innovation assignment new
TRANSCRIPT
Entrepreneurship and Innovation
COVENTRY UNIVERSITY
SCHOOL OF ENGINEERING
Postgraduate Engineering Programmes
Module Assignment
Prepared by
Mr. Lionel Martis
Submission Date
2nd JUNE, 2008
Module
Entrepreneurship and Innovation for Engineers
Module Leader: Mr. NIGEL DENTON
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Index
Introduction to Innovation and Entrepreneurship..........................................................3
Andy Denton..................................................................................................................4
Don Vincent...................................................................................................................5
Similarities and Differences...........................................................................................6
Introduction to Kingfisher Airlines................................................................................7
Vijay Mallya...................................................................................................................8
Audit of Kingfisher Airlines..........................................................................................9
SWOT analysis.............................................................................................................13
Industrial life cycle.......................................................................................................15
Competitor analysis......................................................................................................17
Porter’s 5 Forces...........................................................................................................19
Bowman’s Clock..........................................................................................................21
Strategies adopted by Kingfisher Airlines...................................................................24
Challenges for Kingfisher Airlines..............................................................................26
Strategy suggested for Kingfisher Airlines..................................................................28
Ansoff’s Matrix............................................................................................................30
Conclusion....................................................................................................................32
References....................................................................................................................33
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Introduction to Innovation and Entrepreneurship
“Innovation gives the venture the competitive advantage that results in wealth
creation.”
Innovation may be in the product or service itself, or in the business processes used to
deliver it. Innovation can be developing and implementing ideas for restructuring the
organization, cost cutting, better level of communication within the organization or
for introduction of new technology. This approach could help the company progress
in a successful manner.
Ref: (www.quickmba.com/entre/definition)
“Entrepreneurship refers to an activity which leads to the creation and management
of a new organization designed to pursue a unique innovative opportunity.”
According to an Austrian economist Joseph Schumpeter, wealth is created when
innovation results in new demand and the function of the entrepreneur is to combine
various input factors in an innovative manner to generate value to the customer with
the hope that this value will exceed the cost of the input factors, thus generating
superior returns that result in the creation of wealth.
Ref: (www.quickmba.com/entre/definition)
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Andy Denton
Andy Denton left school at the age of 15 and joined college. At college he opted
for a three year course in engineering motor vehicle but this didn’t benefit him
much, the only knowledge he acquired about vehicles was during his schooling
period. Andy has worked in successful large firms such as Aston Martin, Ford and
Vauxhall, but he quit from the following firms within a short period due some tiffs
with the managements. Denton then started operating from home itself, his
business dealt with the recovery and stolen cars. Andy now intends to enter into
tuning motor sport vehicles.
Characteristics of Andy Denton:
Grasp opportunities: Andy is always been very keen to grab more and more
opportunities available to him be it when he was working in large firms or when
he started operating form home.
Sense of independence: Andy never liked been bossed or pressurized from his
managers, he always preferred to have a sense of independence and freedom so
that he could utilize his potentials to the maximum.
Need for achievement: Andy always dreamt of entering into the world of tuning
motor sport engines and finally after a long ride in his career he is planning to
open a new unit which deals with the tuning of motor sport engines.
Risk taker: Andy had been left jobless once he quit from all the large firms, but
he never lost hope and took the risk of starting his own small business which
shows that he had the ability to take risks.
Ability to cooperate: Andy always preferred to work in teams despite the tiffs
with his manager at Vauxhall, “I like to work as a team” states Andy.
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Don Vincent
Don Vincent is 51 in age. He quit schooling and directly went to work. Initially he
started his career as a clerical accountant and moved to London. He then worked
as a financial accountant. Later Don ran a franchise of Ford, the business seemed
to be going very good initially but suffered later on when the parent company
reached into a declining stage. Don had become financially very weak at that
instant his wife came to his rescue and they started a water cooler company known
as the “Fresher water coolers” by borrowing money from the bank. This firm
started with some initial minor difficulties but flourished within no time.
Characteristics of Don Vincent:
Grasp opportunities: Don has been very adaptive towards any opportunities that
come across his way be it owning a franchise of Ford or starting a new water
cooler company.
Risk taker: Even when Don was in heavy financial crises he started a new
business with the help of his wife which turned out to be worth the risk.
Self confidence: Don was unaware about the water cooler business but still he
stepped into it with a self confidence of achieving success in the business.
Need for achievement: Don always wanted to own his own business though he
was financially broke after owning a franchise of Ford; he didn’t step back but
else borrowed money from the bank and started a new business along with his
wife.
Business skills: His role as a financial accountant helped Don develop an analyst
skill which proved to be a key factor that drove him to become an entrepreneur.
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Similarity and Difference
In terms of individual potential and achievements Don and Andy both are of
equivalent caliber. But in terms of attitude towards their employees both of them
marginally differ. Andy would prefer requesting his employees to carry out a job;
on the other hand Don contradicted this approach. In my view both are right on
their own part, the approach of requesting employees would motivate the
employees and on the other hand in an comparatively bigger organization like
Fresh water following this approach wouldn’t be feasible because of the larger
organizational structure.
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Introduction to Kingfisher Airlines
Kingfisher Airlines is a wholly owned subsidiary of United Breweries Holdings
Limited (the second largest brewery group in the world), the UB Group's investments
holding company. Kingfisher Airlines has been allocated the IATA airline code of
'IT'. The UB Group is one of India's largest conglomerates with a turnover of US $2
billion and is the largest Indian manufacturer of beverage alcohol-beer and liquor.
With the foray of UB Group’s birds into the Indian aviation industry, Kingfisher
Airlines has become a force to reckon with. The Airline already has a number of firsts
to its credit. Kingfisher Airlines Limited is an airline company based in Bangalore,
India. This airline was introduced in the market to target the domestic luxury segment.
Kingfisher Airlines was introduced into the Indian airline market by the Indian
Business Tycoon Dr Vijay Mallya (the owner of United Breweries Limited). It was
introduced on 9th May, 2005. It operates in 37 destinations with 218 flights a day. It
has a fleet size of 71 and also the first Indian domestic airlines to introduce the Airbus
A380.
Kingfisher is one of only six airlines in the world to have a five-star rating from
Skytrax, along with Asiana Airlines, Malaysia Airlines, Qatar Airways, Singapore
Airlines and Cathay Pacific Airways. Kingfisher airlines have been awarded “The
best new airline of the year 2005”. Presently kingfisher airlines has acquired Air
Deccan (one of the major profitable domestic low cost airline) hence penetrating into
the lower segment of the market too.
Ref: (www.thehindubusinessline.com/2007/06/01/stories/2007060106400100.htm)
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Vijay Mallya
Vijay Mallya is 51 years old was born in India. Vijay Mallya has amassed an
enormous fortune from inherited and growing. With an estimated current net
worth of around $1.5 billion, he is ranked by Forbes (2007) as the 692th-richest
person in world. UB group chairman Vijay Mallya, a trained pilot himself and an
avid aviation enthusiast, has delivered an ultimate product to the Indian aviation
industry which is called as Kingfisher Airlines, names after the popular liquor
brand of the UB group (Taking a very different approach again).
Ref: (www.how-to-make-more-money.com/Vijay-Mallya_biography.html)
Characteristics of Vijay Mallya
Grasp opportunities: Since the Indian aviation industry is a growing market,
Vijay Mallya positively noticed the opportunities of expansion in this industry
hence launched Kingfisher Airlines.
Risk taker: Vijay Mallya did know the strong competition he would have to face
from the old player Jet Airways which could shatter his dreams but he never went
on a back foot, instead he took the risk of launching Kingfisher Airlines with a
focused aim of conquering the industry.
Need for achievement: Vijay Mallya is very much known for his different
approaches in any industry which helps him outplay the others. To capture every
possible industry has been his goal from the start of his business career.
Sense of independence: Vijay Mallya likes to be his own boss rather than
working in someone’s shoes. The freedom to play and create a market of his own
makes him a successful Tycoon.
Ability to accept change: Though Vijay Mallya makes his own stand in the
market but all his groups have be very much adaptive to the changes in both the
external and internal environment.
Ref: (www.gaebler.com/entrepreneur-characteristics.htm)
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Audit of Kingfisher Airlines
This audit deals with the present situation in various areas of the organisation.
1. Strategic Planning
Target Market: The Company has targeted a niche market for its
operations. The company operates in the luxury segment of the Indian
aviation industry and leads the competition with its world class services at
competitive prices
Master strategy to stay ahead of the competition : The Company has
adopted aggressive strategy of customer acquisition through world class
services which have increased their market share and made them a
preferred choice within the customer base.
Transparency within the organisation: The employees are aware of the
company’s policies and the top management encourages the employees to
develop their skills to help them become the best in the industry
Potential opportunities for business development: The Company has
overtaken its competitors in order to extend their services in the low cost
segment along with the existing premium class and this has provided them
with an opportunity to develop and extend their operations more
profoundly.
2. Organisational Structure
Relationship between individuals and functions : There are specific
people for specific jobs in the company and the company has hired some of
the most experienced people in the industry to help them move towards
their goal of becoming a leading player in the Indian aviation industry
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Job description: There are clearly defined roles in the top and the middle
management and these are complimented by the ground level employees in
the company. The company has a sound organizational structure which is
backed up by a strong parent company.
3. Human Resource Management
Recruitment: Recruiting quality people is a major plus point of the
company. They hire the best people in the industry and pay them
handsomely so that they contribute to the company’s goals and ambitions
to the best of their capabilities. The crew members of Kingfisher are paid
more than their counterparts in any other airline company in India.
Training: The Company provides its employees with suitable training and
development opportunities to help them grow and develop their skills
which are unmatched in the industry. This aspect of their training has
helped their employees in creating a sound impression on their customers
and they have become a highly admired airline company in India.
Performance appraisal: The employees are paid good salaries and
performance based incentives to motivate them even more.
4. Marketing & Sales Promotion
Market Segment : The Company operates in the premium segment of the
Indian domestic segment offering world class flying experience to its
customers. The company is entering into the low cost sector along with
the existing premium segment.
Mode of Marketing & Sales: The Company does extensive marketing
through celebrities, sponsorship of sports events etc. The sales are mainly
done through offices and websites and through SMS booking.
Market Research: The Company has done an extensive market research
before entering into the aviation industry and they have specifically
targeted a niche market wherein they are concentrating on the premium
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segment. They are also entering into the low cost segment through
acquisition of smaller competitors.
5. Pricing of Products
Pricing Strategy : The Company offers world class services at the most
competitive prices. Their services are rated as the best in the Indian
aviation industry and their pricing strategy aims at acquiring customers
from their competitors by providing state of the art services at very
competitive prices.
Break-Even Analysis: The company carefully analyzes its load factors in
order to optimize their investments in the operations and to break even
because they are operating in a very dynamic industry and it is very crucial
for them to have a measure their costs so that they can optimize the
profitability of their operations.
6. Location
Accessibility to Market: They have a good accessibility to their target
market through modern fleet of aircraft and the best trained staff in the
industry. They are backed up by a strong parent company so they can
afford to spend considerable sums of money to establish themselves as a
major player in the Indian domestic airline industry.
Availability of customers: They have earned their customer’s trust with
their services over time and have willing customers ready to use their
services again and again and this has given them an edge over their
competitors.
7. Planning for Growth
Advance Planning: They are entering into the low cost sector along with
their existing operations in the premium segment and this offers excellent
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chances for future growth as they will have a monopoly in the industry
through a well targeted product mix wherein they will have a major share
of both segments.
Recurring Crises: Despite their best efforts to become the best airline in
the industry, they have not been able to make considerable profits ever
since their introduction in the industry. They are lagging behind the nearest
rival but they are still trying their best to cope up and become a market
leader.
Ref: (www.prenhall.com/scarbzim/html/smallbus.html )
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SWOT Analysis
A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified
as strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm’s
resources and capability.
Source: (http://www.quickmba.com/strategy/swot)
SWOT analysis for Kingfisher Airlines
Strengths:
Kingfisher Airlines have targeted the Indian domestic luxury segment,
therefore operating in a niche market.
Kingfisher Airlines has a strong financial support from the parent company
UB Group and “Kingfisher” itself is a well established brand.
The customer service provided on Kingfisher is extremely exceptional for a
domestic airline, hence providing an ultimate flying experience.
Kingfisher Airlines is well known for its highly trained and attractive staff.
Weakness:
The company has a immature organisational structure and lacks mature
management practices.
The company is unable to generate expected returns on the investments done.
Loads are lesser than that of its competitor Jet Airways which is a reflection of
its marketing and sales capabilities.
The main weakness of the company is the overspending of funds.
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Opportunities:
The Indian aviation industry is a growing industry with a growth rate of nearly
24%.
There are a large number of domestic untapped routes.
There has being a growth in the disposable income of the people especially in
the middle class, therefore more people can afford to fly by a luxury airline.
The air cargo market is still untapped.
Threats:
Fierce competition from other airlines such as Jet Airways
Cost cutting is become a prime need in the aviation industry, hence
pressurising a lot of airline companies
Infrastructure constraints
The major rises in fuel prices
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Industrial life cycle
Indian aviation industry growth rate=24%
Kingfisher airlines growth rate=37%
Fig 1: Distribution of players in the Indian Aviation Industry
India is the 3rd fastest growing domestic aviation market in the world with a growth
rate of about 24%.Indian Subcontinent is the third largest market for new aircraft in
Asia, behind China (1790) & Japan (640). More and more middle class families now
prefer air travel to traditional rail travel this because of the growing income which is
over Rs 90,000 per annum for a normal employees. People are also having an
increasing disposable income. The Indian aviation has swiftly expanded after its
liberation with the ending of government protection for Indian Airlines, the adoption
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of an open skies agreement with the United States and the loosening of a previously
tightly restrictive quota pact with Britain, hence making the Indian market very
exciting to carry out business. These are the some of the possible factors that drove
the Indian flamboyant business tycoon Vijay Mallya to eye this particular market.
Since the introduction of Kingfisher Airlines it has maintained a rapid growth rate of
about 37% which is really extremely remarkable.
Ref: (www.coolavenues.com/know/gm/manasi_6.php3)
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Competitors analysis
Attributes Kingfisher
Airlines
Jet Airways Indian Spice Jet
Price 25% higher
than Jet
Airways and
Indian
Lower than
Kingfisher
Airlines
Lower than Jet
Airways
Extremely low
Permission to
fly to US
It has It has NA NA
Permission to
fly to UK
It hasn’t It has NA NA
IPO Floated Floated Not yet Not yet
EMI scheme It doesn’t It doesn’t It has It doesn’t
Targeted
Customers
Both ends of
customers
Both ends of
customers
Lower end of
customers
Lower end of
customers
Positioning Premium
segment
Two-class, full-
service airline
that will further
leverage its
domestic and
international
reach
Low fares Lowest fares
and no frills
Kingfisher’s only strong obstacle proves to be Jet Airways, since Jet has control on
both ends of the market and secondly it has penetrated into the international market as
well. Benchmarking against Jet Airways, Kingfisher Airlines has acquired Air Deccan
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which was one of the most profitable low cost airlines, hence kingfisher too has
entered in the lower end of the market but bearing in mind that they haven’t changed
the name “Deccan” to “Kingfisher Airlines” so that the brand doesn’t lower.
Kingfisher is still testing the lower end of the market with Deccan. Kingfisher is also
going to start non-stop flights to US so as to foray into the international market.
New players into the market
Name Magic
Air
Go
Airlines
Indus
Airways
Inter
Globe
Air One Crystal
Air
Paramoun
t Air
Visa
Air
East
West
Airlines
Type No frills
domestic
airlines
Low
Cost
Value
carrier
Low
Cost
Regional Regional Regional Low
Cost
Value
carrier
Ref: (www.coolavenues.com/know/gm/manasi_8.php3)
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Porter’s 5 Forces for Kingfisher Airlines
Fig 2: Porter’s 5 Forces for Kingfisher Airlines
Threats from competitors:
The level of threat from the domestic competitors is very high. Competitors like Jet
Airways, Indian are some of the old well established players in the market which
prove to be strong competitors for the emerging Kingfisher Airlines
Threats from new entrants:
The level of threat from new entrants is quite low such as Virgin Atlantic, Qantas.
The major players in the Indian aviation industry form an obstacle to foreign airlines
and moreover Indian flyers prefer to have an Indian experience on the flight.
Threats of substitutes:
The introduction of high speed trains, high tech buses and other means of transport
has given more options to people to travel.
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Bargaining power of suppliers:
The bargaining power of suppliers is medium. For example, Airbus and Boeing are
the major aircraft manufacturers and there aren’t many aircraft manufacturers other
than these two, this confines Kingfisher’s options therefore the bargaining power of
Airbus or Boeing increases. In case of other suppliers such as caters the bargaining
power of the suppliers is low therefore Kingfisher has many other options of caters to
contract to.
Bargaining power of customers:
The bargaining power of the customers is low since kingfisher is designed to meet the
total comfort and value for money; therefore customers aren’t reluctant to pay a little
more sum to gain this experience.
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Position of Kingfisher Airlines
The position of Kingfisher Airlines in the market can be determined using the
Bowman’s Clock.
Bowman’s clock:
The 'Strategy Clock' is based upon the work of Cliff Bowman (see C. Bowman and D.
Faulkner 'Competitve and Corporate Strategy - Irwin - 1996). It's another suitable
way to analyze a company's competitive position in comparison to the offerings of
competitors. As with Porter's Generic Strategies, Bowman considers competitive
advantage in relation to cost advantage or differentiation advantage.
Ref: (www.marketingteacher.com/Lessons/lesson_ bowman .htm )
Fig 3: Bowman’s Clock
1 - Low price/low added value - Likely to be segment specific
2 - Low price - Risk of price war and low margins/need to be a 'cost leader'.
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3 – Hybrid - Low cost base and reinvestment in low price and differentiation
4 - Differentiation –Without a price premium - Perceived added value by user,
yielding market share benefits
With a price premium -Perceived added value sufficient to bear price premium
5 - Focused differentiation - Perceived added value to a 'particular segment'
warranting a premium price
6 - Increased price/standard - Higher margins if competitors do not value
follow/risk of losing market share.
7 - Increased price/low values - Only feasible in a monopoly situation
8 - Low value/standard price - Loss of market share
Ref: (www.marketingteacher.com/Lessons/lesson_ bowman .htm )
Focused Differentiation (Kingfisher Airlines)
Kingfisher Airlines operates in a niche market which is the luxury segment of the
market therefore on the bowman’s clock it lies on the focused differentiation. The
prices of the air tickets for Kingfisher Airlines is comparatively higher than other
airlines but the benefits and services rendered by them is exceptionally excellent.
Brand loyalty : “Vijay Mallya” himself is a brand in the first place and the
brand “kingfisher” has also established a remarkable standing in the market
place. Even before the introduction of Kingfisher Airlines into the aviation
industry the company always thought the brand image of Kingfisher must
always outstand in any industry. Therefore focus on quality service,
entertainment and better technology made “Kingfisher Airlines” to be known
as a unique airline. Kingfisher airlines address all its customers as “guests”
rather than passengers which bring a sense of importance in the flyer’s mind.
Insulation from competitors : Kingfisher Airlines is the only domestic airline
that has the technology and standards as that of an international flight. Since
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the UB group stands as a strong financial support for Kingfisher behind it,
hence these milestones are been able to be crossed. These factors prove out be
a competitive edge for Kingfisher over other competitors.
Excellent marketing skills : Vijay Mallya has always used celebrities as his
medium to deliver his products to the customer. Popular celebrities like
Katrina Kaif, Shah Rukh Khan have always been in his good books. He even
endorses his products through sports like F1, golf, cricket so as to popularize
his brand which has turned out to be successful strategy. Promotions are also
done through events, parties and swimsuit calendars that have been the key
strategy to concentrate the youth.
Additional services: SMS ticketing and Web check in has been organised by
this airlines for the ease of their customers. Kingfisher is the only domestic
airline that has the home ticket delivery service as their additional service.
Highly skilled employees : The recruitment process is personally carried out by
the CEO of the company Dr Vijay Mallya to ensure the best possible staffs
serve his guests. The company offers an attractive package of Rs 75,000 and
additional benefits which is a rare scenario in a domestic airline firm. The
employees have to undergo systematic training programmes in order to
successfully fly on Mallya’s birds.
Innovative: The Company has always had the flair for new technology; the
future introduction of Airbus A380’s would give them a clean advantage in the
market. All the aircrafts of Kingfisher are equipped with the CAT-III B
technology that is very useful for pilots in case of low visibility therefore
avoiding cases of delay or mishaps during bad weather.
Ref: (www.fly kingfisher .com )
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Strategies adopted by Kingfisher Airlines
Kingfisher Airlines is not a run-of-the mill Indian airline but else a value-
added, designer some-friller flight.
Kingfisher Airlines emphasizes on spunky, well-done interiors and trained
airhostesses.
Each A-320 carries 180 passengers.
Borrowing from the Kingfisher beer tagline of “The King of Good Times” the
theme of “Fly the Good Times” is given to Kingfisher Airlines.
Kingfisher has captured the Indian airline market with the twin engines of
‘special flying experience’ and ‘value for money’. (Contests like ‘Kingfisher
flying face of the month’ are on cards).
The Kingfisher airhostesses are selected through a nationwide contest.
The Kingfisher “Funliners” has in-flight silent auctions for lifestyle products
and sales of packaged food and beverages.
The Kingfisher brand of exuberant, youthful and fast-paced image is leveraged
(the brand recall).
Brand endorsement, Kingfisher Airline has roped in model Katrina Kaif to
endorse the airline.
Acquiring Air Deccan has helped Kingfisher to eye the deeper end of the
market too.
In another strategic move, the airline entered into a breakthrough agreement
with Indian Airlines, making it the first ‘public-private’ partnership in the
sector. This partnership under which Indian Airlines will provide all ground
handling services at its exclusive terminals in Mumbai and Delhi will allow
Kingfisher Airlines to efficiently manage investments and overhead costs. The
partnership encompasses a host of areas like mutual assistance on account of
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cockpit commonality and over a period of time will expand to cover
engineering and schedule coordination. It ensures that Indian Airlines makes
incremental returns on its existing infrastructure.
Kingfisher has adopted an extremely simple pricing structure so that
irrespective of the fare that a customer buys at, the rules, regulation and
cancellation policy remain the same.
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Challenges for Kingfisher Airlines
The fluctuating aviation turbine fuel (ATF) prices are always a concern for
low cost airlines, according to analysts. Many doubt how long these no-frills
airlines can survive in the market. In Europe, low cost airline boom was
followed by a bust, which only a few competitors survived. Since low cost
airliners depend on maximum utilization due to lack of stand-by aircraft, any
technical snag would adversely affect on the travellers as only a refund is
made and no alternative travel arrangements are done
Experts say that airlines compete primarily on three fortes such as price,
customer service and value-added services. While no-fillers fight the price
war, service is the main thing provided by their larger peers.
The critical factor will be the ability to keep costs low and the offer of an on
time service at an affordable price, despite the infrastructure constraints, for
survival.
The next issue to tackle is to properly position itself in the aviation market.
The Indian customers are not that much mature as compared to their American
contemporaries. They will not pay more for just mere entertainment or
watching TV in a flight of one or a half hour journey.
Poor airport infrastructure such as few landing slots, Inefficient Air traffic
controllers, not yet automated systems prone to human delays and errors,
shortage of skilled personnel.
The revenue per seat is low.
It cannot rely solely upon the direct selling model for sell of the tickets as the
Internet and credit card penetration is not that remarkable.
The dishonesty of travel agent who usually do not push their seats as that of
the rival’s.
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A certain amount of churn and turmoil for players who don’t have the deep
pockets. For example, as happened in USA, many smaller airlines without
deep pockets fell by the wayside unable to sustain the predatory pricing
techniques adopted by their strong opponents.
The outdated Aviation rules in India which compels the airlines to add more to
their operating cost, which could have been easily, do away with.
Taxes like passenger service fee which is Rs. 221 on one seat looks ridiculous
for a ticket worth Rs. 99.
Overhauling costs is another major hurdle.
Current number of pilots in India is over 1,500.
According to aviation ministry sources, the money that is coming to the sector
is from dubious origin in several cases & is from investor seeking quick
returns. So it may be possible that some of the players may not even be in the
game for long. They may sellout after listing on the stock market or get bought
out, once the market starts consolidating.
Ref: (www.ficci.com/media-room/speeches-presentations/2007/feb/air-con/session3)
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Strategy suggested for Kingfisher Airlines
Collaboration with competitors: The company can get into collaborations
with its competitors to improve their operations and cut costs because costs are
a major issue in any industry especially in airline industry which is such a
dynamic industry that challenges of cutting the costs are of utmost importance
to any company in order to improve their operational efficiency and increase
their profits.
Reconsider the pricing strategy: The Company should rethink its pricing
strategy because they are offering premium services at prices which are
unmatched to the experience that the customers get. The company is offering
too much in terms of value to the customers and this is seriously affecting their
profit margins. Therefore, aligning their services with the industrial standards
and benchmarking with competitors could help them improve their return on
investment and add value to their stakeholder’s money.
Expansion of coverage: The company can exploit the untapped routes in the
domestic sector especially in the urban towns and cities where the disposable
income of the people is rising and the company can take advantage of this
because people prefer to travel by air because they can afford it.
Developing the cargo operations: The cargo sector in the domestic industry
is very much unexploited and the company can exploit this because they have
access to some of the most profitable routes in the industrial towns and cities
in India. The company has got a sound infrastructure to support its cargo
operations and they should take advantage of this before their competitors.
Improving load factors: The company can improve their load factors by
employing more fuel efficient fleet because this will help them to cut down
their fuel costs compared to the passenger count and this will improve their
load factors.
Flamboyant Image of CEO: The company should not be using the
flamboyant image of the CEO to promote their company as this could prove to
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be fatal for the company in case his corporate image is tarnished as a result of
any mis-happening. The company should be aware of any such scenario and
should carefully plan their promotions which are centred on the CEO’s
corporate image.
Acquiring hangers : The company should acquire hangers at the major
airports in order to increase their revenues while cutting down the costs. For
Example, if they have their own hangers then they will not pay the parking
charges to the competitors and at the same time if they have their own hangers
then they can charge their competitors for using their hangers which will
increase their revenues.
Improving management styles: The Company totally focuses on its
marketing strategy rather than evenly focusing on its finance throughput. If an
absorption costing analysis of the company done it will enormous number of
assets which would be non liquid cash but in terms of variable costing
Kingfisher Airlines faces a loss of Rs 577 crore.
Ref: (economictimes.indiatimes.com/.../articleshow/2602464.cms)
Ansoff Marketing Mix Model
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To portray alternative corporate growth strategies, Igor Ansoff presented a
matrix that focused on the firm’s present and potential products and markets
(customers). By considering ways to grow via existing products and new
products, and in existing markets and new markets, there are four possible
product-market combinations. Ansoff’s matrix is shown below:
Ansoff’s matrix provides four different strategies:
Market penetration: the firm seeks to achieve growth with existing
products in their current market segments, aiming to increase its market
share.
Market development: the firm seeks growth by targeting its existing
products to new market segments.
Product development: The firms develops new products targeted to its
existing market segments.
Diversification: the firm grows by diversifying into new businesses by
developing new products for new markets.
Ref: (www.quickmba.com/strategy/ansoff/ )
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Ansoff for Kingfisher Airlines
Market penetration
Encouraging existing Customer to buy more Showing benefits for using more
associating freebies/extra service/membership with primary offering.
Try to look for foreign entrant’s weakness such as Virgin Atlantic which lacks
in Indian values & tastes.
Product development
Seek additional distribution channels such as more tie ups & collaboration, try
seeking collaboration with international carriers, bilateral discussions over
seats and code-sharing between the carriers.
New product development.
Market development
Try to find out new customer group such as Old-retired persons.
Special offering for first time fliers
Diversification
May go for other services like international flights (concentric diversification).
May go for arrangement fashion shows (horizontal diversification).
Conclusion
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The ROI (return on interest) for Kingfisher Airlines turns out to be low since the
capital investments done by them are very high and profits incurred are low.
ROI = Profit / Capital Employed
The strategy proposed for Kingfisher Airlines in this assignment would help
Kingfisher Airlines to recover from their losses by a substantial amount but the
strategy of Vijay Mallya is to conquer the Indian Aviation market by any cost.
Vijay Mallya has been providing exceptional standards of flying experience for
the domestic customer base in order to attract more and more costumers. He has
acquired Air Deccan which has been a profitable low cost airline therefore now
penetrating towards the lower end of the market too and now he is intending to
buy out another competitor Spicejet. This shows that the main motive of Vijay
Mallya is to first conquer the Indian aviation industry at any cost and then dictate
over it.
Another strategy of Vijay Mallya is that he uses Kingfisher Airlines to popularize
his beer “Kingfisher” throughout the world which has proven to be successful
with additional sales of 459%, hence increasing its profits to a huge margin. The
losses attained through Kingfisher Airlines are easily compensated through the
sales of “Kingfisher Beer”.
But the drawback of this company is that it promotes its brand using the CEO’s
flamboyant image rather than promoting the brand “Kingfisher” individually. In
case the CEO vanishes, the brand “Kingfisher” will blur out from the market
because they have always used “Vijay Mallya” as their medium to market
Kingfisher. In case this style of marketing continues Kingfisher which is known
for its “Good Times” might one day have its “Bad times”.
Therefore I would conclude saying that there is a lot of water to draw from the
Indian wells and I personally feel that ‘Kingfisher Airlines’ has the potential to
do so.
References
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http://flykingfisher.com/
http://avindia.blogspot.com/2006_12_24_archive.html
www.moneycontrol.com/india/news/press--news/ kingfisher - airlines
-paymate-to-launch-flybuysms/307281
timesofindia.indiatimes.com/articleshow/2007722.cms
timesofindia.indiatimes.com/articleshow/1955887513.cms
http://www.coolavenues.com/know/gm/manasi_1.php3
http://www.slideshare.net
http://www.wekipedia.com
http://www.google.com
www.quickmba.com/strategy/ansoff/
www.quickmba.com/entre/definition
www.thehindubusinessline.com/2007/06/01/stories/2007060106400100.htm
www.how-to-make-more-money.com/Vijay-Mallya_biography.html
www.gaebler.com/entrepreneur-characteristics.htm )
www.prenhall.com/scarbzim/html/smallbus .
http://www.quickmba.com/strategy/swot
www.coolavenues.com/know/gm/manasi_6.php3
www.coolavenues.com/know/gm/manasi_8.php3
www.marketingteacher.com/Lessons/lesson_ bowman .htm
www.ficci.com/media-room/speeches-presentations/2007/feb/air-con/session3
economictimes.indiatimes.com/.../articleshow/2602464.cms
Entrepreneurship and Innovation, Module Notes by Nigel Denton
Strategic Management, Module Notes by Suresh George
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