CORE COMPETENCE AND COMPETITIVE ADVANTAGE CASE ANALYSIS OF INDIGO AIRLINES AND ITC

ARJUN R (B15017) | DEEPSHIKHA DEB (B15020) | RAJAT GARG (B15040) | SHREY SHAH (B15051) | TATHAGATA GHOSH (B15059)

GROUP - 8

OBJECTIVES OF THE STUDY

1. Differentiation Strategy And 2. Low Cost Strategy

Activity Analysis1. Catalog Activities

1. Primary activities2. Support activities

2. Use activities to analyze Relative cost 1. Calculate cost associated with cataloged activities

2. Determine cost drivers (estimate competitors cost position)

3. Relative cost analysis (difference in individual activities)

4. sensitivity analysis (Honing the assumption)

3. Use activities to analyze Relative Willingness to pay

• Reason for willingness to pay (prod design and mfg activity / sale & delivery / Associated services / Advertisements Intangible factor or perception )

• Narrow the long list into manageable and impactful small list

• Who is the real buyer - what the buyer wants – what they r willing to pay

• How successful they and competitors are at fulfilling customer needs

• Relate the success back to activities identified

4. Explore options and make choices

CATALOG ACTIVITIES

Cost structure (per ASK) Industry Standard Indigo AirlinesFuel Cost (US cents) 3.25 3.07Employee Cost (10-6) 0.35 0.24Maintenance expenses (US cents)

0.63 0.18

Ownership costs (US cents) 1.77 0.97Aircraft Lease Rental Total Cost (US cent) 7.98 5.95

ANALYZE RELATIVE COSTS

COST DRIVERS

Single type of plane Airbus A320 Training of staff becomes cost effective

Low Maintenance costs maintains young fleet and lease back planes Use six year sale and lease back arrangements and constantly replaces the

aircrafts Low turnaround time

Turnaround time of 30 minutes Spends more than 11 hours a day in the sky against industry average of 8 to 10

hours Higher employee efficiency

one of industry's leanest workforces ASK / employee for indigo is 4.1 as compared to industry standard 2.9

ANALYZE WILLINGNESS TO PAY

REASONS FOR WILLINGNESS TO PAY

Economical airline High emphasis on On-time performance Low Flight cancellation rate Low Customer complaints Simplicity in operations

Indigo has simplicity in its operations as compared to competitors like Jet Airways

High frequency of flights Indigo has highest frequency of flights even between non-metro routes

Advertisement Simple message of low fares, on-time flights and a hassle free experience High Say-Do Ratio -> Do what they say

ANALYZE WILLINGNESS TO PAY

ON-TIME PERFORMANCE

CANCELLATION RATE CUSTOMER COMPLAINTS

COMPETITIVE ADVANTAGE

Indigo’s strategy to be a LCC by focusing on above mentioned drivers is reflecting on its financial results

Since last 6 years the company is making profit and its profit has more than doubled, while its competitors are struggling to for break even

Company’s operating expense has increased and its revenue also increased proportionately to maintain the value added

FINANCIAL RESULTS

COMPETITIVE ADVANTAGE

MARKET SHARE OF INDIGO

COMPETITIVE ADVANTAGE

Strategic Advantage

Indigo has started from routes like non-metro routes, where competition was less

Took strategic advantage and simultaneously expanded into other routes, which made it leader in Indian airline industry

Booked 180 A320neo aircraft, which consume up to 15% less fuel than current generation which will further reduce cost of fuel

COST COMPARISON

COST COMPARISON

CORE COMPETENCIES OF ITC

CORE COMPETENCIE

S

DEEP FARMER

LINKAGES

RURAL MARKET EXPERTISE

BRAND BUILDING

CAPABILITIES

UNMATCHED DISTRIBUTION

REACH

CORE COMPETENCY"a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace“ -- C. K. Prahalad and Gary Hamel

Provides potential access to a wide variety of markets

Should make a significant contribution to the perceived customer benefits of the end product

Difficult to imitate by competitors

ITC has an unmatched distribution infrastructure which increases the reach of its products

Warehousing space of over 6.5 million square feet

Presence of distribution channel in 20 states and more than160 districts,

Operates through 65 hubs and over 300 warehouses across India

Its products are available at 4.3 million of the estimated eight million retail stores in India

Minimum number of stocking points leading to lower costs and greater freshness of products

UNMATCHED DISTRIBUTION REACH

BRAND BUILDING CAPABILITIES

DEEP FARMER LINKAGES AND RURAL MARKET EXPERTISE The e-Choupal initiative empowers

Indian farmers with the help of Internet Cost-effective procurement system

through e-Choupal For its paper industry, ITC gets its raw

materials through a farm plantation program which also provides employment and income to farmers

More than 1,93,000 hectares of plantations have been added

Presence of dedicated retail and distribution infrastructure in Tier III and Tier IV cities (like Choupal Sagar, Choupal Haat, etc)

Customized below-the-line engagement platforms

Direct interaction and engagement with farmers and rural population through events like Choupal Mahotsav

MAP OF COMPETENCIES

FMCG HOTELSAGRI-BUSINESS INFORMATION TECHNOLOGY

PROCESSED FOOD, TOBACCOPAPER PULP HOSPITALITY &

SERVICES

UNMATCHED DISTRIBUTION REACH

BRAND BUILDING CAPABILITIES

FARMER LINKAGES AND CROP DEVELOPMENT

PROGRAMMES

RURAL MARKET EXPERTISE

PAPERBOARDS & PACKAGING

THANK YOU