For this week's blog post, you will need to answer ONE of the questions about the Kiwi Air Case. (These questions will help you with this week’s mini-analysis. Try to give an original answer or angle, or pick an question/area that others have not chosen):
2. Explain KiwiAir’s competitive strategy in terms of ONE of the forces in Porter’s Five Forces model. Note: For your Week 1 assignment you need to consider ALL FIVE forces. (See pp52-57 of text; plus the Porter reading – link on Blackboard.)
IMPORTANT NOTE: If you have not already checked your student email for an invitation to become a contributor for the blog, please do so (even if you are already a member of the blog). If you have recently changed to this tutorial or have not received an invitation, please send me an email.
KiwiAir’s competitive strategies, in terms of the industry competitors force in Porter’s Five Forces model, was to apply cost effectiveness, market access, and a differentiation of the services they provide.
ReplyDeleteKiwiAir took focus on customer service with application of the CRM system and applied it throughout the organization to give a consistent focus with any and every customer. This also allowed them to differentiate their service based on the customers’ needs and requirements. Due to the information systems applied, their change in strategy allowed better response, ease of use (for the internal and external customers), improved security and allowed for better relationships with suppliers for remaining competitive within the industry (“with application of RFID the supply chain was reduced to three steps”).
“Customer benefits consisted of simplicity, reduced time-cost and personalization”. Remaining competitive in the airline industry, with new entrants, competitive costs and many different bargaining powers of suppliers and customers, involved strategies to be changed and suited more for the demand at hand. The information system implemented was able to save on time and therefore costs to the airline and the customer. Because KiwiAir was already large in the industry (prior to the shrinking domestic market share and rising fuel prices), there was a slight advantage with the base they had already achieved. New insights we able to be put into action such as the integrated and responsive business processes, centralized online sales and direct interaction with customers, a commitment to educating customers and thus an improved customer service and financial performance. KiwiAir also had the advantage of market access due to the market share they had already acquired. They knew what was needed; it was only a matter of applying action to enable successful changes in the organization to implement a differentiated service so current and new customers remain loyal. This allows for customer retention and an increase in market share, hence an improved profitability.
Even though ERP and CRM were only implemented correctly after great investment on internal training, this proved to be functional and advantageous after the disadvantages KiwiAir had faced. Responding this way to the industry competitors allowed KiwiAir to become one of the most competitive in the airline industry. The following segment explains how the KiwiAir have changed over time rather than a radical organizational change, and illustrates that the information systems in place are value adding rather than merely being used for efficiency and effectiveness. ‘We no longer focus on moving “men and machines” but information. It is the movement of information through a holistic network of integrated processes that delivers our business value. The gains have not been easy as we have all had to accept the different nature of work, the new intellectual demands…different expectations and to resist reverting to old industrial ways. Our customers are more virtual than real and everyone has to be comfortable working in the abstract as a reality.’
Information systems helped to bring about the differentiation in services provided by KiwiAir. Even though the technology was a large cost, due to the ongoing training, educating and managing of the system’s internal and external customers, KiwiAir measured success in their cost-effective supply of services rather than the demand increase. This enabled the new system in place to be flexible and adaptable, ensuring that all customers are able to use it. Concluding that their implementation of systems is constantly changing to customers needs and hence KiwiAir remaining very competitive in the airline industry.
A lot of information systems were applied to KiwiAir in their transformation and in their competitive strategy. A holistic approach of the organization helped to make this a successful outcome for them while ensuring that ongoing adaptability will be needed to remain competitive in their industry with cost effectiveness and differentiation of services for customer retention.
ReplyDeletethe main issues of Kiwi Airline are increasing number of airlines (new entrance) and price sensitivity (buyer power), kiwi airline competitive strategy was competing in low cost and their tactical attack where cost would be cut such as time cost.
ReplyDeleteDo you think that price sensitivity is the main issue though? There are a number of competitive strategies that have been put in place, including the low cost method. However, without KiwiAir's differentiation and changed customer focus organisation-wide, they would not be one of the top competing airlines in the industry. I think that the differentiation brought about in their service as well as the other contributing strategies such as cost effectiveness plays a very integrating role in their competing strategies.
ReplyDeletePorter's 5 forces have all been used in this case: buyer power, supplier power, new entrants, industry competition and threats of substitute products.
If the competing strategy alone is low cost, then they would face threats of substitute products, again having to change their tactical attack.
So, with regard to this, would you also say that differentiation towards a customised customer service and cost both play a role in the competitive strategies used by KiwiAir?
in most of the cases when we use 5forces of porter we can clearly see that cost plays the main role, in this case it is the same all difficulties starts when the price of fuel increases and new entrances using this opportunity to create the new market by lower prices and adding values to their products which brings the idea for kiwi airline to reduce the costs and differentiate their service.
ReplyDeleteThats true. But when looking at the 3 strategies (as we talked about in lecture this week: differentiation, cost leadership and focus), there is no exact place we can position KiwiAir due to their cost and differentiation tactics that have been used. So I think that probably for this question as long as you provide sufficient evidence for your position as to what may have happened, the explanation of KiwiAir's competitive strategies used will be able to be well comprehended by the user.
ReplyDeleteI do agree that reducing costs was to create barriers, remain competitive and attract customers, however, differentiation is the key to KiwiAir's ability to be a top competitor, provide further barriers to entry and thus influence change in the industry with their re-organisation of strategies (business, organisation and IS).
There is also a paragraph in our text that states that customers are willing to pay a higher price for a differentiated and quality product. So in the instance of KiwiAir, their value creation method is a form of quality to the customer, hence also being a main competitive strategy along side of cost effectiveness.