Strategic Management Assignment on “Low-Cost Carriers in India – Spice Jet’s Perspective” Q1. How did the construct of LCC emerge in India? Which factors encouraged the growing of LCCs? Ans.
After the liberalisation policy which was introduced in 1991 the Indian market witnessed the entry of in private owned air hoses and LCC. By March 1994. the authorities had approved six private bearers. However. by 1998 many of these air hoses failed. In this closing game. a sum of IMR 10 billion of capital was wiped out. By 2003.
there were merely four bearers runing in India –Air India. Indian Airlines. Jet Airways and Air Sahara – all operating full service theoretical accounts. And private bearers in those yearss were limited to runing domestic paths merely.In 2003 the first LCC entered in India which was the Air Deccan. The entry of this first LCC in India constituted a turning point in Indian air power industry. It led to a displacement from traditional economic system and concern menus to particular price reductions.
promotional menus. cheque menus. web menus and corporate price reductions. India witnessed a compounded one-year growing rate of 19. 14 % in the air rider traffic and 9. 91 % in lading motions over the period from 2003-2004 to 2007-2008. This complemented the success of the LCC theoretical account referred to as the “no frills airlines” concern theoretical account.
This encouraged other private air hoses to emerge. The entry of LCC along with increased FDI influxs. tourer influxs. higher corporate travel. higher family incomes. sustained concern growing and back uping authorities policies. all contributed to the growing of the Indian air power industry. Today.
there are efficaciously seven major air hoses runing 11 different trade names. * Air India + Air India Express ;* Jet Airways + Jet Konnect + JetLite ;* Kingfisher Airlines + Kingfisher Red ;* IndiGo ;* SpiceJet ;* Go Air ;* Paramount.Out of which GoAir. IndiGo.
SpiceJet. JetLite are LCC air hoses. The most important recent strategic development in the Indian domestic market is that it is quickly turning low cost.
An operating theoretical account that did non be in the Indian market until six old ages ago. could account for about 70 % of domestic capacity by the terminal of 2010. as predicted by the Centre for Asia Pacific Aviation every bit early as 2005. The displacement to low cost has been accelerated late by moves by Jet Airways and Kingfisher Airlines to reconfigure the bulk of their domestic aircraft to run all-economy. no-frills service. Air India is besides be aftering to follow suit. As of Mar-2010. on the domestic forepart.
the three big air hose groups – Air India. Jet Airways and Kingfisher Airlines commanded a 59. 7 % market portion. while the independent LCCs controlled 39. 0 % .Indian bearers domestic market portion: Mar-2010Low-cost air hose rules:All Low-cost air hoses have a different service offering.
by definition they offer some or most of the below. * Standardized fleet ( Lower preparation. care costs. purchase aircraft in majority ) * Remove non-essential characteristics ( Non-reclining seats. no pilot car accelerator. no frequent circular strategies ) * Use of secondary airdromes ( Lower landing fees. marketing support ) * Rapid turnaround ( Less clip on the land.
more flights per twenty-four hours ) * On-line ticket gross revenues ( No call-centers or agents )* On-line cheque in ( Fewer cheque in desks )* Impose luggage charges ( Less bags mean quicker burden of aircraft. excess gross for checkered bags ) * Do non utilize jet-ways ( Avoid extra airdrome charges )* Have staff do multiple occupations ( Cabin crew besides look into tickets at the gate. clean aircraft ) * Hedge fuel costs ( Buy fuel in progress when it is cheaper ) * Charge for all services ( On board services. reserved seating.
excess luggage ) * Do non utilize reserved seating ( Slows down the burden of the aircraft ) * Fly point to indicate ( Passenger transportations to other flights non accommodated )Q. 2 what factors should SpiceJet see before strategizing its operations in India. Use tools such as CPM ( Competitive Profile Matrix ) . EFE Matrix ( External Factor Evaluation ) .
& A ; IFE ( Internal Factor Evaluation ) which serves to place assorted factors and forces that are critical inexplicating appropriate schemes needed to carry through the organization’s aims. Ans. IFE is a tool which basically evaluates the internal factors that affect the schemes of a house. The factors can be economic. demographic. cultural. political etc.
The different factors that can be considered under the same are: Strengthsa ) Low cost menus: entered with Rs 99 menus for first 99 yearss. B ) Targeting tier II tier III metropoliss which gave an chance to increase its market portion. degree Celsius ) More seats were available as comparison to any other LCC theoretical account. vitamin D ) Excellent LCC theoretical accountvitamin E ) Low care and staff costsdegree Fahrenheit ) More air clip than hibernationg ) Use of secondary airdromes avoiding congestionWith the aid of the undermentioned strengths SpiceJet was able to keep operating costs 30 to 40 per cent lower than the full service bearers. Failingsa ) Small fleet construction.B ) Concentrating at merely North- west-south Indian Sectors. degree Celsius ) Small burden efficiency compared to Air Deccanvitamin D ) Low Employee satisfactionvitamin E ) Rising abrasion degreesdegree Fahrenheit ) Infrastructure issuesEFE is a tool which basically evaluates the external factors that affect the schemes of a house.
The factors can be economic. demographic. cultural. political etc. The different factors that can be considered under the same are: Opportunitiesa ) Future Fleet enlargement will increase its market portionB ) Use of digital mediadegree Celsius ) Attractive menus and up to day of the month quality service will bring forth a immense customer’s base consisting frequent circulars. vitamin D ) Favorable consumer penchantsvitamin E ) Use of strategic confederations organizing an international entityMenacesa ) High abrasion rateB ) The menace of new entrantsdegree Celsius ) Strict air hose ordinancesvitamin D ) Security measures – a cardinal challengevitamin E ) Terrorist and highjack state of affairss pose another menacedegree Fahrenheit ) Increasing competitiong ) High rates of ATFQ 3. What schemes could be adopted by Spice Jet to get the better of the factors that inhibit the success of the LCC concern theoretical account? You can concentrate on * Distinguishing the Offer* Undertaking Operating Costss* Entering into Strategic Alliances* Pull offing Employee Remuneration Costss* Motivating EmployeesDistinguishing the offer:* SpiceJet entered into the market with Rs 99 for the first 99 yearss.
Their chief aim was “offering low mundane spicey fares” . * SpiceJet has already worked on all the schemes based on the LCC theoretical account which seem to hold worked in their advantage for many old ages. Their current offer negotiations about a individual rider category and travel for short continuances. However. presently they are presuming that clients do non tie in much importance with additions like repasts. newspapers and on board amusement. * Air travelers seek for “low menus coupled with a comfy travel experience” . * They should besides hold menus somewhat higher than that of low-cost air hoses since to offer frills to those of its travelers who would usually go concern category on full-service air hoses.
This Strategy will pull the concern category travelersUndertaking Operating Costss:Expression at aiming working operations on an international degree. Strategy that can be looked at in footings of cut downing operational costs is a ) Traveling merely to major airdromes and cut down on the issue of connectivity. B ) Flying a individual type of aircraft to cut care costs c )Operating from secondary airdromes: Due to miss of secondary airdromes in India all these old ages. LCC have been forced to pay higher landing fees thereby increasing cost.
but with the new reforms of the NCC69 the scenario is bound to alter and LCC can work this chance to their benefit. vitamin D ) Direct E-ticketing gross revenuesvitamin E ) Change in Airline civilization: Mismanagement and incapable staff comes at a cost to the full air hose. Pilots and cabin crews need to be trained from first assistance to baggage managing to be able to duplicate up when needed. The civilization needs to be changed whereby everyone in the company is viewed to be equal. thereby enabling Spic Jet to salvage on labor costs and offer lower menus to clients. Entering into Strategic AlliancesEntering into Strategic Alliances can assist Spice Jet to acquire competitory advantage in the market. For Eg-The country’s air hoses market leader Jet Airways ( FSC ) has decided that Air Sahara.
which it late acquired will get down operations under the name of “Jetlite” . “Jetlite will be positioned someplace in between a alleged low menu and full service bearer. In instance of cancellation or holds. riders winging on Jetlite would be accommodated on Jet Airways. ”This sort of distinction will take to sustainable competitory advantage in the market. Pull offing Employee Wage Costss and Motivating Employees In order for Spice Jet to stay competitory.
it should sharply prosecute endowment to increase productiveness and profitableness. leveraging human capital to keep a competitory advantage. To run into this challenge. companies. must craft a clear and compelling scheme for implementing a good thought-out entire reward/compensation program to pull. retain and motivate cardinal endowment. This entire wages scheme should incorporate cardinal constituents including: 1.
Entire compensation2. Benefits3. Work-life balance4. Training. calling and personal growing chances ( World at Work Model ) These nucleus constituents are critical for an organisation like Spice Jet to last and boom into today’s composite and disputing concern clime.