Q.1How did the concept of LCC emerge in India? Which factors encouraged the growth of LCCs?

Aviation industry in India was born in the year 1930.Tata group one of the prominent industry in India launched Tata airlines (India s first airline services! After the emergence of the airline industry in India" after two decades more eight private players started their business but their operations were #uite restricted. These airlines proved to be a failure despite constant support from the government. As a result Air traffic en#uiry committee was formed constituted by government of India recommended the nationali$ation of airlines. The air corporations Act 19%3 was formulated and the two entities were nationali$ed namely Indian airlines corporation (IA! and Air India International (AI!. The act restricted private players until 19&'. In 1990 s private sector was allowed to reenter the mar(et with the wave of the economic liberali$ation. This was the time when )** concept in India was brought into picture in the Indian mar(et. +y ,arch 199- the government had approved si. private carriers to commence the domestic services. +ut despite two carriers all others closed and filed insolvency. This duopoly continued till /003" this duopoly was challenged by air 0eccan in /003 with its concept of )** which made this industry emerge in India which proved to be a turning point in this industry. Air 0eccan with its entry brought into picture special discounts" promotional fares" chec( fares" web fares and corporate discounts or plans.

The reasons for the growth of aviation industry were as follows 12 3eed to 4trengthening its infrastructure and succeed in its growth prospects. 5ith the transformation from an over regulated and under managed sector to a more liberal open business" the aviation industry attracted enormous investments post /00- facilitating )** further.

India witnessed a compounded annual growth rate of 19.1-6 in the air passenger traffic and 9.916 in cargo movements from /00320- to /0072 0&. This in turn complemented the )** model and further encouraged other private players to go that route.

Q.2 What factors should SpiceJet consider efore strategi!ing its operations in India. "se tools such as C#$ %Competiti&e #rofile $atri'() *+* $atri' %*'ternal +actor *&aluation() , I+* %Internal +actor *&aluation() which ser&es to identif- &arious factors) and forces that are critical in formulating appropriate strategies needed to accomplish the organi!ation.s o /ecti&es?

Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry. Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors. The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best things about CPM that it include the firm and also facilitate to add other copetitors make easier the comparative analysis.
*8, matri. for 4pice9et Spiceject works on a low cost model and it has to be very careful in matter of operating costs. This model here is to stay for a long term period since it can directly compete with other means of transport. There are certain tools to be discussed below which will give us clear picture of formulation of strategies which can be implemented by Spicejet.

EFE MAT !"

External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that

a business is facing.The EFE matrix is very similar to the IFE matrix. The ma or difference bet!een the EFE matrix and the IFE matrix is the type of factors that are included in the model. "hile the IFE matrix deals !ith internal factors# the EFE matrix is concerned solely !ith external factors. External factors assessed in the EFE matrix are the ones that are sub ected to the !ill of social# economic# political# legal# and other external forces. $eveloping an EFE matrix is an intuitive process !hich !or%s conceptually very much the same !ay li%e creating the IFE matrix. The EFE matrix process uses the same five steps as the IFE matrix. &ist factors' The first step is to gather a list of external factors. $ivide factors into t!o groups' opportunities and threats. (ssign !eights' (ssign a !eight to each factor. The value of each !eight should be bet!een ) and * (or alternatively bet!een *) and *)) if you use the *) to *)) scale). +ero means the factor is not important. ,ne or hundred means that the factor is the most influential and critical one. The total value of all !eights together should e-ual * or *)). .ate factors' (ssign a rating to each factor. .ating should be bet!een * and /. .ating indicates ho! effective the firm0s current strategies respond to the factor. * 1 the response is poor. 2 1 the response is belo! average. 3 1 above average. / 1 superior. "eights are industryspecific. .atings are company-specific. 4ultiply !eights by ratings' 4ultiply each factor !eight !ith its rating. This !ill calculate the weighted score for each factor.

Total all !eighted scores' (dd all !eighted scores for each factor. This !ill calculate the total weighted score for the company.
#E$ E"TE %A& FA'T( S E3ternal (pportunities M4A5 Stake sale E3ternal Threats -.. 6 -.6 )E!*+TS,-../-.01 ,&ow to high1 AT!%*,./01 ,+igh to low1 )E!*+TE2 S'( E

'ompetition from other low cost carriers Total

-.0

-.8

..6

!FE matri3

Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating ma or strengths and !ea%nesses in functional areas of a business.

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IFE matrix also provides a basis for identifying and evaluating relationships among those areas. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy formulation. The IFE Matrix together !ith the EFE matrix is a strategyformulation tool that can be utilized to evaluate how a company is performing in regards to identified internal strengths and weaknesses of a company. The IFE matrix method conceptually relates to the 5alanced 6corecard method in some aspects. The IFE matrix can be created using the follo!ing five steps' Key internal factors... 7onduct internal audit and identify both strengths and !ea%nesses in all your business areas. It is suggested you identify *) to 2) internal factors# but the more you can provide for the IFE matrix# the better. The number of factors has no effect on the range of total !eighted scores (discussed belo!) because the !eights al!ays sum to

*.)# but it helps to diminish estimate errors resulting from sub ective ratings. First# list strengths and then !ea%nesses. It is !ise to be as specific and ob ective as possible. 8ou can for example use percentages# ratios# and comparative numbers. Weights... 9aving identified strengths and !ea%nesses# the core of the IFE matrix# assign a !eight that ranges from ).)) to *.)) to each factor. The !eight assigned to a given factor indicates the relative importance of the factor. +ero means not important. ,ne indicates very important. If you !or% !ith more than *) factors in your IFE matrix# it can be easier to assign !eights using the ) to *)) scale instead of ).)) to *.)). .egardless of !hether a %ey factor is an internal strength or !ea%ness# factors !ith the greatest importance in your organizational performance should be assigned the highest !eights. After you assign weight to individual factors, make sure the sum of all weights equals 1.00 (or *)) if using the ) to *)) scale !eights). The !eight assigned to a given factor indicates the relative importance of the factor to being successful in the firm:s industry. "eights are industry based. Rating... (ssign a 1 to X rating to each factor. 8our rating scale can be per your preference. ;ractitioners usually use rating on the scale from * to /. .ating captures !hether the factor represents a ma or !ea%ness (rating 1 *)# a minor !ea%ness (rating 1 2)# a minor strength (rating 1 3)# or a ma or strength (rating 1 /). If you use the rating scale * to /# then strengths must receive a / or 3 rating and !ea%nesses must receive a * or 2 rating.

<ote# the !eights determined in the previous step are industry based. .atings are company based. ulti!ly... <o! !e can get to the IFE matrix math. 4ultiply each factor:s !eight by its rating. This !ill give you a weighted score for each factor. "um... The last step in constructing the IFE matrix is to sum the !eighted scores for each factor. This provides the total weighted score for your business.

!FE MAT !"

Key internal factors !nternal Strengths +igh load factor (n time service !nternal weakness +igh operating cost &ow service 9uality Total

)eights,-../-.01 ,&ow to high1

AT!%*,./01 ,+igh to low1

)E!*+TE2 S'( E

-.6 -.0

. 7

-.6 .

-.0 -.. -..0

6 :

7 -.: -.;

Q 3. What strategies could be adopted by Spice Jet to overcome the factors that inhibit the success of the LCC business model? ou can focus on

The mail challenges they face are as follows </ Employee shortage =oor infrastructure +igh cost of aviation fuel All the above listed are the factors which are affecting the whole aviation industry and not the spicejet as an individual company. Following are the ways or strategies that should be adopted by spicejet so as the cover up or to hedge them. a1 2ifferentiating the offer< .1 2ifferntiation should be based on the core compentency of Spicejet and should differntiate in such a way that they should lure customer from the other mode of trasnport rather than competitor. 71 (ffer and discounts should be introduced during some festivals which can be sucessful in turning customers towards them from the other mode of transport as railways and volvo bus transport ,middle class1 this strategy mainly involves the urgency part of reaching the destination. )hich will help them cover their cost.

:1 Should have corporate customer loyalty programme in place. ,suppose co A employee travels for .- times to a particular destination in the same year ne3t travel would be .> cheaper1 61 So differentiation is a big but important hurdle for Spice ?et to overcome competition from !ndigo and ?et &ite.

b1 Tackling operating costs and managing remuneration of employees<

.1 (perating costs are one of the important factor in aviation industry many airlines have failed because of not being able to manage its operating costs. 71 #ingfisher is the live e3ample in front of the industry it is struggling because of being unable to control their operating costs :1 Also the rental is very high since they go for the purchase of aircraft through lease. 61 As ATF are increasing day by day they really need to have a strategy in place to ring dow its cost one way of doing the same is to hedge against the dollar price and to invest in the derivatives instruments with underlying asset as ATF which will bring into account the future price rise and it is a hedge against price rise. 01 Flying a single type of aircraft to cut maintenance costs. 81 Should e3orbiantly for the e3cess baggage. And bagage limit can be differntiated according to the destination and the ticket price.

;1 Also airport charges are low comparatively in Tier/ii cities so they can cover that as their landing@parking space A1 !ncrease operations in 7 tier cities and some international destinations.

c1 Motivating employees<

.1 !n these tough times striking good relationship with employees is very essential 71 This industry has a comparatively high attrition rate. :1 Spicejet should introduce performance based appraisal and promotion mechanism into place. 61 Employees should be offered ES(= plan on certain criteria. 01 Special discounts for the employee and their family for the travel across !ndia.

d1 Strategic Alliance<

.1 Strategic alliance is one of the method to reduce the e3sisting competition. 71 Spice jet should try and take advantage of the e3sisting sitituation and should have a strategic alliance with #ingfisher and try to e3pand its business. :1 #ingfisher symbolises the lu3ury in travelling and on other hand Spicejet is &'' 5 this strategy will help Spicejet to diversify its business and offest its losess. 61 Spice jet can try to get membership of Star Alliance5 one of the biggest strategic alliance groups. 01 This will help them to spread their wings across different continents and they can develop the ability to benchmark against the high industry standards 81 This will add to 9uality5 which in turn could generate revenue and reduce the costs. ;1 Aviation industry outside !ndia has some very big players and they are into profits

!anaging "mployee #emuneration

!n order for Spice ?et to remain competitive5 it should aggressively pursue talent to increase productivity and profitability5 leveraging human capital to maintain a competitive advantage. To meet this challenge5 companies5 must craft a clear and compelling strategy for implementing a well thought/out total reward@compensation plan to attract5 retain and key talent. This total reward strategy should integrate key components including< .. Total compensation 7. Benefits :. Training5 career and personal growth opportunities ,)orld at )ork Model1 These core components are critical for an organiCation like Spice ?et to survive.