As the economies boom, markets widen. But in this boom, I think the approach to markets has changed quite a lot and I think we will see more of that in the coming years. I’ve been thinking if old companies will have the ability to catch up with the newer ones on the horizon which are being built very differently - from the ground up.
Historically, companies have acquired a lot of assets and have then have paid the price because of maintenance costs of these assets. Can newer companies usurp that position by reducing their infrastructure costs and streamlining their methodology of delivery of products/services ? One example that comes to mind is ‘Low Cost Airlines’. Their major infrastructure costs are in the aircrafts. Period. No agents, no caterers, no perks, no frequent flier miles, nada nada nada. How can old airlines survive this onslaught ? Will they reduce the no. of agents, or reduce the extraneous infrastructure etc etc etc .. Just how much can you reduce when you are simply reacting to a company that was built ground up with ‘thrift’ in mind.
Will many of the old companies even survive this onslaught ? I’d like to see .. and more importantly..I am realising that this new way of doing business and complete revamping of your asset relocation can open up entirely new avenues for business. You don’t really have to compete, rather you just have to show the way .. 
Comments 2
Yeah,companies are becoming leaner by the day,but showing the way isnt enough. Air Deccan now has it’s own set of competitors and the first mover advantage doesnt last long.Cutting the middle man out seems to be the mantra these days.
The question here is,with increasing compt and costs,how much cost cutting can you actually afford?
As for the oldies, they already have their infra in place, wht’s needed now is cutting corners.Or mebbe they can operate in both the segments, thanks to their brand equity.You retain your cust base and u compete with the new forces too, ala Lux…premium to Rs.10/-,you’ll find the complete range under 1 brand. Or take Hyundai. The trick lies in how fast you adapt to the change. Another aspect worth considering is the target market of both these airlines. Deccan is the low cost carrier,but how many ‘status conscious’ (and our society is full of them) are willing to travel it? Deccan is good enough for the students and young working execs. The premium junta might not prefer it. And the switching costs may be higher if they piled up enough freq flier points…and err…I better stop here
Btw, why doesn’t the text in your comment text box wrap around the box borders?
Posted 29 Aug 2005 at 12:07 am ¶I never meant to say you will never see competitors. But the advent of new business might make it situations entirely unpalatable to the old ones. Do you know the no. of airlines that have filed bankruptcy or are going to do so in the near future ? Where did that come from ? If we talk about ’status conscious’ people, do you mean that there are more of them in India than in the US where these companies are filing bankruptcy ?
Plus the airlines was just an example to show that all is not well with the old style of functioning and loads will have to shut shop if they keep going the way they do, or will do so when someone comes in and challenges existing ways of doing business
PS: The text comment box doesn’t wrap because I like to see people flounder and forget whatever they’ve typed
Posted 29 Aug 2005 at 1:07 pm ¶Post a Comment