Case Study – Low Cost Airlines
Texas on June 18, 1971 by Herb Keller, Southwest Airlines offered tickets that worked out to be cheaper than a car or coach ride. It is the fourth largest US airline in terms of domestic customers carried annually.
It has been profitable every year since 1973. Low cost airlines in India But a booming economy, a congested and crumbling train network and the emergence of low-cost carriers similar to Ryan alarm have meant a slice of Indian society asking to the skies for the first time.
With half-a-dozen airlines planning to launch In the next year, fares have tumbled – and more than a third of the seats will be filled with first-time flyers. Three years ago a return ticket from New Delhi, Indian’s capital, to Iambi, the country’s financial hub, was fixed at 20,000 rupees. In 24 months, Air Decca has revolutionized Indian air travel. Last year it carried 1 million passengers, this year that figure will reach 4.
4 million. With 35 destinations, the fleet is already stretched and the company has ordered a further 62 aircraft.
Difference between a market oriented organization and those with a sales oriented/product oriented/ production oriented organization Market oriented With marketing orientation, a business revolves its strategic decisions around the wants and needs of the target market, including potential customers. A company that is marketing-orientated has the commitment to valuing customers and the customers’ needs. In fact, it can even contribute to the transformation of a company’s business culture. This marketing concept Involves three essential steps in being customer-focused.
First, the wants ND needs of the customers are researched and identified.
Then, the research outputs are studied by the marketers and new products are created based on the consumer needs. Finally, customer satisfaction is aimed after public awareness and introduction of the product is made. A marketing-orientated business Is characterized by various attributes. The company makes good and extensive use of marketing research, develops new and broad products, highlights product value and benefits, uses product innovation methods, and designs supplementary services or customer benefits such as delivery, installation, warranty, and credit availability.
All these are geared toward customer advantage. Product Orientation A company believes that if the products offered in the market are of good quality and high standard, customers are sure to buy and take advantage of It. The production of these high quality products are either a response to the needs of the customers or Day pure Innovation. A good example would be mobile phone companies. Let us take Apple as an example of a company that always makes sure their phones have a competitive edge over the est.
of the mobile phone manufacturers.
Companies that employ product orientation invest on product innovation as a way to attract the market. But, in order to keep the competitiveness in a certain industry, a company should always highly consider the recent changes and developments in technology and customer preferences. Otherwise, it may lose its ground to other competing businesses. Sales Orientation Sales-orientated organizations are targeted not on the customer needs and product quality but the selling and promotion of the products to the market.
Businesses that me to have a hard time selling their available product or services are more aggressive in pushing sales, pricing, and distribution.
If the company’s product stocks have barely moved and remain stagnant on the store shelves, for example, the company will utilize sales orientation to push the sales of these stocks without much consideration for customer tastes and preferences. As such, a sales-orientated business does not place a high priority on production but may need to employ product orientation by innovating existing products to suit to changing customer preferences.
Production Orientation This alternative is different from product orientation in a way that product- orientated businesses are concerned more on the creation and manufacturing of as many product items as possible. A company that focuses more on generating high volume of its products is aiming to maximize revenue growth and profitability. With product orientation, product output has more importance than the customer needs. A business may focus on this type of orientation if it is more than capable to cater to a large market without having to risk on the production.
The law of economics is highly relevant and applicable to this orientation. If the demand is high, the company may increase the supply of the products as a way to generate more profits. Indian aviation industry has been ruled by the two state airlines: Air India and Indian Airlines for quite a while. Till 1990 there were very strict rules for the new entrants on operating their air taxis. No private carrier was allowed to fly more than 700 SMS at a stretch.
The government disapproved the prevarication of the state airlines despite the losses incurred by them. For 40 years the 2 airlines led the Indian aviation industry.
It was only in 1990-1991 that the “open skies” policy was introduced were scheduling restrictions were lifted from private airlines The services sector, which accounts for over 50 per cent of the country’s GAP today, has increased at very high rate. If the growth goes at a similar rate, this sector would alone be earning $60 billion in the next four years. Porter’s five forces The Porters five forces model talks about the competition in the airline industry.
I narrate AT new entrants: Militantly ten entry AT new entrant was very Doolittle Owe ten regulation in the industry.
There was always a threat of new entrants at some point of times as the state run carriers did not provide satisfactory service. There were not many players in the market but with the deregulation it attracted a few companies but still there were initial restriction. As the regulations were withdrawn more companies Joined in and the competition grew. Bargaining Power of the Buyers: Buyers being the end customers did not have a great control over the providers.
They had to accept the price and the service provided. These prices and services were under close watch of the regulating bodies.
The breakthrough came with the introduction of low cost carriers who might have not provided lavish facilities on board like the full service airlines but did provide a competitive cost. Rivalry Amongst Existing Firms: Since the deregulation and the easing of rules the competition has rises to its zenith. Initially there was competition among Indian Airlines, Jet Airways and Air Sahara, but with the entry of low cost carriers the competition grew more. It provided customers to choose between high services with high prices against no onboard services with relatively low prices.
Although the competition is still high, service providers are merging together to kill the competition further. A great example is the acquisition of Air Sahara by Jet Airways and Kingfisher Airlines taking over Decca Air. PESTLE analysis of the industry Technological: This has been the most significant change in the industry.
With the relaxation in the rules in the aviation industry there has been an illustrative change. Airlines have ordered bigger and better planes and have used state of the art technology to provide maximum satisfaction.
Kingfisher airlines acquired a fleet of air axis which have mini television in front of the seat for every customer. Louise (1999) says that India has even acquired an instrument landing system that could allow aircraft to land in reduced visibility. Our strategy Though the general assumption is that low cost airlines in India benefit only the people in the metros, this is not true.
Paramount airlines will focus on non-metro cities. Frequent business travelers are the primary customers of low cost airlines operating in non-metros. Market segmentation for Paramount Airlines Importance of market segmentation
Markets are segmented for three reasons: Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups. Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment. Segmentation helps marketers satisfy customer’s wants and needs while meeting the organization’s objectives. Markets have a variety of product needs and preferences.
Marketers can better define customer needs. Decision makers can define objectives and allocate resources more accurately.
Until the sass, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed to different market segments. Differentiated Marketing segmentation strategy This is a strategy that chooses two or more well-defined market segments and develops a distinct marketing mix for each.
Therefore we will offer high priced outlets to tense won are Include, Tanat means ,teen cannot tell In advance when teen need to fly and find it impractical to stay over a Saturday etc.