innovation assignment new

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

Lionel Martis 1


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

Lionel Martis 2


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)

Lionel Martis 3

http://www.quickmba.com/entre/definition



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.

Lionel Martis 4


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.

Lionel Martis 5


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.

Lionel Martis 6


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)

Lionel Martis 7

http://www.thehindubusinessline.com/2007/06/01/stories/2007060106400100.htm


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)

Lionel Martis 8

http://www.how-to-make-more-money.com/Vijay-Mallya_biography.html


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

Lionel Martis 9


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

Lionel Martis 10


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

Lionel Martis 11


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 )

Lionel Martis 12


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.

Lionel Martis 13

http://www.quickmba.com/strategy/swot


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

Lionel Martis 14


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

Lionel Martis 15


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)

Lionel Martis 16

http://www.coolavenues.com/know/gm/manasi_6.php3


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

Lionel Martis 17


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)

Lionel Martis 18



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.

Lionel Martis 19


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.

Lionel Martis 20


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'.

Lionel Martis 21

http://www.marketingteacher.com/Lessons/lesson_bowman.htm


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

Lionel Martis 22


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 )

Lionel Martis 23

http://www.flykingfisher.com/


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

Lionel Martis 24


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.

Lionel Martis 25


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.

Lionel Martis 26


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)

Lionel Martis 27

http://www.ficci.com/media-room/speeches-presentations/2007/feb/air-con/session3


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

Lionel Martis 28


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

Lionel Martis 29


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/ )

Lionel Martis 30

http://www.quickmba.com/strategy/ansoff/


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

Lionel Martis 31


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

Lionel Martis 32


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.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 .


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

Lionel Martis 33

http://www.ficci.com/media-room/speeches-presentations/2007/feb/air-con/session3

http://www.marketingteacher.com/Lessons/lesson_bowman.htm




http://www.prenhall.com/scarbzim/html/smallbus

http://www.gaebler.com/entrepreneur-characteristics.htm

http://www.how-to-make-more-money.com/Vijay-Mallya_biography.html

http://www.thehindubusinessline.com/2007/06/01/stories/2007060106400100.htm


http://www.quickmba.com/strategy/ansoff/

http://www.google.com/

http://www.wekipedia.com/

http://www.slideshare.net/


http://www.moneycontrol.com/india/news/press--news/kingfisher-airlines




http://avindia.blogspot.com/2006_12_24_archive.html

http://flykingfisher.com/

innovation assignment new

Documents