SpiceJet Case Study: How SpiceJet avoided being another Kingfisher Airlines

Spicejet Case Study

1SpiceJet Case Study

SpiceJet, a leading Indian aviation player, was on the verge of shutting shop few years back (2014). With delaying salaries, layoffs, delay in payment of statuary dues – Service Tax, TDS etc- in 2014, SpiceJet was struggling to survive. Here, in the SpiceJet Case Study, we discuss how the the airline ended up becoming the world’s best airline stock in 2017 from the turmoil.

2The Curious Case of SpiceJet – Issues and Problems

  1. Chennai based Sun Group acquired SpiceJet in 2010. The inconsistent profits were set off with investments by media baron Kalanithi Maran. Maran invested close to Rs 1500 cr in the airine and ended up owning 58% shares.
  2. The losses in the airline were still overlooked in a hope to loop in an overseas investor.
  3. SpiceJet was in talks with American private equity investors who could bail the airline out from immense losses. PE investors like TPG Capital, Indigo Partners etc- were keen to invest in the airline. However, when the deal was about to take shape, Dayanithi Maran, brother of the majority stakeholder Kalanithi Maran, was accused of misconduct by the CBI in the famous Aircel-Maxis case. The PE firms therefore backed out from SpiceJet investment.
  4. With no investors and burgeoning losses, SpiceJet was forced to return planes, cut man power and consequently cancelling flights. This made the airline to default on fuel payments, clearing vendors outstanding and other debt. SpiceJet defaults on salary payment a second timeSpiceJet asks 50 captains in its flight crew to leave in a month.
  5. DGCA came into action and prevented booking of tickets from more than 30 days and ensured immediate refund to passengers whose flights were cancelled.
  6. Cash inflows declined, travel agents, who used to deposit advances for bookings and then took refunds, now said no to deposits and on December 15, 2014, the SpiceJet management told the DGCA it was about to suspend operations.

3The Curious Case of SpiceJet – Action and Turnaround

  1. Kalanithi Maran sold its stake in the airline and a new management led by Ajay Singh came into force. Under the leadership of Ajay Singh, the airline proposed a new turnaround plan to Ministry of Aviation.
  2. The government had a vital role in bringing SpiceJet back to life. Aviation ministry wrote to AAI and oil companies asking them to allow credit facilities to SpiceJet and also allow the airline to stagger payments to clear its dues. Also, DGCA was asked to lift the 30 day ban on sale of tickets placed on the airline.
  3. Simultaneously, Singh himself met the oil companies to resume working with SpiceJet on part payment of their dues. The falling oil prices also helped.
  4. Singh identified that their problems were multiplying was because of ‘loss of trust’. The airline was paying a price of loss of trust amongst it customers, employees, vendors etc-. He identified that the only way to win the trust back was by resuming normal operations back. Therefore, Singh on getting the basics of the airline right – ensure that flights are taking off in time and interfaces like websites, counters at airport are working smoothly. SpiceJet strategically chose the holiday period to rollout the measures so that most of the customers can benefit and gain trust back again in the airline.
  5. SpiceJet also shut down five domestic and 3 international destinations to optimise their cost.
  6. Though sale offers continued, but the key dates – holidays, festivals etc- were kept outside the purview of the sale. Earlier, the offers were applicable across all dates hitting the revenues.

4SpiceJet in 2017 – Flying High

  1. SpiceJet case study tells us what an positive attitude and the right strategic moves can do. Today, the airline’s shares are hovering around Rs 125 each. In June, Bloomberg said it was the world’s best aviation stock this year with a 124% gain.
  2. SpiceJet is valued at Rs 7,400 crore, up from the Rs 650 crore it was valued at during its darkest hour in 2014. Rival Jet Airways Ltd, with a fleet double that of SpiceJet, is valued at Rs6,200 crore.
  3. Earlier this year, the airline ordered 100 fuel-efficient Boeing Max aircraft, adding to a previous order of 55 planes which will be delivered over the next decade and bring down its costs by another 5-10%.  It also has options to buy 50 more planes taking its order book to 205.

The SpiceJet Case Study is amongst the rarest instances where an airline has revived back from near closure levels. Prior to SpiceJet, players like Kingfisher Airline and Paramount Airways and Indus Airlines have already shut shops.

Loan Waiver Not a Solution to India’s Agriculture Problem

The deaths of five farmers in Madhya Pradesh has brought India’s Agriculture Problem once again to the editors desk across all forms of media. While the latest incident may have got the much needed attention, but the fact is that the crisis has been under the shackles for some time. Farmers across the nation have been demanding loan waivers to get out of the trouble. Lets have a look at what steered to such a dismal situation in Indian Agriculture and what is a sustainable solution to the problem.

1Lack of Government Attention in the sector has fuelled India’s Agriculture Problem

Agriculture in India has faced slowdown in the first 2 years of the BJP led government.

The national accounts (new series) data clearly demonstrates that agriculture is facing a severe slowdown. The net value added (NVA) in agriculture declined at 0.23% per annum in the first two years of the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government. Even accounting for bumper production last year, gross value added (GVA) in agriculture has grown at 1.77% in the last three years.

Investments in Agriculture has been on a decline in India has faced slowdown in the first 2 years of the BJP led government fueling India’s Agriculture Problem further.

Data shows that investment in agriculture is declining at 0.8% per year at constant prices since 2010-11. For the first two years of the current government, investment in agriculture declined at 3.8% per annum. It declined from Rs2.84 trillion in 2013-14 to Rs2.63 trillion in 2015-16 at 2011-12 prices—the sharpest fall in more than two decades.

Minimal Increase in MSP (Minimum Support Price)

Not only was the growth of minimum support price (MSP) minimal, the central government refused to pay the usual bonus that the farmers were given. For crops such as pulses, the MSP announced was much lower than promised.

Demonetization Effect

The final nail in the coffin was the demonetization of high-value currency notes, which affected the purchasing capacity of market traders, forcing farmers to undertake distress sales. India’s Agriculture Problem

Short Term Solutions from the Government

The response of the government in the sector has never been proactive and has been focussing on the short term. Farm loan waivers are never a long term solution. Increasing MSP also benefits only a small section of farmers.

2Farmers have been struggling to keep up with changes

Increase in Input Costs

In the same period, input costs have increased. The big increase has come in fertiliser and seed prices, denting the profitability of farmers and complelling them to hunt for loans.

Change in Cropping Patterns

There has been a structural shift in cropping patterns with horticulture and cash crops dominating farm output. Today, the overall horticulture production is higher than food grain production. Most of these crops are outside the ambit of MSP operations and hence vulnerable to fluctuations in market prices.

3The Solution to India’s Agriculture Problem

Recognition of changing patterns in Indian Agriculture

The long-term solution has to first recognize the new reality of Indian agriculture as well the changing role of agriculture in rural incomes and growth. While reviving agriculture is necessary for revival of non-farm sector and rural jobs, the instruments required are not adequate to cover the uncertainties in a globalized context.

Dedicated Investment in Storage Capacities

With farmers resorting to a more lucrative but risky perishable horticulture and cash crops, government needs to invest in better and bigger storage capacities.

Improved Transportation Network, Farming Technology and Infrastructure

What is needed is not only better integration of farmers with markets and price intervention strategies for non-food crops, but also large investments in agriculture. These are essential for creating better marketing infrastructure, storage capacities, transportation network, farming technology, research for new crop varieties, extension services and above all irrigation.

Focus on Agricultural Research

R & D capacities are required to be pumped up in the field of agriculture. Also, norms of usage of GM (Genetically Modified) crops can be reconsidered and looked upon from a more liberal perspective.

While the government may offer a temporary solution to India’s Agriculture Problem by offering farm loan waivers, the crisis is not going away. The government should rather dedicate resources to step up investment in agricultural infrastructure and price support. Not only will it revive agriculture, it will also generate employment in the rural economy.

International Marketing – Definition and Examples

International Marketing Definition

International Marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit. The only difference between the definitions of domestic marketing and international marketing is that in the latter case, marketing activities take place in more than one country. No matter domestic or international the Marketing objective remains the same for marketers. The objective is to make profit by selling products or services in geographies which have a demand for them.

2Challenges with International Marketing

When compared to domestic Marketing, International Marketing has its own set of challenges. Marketers are generally unaware of the foreign environment and therefore have to deep dive into the market where they plan to venture.

The challenges can be:

  1. Competition
  2. Legal Restrains
  3. Government Controls
  4. Varied Consumer Behaviour
  5. Ecological factors – Weather etc-

Controlling all the above mentioned factors to create a favourable market is next to impossible for the marketers as most of them are beyond their control. Therefore, marketers need to focus more on what they can control instead of things which is out of their purview. International Marketing Managers adapt to the prevailing conditions and function in a way so that they can smoothen their operation in the country with predictable results of their action.

What makes marketing interesting in the international arena is the fact that marketers have to alter is their elements of marketing – product, price, promotion, distribution, and research keeping in mind the uncontrollable elements of the marketplace – competition, politics, laws, consumer behavior, technology, in a way that marketing objectives are achieved.

3International Marketing Examples:

When McDonalds entered in India, they did an extensive research before zeroing upon the menu on offer for the Indian consumers. The entire menu was tailer made as per Indian consumer taste. The company stuck to 40% Pure Vegetarian offering unlike any other overseas market. McDonald’s also made sure to respect Indian culture by not serving beef or pork recipes which on the other hand were popular ingredients in other markets. McDonalds also made sure to create recipes with Indian spices to match the local taste. You can check the current menu here – McDonald’s Indian Menu

Kellogg’s, the global giant when it comes to cereals, entered in India in 1994 and introduced their proprietary ‘original’ recipe which failed miserably in the Indian subcontinent. The main reason was that Kellogg’s India did not correctly ascertain their competition. Indian consumers were used to local homemade wheat based breakfast recipes. Kellogg’s quickly learnt from their mistake and customised their product from their original recipe to wheat flakes, rice flakes etc-

There are plenty of other examples where global giants customised their offering to meet Indian consumer equipment and thrived. Here are few:

  1. Nokia – Dust resistant phone, anti slip grip and in built flash light for India rural consumer.
  2. Hindustan Unilever – Introduced shampoo sachets priced at Re 1 for price sensitive Indian consumer.
  3. MTV – Localised programming help to gain wider audience.

All these product localizations translated into success stories in India and helped the brand reach every household in the country. Post the success of these products and familiarity with the brand, it gave companies leeway to experiment with their new offerings and lure consumers to try new variants.

Kapferer Brand Identity Prism – Concept & Examples

In order to become a brand with loyal following or how Kapferer says ‘passion brand’ or ‘love marks’, brands should not be just a name. Instead they should have a story or a deeper inner inspiration which connects to its consumers. Brands should have their own character, their own beliefs and their own identity. Kapferer Brand Identity Prism tells us how to build a story and give the brand a much needed identity considering six important facets of brand identity.

Kapferer Brand Identity Prism

1Brand Physique (Kapferer Brand Identity Prism)

A brand, first and foremost, should have ‘physique’ with physical specifications and qualities. It is made of a combination of either salient objective features (which immediately come to mind when the brand is quoted in a survey) or emerging ones. Physical appearance is important but it is not all. Nevertheless, the first step in developing a brand is to define its physical aspect: What is it concretely? What does it do? What does it look like? The physical facet also comprises the brand’s prototype: the flagship product that is representative of the brand’s qualities.

Example: Coca Cola in all its communications lays special emphasis on the ‘Coke Bottle’ and how it looks. For markets where Coke entered for the first time, it always starts with the traditional Coke bottle. In fact to no surprise, Coke cans also have a outline of the iconic coke bottle. Therefore, the physical appearance of the brand remains intact.

Also, colour of the product (say Black in the case of Coke), should be a part of the physique. And if so, you can never imagine a colourless Coke. There could be variants of different colours but the brand colour will never change.

2Brand Personality (Kapferer Brand Identity Prism)

A brand has a personality. By communicating, it gradually builds up character. The way in which it speaks of its products or services shows what kind of person it would be if it were human. This is a tough task to implant a product as a human in the mind of consumers. Therefore, brands rope in famous personalities to endorse the product. The brand and the celebrity being roped should sync in personality therefore forming an important facet of Kapferer Brand Identity Prism.

Example: Mountain Dew, a drink from Pepsico, promises thrill and adventure and therefore always loops in celebrities who are seen close to sports.

3Brand Culture (Kapferer Brand Identity Prism)

A Brand should have its own culture and brands with strong culture end up being ‘cult’. Both product and communication should reflect this culture. Brands targeting masses focus on culture which is common to a wider chunk of population or vice versa. Late entrants to the market prefer choosing a niche targeting a particular culture and evlove big in due course of time.

Brand culture plays an essential role in Kapferer Brand Identity Prism and helps differentiating brands. It indicates the ethos whose values are embodied in the products and services of the brand.

Example: Royal Enfield motorcycles in India have a cult following as the brand has a very strong culture. Though started slow but the brand is the fastest growing in the motorcycle industry in India both in terms of following as well as market share.

Brand Culture is very much influenced by the country of origin. Other global brands such as Apple, Nike, IBM adhere to an idea which is more globally accepted.

4Relationship (Kapferer Brand Identity Prism)

Indeed, brands are often at the crux of transactions and exchanges between people. This is particularly true of brands in the service sector and also of retailers. Once the consumers build a relationship with the brand, the brand can demand consumers to do things which it believes in.

Example: Nike bears a Greek name that relates it to specific cultural values, to the Olympic Games and to the glorification of the human body. Nike suggests also a peculiar relationship, based on provocation: it encourages us to let loose (‘just do it’). Nike in India created amazing TVC celebrating women athletes featuring Deepika Padukone. Here the brand is in a position to ask its consumers to ‘Just Do It’ because it has nurtured a relationship.


5Reflection (Kapferer Brand Identity Prism)

A brand is a customer reflection. When asked for their views on certain car brands, people immediately answer in terms of the brand’s perceived client type: that’s a brand for young people! for fathers! for show-offs! for old folks! Because its communication and its most striking products build up over time, a brand will always tend to build a reflection or an image of the buyer or user which it seems to be addressing.

Example: A majority of apparel brands portray a model in the age group of not who they are targeting, but the age group which the consumer thinks he/she belongs on buying that brand. In reference to the below ad, only a minuscule percentage of people in the age group (as shown in the image) will buy a Louis Vuitton suit. The consumer group will be much older for the product, however all those consumers will perceive to look younger with an ad featuring a young model (Jacey Elthalion in the below ad).


6Self Image (Kapferer Brand Identity Prism)

Finally, a brand speaks to our self-image. If reflection is the target’s outward mirror (they are …), self-image is the target’s own internal mirror (I feel, I am …). Through our attitude towards certain brands, we indeed develop a certain type of inner relationship with ourselves. And therefore, these brands always communicate to push the limits.

Example: BMW India launched a campaign for people who see themselves driving a BMW, no matter now or future. The campaign went on TV as Don’t Postpone Joy. Below is the TVC asking to drive a BMW sooner.


Flipkart buying Snapdeal! Logic behind the mega acquisition

Flipkart Buying Snapdeal

With most of the e-commerce players running into losses, its time for the industry to churn out some numbers for the investors and prove that their net worth is not just a number but their real value. For those who can not bring cheer to the investors are set to perish in an over estimated Indian e-commerce market. Few players have already shut shop. PepperTap is one example and its time to witness some further consolidation in the industry with Flipkart buying Snapdeal.

Once among the top 3 e-commerce player of India, Snapdeal, is having a tough time to impress its investors and especially Softbank, its biggest stakeholder. The company which was couple of years ago valued at $6.5 bn is today struggling to prove even one sixth of its valuation. In a latest development, sources state, that Flipkart is buying Snapdeal operations to take on rival Amazon in India.

Why is Flipkart buying Snapdeal?

However, the question arises, why will Flipkart be interested in a venture which has been making losses? Why will a company spend heavily to nurture two brands especially after the failed effort of Snapdeal’s biggest campaign – Unbox Zindagi. If we take a closer look at both the companies we find stark difference which actually complement each other to take on the bigger rival – Amazon. Below are few points which might have excited Flipkart to take over Snapdeal:

  1. Flipkart is holding around $50-60 mn in its kitty in addition to the recent funding of Rs 1.5 bn (Flipkart set to raise up to $1.5 billion amid talks to buy Snapdeal) With Flipkart buying Snapdeal, they not only eradicate one competition but also put their cash to good use.
  2. Flipkart is particularly strong in the the Western and Southern part of India in terms of reach and logistics where as on the other hand North and East India have been a focus market for Snapdeal. To take on a giant like Amazon, Snapdeal acquisition will give Flipkart a uniform Pan India presence.
  3. Unlike Flipkart, Snapdeal has unparalleled reach to tier II and tier III cities supported by a robust logistics arm.
  4. Vulcan Express, Snapdeal’s fully-owned logistics arm that not only functions as the primary delivery mechanism between sellers and customers and vice-versa for the marketplace but has an external client list as well, would most likely be part of the merger.
  5. Snapdeal’s Vulcan Express is about the reach profitability numbers compared to Flipkart’s e-kart which posted a loss of Rs 810 cr. The logistics of the e-commerce giant will certainly pump up.
  6. Snapdeal currently has 300,000 sellers compared to Flipkart’s 100,000 sellers. Additionally a majority of these Snapdeal sellers are in the sale in the unorganised sector where as Flipkart has always been more skewed towards the organised sector.
  7. Last but not the least, Flipkart will get Softbank on board as a stakeholder and chances of further funding coming from Softbank can not be ruled out.

One thing is clear for sure, that the fortune of companies have moved from their founders to the stakeholders (Snapdeal’s co-founders hint firm’s fate not in their hands) and its now time that the investors take charge and aim at getting the right ROI.

TV Viewership in India – March 2017 – BARC Broadcast India Survey

Amidst the fan fare created around digital media reach coupled with Digital India movement, BARC released some interesting TV Viewership Numbers in India. The TV viewership showed increase across all parameters when compared to a similar number in 2013.

TV Viewership in India

TV penetration in the country jumped by 10% in 2017 at 64% when compared to 2013 which was at 54%. The TV viewing universe stood at 780 mn in 2017 compared to 675 mn in 2013. TV owning home also jumped 19% and stood at 183 mn in 2017. However, the interesting point is that out of these 183 mn households 99 mn households are in rural India compared to 84 mn households in urban India. Thereby rural India TV ownership stands 17% higher than Urban India.

TV Viewership in India- March 2017

TV Advertisers stay Cautious

Though TV Viewership numbers show a growth but advertising agencies predict slower growth in ad revenues compared to previous years. GroupM, in its report, This Year Next Year states that the total ad expenditure grew 12% in 2016 and predicts a slower growth at 10% in 2017. Another report jointly published by media agency Madison and advertising magazine Pitch, however, projected TV to grow at a higher 13% in 2017. According to the Pitch-Madison report, among all media, TV still enjoys the largest share of the advertising pie at 38%.

One of the reason of increase in reach is the fact that earlier viewership was reported from the age of 4 years plus which this time has been brought down to two years plus. Clearly, increase in rural viewership will skew advertisers to create content specific towards the rural market.