Trade-offs in the Market

Trade-offs in the MarketAviation Industry

ContentIntroductionFactor Affecting TradeoffMarket AnalysisCase of Cessna & GulfstreamCase of KingfisherConclusionRecommendationIntroductionTrade-offs: A trade-off is a situation that involves balance between two different quantityExchange of one quantity for others

Factor affecting tradeoff in Airline IndustryFareSpeedRangeDelayReliabilityFareLow ticket prices attracts customersRefundable ticket attracts customersSpeedSpeed matter to business classFaster flight attracts customer as travel duration smallRangeLong range attracts customersLong range implies less travel duration which attracts customersMatters much international routesDelayCustomer want efficient servicesDelays in flight evades customersA delayed flight can ruin the schedule of customersCustomer resists in travelling in flights that are delayed every now and then.ReliabilityReliability of service attracts customersBetter and reliable services helps firm gain loyal customersCase

To Fly far or to Fly fastIntroduction of Cessna AircraftThe Cessna Aircraft Company is an American Aircraft manufacturingFounded in 1927Its headquarter in Wichita, KansasIn March 2014 Cessna became a brand of Textron AviationCessna built the fastest Aircraft Citation X, with a speed up to 600 miles per hourIntroduction of Gulfstream AircraftGulfstream Aerospace Corporation is a wholly owned subsidiary of General Dynamics.Gulfstream designs, develops, manufactures, markets, and services business-jet aircraft.Started in 1950Gulfstream has produced more than 2,000 aircraft since 1958Gulfstream builds the longest-range business jet Gulfstream V, with a range up to 7,500 miles.

Problem StatementCessna and Gulfstream wanted to increase their Market ShareCessna Market AnalysisMarginal rate of substitution between speed and range highBelieved customer would trade-off lot of range for more speed

CessnaIndifferenceCurve

Decision at CessnaIntroduced fastest business jetHoped to increase its market share

Gulfstream AnalysisMarginal rate of substitution between speed and range lowCustomer wont trade-off lot of range for speed

GulfstreamIndifference Map

Decision at GulfstreamIntroduced longest range business jetHoped to increase its market shareResultGulfstream market share increased from 14% to 21.2% Cessnas market share dropped from a market-leading 26.9% to 20.5%Gulfstream vs. Cessna GulfstreamCessnaMarket AnalysisCustomer Value range more than speedCustomer not willing to tradeoff lot of range for speedImportance of Market AnalysisImportant because it help managers to make correct decision about consumer behaviorWrong market analysis by Cessna let to fall in its market share.Correct market analysis by Gulfstream resulted in increase of its market share

Case

Tradeoff between Service and FaresIntroduction to KingfisherKingfisher Airlines Limited was an airline group based in IndiaHead office: Andheri (East), MumbaiRegistered office: UB City, BangaloreFounded in 2003Bought Deccan Airlines which was low cost carrier

StrategyFocused on business class customerFew low cost flightTicket CostlyDecisions at KingfisherChanged its business model from low cost carrier (Deccan Airlines) to business class carrierFocused business class customerIncreased FareContdBelieved Customer would pay more for better serviceIgnored the Indias booming low cost carriers market segment

ResultMarket Share declinedCustomers switched to Low cost carrier such as IndiGo2011, Debt 7057 croreOther Factor for failureNo Constant Business ModelLarge no. of Cancellation of flightsUnreliable service

Market AnalysisIndian Customer prefer low fare to better servicesCustomer want reliability of service offeredConclusionMarginal rate of substitution for range over speed is lowCustomer prefer low fares over better serviceRecommendationMarket should be analyzed thoroughlyCustomer tradeoff for different quantities should be determined correctlyManager should take decision with respect to local consumer behavior Any Question?

Managerial Economics:Case Study Power Point PresentationPresenters Roll NumberYogendra Kumar Pal RE3110-A33Ankit Kumar Swami RE3110-A34Vikash Swami RE3110-A35Faiz Rahman RE3110-A36Abhilash Gautam RE3110-A37Thank You