• Proactive. Strategic leadership needs to be proactive in a way that it should be able to prevent adversity instead of having to deal with consequences.

References

1. MGMT 507: Strategic management materials by Dr. Houyam Lababidi.
2. Gaca. Web.
3. Domestic tourism surges in Saudi Arabia in July and August. Web.
4. Saudi Aviation Club is Pleased to Announce GACA as a Strategic Partner for the First Saudi International Airshow. Web.
5. Interview with GACA leadership.