CASE
STUDY OF KINGFISHER
In today’s world
everyone aspires to be successful and majority of the discussions are weaved
around success stories of businesses and individuals. Here I would like to take
an opportunity to swim against the current, and analyze and discuss a failure!
Failure! Wait, before
you start judging me, let me clear one thing – I am a go getter and always
believe in winning. But, what I have learnt from my experiences is that failure
teaches you more than any success ever can.
Today, I will discuss
classic case of mismanaged Kingfisher and its journey from zenith to nadir.
· MISMANAGEMENT TURNED INTO SCANDAL
Management is the lock
that can only open with the right key. Right from time management to
relationship management every individual strives to strike a perfect balance.
But, how business mismanagement can cause a great fall is what this article
deals with. As far as kingfisher is concerned it was poorly managed and short
sighted business model. For a smooth business management an experienced CEO is
the pioneer. After making huge success initially kingfisher flaunted all over
the world being only aviation flying every corner of the country. It was
providing services to destinations which is less beneficial for the comapny.
Also a sustainable business model was the major drawback. Frequent fluctuation
from economy to premium and from premium to mixed displayed a handicapped
business model.
A business is not stable on money but with firm leadership and
efficient business model. Kingfisher had neither of them except pretty female
models.
·
MISTAKE OF ACQUISITION AND
EXPANSION
The world still has a
big question mark as why kingfisher took acquisition of Deccan. Deccan airlines
were already a non-profitable and bleeding aviation company. Later, another
irrelevant decision of international expansion made a brand kingfisher a matter
of ridicule. Deccan was renamed as Kingfisher Red which was neither a low
service carrier nor a full service carrier whereas kingfisher was a full
service carrier. With low profitability, low liquidity, low margin
international expansion was like building palace on air! Instead with an efficient
management they could keep the parent brand as full service carrier and
kingfisher red as low service carrier. The former would conquer the international
market and later would cover the economic market.
EXPANSION WITHOUT GROSS MARGIN IS
COMMITING SUICIDE
Lack of Strategy
Kingfisher initially
launched luxury business class and later shifted to Economy class. The services of the
airlines were appreciated by the travelers as the hospitality and aircraft
condition of the Airlines were above average. But soon, the airlines shifted to
low-cost air traveling, frequent changes made travelers lose interest in the
airlines. In addition to that, they didn't focus on highly profitable routes in
domestic area.
Lack of delegation
Mr. Mallya was too
involved in the business and unlike his other two major businesses - the
spirits and beer segments which were running smoothly under the managing
directors, this airline had no long term CEO or MD.
High Operational Cost
Operational costs in
airline industry are far above the ground compared to other industries. Airline
companies require licenses for the routes, investment in the aircraft
maintenance, salaries employees (which are usually on high end), airport
charges, and huge taxes to the government. Above all, the cost of fuel was
excessive and as such Kingfisher found it difficult to recover the high fuel
cost and was making losses. Amidst the cut throat competition between airlines
companies all these high operational costs without good profit margin caused
the Kingfisher to downfall.
Frequent Change in
Business Model
Kingfisher was launched
as an all-economy, single-class configuration aircraft in 2005. However, just
after about a year of operations, the airline shifted its focus from luxury to economy
by a merger with Air Deccan, which was a low cost airline. It is very simple to
understand that frequent change in the business model is not good as it gives
no time to adjust in the existing business model. The same happened with
kingfisher as they had no time to stabilize in the market.
Undoubtedly UNITED
BREWRIES was advancing in full swing. As far as aviation industry is concerned one
need to invest more and most importantly think twice before investing! As the
saying goes business of breweries is a business of fun but aviation is a
business of caution. Both don’t work in same temperament.
Business world is all
about upsurge and downfall. At a certain point you might see your cover story
on Forbes magazine and the other day u may end up bankrupt! All you can do to
make yourself as well as your business stay stronger and longer is to learn
from these big business scandals.
Learning from your own
failures makes u human but learning from failures from your fraternity will not
only humble you but will bring out the best in you! You will utilize your
ability and minimize your drawbacks more efficiently. May it be business or
life luck plays some part and your faith does miracles. This is the rule of
universe that will keep you stable in every arena of your life,
When time is in your favor,
Keep yourself grounded
And
When time is against you,
Keep yourself patient.
In the mean while keep learning and upgrading
yourself from your failures!
