2014 Case study report
Shivam Bajaj 130085 GDGOENKA WORLD INSTITUTE – LANCASTER UNIVERSITY
11/27/2014
ACKNOWLEDGMENT I would like extend my thanks to Mr. S. Das, our module leader for guiding us and bestowing Knowledge upon us. His motivational skills have and support contributed largely to my case analysis. While working on the case I have enriched my knowledge base and adapted the learnings to my thought process. I am truly grateful to my colleagues for their help, support, and providing me with valuable insights wherever I required them which helped me throughout the course of writing the report.
CONTENTS Acknowledgment ...........................................................................................................................................................1 Case – Brief ....................................................................................................................................................................3 Introduction ...............................................................................................................................................................3 Assumptions ..............................................................................................................................................................3 Issues .............................................................................................................................................................................4 Analysis of data ..............................................................................................................................................................5 Swot ...........................................................................................................................................................................6 Porter’s 5 forces analysis ...........................................................................................................................................7
Options & alternatives ...................................................................................................................................................8 Porter’s generic strategies .........................................................................................................................................8
Ansoff matrix .............................................................................................................................................................9 Conclusion & recommendation ...................................................................................................................................10 Appendix......................................................................................................................................................................11 Table 1.1 (adapted from the case) ........................................................................................................................... 11 Table 1.2 (adapted from the case) ........................................................................................................................... 11 Exhibit 2.1 ................................................................................................................................................................12 Exhibit 3.1 ................................................................................................................................................................14 References ...................................................................................................................................................................18
CASE – BRIEF INTRODUCTION Founder: Naresh Goyal Before the inception of Jet airways he worked around in the same industry viz. cashier at continental travels, sales agent at Lebanese international airlines, PR manager a t Iraqi airways etc. Doing so he developed know how and contacts in aviation industry. The company initially started as a representation providers in sales and marketing for airlines like a ir France, Austrian airlines and Cathay pacific. The major development of liberalization in 1991 was point in time which lead to Naresh Goyal starting up his own airlines by leasing 4 Boeing 737 backed up by Gulf a ir and Kuwait airways. Commenced commercial operations on 5 th may 1993. In first year of operation, no. of passengers served were 730,000/-. In 2005, the company, had 55 aircrafts, served over 10 million people and generated revenues of USD 1.4 billion. It uses five hubs —Mumbai, Delhi, Chennai, Kolkata, and Bangalore. It has scheduled services in 42 destinations and over 1,924 flights a week. Their strategy was clear: serving the “business traveler” in India. Their services a re directed towards the
convenience of the business traveler like tele-check-in, priority service, same day return flights, e-ticketing etc. High daily aircraft utilization is maintained at Jet airways. It enhances the efficiency of its operations and generates more revenue and is achieved in part by reducing turnaround time at airports in order to fly more hours on an average in a day. Another source of revenue is carriage of cargo, consisting courier, postal mail, and commercial cargo. Its market share peaked at 46% but has fallen to 35% since the launch of aggressive new low-co st carriers such as Air Deccan, Spice Jet, Indigo, Go Air, etc. However, the acquisition of Air Sahara by Jet Airways on 13 April 2007 is indeed a positive development for Jet Airways. The takeover has propelled Jet Airways a s the largest private airline in the country having a fleet size in excess of 80 aircraft and around 42% of the market share.
ASSUMPTIONS The discussions and analysis that will follow are subject to scope of the given case study and not the information available outside it. Only analytical tools and theories to support the study and analysis are beyond the scope of the given case.
ISSUES Market share of jet airways is falling due to intense current competitive scenario. Should focus on business customers be continued? Is the service tracker instrument devised by jet airways better than SERVQUAL? Can the current yield management systems be further improvised by prompt communication with potential customers to ensure full occupancy?
ANALYSIS OF DATA The primarily conspicuous problem that has to be addressed is that the domestic market growth rate is approx. 25% in comparison to the growth in yield and revenue of Jet a irways (refer table 1.2) . This implies that there is considerable rise in new entrants and growth of competitors which can be a major obstacle in future sustainable development of jet airways.
Passenger load factor 0.645 0.64 0.635 0.63 0.625 0.62 0.615 0.61 0.605 0.6 2002
2003
2004
Passenger load factor
Average revenue per passenger 4700 4600 4500 4400 4300 4200 4100 4000 3900 3800 3700 2002
2003
2004
Average revenue per passenger
The above mentioned charts signify that Jet airways is doing well in respect of growth in revenues and increasing customer base but it is observable that the number of domestic stations served has decreased by 3 stations and there is an addition of 1 international station. Hence it becomes necessary that their strategy should be in line with growing market environment.
SWOT Internal: Strength
ISO 9001 certified Largest video touch screen Renowned for good meals even during non-meal flight timings Biggest domestic airlines Award holder by many institutes High daily aircraft utilization
Weakness
Targets only Business class High risk of delays (Due to over high daily aircraft utilization)
External: Opportunity
Market in growing phase Having 42% share in the domestic market Unpenetrated potential markets
Threats
Cheaper airlines Security requirements; Air traffic and airport congestion; Adverse weather conditions, especially in North India during winter months; Defects or mechanical problems with the aircraft of the airline; Unavailability of cockpit and in-flight crew; Strikes or work stoppages; and Acts of third parties upon which the airlines rely for requirements, such as, fueling and maintenance
PORTER’S 5 FORCES A NALYSIS THREATS FROM NEW ENTRANTS
(LOW)
Huge capital investment Low profit margins Domestic market at growth stage Government policy Difficulty in differentiation Huge Switching costs Proprietary products
SUPPLIER POWER (HIGH)
DEGREE OF RIVALRY (HIGH)
BUYER POWER (HIGH)
Rising costs of fuel
Competitors like Kingfisher, Indian Airlines, Indigo, spice jet et c.
Mainly 2 suppliers: Boeing and air bus
Industry sensitive to economic cycles
Internet booking comparison makes more informed customers
Predatory pricing
Limited Buyer volume
Limited availability of skilled and technical (aviation) employees
Ambush marketing strategies
Price sensitive Indian customers
Brand identity
No switching costs Substitutes available
THREAT OF SUBSTITUTES (HIGH) -Low cost airlines present in the market -Trains are a major threat -Price-performance trade-off of substitutes
THREATS FROM NEW ENTRANTS
LOW
SUPPLIER POWER
HIGH
DEGREE OF RIVALRY
HIGH
BUYER POWER
HIGH
THREAT OF SUBSTITUTES
HIGH
Now we can observe here that the market has low restrictions to entry and there are high restrictions to exit. Hence it is imperative for jet airways to strategically position themselves to increase the barriers to new entrants so as to gain excess market share. There is a dire need for jet airways to draft a strategy to maintain market leadership and they can exercise their current supremacy and holding to take proactive measures.
OPTIONS & ALTERNATIVES PORTER’S GENERIC STR ATEGIES
Competitive advantage
Adapted from porter 1990
Here the company has 3 alternatives: 1.
2.
3.
They can go for cost l eadership, but for jet airways this is a highly unlikely option as they are positioned as a brand for the business traveler. If they take up cost saving no frill methods of operations, they might lose their niche that they have developed. Differentiation is the one of the preferable option for Jet airways as they a re currently operating under the same and if they eff ectively perform on the same basis, the just might gain intrinsic niche in their target market. Focus is also a narrower approach which yet another option at the present market growth rate. Right now the company needs to have a broader approach to gain in accordance with the increase in the market.
Jet airways are currently following a mix of differentiation and focus techniques as they have multiple awards for quality and they focus on business class. Their competitors are low cost a irlines. They have the option to either continue with the same strategy or strive to a chieve cost leadership too and attain market dominance.
ANSOFF MATRIX
Jet airways can use Ansoff matrix to determine the most appropriate alternative for them: They have the option of mark et penetration i.e. they can attempt to gain more market share in the current scenario by either product differentiation or providing the same quality at a lower price to fend off competition. They can also go for prospecting new target market. Currently they focus on the business class and the frills and add on services for them. They should contemplate about tapping undiscovered potential market as I ndia has a huge population and most of it is untapped market as they are focusing solely on the business class They can try to come up with a new product all together, but switching cost in the aviation industry is too high hence this option is prima facie unfeasible. Diversification is also an option open to them but it is not advised at the moment as current scenario demands them to focus on retaining their market share and if they invest into another industry, they might not be able to invest the required capital in their current business and lose to competitors.
CONCLUSION & RECOMMENDATION Jet airways should try to tap into other market segments lest they lose the market share to new low-cost competitors. They are one of the select few airlines in the whole world to receive ISO 9001 certification. The acquisition of Air Sahara by Jet Airways on 13 April 2007 for 14.5 billion was a very impactful and positive development for Jet airways that lead the company to being a market leader. In order to aggressively fend off competition they need to develop the market and go for cheaper market segments and provide superior quality at a lower price as they ae currently known for their quality but cater only to premium/ business class. Pricing and Revenue Management should be re-invented so as to cater to a wider range of customers which shall enable them to gain more market share an d facilitate to bear the fruits o f a growing industry. J et Airways started its operations with the new Boeing 737-400s, and not the older Boeing 737-200s, these new aircrafts were fuel-efficient and cheaper to maintain hence giving an edge to jet airways in respect of cost optimization. They should re-invest and optimize their operations to a level where they themselves become a threat to new entrants. It is fairly obvious that the service tracker questionnaire is way better than SERVQUAL. The service tracker is drafted focusing on the customers of jet air ways and in line with the services provided by them while Servqual is generic though widely popular. The targeted questionnaires of the service tracker is more relevant and appropriate. Jet airways receives and a nalyzes over 57,000 service tracker questionnaires every month, where passengers are asked to evaluate all its services on a four point scale. The service tracker audits the quality of in flight and ground services which is undertaken by a services and product quality team. They strive to resolve ASAP to any customer complaint. The service tracker is a better instrument that provides information which if resolved facilitates to meet and exceed the customer’s expectations where SERVQUAL may not provide the same relevant information. The service tracker instrument is far more comprehensive than Servqual and is f undamentally based upon the sequential incident technique. The current yield management system (Sabre) that receives prompt information about the passengers filled is state of the art but has room for improvisation. Their systems can be modified to automatically reduce the flight fares with a predefined time duration before the take-off while considering the number of vacant seats. This way rather than just knowing how many seats are vacant, they can still generate revenue; even though the profits per passenger may reduce but the overall profitability shall increase.
APPENDIX TABLE 1.1 (ADAPTED FROM THE CASE) Various parameters and data relating to the utilization of aircraft efficiency at jet airways: Parameters
2002
2003
2004
Passengers carried (in millions)
5.82
6.41
6.91
ASKM’s (available seat kilometers) (in millions)
7,780
8,496
9,162
RPKM’s (revenue passenger kilometers) (in millions)
4,777
5,291
5,852
Passenger load factors
61.4%
62.3%
63.9%
No. of aircrafts at period end
38
41
41
Average no. of aircrafts
34.9
38.9
40.8
No. of stations served (domestic + international)
44
40
41+1
Aircraft utilization (hours/day/aircraft)
9.66
9.41
9.46
Average aircraft stage length (in kilometers)
792
805
816
Parameters
2002
2003
2004
No. of Passengers carried (in millions)
5.82
6.41
6.91
Capacity ASKM’s (available seat kilometers) (in millions)
7,780
8,496
9,162
Utilization RPKM’s (revenue passenger kilometers) (in millions)
4,777
5,291
5,852
Passenger load factors
61.4%
62.3%
63.9%
Gross average revenue/ passenger (in ₹)
4,057
4,173
4,655
Growth in average revenue/ passenger (in %)
-
2.8%
11.5%
Yield
4.36%
4.52%
5.01%
Growth in yield (in %)
-
3.7%
10.8%
TABLE 1.2 (ADAPTED FROM THE CASE) Parameters and data relating to revenues at Jet airways:
EXHIBIT 2.1
Dear Passenger, Thank you for choosing to fly with us. On behalf of the entire Jet Airways family, I am delighted to welcome you on board our flight. For us taking care of you is not just good business but indeed an enduring commitment. We always seek the views of customers such as yourself to help us serve you even better. I will therefore be very grateful to you if you spare some of your precious time to fill-in this Service Tracker. As the Tracker is a service quality survey it is not designed to enable you to provide specific feedback. You may, however, for any specific fee dback, request our cabin Crew for a Comment Form. Once again, we are delighted to have you on board and wish you a very pleasant flight. Warm Regards, Wolfgang Prock Schauer Chief Executive Officer Flight No. 9W……………………………From……………………………….To…………………………………………. Date……………………………………..Seat No……………………………………. Class of Travel o Club Premiere o Economy
1.
2.
3.
4.
Frequent Flyer Programme a. Are you a Jet Privilege member o Yes (Your JP Membership No…………………………………………) o No b. Your current JP membership status o Platinum o Gold o Silver o Blue Plus o Blue Reservation a. Where did you make your reservation o Jet Airways Reservation/Ticket Office o E-ticketing o Travel Agent b. In Which city did you make your reservation o Excellent o Good o Average o Poor c. In case you used the Jet Airways website (www.jetairways.com), how do you rate it for i. Ease of navigation o o o o ii. Ease of online booking o o o o iii. Information provided o o o o Accessibility a. Accessibility of our telephone nos. i. Reservations o o o o ii. Airport o o o o iii. Tele check-in o o o o b. Handling of Tele check-in/Enquiry i. Staff efficiency o o o o ii. Staff courtesy o o o o c. Overall rating for Accessibility o o o o Airport Services a. Baggage security screening i. Time taken o o o o ii. Assistance provided o o o o b. Check-in procedures i. Where did you check-in for this flight o Airport check-in o City check-in o Tele check-in ii. How long did you have to wait in the queue before check-in o <5 mins o 5-10 mins o 6-10 mins o >15 mins iii. Time taken to check-in at the counter o <2 mins o 2-5 mins o 6-10 mins o >10 mins iv. Staff greeting, helpfulness, and warmth o o o o v. Staff grooming o o o o vi. Staff efficiency o o o o vii. How do you rate the check-in progress o o o o c. Boarding procedures i. Clarity of boarding announcements o o o o ii. Boarding process At boarding hall o o o o At the aircraft o o o o iii. Friendliness and warmth of staff o o o o iv. If your flight was delayed, how well was it handled by our airport staff?
5.
6.
o d. Overall Rating for Airport Services o In-flight Services a. Service by Cabin Crew i. Friendly welcome at the time of boarding o ii. Assistance on board o iii. Courteous and professional service o iv. Responsiveness to your needs o v. Grooming o vi. Interaction o vii. Overall rating for cabin crew o b. In-flight reading material i. JetWings o ii. Selection of newpaper(s) o c. JetKids giveaway i. Quality o ii. Content o d. Announcements Cockpit Crew i. Clarity o ii. Diction and Fluency o Cabin Crew i. Clarity ii. Diction and Fluency e. Others i. Cleanliness of the cabin o ii. Cleanliness of the washroom o iii. Temperature in the cabin o Before take-off o Just right o Too cold o Too hot After take-off O Just Right o too cold o Too hot
o o
o o
o
o o
o
o
o
o
o
o
o
o o
o o
o o
o
o o o o
o
o o
o o
o o
o o
o
o o
o o o o
o o
o o
o o
o o o o o
o o
o o o
o o o
Food a.
7. 8.
9.
Type of meal enjoyed in this flight o Vegetarian o Non-vegetarian o Others b. Meal appropriateness (for time of flight) o o o c. Meal presentation (visual appeal) o o o d. Meal quality(taste) o o o e. Meal quantity o Just right o Too little o Too much f. Overall rating for food o o o Please rate your total experience with Jet Airways on this trip o o o Based on your experience on t oday’s flight i. Would you travel with Jet Airways for your next trip? o Definitely o Probably o Definitely not ii. Would you recommend Jet Airways to your friends? iii. o Definitely o Probably o definitely not Your experience on arrival, of your previous fl ight on Jet Airways Date ……………………….. Flight No. 9W………………………..From………………………..To…………………………….. a. Waiting time for Tarmac Coach (if applicable) o None o 2-5 mins o 6-10 mins o >10 mins b. Baggage arrival o 2-5 mins o 6-10 mins o 11-15 mins o >15 mins c. Presence of staff at conveyer belt o Yes o No d. Handling of baggage related issues (if any) Staff efficiency o o o o Courtesy and helpfulness o o o o Responsiveness to your query o o o o e. Overall rating for baggage handling o o o o
Staff Recognition Kindly help us recognize those members of our staff who have impressed you with their outstanding service . i.
Name ………………………………………………
o o
o o o
o o
ii. iii. iv.
Department …………………………………….. Name ………………………………………………. Department ……………………………………... Name ………………………………………………. Department ……………………………………… Name ……………………………………………….. Department ………………………………………
We thank you for the time that you have invested in answering our Service tracker. Your valuable opinion and constant support is our inspiration
EXHIBIT 3.1
The questionnaire below is in two sections. The first section asks you to rank all banks a ccording to your expectations i.e. what you expect all banks to provide. The second section asks you to rank the bank you chose for the survey according to your experiences and perceptions.
This section of the survey deals with your opinions of banks. Please show the extent to which you think banks should posses the following features. W hat we are interested in here is a number that best shows you expectations about institutions offering banking services.
You should rank each statement as follows:
Strongly
1
2
3
4
5
6
Disagree
7
Strongly Agree
1.
Excellent banking companies will have modern looking equipment.
2.
The physical facilities at excellent banks will be visually appealing.
3.
Employees at excellent banks will be neat in their appearance.
4.
Materials associated with the service (pamphlets or statements) will be visually appealing at an excellent bank.
5.
When excellent banks promise to do something by a certain time, they do.
6.
When a customer has a problem, excellent banks will show a sincere interest in solving it.
7.
Excellent banks will perform the service right the first time.
8.
Excellent banks will provide the service at the time they promise to do so.
9.
Excellent banks will insist on error free records.
10.
Employees of excellent banks will tell customers exactly when services will be performed.
11.
Employees of excellent banks will give prompt service to customers.
12.
Employees of excellent banks will always be willing to help customers.
13.
Employees of excellent banks will never be too busy to respond to customers' requests.
14.
The behaviour of employees in excellent banks will instil confidence in customers
15.
Customers of excellent banks will feel safe in transactions.
16.
Employees of excellent banks will be consistently courteous with customers.
17.
Employees of excellent banks will have the knowledge to answer customers' questions.
18.
Excellent banks will give customers individual attention.
19.
Excellent banks will have operating hours convenient to all their customers.
20.
Excellent banks will have employees who give customers personal service.
21.
Excellent banks will have their customers' best interest at heart.
22.
The employees of excellent banks will understand the specific needs of their customers.
The following statements relate to your feelings about the particular bank you have chosen. Please show the extent to which you believe this bank has the feature described in the statement. Here, we are interested in a number from 1 to 7 that shows your perceptions about the bank.
You should rank each statement as follows:
Strongly
1
2
3
4
5
6
7
Disagree
Strongly Agree
1.
The bank has modern looking equipment.
2.
The bank's physical features are visually appealing.
3.
The bank's reception desk employees are neat appearing.
4.
Materials associated with the service (such as pamphlets or statements) are visually appealing at the bank.
5.
When the bank promises to do something by a certain ti me, it does so.
6.
When you have a problem, the bank shows a sincere interest in solving it.
7.
The bank performs the service right the first time.
8.
The bank provides its service at the time it promises to do so.
9.
The bank insists on error free records.
10.
Employees in the bank tell you exactly when the services will be performed.
11.
Employees in the bank give you prompt service.
12.
Employees in the bank are always willing to help you.
13.
Employees in the bank are never too busy to respond to y our request.
14.
The behaviour of employees in the bank instils confidence in you.
15.
You feel safe in your transactions with the bank.
16.
Employees in the bank are consistently courteous with you.
17.
Employees in the bank have the knowledge to answer your questions.
18.
The bank gives you individual attention.
19.
The bank has operating hours convenient to all its customers.
20.
The bank has employees who give you personal attenti on.
21.
The bank has your best interests at heart.
22.
The employees of the bank understand your specific needs.
REFERENCES Naresh goyal and jet airways case Francis Buttle, 1996, "SERVQUAL: review, critique, research agenda," European Journal of Marketing, Vol.30, I ssue 1, pp. 8 –31 Humphrey, Albert (December 2005). "SWOT Analysis for Management Consulting". SRI Alumni Newsletter (SRI International). Porter, Michael E. (1980). Competitive Strategy . Free Press. ISBN 0-684-84148-7 The Five Competitive Forces That Shape Strategy - Article - Harvard Business School. 2014. The Five Competitive Forces That Shape Strategy - Article - Harvard Business School. [ONLINE] Available a t: http://www.hbs.edu/faculty/Pages/item.aspx?num=34522. [Accessed 26 November 2014 ]. The Ansoff Matrix. 2014. THE ANSOFF MATRIX. [ONLINE] Available at:http://www.spencertom.com/2013/10/09/ansoff -matrix/#.U60YwZSSz3Q. [Accessed 26 November 2014].
