KINGFISHER AIRLINES

BCG Matrix

Current situation:

The airline had shut down its operations when on 20 October 2012 the DGCA suspended its flying license. This suspension had been due to failure to give an effective response to the show-cause notice issued by DGCA. However, The airline had locked out its employees for several days before this suspension. On 25 October 2012, the employees agreed to return to work. On 7 June 2010 Kingfisher became a member elect of the Oneworld Airline Alliance when it signed a formal membership agreement. Kingfisher confirmed on 20 December 2011 that it will join the Oneworld airline alliance on 10 February 2012. Kingfisher would have been the first Indian carrier to join one of the big airline alliances. However on 3 February 2012, owing to bad financial situation and two days after the International Air Transport Association (IATA) clearing house suspended Kingfisher Airlines; the airlines participation to Oneworld has been put on hold. In February 2013 the Indian government announced the withdrawal of both domestic and international flight entitlements allocated to the airline.

Kingfisher started off with a QUESTION MARKA, was slowly moving towards STAR. Currently a DOG. It was never a CASHCOW in its business.

Kingfisher Airlines

POTERS 5 FORCE MODEL

RIVALRY AMONG EXISTING COMPETITORS (VERY HIGH)

- Cut Throat Competition

- High Fixed Cost and Low Profitability

BARGAINING POWER OF BUYERS (Low)

- Low (high in number, but fragmented)

- Low switching cost and alternatives

THREAT OF NEW ENTRANTS (Difficult)

- Cost intensive and strict regulatory compliance

- Stiff competition and retaliation

BARGAINING POWER OF SUPPLIERS (High)

- Concentration of Suppliers

- Switching Cost high for the Carriers

THREAT OF SUBSTITUTES (VERY HIGH)

- Other modes available- Substitution for need - options

such as video conferencing etc reduces the need to travel

THE MCKINSEY 7S FRAMEWORK

The McKinsey 7S model involves seven interdependent factors which are categorized as either "hard" or "soft" elements:

Hard Elements Soft ElementsStrategy

Structure Systems

Shared ValuesSkillsStyleStaff

"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems."Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful. 

The above figure depicts the interdependency of the elements and indicates how a change in one affects all the others.

Strategy Pioneer in the concept of bringing luxury, glamour and lifestyle to the skies. Marketed itself as a budget airline targeting the middle of the market. It used

multiple promotional campaigns, from having India's top model Yana Gupta on flight, to schemes on discounted tickets, initially, to invite people to experience the 'good flying' concept.

Points of Differentiation rather than Point of Parity. The KFA always tried to differentiate itself from other rivals by trying to provide so called premium low

cost service. But, while doing this, the cost increased quite rapidly as compared to the revenue which resulted in not a single profitable year for the airline.

Structure The KFA, when started, did not have a full time CEO - Dr Vijay Mallya was the

Chairman, CEO and MD for the airline; and was handling all these positions till August 2010.

But - had very strong and capable CEO's in the form of Vijay Rekhi and Kalyan Ganguly at both of the other major and very successful businesses, United Spirits Ltd., and United Breweries Ltd.

August 2010, appointed Mr Sanjay Agarwal as CEO of KFA, while continuing himself as Chairman and MD. Having a good experience of aviation industry, Mr Sanjay Agarwal former CEO of Spicejet, had a challenging task of pulling the KFA out of debt.

System Sanjay reports directly to Mr Mallya. All Executive Vice Presidents and other officers report directly to Sanjay. KFA tried to play in three different fields simultaneously as - premium business,

premium economy and premium low cost - to span the entire market - did not send out a very clear positioning message and diluted its brand.

Later, opted out from its premium low cost segment only to surprise analysts and critiques who are expecting a boom in LCC market in India.

Style/CultureThe style of organizational work at Kingfisher is evident from the company’s vision and value statements.

Vision:“The Kingfisher Airlines family will consistently deliver a safe, value-based and enjoyable travel experience to all our guests.”

Values- Safety

This is our overriding value. In our line of business, there is no compromise.- Service

We are all in the hospitality business; we must always seek to serve our guests and gain their trust, goodwill and loyalty.

- HappinessWe seek to build an organisation with people who choose to be happy, and will endeavour to influence our guests and co-workers to be happy too.

- TeamworkWe will succeed or fail as a team. Each one of us must respect our colleagues regardless of their rank, and we must work together to ensure our mutual success.

- AccountabilityEach one of us will be held accountable for the successful execution of our duties, commitments and obligations, and we will strive to lead by example.

Due to negligence towards cost factor, over the years, KFA has acquired a lot of debt and loans.

While trying to keep the guests happy, KFA slipped on suppliers’ and co-workers’ happiness front. 

StaffThere has been problem with staff for the KFA as it is unable to pay the salaries and incentives to their staff. In February 2012, KFA has announced that it will give special recognition to the staff which will remain loyal to KFA during these cash strapped and debt laden days.

SkillsKFA has always been good in pooling talent for the company.  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 group’s commitment to human resources”.

Shared ValuesA typical LCC customer would have certain basic needs:

(i) Economy – price sensitive(ii) Convenience – punctuality, appropriate baggage handling etc.(iii) Comfort – in-flight reading material, food etc. (Kingfisher Red offers)(iv) Luxury – Value added services – personalised entertainment

Perhaps, akin to the "Maslow's hierarchy of needs" concept, the higher order need might appeal only when the lower order one has been satisfied.While Kingfisher Red had focused on higher order needs of their guests, it has ignored the lower order needs of the guests like punctuality and economy. It has forgotten points of parity like scheduling, economy, cleanliness, connectivity while putting emphasis on points of differences like tele-booking, free food, etc.

UB BEVERAGE ALCOHOL

BCG Matrix

- TAJMAHAL BEER- Premium Lager beer. Demand of this beer is mainly in abroad and served in some premier hotels in India. The demand outside is very good and it accounts for good market share in the exported beer in India.

- KINGFISHER STRONG- growth of 36% as against a market growth of 16%Now achieved the No. 1 position in the strong beer segment.

- LONDON PILSNER - witnessed a market growth of more than 20% and targeting a market share of 15%

- KINGFISHER LAGER BEER - market growth of 13% in comparison to the beer industry growth of 9.4%UBL is the market leader in all the 10 largest states of the Country. UBL commands a market share of around 40% with 67% of the market share in the lager beer segment.

- KINGFISHER DRAUGHT - has good market growth as it is proving success in its 2 years. Still, the market share is less.

- KINGFISHER BLUE – launched a few months back, market share occupied is less as strong beer and lager beer segment is increasing very fast

- UB ICE BEER – Did not receive good response; has very low market growth.

- KALYANI BLACK LABLE - One of the oldest brands launched in 1969, has low market share - popular in east India only

POTERS 5 FORCE MODEL

RIVALRY AMONG EXISTING COMPETITORS (V. HIGH)

-Number of major competitors are less.

- Industry growth rate is more.-Relative size of competitor is large.-Buyers switching cost is low.-Competitor less diversified.

BARGAINING POWER OF BUYERS (HIGH)

-Number of buyers are high.-Enough options in form of product.-Buyers use multiple sources.-Buyers threat to backward

integration is low.-Importance of product to the buyers

varies based on customer profile.

THREAT OF NEW ENTRANTS (MODERATELY HIGH)

-High Economies of Scale.-Less differentiated product, can be copied.-High capital Requirement.-Switching cost to buyer is low.-Less access to distribution channel.-Stringent Government Policies and taxes.-High Industry Growth.

BARGAINING POWER OF SUPPLIERS (LOW)

- Number of organized suppliers is less.- Availability of substitute input is less.- Suppliers threat to forward

integration is low.- Buyers threat to backward integration

is high.

THREAT OF SUBSTITUTES (VERY HIGH)

- Relative price of Substitute is same and low.

- Switching cost of Buyer is low.- Relative Quality of substitute is

different.

ANSOFF MATRIX

MARKET PENETRATION

The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.

- KINGFISHER LAGER PREMIUM - it has witnessed a market growth of 13%in comparison to the lager beer industry growth of 9.4%.in the lager beer segment.UBL is doing market penetration in all the places by promoting the beer in every state. UBL commands a market share of around 40% with 67% of the market share in the lager beer segment.

- KINGFISHER STRONG - The company is investing much in this product and also the customers are increasing due to the more alcoholic content and it has registered spectacular growth of 36% in strong beer (against a market growth of 16%)

MARKET DEVELOPMENT

The firm seeks growth by targeting its existing products to new market segments.

- TAJMAHAL- This beer is made mostly for export purpose and contains less alcoholic content though the taste is unique due to its bitterness. The demand of this beer is mainly in abroad - Australia, France, USA) as it is premium priced and have bitter taste, which is not liked much in India though it is served in some premier hotels in India.

- LONDON PILSNER - this beer mainly aims lower income group as it is an economical beer and this beer contain less alcoholic content hence catering to all together different segment.

PRODUCT DEVELOPMENT

The firms develops new products targeted to its existing market segments.

- KINGFISHER DRAUGHT - this beer contain less amount of water and comes in 500ml can. Hence creating a new product in existing market.

- KINGFISHER BLUE- launched around 8-9 months back to tap the segment preferring less alcoholic content as compared to strong beer, but opting for something stronger than the mild. It has around 6% alcohol content. This was also a new product for UB.

- KINGFISHER BOHEMIA- Kingfisher- the brand that has been synonymous with providing a "good time" to consumers have launched their own brand of wines in India -"Kingfisher Bohemia". It is launched in 2008 to get the wider reach in the alcoholic drink market.

- KINGFISHER ULTRA- This will be launched within some months. It is a new drink having sweetness in it.

DIVERSIFICATION

This resulted in the company entering new markets where it had no presence before

- KINGFISHER LEISURE WEAR - kingfisher is diversified in the leisurewear segment; extending itself in the path of providing good time to customers.

- KINGFISHER AIRLINES - kingfisher airlines had become a very well known company in itself. This is a full-fledged carrier providing comfort to its fliers.

- KINGFISHER SWIMSUIT CALENDAR - kingfisher also launch its annual swimsuit calendar which is the second costliest calendar in the world.

- SPORTS - kingfisher also diversified in various sports; Formula 1, Football and Cricket