A case study of ITC and Indigo Airlines on their core competency and competitive advantage

1. 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

2. 1. Differentiation Strategy And 2. Low Cost Strategy
Activity Analysis
1. Catalog Activities
1. Primary activities
2. 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

3. Cost structure (per ASK) Industry Standard Indigo Airlines
Fuel Cost (US cents) 3.25 3.07
Employee Cost (10-6) 0.35 0.24
Maintenance expenses (US cents) 0.63 0.18
Ownership costs (US cents) 1.77 0.97
Aircraft Lease Rental
Total Cost (US cent) 7.98 5.95

4. 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

5. 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

6. ON-TIME PERFORMANCE CANCELLATION RATE CUSTOMER COMPLAINTS

7.  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

8. MARKET SHARE OF INDIGO

9. 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

12. CORE COMPETENCIES OF ITC
CORE
COMPETENCIES
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

13.  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

14. BRAND BUILDING CAPABILITIES

15. 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

16. 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

17. THANK YOU