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A. The Indigo Story: On Time, Hassle Free


Overview of Indigos business model in terms of operational efficiency
and market positioning to have an internal view of strategy.

Operatio
nal
Efficiency
-Turnaround time
less than 30
minutes.
-Highest aircraft
utilization in the
Indian domestic
aviation industry
-Single type of
aircraft with fuel
efficient engines.
- On time with
minimum
occurence of
delay

Market
Positionin
g
- Low price but not
low quality.
- No inflight
services which in
turn reduced the
number of cabin
crew members.
-Brand image is
strong and thus
positions Indigo
airlines on the top
of consumer
preferences.
- Focussed only on
high load sectors

While these characteristics resulted in the highest profitability among


all airlines in India, it is a bumpy ride for Indigo. These are the major
problems and their corresponding solutions:

1. Innovation
In aviation industry, competitors can quickly imitate the best
practices deployed to achieve the operational efficiency. From an
internal strategy point of view, Indigo should invest in superior yet
cost effective ways of attracting the customers. For example, Indigo
can differentiate itself by providing fast and reliable customer
services. Since Indigo has only one type of airplane, it can leverage
this feature by providing cheaper reallocation options to people who
want to change travel plans.

Case Summary|Indigo and Zespri

2. Product Differentiation
Customer loyalty is low in a very cost sensitive aviation market in
India. This problem can be created by adding value to customers in
different ways. Indigo airlines can have complementary partnerships
with hotels to provide holiday packages. This would give Indigo a
first mover advantage in such types of collaborations and help it
create an ecosystem of the value added services to lock its
customers.

3. Sustainability
It is hard to sustain this business only based on pricing strategy. The
scope of product differentiation is less. With growing
commoditization of airline services, Indian aviation industry is not
an attractive market for existing companies. To overcome the issue
of obsolesce, Indigo is targeting fleet expansion for catering to
international routes within 4-5 hours of flying distance. It should
have strategic alliances with other airlines to expand its reach to Far
East Asia or to Europe.

Generalized Strategic Management

In context of Indias aviation industry, it can be inferred from VRINE


analysis above that cost efficiency is Indigos key competency. In
general, key capabilities lead to industry leadership. Foundation of
strategy should be to combine resources and capabilities in a way that
is unique and hard to copy. This determines the success of a company
in that industry. Indigo is a leader because they have cost efficiency as
their key competency which is superior to other airlines in a cost
sensitive aviation industry. It is also an intangible resource which
cannot be bought. However, success of Indigo is a combination of all
the above capabilities. In general, there is no one silver bullet that can
explain success of an organization. So any company must be able to
put together an array of key competencies to make themselves difficult
to copy. To conclude, one key competency along with a vector of metacapabilities1 produces an extraordinarily powerful business model.

1 Conceptualized by Dr. Yusaf Akbar. The ability to coordinate capabilities.

Case Summary|Indigo and Zespri

Case Summary|Indigo and Zespri

B. Zespri
Zespri has reduced competition and increase profitability in terms of
positioning and differentiation by decommoditize the industry for
standard kiwi fruit. Zespri has horizontally differentiated itself from
other kiwi fruit by virtue of psychological and emotional understanding
of their product. The cost advantage led to 50% to 100% higher
markups. This has given them an ability to innovate and build
collaborations with retailers and growers at the same time and sustain
in the fruit business through economies of scope. However, three major
problems highlighted in the case are as follows:

1. Regular Consumption

This is a low volume, high margin business basing their business


model on economy of scope. However, demand of kiwi fruit has
typically remained flat across the globe. So the major issue is to
ramp up the demand.
standard kiwi fruit.

Zespri has differentiated itself


in a niche market. It would be
difficult for them to move to
broad differentiation with

Zespri
should come up
with

other

techniques such
jams, juices etc.

deployment
as Zespri

Health benefits of kiwi fruit should be well advertised


complemented with enhanced taste performance to increase
consumption levels of the fruit.

2. Low Risk Diversification


Zespri has single focus on kiwi fruit and this exposes them to
risk associated with unforeseen diseases related to kiwi fruit.
Historically, various fruits and vegetables have suffered from
diseases. Zespri should diversify risk by focusing on their key
capabilities. The business model can be replicated in other fruit
categories. The strategic question that arise here is whether to
continue to leverage the country of origin effect. Zespri can
build a business model which could exist outside of New
Zealand and can be globally applied. Zespri should focus on
diversification through capabilities that they have developed-

Case Summary|Indigo and Zespri

governance, innovation, knowledge sharing and branding.


Diversification will also add multiple revenue streams.

3. Threat of substitution
Horizontal differentiation poses a threat of substitution especially
if markets like China start producing kiwis of same quality as
Zespri but at low costs. It will influence significant market share
of Zespri. For New Zealand government, Zespris export business
is negligible and thus might not get enough government backing.
To overcome this issue, Zespri must invest in knowledge. If there
is a lot of tacit knowledge involved in the business, Zespri will
have a comparative advantage over any company that would try
to imitate and substitute them.

Generalized Strategic Management


The key message from the major threats highlighted above is loud and
clear. Zespri would need to diversify to sustain over a long time. From
general strategy perspective, diversification and resources &
capabilities go hand in hand.
According to Ansoff matrix, diversification implies the highest risk. So
before taking the leap, strategy should be well supported with
capabilities. In case of Zespri, the company has developed key
competencies such as cooperative bonds with the growers, research
and development and well-built marketing campaign. This
diversification is a consequence of incredible expertise in fruit industry.
So Zespri defined the strategy based on opportunities of expansion
and validated it with the core competency the company has. On the
contrary, strategy can be built around the capability that a company
currently has and it can be matched with the opportunities. However, it
might bias a company to be more conservative. Although, it reduces
the risk of overestimating the abilities and risking the strategy at the
first place.

Bibliography
Publishing, D. B. (2013, December 10). The Indigo Story: On time, Hassle Free.

Case Summary|Indigo and Zespri

Alvarez, J. B. (2012, January 13). Zespri.

Case Summary|Indigo and Zespri