Recently Kingfisher acquired Deccan Aviation’s majority stake. Both are like Chalk and Cheese, with different operating philosophies and different target segments. What, then, is the rationale behind their merger? Why did this happen after all?
The two airlines have different business models and cater to totally different passenger segments. Air Deccan, after it’s arrival in 2003 has rewrote the Indian aviation industry. With low cost operating model, Air Deccan bought the prices down and thus allowed Indian middle class and business travelers to afford the prices. Result: domestic air travel really took off. However Deccan is still bleeding in terms of revenue.
First and obvious outcome of this merger is the consolidation in the sector. The reason is, weaker players pay more attention to cash generation than profitability and that brings down the financial health of the industry. So, this merger will help industry in consolidation.
Other compelling reason behind the merger is the potential for huge savings from cost synergies, route rationalization and bulk order deals. A close look at the two airlines reveals that except the business model there is no fundamental difference between two airlines. Sharing parking lots, maintenance, flight operations, cabin crew, pilots and ground staff really will save a lot of cost. Besides marketing network created by Deccan can be used by Kingfisher and visa versa.
Also, with this merger Kingfisher will get license to operate international sector. Due to 5 years ban, Indian operators are not allowed to enter international sector for 5 years of their operation. Since Air Deccan is operating since last almost fives years, getting the international license will not be an issue for Kingfisher.
Tough Air Deccan is at the lower end of the spectrum with lost cost service and Kingfisher is operating in service and business sector. But merger is promised to maintain separate identities thus serving entire spectrum of the industry. With international sector getting added up, it will only help in revenue generation. So, merged entity will serve low cost sector, service sector and international sector, thus becoming one preferred carrier for all needs.
Years ago, Mr. Gopinath changed the rules of the Indian aviation industry and rudely woke up the established players with his innovative pricing policies. Following this merger, Indian aviation industry will be consolidated with three players, Indian-Air India, Kingfisher and Jet-Jet Light.
The bottom line is, Mr Mallya’s gambit may result in a win-win situation. And also, good for passengers.
After all we want good service and also want to save money when we fly, isn’t?
Sunday, January 27, 2008
Sunday, January 20, 2008
Employee Polls
Did you ever wonder why these employee polls are being conducted? Did you fell these are waiste of time and money?
Jack Welch tries to answer these 'obvious' question in his column in Business Week.
Good Read!
http://www.businessweek.com/magazine/content/08_04/b4068090140030.htm?chan=magazine+channel_opinion
Jack Welch tries to answer these 'obvious' question in his column in Business Week.
Good Read!
http://www.businessweek.com/magazine/content/08_04/b4068090140030.htm?chan=magazine+channel_opinion
Sunday, January 13, 2008
Power of Strategy- ITC's Bingo Story.
ITCs entry into wafers market with Bingo chips is an excellent case study of how to enter in to already overcrowded market and be successful with right strategy.
A year ago, ITC Foods was looking at new business segments to expand its product portfolio. The packaged snacks category was growing at approximately 25-30 per cent every year. But it had only one national player — PepsiCo’s Frito-Lay. Ten months after it entered the category with its wafer snack brand, Bingo, ITC’s foray into the Rs 1,800-crore branded snack market has fetched the company a 16 per cent market share across the country.
Bingo’s success story is about how a combination of leveraging synergies, building on consumer insights and high decibel advertising can win the game. There were many advantages for ITC to enter this segment. The company could leverage its existing distribution network and also source from farmers easily, as its earlier foray into categories like atta and biscuits had already given it access to the supply chain.
Once this decision was made, a cross-functional team of eight individuals were sent across the country to research the snacking habits of the Indian consumer. After travelling to 14 cities and speaking to more than 1,000 people, the team came back with an insight that Indian consumers were looking for novelty and excitement in existing snacks.
The team found that while vada pavs and samosas still sell, vada pav with cheese and paneer-filled samosas, or for that matter, tomato-flavored khakra were the ones that excited the new and more demanding Indian consumer. Based on this information, the company decided to look at chips with innovative flavors.
For the recipes, the company went to the chefs in its hotels. The chefs came back with 16 flavors with twists like bindaas masti chaas, chatkila nimbu achar and tandoori paneer tikka-flavoured potato chips, chilli and tomato-flavored mad angles — inspired by khakras — and other snacks. The company decided that youngsters in the age group of 16-30 are the most experimental and hence they would be the primary target audience.
But there was another challenge. Advertising in the category was extremely crowded. Every week, two-three new brands (many of them, local) are launched and more often than not, they are targetted at the youth.
ITC also ensured that it reached its audience through every possible medium. It first created a website www.bingeonbingo.com with offers, online games, downloads and even mobile games. The site was advertised with banners on websites such as Yahoo!, Rediff and Sify.
On television, the company booked 10 to 15 spots per channel per day on youth channels such as MTV and Star World, mass Hindi channels like Zee and Star TV, and news channels. It also had around 20 spots on a variety of radio channels and advertised in most leading national dailies. In the top-30 cities, over 1,000 outdoor hoardings advertised the product.
But, analysts believe the Bingo story is more about well-leveraged distribution. The company distributed more than 4 lakh large racks, to display the brand at all points of sale. The racks created so much impact that even competitors like market leader Frito-Lay’s introduced its own version of wafer racks. After all in India, joh dikhta hai, wahee biktha hai,”.
It is all about offering a differentiated product or service, which will clinch the market share. ITC has been there and have done it!.
A year ago, ITC Foods was looking at new business segments to expand its product portfolio. The packaged snacks category was growing at approximately 25-30 per cent every year. But it had only one national player — PepsiCo’s Frito-Lay. Ten months after it entered the category with its wafer snack brand, Bingo, ITC’s foray into the Rs 1,800-crore branded snack market has fetched the company a 16 per cent market share across the country.
Bingo’s success story is about how a combination of leveraging synergies, building on consumer insights and high decibel advertising can win the game. There were many advantages for ITC to enter this segment. The company could leverage its existing distribution network and also source from farmers easily, as its earlier foray into categories like atta and biscuits had already given it access to the supply chain.
Once this decision was made, a cross-functional team of eight individuals were sent across the country to research the snacking habits of the Indian consumer. After travelling to 14 cities and speaking to more than 1,000 people, the team came back with an insight that Indian consumers were looking for novelty and excitement in existing snacks.
The team found that while vada pavs and samosas still sell, vada pav with cheese and paneer-filled samosas, or for that matter, tomato-flavored khakra were the ones that excited the new and more demanding Indian consumer. Based on this information, the company decided to look at chips with innovative flavors.
For the recipes, the company went to the chefs in its hotels. The chefs came back with 16 flavors with twists like bindaas masti chaas, chatkila nimbu achar and tandoori paneer tikka-flavoured potato chips, chilli and tomato-flavored mad angles — inspired by khakras — and other snacks. The company decided that youngsters in the age group of 16-30 are the most experimental and hence they would be the primary target audience.
But there was another challenge. Advertising in the category was extremely crowded. Every week, two-three new brands (many of them, local) are launched and more often than not, they are targetted at the youth.
ITC also ensured that it reached its audience through every possible medium. It first created a website www.bingeonbingo.com with offers, online games, downloads and even mobile games. The site was advertised with banners on websites such as Yahoo!, Rediff and Sify.
On television, the company booked 10 to 15 spots per channel per day on youth channels such as MTV and Star World, mass Hindi channels like Zee and Star TV, and news channels. It also had around 20 spots on a variety of radio channels and advertised in most leading national dailies. In the top-30 cities, over 1,000 outdoor hoardings advertised the product.
But, analysts believe the Bingo story is more about well-leveraged distribution. The company distributed more than 4 lakh large racks, to display the brand at all points of sale. The racks created so much impact that even competitors like market leader Frito-Lay’s introduced its own version of wafer racks. After all in India, joh dikhta hai, wahee biktha hai,”.
It is all about offering a differentiated product or service, which will clinch the market share. ITC has been there and have done it!.
Tuesday, January 01, 2008
New Year Resolutions for 2008.
- Get more profitable revenue for MatrixOne Services group.
- Be regular in blogging/writing articles.
- Continue hitting gym! (With same intensity that I have currently)
- Read more and think strategy!
Subscribe to:
Posts (Atom)
