1. Case Study Tiger Air Express Company was founded in 1987, primarily to provide charter air services. Soon after, it incorporated tour business and taxi business into its domain and during its first two yea$ of operations, its sales grew by 168 per cent. Because of its rapid growth, it experienced some difficulties in providing the necessary resources and building proper infrastructure for this growth. These difficulties were due to underestimated requirement of capital for vehicles, maintenance, office facilities, and staff. The Gulf War which resulted in steep increase in fuel costs added more burden on the financially-strapped organization. The management was having difficulty in exactly evaluating the financial and operational situation of the company. A well-known accounting firm was hired to develop and install an accounting system that would accurately reflect the Companys financial situation at any given time. As a result of the report, the taxi division was eliminated and the resources were diverted towards the freight and tour divisions of the company, specially the air-freight capabilities. In order to expand on the air-freight business, further studies were conducted in order to understand the market better. Some insights into the air-freight market were gained through a survey of 44 air freight shippers conducted by an outside agency in 1992. There are two types of services available for forwarding air freight. First, there are integrated carriers. These are the companies which have their own planes. An example is Federal Express. These carriers offer customers pickup and delivery by truck along with airplane shipping. Second, there are freight forwarders. These are the carriers that handle pickup and delivery but use the regular scheduled airlines for air shipment. A summary of the responses to some of the questions asked in the survey, as noted above, are explained below: (i) 30 per cent of the survey respondents stated that their air-freight expenditures had increased in the past year. 60 per cent indicated no change in these expenditures and 10 per cent reported a drop in expenses. (ii) 50 per cent of the survey respondents used integrated carriers for shipping. However, for small packages, this percentage increased to 75 per cent. Only 19 per cent used freight forwarders. 62 per cent of those who used freight forwarders did so because of their ability to handle international air freight more efficiently and reliably. (iii) 39 per cent of the respondents indicated that they were using more 2-3 days deliveries which was cheaper than one day delivery, than they did 2 years ago. (iv) When the survey asked the customers as to what they looked for in a carrier the responses were as follows: On-time delivery: 59 per cent, Price : 57 per cent, Customer responsiveness : 43 per cent, Geographic coverage : 9 per cent, Single source control : 7 per cent, Tracing capabilities : 7 per cent. Questions for Discussion 1. Based on your knowledge of probability theory, what strategy should Tiger Air Express adopt in determining their emphasis on the air freight business, based on the data given? Explain why. 2. Some of the percentages reported in the survey can be converted into conditional probabilities. Conditional probabilities contain information about the responses in certain categories. Can you describe some of these categories? How would these categories help the management of Tiger Air Express? Support your argument with examples 3. If you were a consultant to Tiger Air Express, what recommendations would you give to the management so that they can meet the competition with other companies, offerings based on the type of shippers and shipments that are most probably in demand. Support your argument with examples