What Management Is

Topics: Business model, Low-cost carrier, Value Pages: 11 (3774 words) Published: June 3, 2012
What Management Is
Question 1
An ‘External Orientation’ rather than an ‘Inward Focus’ is useful in understanding the concept of value. Describe ‘Value Creation’ from the context of Low-Cost Airlines (No-Frill airlines). Compare it with how the Indian Railways creates value. Answer 1

Value creation is a term which cannot be defined / quantified specifically and measured accurately or attributed a particular definition. It has a distinct and broad view and originates from the customers point of view rather than monetary value which originates from the organizations financials. An external orientation is important and useful to understand value rather than an inward focus. Value Creation from the context of low-cost airlines in India Customers Define Value:

India is one of the fastest growing aviation industries in the world. Because of the introduction of liberalization policy and deregulation policy in the Indian aviation sector, the industry has witnessed a vast difference with the entry of the privately owned full service airlines and low cost carriers. Besides, there was significant increase in the number of domestic air travel passengers. Some of the factors that have resulted in higher demand for air transport in India include the growing purchasing power of middle class, low airfares offered by low cost carriers and the growth of the tourism industry in India. Now focus is towards customers. Today there are new segments of travelers; the leisure customers and the first time travelers apart from the earlier Business travellers. Low Cost:

Earlier domestic flying in India was as costly as international flights. The main airlines back then were Air India and Indian Airlines. But today, there are multiple airlines operating in the domestic routes, thereby giving Indian travellers competitive prices. Till the early years of the 21st century, trains were the best means (price wise) for the lower and middle income groups in India had for travelling inside the country. Less Time:

But now, someone from Kerala does not have to spend 52 hours in trains to reach New Delhi. An employee with an IT/Pharma MNC has a 2 day weekend, flexible work/time schedule, plus high disposable income to visit his hometown from the metro cities he works in. New / Better / Safer Aircrafts:

The biggest headline maker in the global aviation industry in recent times is not Cathay Pacific or Lufthansa but a domestic player from India, known as ‘Indigo Airlines’. It made headlines by placing the biggest order in the history of Airbus worth 16$ billion to buy 180 A320s. This includes 30 classic A320s and 150 upgraded versions called A320neo. Compare this to the old/aging aircrafts with Air India. Skilled Personnel:

The young, confident personnel in their smart new uniforms project an efficient approach to flying as compared to the aging red tape of the full cost airlines! Online Ticketing System:
The concept of e-ticketing allows airlines to evade the middle-men / travel agencies commission which can instead be passed on to the end customer. The schedules, fares and availability of tickets online are published on their websites. An All India 24*7 multi-lingual call-center for ticket booking is also available by most airlines. Innovation in Pricing:

Dynamic pricing i.e. selling at a higher price during high season (tourist season) and selling cheap during the off-seasons resulting in price change depending upon the kind of competition and also the load factor. Buying weeks in advance also results in price change. No-Frills:

The low-cost airlines maintain low operating cost structure along-with less luxury than their competitors by eliminating all non-essential facilities. But they may charge extra for add-on facilities like food, priority boarding, seat allocating, wheelchair assistance, baggage etc. which the ‘new young traveller’ doesn’t need if it helps to reduce ticket cost. X Compared to the time taken to reach from point A to point B in...
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