A look at its strategy
Submitted to: Prof. Upendra Kachru
FORE School of Management
Submitted by: Rahul Singh FMG 19A -191047
Date of Submission: 15/09/2011
Jet Airways was one of the first airlines that rose high in the Indian skies. It was launched in the time when flying in air still cost a limb and a half! State run India Airways was the only carrier plying in the air at that time. The industry was running on a leisurely pace, with a lot of slack cutting possible. Routes were marked under political pressures as well as on the basis of including almost all the important centers in India. There was little stress on efficiency or profitability. The entry barrier in the aviation sector is very high. The fixed cost investment is very huge. So when a firm enters in this industry, it is for the long haul since the exit will be a very costly affair (unless the firm is open to takeovers, in this case losses can be minimized). When Jet entered the market, it clearly had a strategy. Broadly it was three-pronged. * Fly between profitable sectors.
* Use hub and spoke model for tier 2 cities.
* Provide a professional and pleasant experience for flyers, i.e. treat your flyers like customers.
In the initial stage, the only competition was from Air Sahara and of course the incumbent loss making Indian Airlines. Competition was not stiff but the environment was also not rich.
Flying was still a luxury restricted to the most affluent classes, so the demand was less. With the launch of low cost carriers like Air Deccan, there was suddenly a predator in the jungle. The size of the pie was increasing and Jet was not getting any piece of new action. So ultimately the market share was declining for Jet Airways. What was the strategy?
It responded in year 2006 by taking over Air Sahara and then launching it at JetLite, a direct assault on the low cost carriers. What we can say that is that initially Jet was focusing on a particular market segment. But owing to a flank attack by the low cost carriers, it decided to flex its “market leader” muscle.
Before going into further analysis, let us see where does Jet Airways stand at this point in the aviation landscape.
The tool that we will be using will be SWOT analysis:
STRENGTH 1. In the private players, it has the best domain knowledge and a source of competency. 2. Only one of the two private players having a good international span. 3. Huge fleet of aircrafts. 4. Good relations with the political class owing to its clean image.
| WEAKNESS 1. Huge threat from low cost carriers. 2. Competing against well-established brands in the international domain. 3. The recent agitation by its employees charred its image. 4. Fleet growing old. 5. Weak brand image.
| Opportunities 1. Ever expanding spending power of the great Indian middle class is prompting them to use air for travelling. 2. The indirect competition from rail is decreasing since it is still not run professionally. 3. India has become a important destination for international travellers for business purposes which has hiked the international travel. 4. Untapped air-cargo sector in India.
| Threats 1. Cost cutting and aggressive pricing by low cost carriers. 2. Hiking in fuel prices is affecting operation cost. 3. Government regulations to appease the galleries have adversely affected the aviation sector.
Looking at Porter’s Five Forces Model, so that we...
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