Kingfisher Airlines Marketing HR Financial Strategies

Kingfisher airlines launched its domestic air service operations in May 2005.KFA was promoted by UB group and offered a single class- Kingfisher Class. KFA successfully leverage the youthful and vibrant image of its kingfisher beer brand and called its airlines as Funliners to emphasize the fun-filled experience. Within the first six months of its launch, KFA managed to corner a 6% market share in the domestic air travel mark. KFA started its operation in May 7, 2005, positioning itself as a budget carrier and not as Low Cost Carrier (LCC). Following strategies were followed to make it one of the leading Airlines in India.

It came up with a very appealing promotional line Fly the good times and it reflected in the experience the company offered to its passengers. KFA is also launched Kingfisher express in order to tap into the growing LCC segment. It planned to re-launch its commercial air service called UB Airway again which it had to withdraw it due to government restrictions. The company gave best services to its customers that were like providing world class interiors, and in-flight entertainment systems. The company came up with only one class airlines rather than other airlines that had Business Class; Economy Class the idea was to combine Business Class experiences and Economy Class experiences in one.

Having a single class freed up more leg space for passengers when compared to normal economy class flights.

The company started addressing its customers as GUEST rather than passengers. The company made its mark by providing its guests with more legroom and bigger seats so as to provide better comfort.

KFA has set its sight to become Indias largest airline both is capacity and in market share. KFAs Promotional Strategies As part of its promotional strategy the marketing team of KFA showcased the airline as the new flying experience. The following initiatives were taken as part of its promotional strategy

Advertisements hoardings at airports depicted the stylish interiors of the Funliners, which conveyed youthfull, fun-filled, and world class image. INOX multiplexes in Mumbai publicized KFAs special offers for a month. KFA was the official travel airlines for the cast and crew of Mangal Pandey- the movie. KFA made use of various fashion shows, celebrity golf matches, New Year parties all to build its Kingfisher brand. The UB groups monthly magazine called Pegasus published information about KFA along with other information related to UB group. KFA launched many attractive offers to promote its sales like the King Card in association with ICICI Bank, in August 2005. This was ment to creat loyal customers for KFA by providing benefits

like privileged access to lounges, restaurants, free refreshments at airports, access to 180 golf clubs across India, special invites for lifestyle shows . In October, KFA launched Chill Times Offer in the month of August 2005 and September 2005. In October they launched the King Saver Offer which said Fly like a King, dont play like one. KFA targeted the frequent fliers business traveler segment, which was dominated by Jet Airways. By offering a King Saver Booklet, This booklet contained six free flight tickets and was presented as a free gift if the passenger bought two such booklets each worth Rs. 26,999.Passengers could avail off this offer if they showed there Jet Privilege Member (Gold or Platinum) card.

Financial strategies: KFA came up with many new financial strategic moves that made it one of the leaders of aviation industry the company had adopted following strategies:

It purchased brand new A320 aircrafts powered by the cockpit that was a paperless environment. In June 2005 KFA planned to order US$5 bn at the Paris Air Show, for 5 new A350-800 aircraft, and five A330-200 aircraft. KFA was first Indian carrier to place an order for A380s. In November 2005 it placed an order for 30 A 320 and 20 ATR72-500 aircraft at the Dubai Air Show. This ATR72-500 was worth US$750.

To further its expansion plan KFA put in its bid to buy Sahara in November 2005.How ever negotiation came to a standstill when KFA felt the valuation of Sahara Airlines of around US$750mn to US$1 bn. was too high. KFA has plans to make an Initial Public Offer (IPO) and raise around US$200 mn that would be used for its fleet acquisition and route expansion activities. KFA set up Kingfisher International Inc. (KII), a subsidiary in US for its international operations. KFA plans to operate international routs by end of 2007. But KFA had yet to receive permission from the Indian government. According to Indian government domestic air carriers are not allowed to fly international routes without five year of domestic flying experience. But Mr. Mallya said if he failed to convince the government to change its rules, it would start an airline in a foreign country and fly it to India. Human Resource Strategies Prior to launch, KFA signed a non-poaching alliance with Air Deccan under which both the airlines agreed not to hire each others employee. KFAs flight attendants called Flying models were selected through a national level model contest. KFA also stressed the fact that its employees had to be capable enough to meet the airlines high service standards.

Among one of the biggest HR move for KFA was addition of Nigel Harwood as Chief Operating Officer with effect from August 1, 2005, to strengthen its management team. Mr. Mallya said Kingfisher Airlines Limited has a first class management team not just at top most level but also in the second line. This is part of the UB groups commitment to human resources.

Product Life Cycle Introduction Growth Maturity Stage

Another approach to examine product mix is by looking at different stages of products life cycle. Every product introduced has a specific life span. This life span is divided into different phases.

Phase1: Introduction stage of product life cycle. Phase 2: Growthstage of product life cycle. Phase 3: Maturitystage of product life cycle. Phase4: Declinestage of product life cycle.

Introduction stage of product life cycle: This product life cycle reflects sales and profits of a product over different phases of its life. Generally, most products show an established path which forms an S shaped curve. It is important to understand how the product contributes to profit and sales in different phases. During an introduction phase of product life cycle , there are many costs involved in order to introduce the product into the market. For example, new product development cost (also termed as NPD), expense involved in promotional activities, high operational costs etc. Due to this in majority of cases during introduction phase products tend to contribute negligibly towards profits. Rather at this time it is an expense involved (could be termed as loss). The other reason is that as the product is new and even suppliers of the raw material for the product are not very confident about the success of the product so they often tend to resist giving credits and the dealing has to be done all in cash. Growth stage of product life cycle As the introduction stage of product life cycle ends, the product has spent considerably moderate time into the market where customers / consumers get familiar to the product and start buying the product (or consuming it). As the product is now into the market it becomes more strengthened and faces more intense competition. This competition now offers greater choice to the customer in the form of different product type, packaging and price. The market base expands as more customers by the product. More trade channels are now willing to keep the product and one generally observes softening of prices.

At this time the company soon starts operation on economic levels. There are les product bottlenecks hence cost is low. To remain competitive over a period of time the firm initiates product improvement or modification in the product to stay in the market, but profits taper off at the end of this phase. Maturity Stage of product life cycle This now brings the product to its maturity stage. There can be ample number of reasons for product getting mature. For example, entry of a new product that may be offering better quality at a cheaper price which has induced the consumer to shift. This calls for some great marketing strategies that could revitalize the product so that the product stays in the market. But at this point, its difficult to survive, as there are new entrants that are now offering better priced products. This maturity often leads to death of the product and this is the time when company is incurring losses due to its production (no sign of profits). Remember, till the time a product is contribution to the growth of the company, the product is continued to be produced. But when the carrying cost increase than cost of production the production is stopped.

SWOT Analysis - Strengths Weaknesses Opportunities Threats

SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. SWOT (sometimes referred to as TOWS) stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis consists of the following two activities:

An assessment of the organizations internal Strengths and Weaknesses and An assessment of the Opportunities and Threats posed by its external environment

Assessing the Internal Environment Internal scan or assessment of the internal environment of the organization involves identification of its strengths and weaknesses i.e., those aspects that help or hinderaccomplishment of the organizations mission and fulfillment of its mandate with respect to the following Four Ps:

People (Human Resources) Properties (Buildings, Equipments and other facilities) Processes (Such as student placement services, M.I.S etc.) Products (Students, Publications etc.)

Assessing the External Environment

External scan refers to exploring the environment outside the organisation in order to identify the opportunities and threats it faces. This involves considering the following:

Events, trends and forces in the Social, Technological, Economical, Environmental and Political areas (STEEP). Identifying the shifts in the needs of customers and potential clients and Identification of competitors and collaborators.

After assessing these internal and external factors of an organization a SWOT Analysis is sketched. Strengths could be as following STRENGTHS Under SWOT Analysis

Specialist marketing expertise Exclusive access to natural resources New, innovative product or service Location of your business Strong brand or reputation Quality processes and procedures

It is important to make sure that we consider only internal factors that show our core competencies. In a similar way weaknesses could be as under and they are also very internal like strengths. WEAKNESS Under SWOT Analysis

Lack of marketing expertise Undifferentiated products and service (i.e. in relation to your competitors) Competitors have superior access to distribution channels Poor quality goods or services Damaged reputation Lost brand value

Opportunities could be the Areas left out by the competitor and could provide us an opportunity to explore and grow our business rapidly. Opportunities should be grabbed and should be worked on so as to get a competitive edge . Opportunities could be as following OPPORTUNITIES Under SWOT Analysis

Developing market (China, the Internet) Loosening of regulations Removal of international trade barriers A market led by a weak competitor

Some thing that bothers the most are threats , they are signals that some thing should be done so as to stay in the business. Threats are factors that need to be worked as soon as possible. Apart from some threats like , change in government policies which dont leave much to tinkle with other threats could be converted into opportunities. THREATS under SWOT Analysis

A new competitor in your home market Competitor has a new, innovative substitute product or service New regulations Increased trade barriers Taxation may be introduced on your product or service

It is important to understand that in a SWOT Analysis, S and the W are INTERNAL and the O and T are EXTERNAL. Traditionally, facilitators begin with the organizations Strengths and Weaknesses and then move out to the external Opportunities and Threats.

Porter's 5 Force Model

Porters fives forces model is an excellent model to use to analyse a particular environment of an industry. So for example, if we were entering the PC industry, we would use porters model to help us find out about: 1) Competitive Rivalry 2) Power of suppliers 3) Power of buyers 4) Threats of substitutes 5) Threat of new entrants. The above five main factors are key factors that influence industry performance, hence it is common sense and practical to find out about these factors before you enter the industry. Lets look at them below. Competitive Rivalry A starting point to analysing the industry is to look at competitive rivalry. If entry to an industry is easy then competitive rivalry will likely to be high. If it is easy for customers to move to substitute products for example from coke to water then again rivalry will be high. Generally competitive rivalry will be high if: There is little differentiation between the products sold between customers. Competitors are approximately the same size of each other.

 If the competitors all have similar strategies. It is costly to leave the industry hence they fight to just stay in (exit barriers) Power of suppliers Suppliers are also essential for the success of an organisation. Raw materials are needed tocomplete the finish product of the organisation. Suppliers do have power. This power comes from: If they are the only supplier or one of few suppliers who supply that particular raw material. If it costly for the organisation to move from one supplier to another (known also as switching cost) If there is no other substitute for their product. Power of buyers Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: There is little differentiation over the product and substitutes can be found easily. Customers are sensitive to price. Switching to another product is not costly. Threat of substitutes Are there alternative products that customers can purchase over your product that offer the same benefit for the same or less price? The threat of substitute is high when: Price of that substitute product falls. It is easy for consumers to switch from one substitute product to another. Buyers are willing to substitute. Threat of new entrant The threat of a new organisation entering the industry is high when it is easy for an organisation to enter the industry i.e. entry barriers are low. An organisation will look at how loyal customers are to existing products, how quickly they can achieve economy of scales, would they have access to suppliers, would government legislation prevent them or encourage them to enter the industry. So to summaries porters five forcesmodel is essential to carry to help you understand your industry in depth before you enter it.

Porter's Generic Strategies

The article focuses on the main aspects of Porters generic strategies / porter's generic forces. The three generic strategies of cost leadership, differentiation, and focus are discussed along with the advantages and risks inherent with each strategic option. The article includes tips for students and analysts on how to write good generic strategies analysis for a firm. Moreover, sources of findings information for generic strategies analysis have been discussed. The limitations of Porters generic strategies analysis have been discussed, and the relationship between these

strategies and industry forces is also discussed.

Porters Generic Strategies Analysis Introduction Porters generic strategies framework constitutes a major contribution to the development of thestrategic management literature. Generic strategies were first presented in two books by Professor Michael Porter of the Harvard Business School (Porter, 1980, 1985). Porter (1980, 1985) suggested that some of the most basic choices faced by companies are essentially the scope of the markets that the company would serve and how the company would compete in the selected markets. Competitive strategies focus on ways in which a company can achieve the most advantageous position that it possibly can in its industry. The profit of a company is essentially the difference between its revenues and costs. Therefore high profitability can be achieved through achieving the lowest costs or the highest prices vis--vis the competition. Porter used the terms cost leadership and differentiation, wherein the latter is the way in which companies can earn a price premium. Main aspects of Porters Generic Strategies Analysis Companies can achieve competitive advantages essentially by differentiating their products and services from those of competitors and through low costs. Firms can target their products by a broad target, thereby covering most of the marketplace, or they can focus on a narrow target in the market. According to Porter, there are three generic strategies that a company can undertake to attain competitive advantage: cost leadership, differentiation, and focus. Cost leadership The companies that attempt to become the lowest-cost producers in an industry can be referred to as those following a cost leadership strategy. The company with the lowest costs would earn the highest profits in the event when the competing products are essentially undifferentiated, and selling at a standard market price. Companies following this strategy place emphasis on cost reduction in every activity in the value chain. It is important to note that a company might be a cost leader but that does not necessarily imply that the companys products would have a low price. In certain instances, the company can for instance charge an average price while following the low cost leadership strategy and reinvest the extra profits into the business (Lynch, 2003). Examples of companies following a cost leadership strategy include Deccan Airlines.

The risk of following the cost leadership strategy is that the companys focus on reducing costs, even sometimes at the expense of other vital factors, may become so dominant that the company loses vision of why it embarked on one such strategy in the first place. Differentiation When a company differentiates its products, it is often able to charge a premium price for its products or services in the market. Some general examples of differentiation include better service levels to customers, better product performance etc. in comparison with the existing competitors. Porter (1980) has argued that for a company employing a differentiation strategy, there would be extra costs that the company would have to incur. Such extra costs may include high advertising spending to promote a differentiated brand image for

the product, which in fact can be considered as a cost and an investment. McDonalds , for example, is differentiated by its very brand name and brand images of Big Mac and Ronald McDonald. Differentiation has many advantages for the firm which makes use of the strategy. Some problematic areas include the difficulty on part of the firm to estimate if the extra costs entailed in differentiation can actually be recovered from the customer through premium pricing. Moreover, successful differentiation strategy of a firm may attract competitors to enter the companys market segment and copy the differentiated product. Focus Porter initially presented focus as one of the three generic strategies, but later identified focus as a moderator of the two strategies. Companies employ this strategy by focusing on the areas in a market where there is the least amount of competition (Pearson, 1999). Organizations can make use of the focus strategy by focusing on a specific niche in the market and offering specialized products for that niche. This is why the focus strategy is also sometimes referred to as the niche strategy (Lynch, 2003). Therefore, competitive advantage can be achieved only in the companys target segments by employing the focus strategy. The company can make use of the cost leadership or differentiation approach with regard to the focus strategy. In that, a company using the cost focus approach would aim for a cost advantage in its target segment only. If a company is using the differentiation focus approach, it would aim for differentiation in its target segment only, and not the overall market. This strategy provides the company the possibility to charge a premium price for superior quality (differentiation focus) or by offering a low price product to a small and specialized group of buyers (cost focus). Ferrari and Rolls-Royce are classic examples of niche players in the automobile industry. Both these companies have a niche of premium products available at a premium price. Moreover, they have a small percentage of the worldwide market, which is a trait characteristic of niche players. The downside of the focus strategy, however, is that the niche characteristically is small and may not be significant or large enough to justify a companys attention. The focus on costs can be difficult in industries where economies of scale play an important role. There is the evident danger that the niche may disappear over time, as the business environment and customer preferences change over time. Stuck in the middle According to Porter (1980), a companys failure to make a choice between cost leadership and differentiation essentially implies that the company is stuck in the middle. There is no competitive advantage for a company that is stuck in the middle and the result is often poor financial performance (Porter, 1980). However, there is disagreement between scholars on this aspect of the analysis. Kay (1993) and Miller (1992) have cited empirical examples of successful companies like Toyota and Benetton, which have adopted more than one genericstrategy. Both these companies used the generic strategies of differentiation and low cost simultaneously, which led to the success of the companies.

Segmentation Targeting and Positioning the apt Strategy

The strategic marketing planning process flows from a mission and vision statement to the selection of target markets, and the formulation of specific marketing mix and positioningobjective for each product or

service the organization will offer. Leading authors like Kotler present the organization as a value creation and delivery sequence. In its first phase, choosing the value, the strategist "proceeds to segment the market, select the appropriate market target, and develop the offer's value positioning. The formula segmentation, targeting, positioning (STP) - is the essence of strategic marketing." (Kotler, 1994, p. 93). Market segmentation is an adaptive strategy. It consists of the partition of the market with the purpose of selecting one or more market segments which the organization can target through the development of specific marketing mixes that adapt to particular market needs. But market segmentation need not be a purely adaptive strategy: The process of market segmentation can also consist of the selection of those segments for which a firm might be particularly well suited to serve by having competitive advantages relative to competitors in the segment, reducing the cost of adaptation in order to gain a niche. This application of market segmentation serves the purpose of developing competitive scope, which can have a "powerful effect on competitive advantage because it shapes the configuration of the value chain." (Porter, 1985, p. 53). According to Porter, the fact that segments differ widely in structural attractiveness and theirrequirements for competitive advantage brings about two crucial strategic questions: the determination of (a) where in an industry to compete and (b) in which segments would focus strategies be sustainable by building barriers between segments (Porter, 1985, p. 231). Through market segmentation the firm can provide higher value to customers by developing a market mix that addresses the specific needs and concerns of the selected segment. Stated ineconomic terms, the firm creates monopolistic or oligopolistic market conditions through the utilization of various curves of demand for a specific product category (Ferstman, C., & Muller, E., 1993). Segmentation as a process consists of segment identification, segment selection and the creation of marketing mixes for target segments. The outcome of the segmentation process should yield "true market segments" which meet three criteria: (a) Group identity: true segments must be groupings that are homogeneous within segments and heterogeneous across groups. (b) Systematic behaviors: a true segment must meet the practical requirement of reacting similarly to a particular marketing mix. (c) The third criteria refers to efficiency potential in terms of feasibility and cost of reaching a segment (Wilkie, 1990). In addition, Gunter (1992) recommends considering the stability of market segments over time and different market conditions.