Kingfisher Airlines

21 Pages   |   6,067 Words
Contents
Executive Summary. 1
Indian Aviation Industry. 2
Introduction. 2
Current Status. 3
Analysis. 4
PESTEL Analysis. 4
Political Factors: 4
Economic Factors: 5
Social Factors: 5
Technology Factors: 5
Environment Factors: 5
Legal Factors: 6
Porter Five Forces Analysis. 6
Barriers to Entry: 6
Competition: 6
Substitutes: 7
Bargaining power of Suppliers: 7
Power of Buyers: 7
Porter Diamond Model 8
Factor Conditions: 8
Demand Conditions: 8
Related and Supporting Industries: 9
Firm’s Strategies, Structure and Rivalry: 9
Internal Factors Analysis summary (IFAS). 10
Strengths: 10
Weakness: 10
External Factors Analysis Summary (EFAS). 10
Opportunities: 10
Threats: 11
Barney Analysis. 11
Valuable: 12
Rare: 12
In-imitable: 12
Non-substitutable: 12
TOWS Analysis: 13
Strengths and Opportunities (SO). 13
Weaknesses and Opportunities (WO). 13
Strengths and Threats (ST). 13
Weaknesses and Threats (WT). 14
Value Chain Analysis. 14
Recommendations. 15
References. 17
 
 
 

Executive Summary

This report provides us with competitive analysis of Kingfisher airline. Kingfisher, among top airlines in India, as per market capitalization, caught itself in sever debt crisis. Kingfisher almost went bankrupt, and Vijay (CEO) along with four executives was almost put into jail. This report starts with the background of Indian Aviation industry and its importance. Then, this report provides a brief introduction and synopsis of kingfisher and its crisis.
After picture of an overall problem, this report tries to probe out the competitiveness of kingfisher in the aviation industry. So as part of analysis, it starts up with PESTEL analysis. This analysis compares overall situation, and where the company stands as per political, economical, social, technological, environmental and legal issues.
 Michael Porter’s work in finding out competitiveness is most recognized and well reputed. So, a major emphasis was paid in evaluating Kingfisher according to porter five forces model and diamond model. Evaluation of Kingfisher on the basis of these models provided much clear picture of Kingfisher standings.
 

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In addition to Michael Porter competitiveness analysis, Kingfisher was further probed using Internal Factor Analysis Summary (IFAS) and External Factor Analysis Summary (EFAS). This analysis provided a clear SWOT analysis of the firm. These analyses helped in providing us recommendations.
This research report flows with the Barney’s analysis. This analysis was done to get wider insights about company’s condition. Else, it also provided us with a clear picture of whether these resources and activities can be responsible for Kingfisher to achieve a competitive edge.
After the Barney’s analysis, Value chain analysis was done. This was done to probe out activities that can help kingfisher achieving competitive edge. Over all these analysis presented company to be in trouble but they helped out getting necessary steps to counter these problems.
Last, but not the least, recommendations were provided at the end of this research report. These recommendations were provided after a careful analysis of whole situation using various models. These models helped a deep understanding of the situation and so, helped us making conclusion and provide recommendations.
 

Indian Aviation Industry

The Indian aviation industry originated in 1911 as a French pilot covered a distance of 10 km during that flight. Since then, India made a consistent effort to improve the standard of its aviation industry. Now aviation industry of India can be referred as one of the fastest growing industries of the world. Indian Aviation industry has a growth rate of 18% annually. India has eight players operating in this industry, and it’s dominated by the private sector. According to estimation almost 75% of the total business or market share in this industry is owned by the private sector. On the other hand, government’s open sky policy has provided an opportunity for many other players to enter into the market. Reason being, India has huge market as it ranks number four in term of total volume of the domestic passengers and it this traffic increased by 16.6% in 2011 (India domestic passenger growth slows to 8% in Dec-2011; 2012 growth to slow from 16.6% in 2011, 2012). Indian aviation industry has not been able to capitalize over the increasing demand. Because of not being able to capture demand, it ranks ninth biggest industry, thus providing opportunities for new entrants. India’s new policies also encourage new entrant. For the current year, one of India’s biggest airline, Kingfisher, has gone through sever crises and almost caught itself into bankruptcy. This badly hurt the Indian aviation industry, as a result of that this industry suffered a loss of approximately USD $2 billion (Indian aviation sector in crisis: global body, 2012).

Introduction

King fisher airline has an Indian origin, with its head office located at Andheri, Mumbai. It was established in 2003, with a majority of stake, 50%, belonging to United Breweries Group. Kingfisher airlines started to operate in 2005, focusing primarily on domestic flights from Mumbai to Delhi. Later on in 2008, kingfisher started its international flights, choosing a destination of London from Bangalore. It had plans to start of more international flights with designations across Asia Europe and Africa Kingfisher started its operation with a total of four new airbus A320-200s aircrafts. Till first quarter of current year (2012), kingfisher covered twenty five domestic destinations.
Kingfisher had 63 different aircrafts covering different destinations of long and short haul. It always served its customer with international standard planes and superior services. For domestic flights, Kingfisher provided its customers with wide and comfortable seats had an arrangement for entertainment with both English and Hindi channels and songs. Kingfisher provided passengers with accessories like laptops, chargers and noise cancellation headphones.
While, for international flights seats were provided, that can convert to bed, superior refreshment and alcoholic drinks. Passengers were provided with touch control screen for entertainment. Addition to that they were provided with blankets and flexible seating arrangements and lounges (KINGFISHER AIRLINES unveil new Airbus A330-200 which is designed to take the Customer Experience to the highest Quality level, 2008).
With its superior service and extravagant branding, Kingfisher won numerous awards. Firstly, as mentioned it had second position in market sharing. In 2005, Kingfisher won awards like busiest brand and best new airline of the year award. Due to its superior services kingfisher got its name written in top 100 most trusted brands and got the award for best customer responsiveness (The Brand Trust Report, n.d.). In 2008 kingfisher was names as the second busiest air line. Addition to that, in 2009 it received two Freddie awards for best bonus promotion and best customer services (Mirpuri, 2009). Kingfisher continued with its journey of awards and so, in 2010 it received three international at skytrax. These awards include best cabin crew, best Indian airline and low cost air line (About Us, n.d.).
Kingfisher won numerous other awards related to its super service, innovation and many other fields. Until recently, it found itself in many crises. These crises continue to build up, and kingfisher found itself almost going bankrupt.

Current Status

Very interesting thing to mention here is, since its inception of operations in 2005, kingfisher was reporting losses. Despite of those losses, kingfisher took over Air Deccan and then decided to take international flights. So as per recent figures in 2012, Kingfisher has a cumulative loss of USD $1.32 billion, which kingfisher claims that, it has recovered and is in better condition than before. Another attention-grabbing point here is that, after acquiring Air Deccan, Kingfisher suffered a loss of USD $189million. This was the time when kingfisher decided to go international. Now kingfisher is at the stage where half of its fleet is grounded, it’s in severe crisis and facing strikes, financial issues and filed a petition because of nonpayment of dues.
When it started operation, it had second largest share in Indian domestic air travel industry. But, due to sever crisis, kingfisher is no longer able to maintain this position, and now it’s ranked at number five, the lowest share in that market. As per observation of the increase in the cumulative losses, Kingfisher operations got suspended till 20th October, 2012. Its accounts also were suspended at the end of 2011 but were reopened after one day. In order to save the sinking ship, Captain Vijay Mallya called the meeting to pay dues to the creditors. By, 2011 seven of its creditor were not paid. In the start of February, these crises rose to peak. Crisis leaded to cancelation of 80 flights per day (Sen, 2011). Few excuses were presented, but these were not given much importance. Cancelation of fights at such large scale, impacted airline share price, and it dropped rapidly, almost 13.5%.  As a result, by the end of February only 22 out of 64 aircrafts were operational, with international flight temporarily closed. Now, most recent report that was mentioned as of march suggested that only 16 of its aircrafts were operational.
With, all the petition files against Kingfisher and cases in court, it found itself in trouble. Until recently, kingfisher was provided another shock when non bail able warrants by Hyderabad court were issued against the CEO Vijay Mallay and four other executives. This order was issued as per GMR’s claims of Rs 10.5 crore against Kingfisher. In the end, kingfisher paid the due amount and it’s seen to be a positive sign for Kingfisher (Warrants against Mallya withdrawn as Kingfisher settle GMR dues, 2012).

Analysis

PESTEL Analysis

PESTEL analysis provides us with the better understanding of the situation considering factors including six of most important factors for any organization.

Political Factors:

Political factor is one of the most important factors for any industry to perform better. Specially, it’s important in the case of an Aviation industry. It’s been said that the political situation defines tourism in the country and tourism defines the perception about that country. This perception leads to building up of business and market size of industry in that country.
India is one of the fastest growing economies of the world, with GDP of around 8-8.5%. With this growth pace, India has capitalized on the opportunity to attract new investment. In case of the aviation industry, one of such step includes providing on open space for commercial flights (Indian Aviation Sector – 20 years of the Open Skies Policy, 28). This opened the new door to investments and potential new entrants. In order to support that, Indian policy makers took further steps like tax exemption for projects related to this industry, full FDI under automatic routes, 100% equity for Indians not living in India. Furthermore, landing charges and foreign travel taxes were abolished. These policies were successful in bringing big giants like TATA industries, Hindustan Aeronautics and others to invest in the aviation industry. This situation puts Kingfisher in dilemma. At one end, it shows with a huge opportunity, to gain huge market and growing market share. At the other end, it tells Kingfisher about other potential giants that are going to come and take in their piece of meat. With such condition and crisis, it’s becoming hard for kingfisher to cope up with the growth rate of this industry and face potential giants. However, with recent good news of CEO’s bailout its shows light in the tunnel for kingfisher to get out of the dark.

Economic Factors:

As foresaid, India is one of the fastest growing economies of the world, with GDP of around 8-8.5%. It’s forecasted that Indian growth rate will maintain this pace for upcoming years. Because of such phenomenal performance of India, the average disposable income of the household has increased. That leads to more spending on tourism and travelling. As witness, India has 4th largest passenger volume. This represents a big opportunity for its aviation industry. Addition to that blooming economy, bring in more investment, and its voluntary participation in sports activities like IPL attracts tourists. This further builds in the infrastructure. So kingfisher has an opportunity to rise and make a mark. But, for that kingfisher will have to get out of these crises. This can be done by attracting the investments and capitalizing on its brand image and superior service.

Social Factors:

Because of such level of growth rate the lifestyle of people got changed. They have more disposable income, as the number of working members in the family is increasing. Another factor for an increase in disposable income is the inflation rate (Indian inflation rate, 2012). Because, of increase in the inflation, earning members of the family has to be increased. This added on to the travel rate and so, growth in the domestic travel.  In addition to that India has represented its culture and promoted tourism very well through mass media. This is also adding to the passengers traffic, as more and more people want to explore India and attend events like sports and cultural. So, in any sense Kingfisher has every chance of making and capitalizing on the market as its growing and customer traffic is increasing. At the same time, it has a strong brand image in term of its efforts for improvement of the aviation industry.

Technology Factors:

Recent decades, India has really capitalized over this sector and earned a great name in achievements. Technology giants have emerged in India, and they are ready to take on challenges of innovation and at the same time challenging the world. Some of achievements of in this industry include satellite navigation, development of Greenfield airports e ticketing etc. This has provided great opportunities for investments and attracted new investors. So, part of navigation kingfisher won most innovative firm award. This award shows us the capabilities of kingfisher, which is now taking last few breaths.

Environment Factors:

Because of increase in the global warming, India has adopted concepts of green field airports. To pursue this target it has started to work on them and Bangalore airport is one of the prime examples.

Legal Factors:

The legal factors of India provide a tough time for new starters. They have to go through many legal procedures and formalities. Addition to that, it’s highly capital intensive industry, so it requires an amount of almost 30 crore in hand to put the airplane on track. Subcontinent is not a very safe place to operate in and so it leads to many security concerns.

Porter Five Forces Analysis

Barriers to Entry:

India has planned such regulations to promote and attract foreign investors in that sector. As fore said, Indian aviation being fourth in domestic volume of passengers and ninth as an industry provides a great attraction for other potential players to invest in. One can clearly observe a gap in demand and supply in this industry, which encourages other players to jump in. In addition to that, India has changed its policy as such that it supports other players to get in the game. These policies include a free airspace for commercial flights, tax exemption for airport projects and many more. So, for kingfisher it’s not really good news as more and more attractive the opportunity foreign players will get they will invest (SINHA, n.d.). Infect, this investment has started with giants like TATA investing and Airbus SAS makers moving part of their activities to India.
On the other side of the picture, this industry is cost and capital intensive, as one will have to through many of regulations before finally getting permission to operate. Addition to that, airport infrastructure is not at an international level. But India has taken initiatives to develop airports. So, as if a company jumps in because of its huge investments made it has to stick by and making exit difficult. Like in case of kingfisher, it extensively put in money accumulating debts, and as a result, they can’t operate at the same time can’t leave. Another dark aspect of it is its highly technical industry and, so it’s hard to get pilots and other engineers specialized in aviation.
These barriers to entry are not of a great concern, if the players are huge. But it certainly provides an opportunity for Kingfisher to rise and fight for its survival in such cut throat competition. Because all that’s needed by kingfisher is to rise through crisis. As it already has settled its business and gone through initial phases.

Competition:

As discussed before, this industry is overwhelmed by the private players. It was stated that almost 75% of the market is catered by the private players. So this industry is driven by cut throat competition. As, most of the players are private it means that most of them are innovative and are doing their best to serve customer. One reason for this level of competition is that there is not much differentiation in services provided. On the other hand, government policies are encouraging other players to enter into the market take off the share. This is not good news for Kingfisher in the middle of its crisis. Because, most of them are going to take advantage of Kingfisher’s absence in that era and as a result, kingfisher will lose its market share. This industry has potential of many mergers like Kingfisher took over Deccan air lines this further adds on to competition threat. These mergers are also done to acquire more technology, customers and to cover costs. Kingfisher is striving in this era while competition is driving level and expectations high, so it’s very hard for Kingfisher to gain the lost market share.

Substitutes:

Indian population disposable income is rising. In addition to that, the modes of transportation are improving. Road and railways are part of substitutes available to Indian people. Recently Indian railways have done a nice job to provide cheap transportation to its people. It certainly provides a threat to low cost services like Kingfisher red. On the other side of it, seven of other airlines operating in India are part of a substitute and threat to kingfisher. Low service differentiation makes it highly completion based industry. As per substitutes, Kingfisher is no more up to the competition as completion has already taken its pie and is now lowest in terms of market capturing.

Bargaining power of Suppliers:

Bargaining power of suppliers is very high in this industry. Reason being, this highly technical and, therefore, require a highly skilled labor. Neither in other words, every school or institute is nor providing pilots. So this drives the competition high, pilots are attracted towards rival with better opportunities. In addition to that, this industry is low differentiated, and as a result, the switching cost is almost negligible. Fuel cost is increasing day by day and its one of reason that Vijay was almost into jail (Arrest warrant issued for India magnate Mallya: reports, 2010). So suppliers have a strong bargaining power to increase or decrease cost for industry player. It’s again not good sign for Kingfisher since its performance was so poor during last year. It was sued by fuel providers for not making payments.

Power of Buyers:

Power of buyers is low in case of their fragmentation but, high in case of switching cost. It’s a low differentiated industry with almost same routes and destinations. Consumer can switch to any other airline without incurring any cost at all. So, if kingfisher sees a window of opportunity and capitalizes on that it’s a plus for them. But kingfisher will have to have entrepreneurial mindset. This can provide them with first mover’s advantage and can bring faithful customers (Strategic Management, n.d.).

Porter Diamond Model

Factor Conditions:

Porter refers these conditions as infrastructure, land, labor investments and national resources. So these factors are part of India’s strategies to improve on and get more investments. It includes, providing of land adjacent airport to company investing in aviation and many other steps. So these factors will surely bring in more companies to give more tough time to existing players and Kingfisher. According to Porter increase in competition brings more competitiveness and innovation. So, kingfisher, an already drowning company will have the opportunity and at the same time it will kingfisher ability to fight and survive.

Demand Conditions:

Porter refers to increase in internal demand results in increasing competitiveness. Indian domestic demand is increasing, with industry growth rate of 18%. Addition to that, India GDP is among the fastest growing in the world (about 8-8.5%). India is 4th in terms of volume of passengers. So, demand factor of India is very strong. At one side, it provides the domestic operators to expand more and force them to do mergers and acquisitions. On the other hand, it provided attractive opportunity for foreign companies. If Kingfisher takes necessary steps it can avail theses opportunities. Kingfisher covers almost 66 destinations across India, so it has a great opportunity to retreat (Porter, n.d.).

Related and Supporting Industries:

Kingfisher was India’s first airline to acquire new jets. At the other side of it, India does have relating and supporting industries for aviation, but these are not of international level or well developed. This adds on to lack of infrastructural development and many other factors. So, overall this aspect on India is not very strong. But kingfisher has already on tracks for quite long, and it’s important for kingfisher to do its best to rise. As, cost associated with leaving is very high.

Firm’s Strategies, Structure and Rivalry:

Aviation industry of India is driven by cut throat competition. There are few players, but most of them are privately owned. This leads to high innovation and rivalry. In order to abide by increase demand, firms are taking steps of mergers and acquisition. Kingfisher strategies were never strong enough to cater to demand and capitalize over its market share. Because, aviation is low differentiation industry with no switching cost. The players who performed better are now the leaders (The diamond model, n.d.).
Factor Conditions. Demand Conditions. Related and supporting industries. Firm strategies, structure and Rivalry
  • Investments on infrastructure.
  • New policies supporting infrastructural development.
  • Internal demand is increasing.
  • Income per capita also increasing.
  • Have high bargaining power.
  • Industries still in progress of development.
  • High rivalry.
  • Highly innovative.
  • Dominated by private players.
 
 

Internal Factors Analysis summary (IFAS)

Strengths:

Kingfisher has won numerous awards in various categories. Because of that this, it had a strong brand image in the minds of consumers. Kingfisher has an opportunity to remind consumers of mitigating brand image. This reminding activity can be conducted through various public relations and marketing efforts. Addition to this, kingfisher has been awarded for being most innovative. So, one cannot underestimate its capabilities to rise again. In had wide network within India and also have a destination at UK, London. Strength of kingfisher is that it’s backed up by a powerful group. With this group backing up, kingfisher can certainly take some risks.

Weakness:

On the other side of it, one of the primary issues with kingfisher is that, it’s still not able to breakeven. It has been in the field since long but still not able to breakeven. Addition to that, it has incurred too much debt because of overspending and not paying. As an effort to cut cost, it started laying off employees causing bad reputation for the company. Because of this level of debt it was forced to close is operations.

External Factors Analysis Summary (EFAS)

Opportunities:

Tourism at India is rising, because of its positive brand image. Indian government’s efforts to promote itself as a peaceful nation added to its tourism. So, kingfisher has an opportunity to cater to international market. It has not yet captured international market else London. Addition to that it has untapped cargo market, it’s quite capable in this area because of its large fleet. Addition to that, if it gets its financial difficulties solved its can be a big challenge for other players in the market. Another plus point for Kingfisher is its large network. Brand image of the company is mitigating that can be recovered through public relation and marketing efforts. As a parent company, UB can help kingfisher coming out of financial difficulties.

Threats:

India has setup many policies to attract foreign investors and thus many foreign companies are interested in investing in India. It can cause competition to increase rapidly. Addition to that, aviation industry is overwhelmed by the private players, and they certainly are more innovative and competing to survive and create a monopoly. Fuel constitutes major cost in this industry and fuel prices are on the rise. Kingfisher has been out of the game for quite long that resulted in falling demand. So kingfisher has to work hard to get out of these troubles.
Strengths Weaknesses Opportunity Threat
  • Has strong brand image.
  • First to come up with new aircrafts.
  • Widespread coverage.
  • Can get investments.
  • UB backing up.
 
 
  • High debt.
  • Industry ruled by private player.
  • Innovations at acme.
  • Industry is growing
  • Untapped cargo market
  • 4th largest industry
  • Mergers and acquisitions.
  • Potential new entrants
  • Accumulation of interest causing debt
  • Interest rate increasing
  • Private players going more innovative.
 

Barney Analysis

Barney analysis, relating to competitiveness includes following components:
Indicators of potential of firm resources to generate sustained competitive advantage.
V Valuable
R Rare
I Imperfectly Imitable
N (Non) Substitutability
 
 

Valuable:

In case of Indian aviation industry, these resources are valuable with few players in the industry controlling seventy five percent of the total market size.  Along with that, this industry is still on the rise as per their development projects and steps taken by the Indian government. So, in this case kingfisher has an opportunity to get back and rise again.  But, at the same time, many private players are in race and being a private organization, they are innovative and ready to face any competition. When such resources are valuable as per market size (4th biggest domestic industry by the passenger’s volume) and its growing at a fast pace, its attracting other international players. So in these cases it’s very difficult for kingfisher to implement strategies to achieve competitive advantage. In addition to that, there is no differentiation in services offered this also shows a severe competition to achieve differentiation.

Rare:

Kingfisher won numerous awards for its superior services, thus, earning a positive brand image and perception. However, these services are not rare anymore. Because of the fact, the industry is overwhelmed by private players; it’s hard to capitalize on previous earned image and perception. Mostly private firms are innovative. Kingfisher dropped down to lowest, 5th position in holding market size. This shows that passengers have accepted other alternatives. One of the biggest reasons for availing other alternatives is there is no switching cost involved and services are alike. Kingfisher has a bad reputation in maintaining business to business relationship. This affected its overall brand image, which from now on seems hard to recover as per this model.

In-imitable:

Services within airline industries are easily to imitate. So, it can’t be a source of competitiveness until branded. Like cabin crew or air hosting services of Singapore airline was branded as Singaporean girl. Such services for kingfisher airline were not branded so it’s not difficult for other operators in that industry to imitate. However, kingfisher has a positive image in coming up with new aircraft, the accessories they provided and branding of travelling class as “kingfisher class”. So kingfisher can retain its competitive edge in branded services. Whereas, others services are already taken or are easy to imitate.

Non-substitutable:

Majority of services offered at the airline industry is easy to substitute, because of low differentiation. These services don’t serve as a source of competitive advantage. In low differentiation industry, it’s always wise to brand the services. Kingfisher has not been successful in branding those services. Dark side of it, these services are easy to imitate, and there is no cost for passengers on switching services. So, as per the model these are not in favor of offering kingfisher a source of competitive advantage.

TOWS Analysis:

TOWS matrix provides us with the detailed analysis and relation of internal strengths or external opportunities and threats. It also provides us with relation of internal weaknesses to external opportunities and threats.

Strengths and Opportunities (SO)

  Internal
Strengths
Internal Weaknesses
External Opportunities
SO

WO
External
 Threats

ST

WT
Kingfisher had a positive brand name associated with itself, and it had large domestic coverage. In addition to that Kingfisher was awarded numerous awards for its superior performance. Furthermore, Indian domestic market is ranked 4th, and its expected to grow further for a prolonged period of time. So, it provides Kingfisher with the opportunity to make a mark and capitalize on its strengths. It’s supported by UB group that allows Kingfisher to take risky steps. In addition to that it also allows it to be more innovative and quality oriented.

Weaknesses and Opportunities (WO)

Kingfisher is overwhelmed with debt, on the other side of it; it’s supported by UB group. UB group can take steps to settle its debts and try alternate steps. Firm’s management has not been strategically superior and, this is one of the reason it has accumulated so much debt. India’s GDP per capita is, and its passengers’ travelling is increasing. This increase in market size coupled with untapped cargo market provides an opportunity for kingfisher t to rise again. Addition to that, Kingfisher has UB group as its parent company. This group can provide much of solutions for its debt can be provided by UB.

Strengths and Threats (ST)

Kingfisher has a strong brand name. It won numerous awards for its superior services. Addition to that, India’s economy is booming, while many efforts are made to improve its aviation industry. This provides an opportunity to get investments to pay off debt or opportunity for mergers and acquisitions. Kingfisher is caught in debt crisis, at the same time its UB is its stakeholder, a potential debt payer. Due to heavy investment in infrastructural improvement kingfisher has an opportunity as well a threat. Kingfisher is provided with the opportunity, to get more investments, and threats of potential new entrants. These entrants can severely damage Kingfisher, as most of these entrants will be highly innovative and techno savvy.

Weaknesses and Threats (WT)

Kingfisher is overwhelmed with debt, mostly from oil providers. This debt almost pushed it into bankruptcy. At the same time, oil prices and interest rates are on the rise. This rise will accumulate more debt as if kingfisher is later with its payments. Addition to that, it’s facing threats from new entrants and private players. Indian aviation industry accumulates 75% of their domestic industry in hands of private players. Private players aim monopoly this leads them to me more innovate and more competitive. So, it’s hard for kingfisher to compete with other private players, who already have taken its pie. Kingfisher rank dropped from number two, to lowest in the industry. With the rise of these crises, Kingfisher’s stock price also started to plummet. This price downfall further added onto the troubles of kingfisher (Weihrich, n.d.).

Value Chain Analysis

Value chain represents a sequence of factors or activities that are responsible for building competitive advantage. These activities are further divided into primary and secondary activities. Within the value chain, primary activities are:
  • Inbound logistics
  • Operations
  • Outbound logistics
  • Marketing and sales
  • Services
Kingfisher was the first airline to bring in new aircrafts in India. But it was operating in loss since its inception. It spent its money without any hesitation and proper planning. Likewise, it took over Air Deccan despite it was incurring losses. Kingfisher did won some awards relating to its superior logistics and its services, but it was unable to continue those superior operations. Primarily, because of heavy debt and the creditors started to claim their credit. It was ranked 2nd in the industry as per the market share. But soon it lost its position and slipped to lowest market share. This rank represented it capabilities in logistics. But, cargo market still remained uncatered. Addition to that, it covered 66 destinations for domestic market and covered UK internationally. It had strong marketing campaign that included celebrity endorsement and Vijay himself appearing in some ads. Kingfisher had distributed its services into three classes’ red, kingfisher and business. First class targeted low income group while others intended to charge a premium. These services were superior, but spending was done way too leniently, so kingfisher had to suffer its cost. Because oil prices are raising daily and when one buys on credit he has to return with a certain percentage on interest. This accumulated debt put Kingfisher into great trouble so got its operations closed. These didn’t let to increase in gross profit, so one can conclude these were not competitive enough for the company to breakeven.
These activities are to be supported by factors including infrastructure human resource, technology and procurement. One did see that these supporting activities were strong case of Kingfisher, but strategies were not good enough. There was no proper planning and some negative media campaigns related to kingfisher. In addition to that, kingfisher was declared with award of being the most innovative firm. But the overall strategies were not good enough to maintain a competitive edge (The value chain, n.d.).

Recommendations

This analysis shows that the firm is in deep trouble. It’s very hard for them to achieve competitive advantage. But there are always some ways out to every problem. Kingfisher was careless spending money, and they continued to spend even after 3 years when they were not able to breakeven. This was not wise and shows poor strategies. Now company will have to rethink of their strategies and simplify their operation and spending. This includes simplification of pricing strategies. Kingfisher should be transparent on their strategies. Addition to that, kingfisher has to pay its fuel debt at any cost. So this paying can be turned into a pure public relation activity. Instead of getting legally forced to settle debts, Kingfisher should come out publically and apologize to all creditors and pay them their money. This will help them build their positive brand image and transfer message of being a trustful and loyal organization. These debts should be settled anyways. In addition to this, kingfisher has to build a relationship with fuel providing organizations, settle proper terms and condition. Fuel is a major cost in the aviation industry constituting almost 34% of total cost. Simplification of operations will reduce fuel cost controlling other costs. In addition to this, kingfisher should cut costs on operating costs. This cost cutting can be done through stopping on aggressive expansion or even selling some surplus operations (Lenders in a bind on kingfisher debt, 2012). It should cut cost and investment in public development to enhance brand image.  Another way to reduce its cost is, by reducing travelling on routes that are low frequent and by focusing on the busiest routes or routes where there is passengers surplus. At the end, if Kingfisher can’t reduce cost and still is caught in troubles then last thing left is to focus on mergers and acquisitions. It should act as a subsidiary to another organization after being acquired. These acquisitions will probably lead management to be changed and overall strategies paying off all the debt of the company.
 

References

Unsupported source type (Report) for source Placeholder1.
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'Arrest warrant issued for India magnate Mallya: reports', Oct 2010.
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