MANCOSA: MBA (GENERAL) YEAR 2

COURSE AND ASSIGNMENT HANDBOOK: JANUARY 2014 INTAKE

ASSIGNMENT 3: CORPORATE STRATEGY DUE DATE: 06 MAY 2014

SECTION A [50]

THIS SECTION IS COMPULSORY. YOU ARE REQUIRED TO ANSWER ALL THE QUESTIONS IN THIS SECTION.

READ THE CASE STUDY AND ANSWER ALL THE QUESTIONS

kulula.com, “Anyone can fly”, 2001

It was January 2003, 17 months since kulula.com had taken to the skies for the first time.

This low-cost airline had survived almost two years in an extremely tough industry and, in addition, claimed to have been profitable since its inaugural flight on 1 August 2001.

Gidon Novick, Comair Limited’s executive manager of marketing, was involved in kulula.com’s somewhat unusual communication strategy from day one and maintained a close relationship with the advertising agency, morrisjones & co. The brand had been very effectively established and the airline had received two awards: the Marketing Federation of Southern Africa’s prestigious 2002 Tusk ‘‘Service Launch of the Year’’ award; and the Airports Company of South Africa’s ‘‘Domestic Airline of the Year’’ annual customer survey award for 2002.

But despite the hugely successful campaign, which had required only a few minor adjustments over the past 17 months, Novick did not feel comfortable. He realised that the business might soon face a problem – the possibility that the hype in the market had declined to a certain extent or could do so in the near future. He knew that in the fiercely competitive airline industry – an industry that had become even more competitive since the September 11 terrorist attacks – one could never sit back and relax.

It was time to rethink kulula.com’s strategy. Novick could not afford to miss a single significant fact in establishing whether the current formula was sustainable or not. Other competitors entering the market – such as national carrier South African Airway (SAA) with its own low-cost airline, was a lurking threat. Even the current relationship with kulula.com’s advertising agency needed some reconsideration. With this in mind he started studying all the necessary supporting documentation that was lying on his desk.

Background to the low-cost airline industry

Up until 1978 the global airline industry had been controlled mainly by national governments that owned or subsidised the so-called national flag-carriers, which carried the flag of their nation on the tail of the aircraft. Following the deregulation of the domestic airline industry in the USA in 1978 and in the UK in 1979, the market was subsequently freed up for the entry of other competitors.

The terrorist attacks on theWorld Trade Centre on 11 September 2001, however, left many of the world’s already ailing airlines in a state of crisis, with Swissair, Belgium’s Sabena, Australia’s Ansett and

US Airways going bankrupt. The healthier airlines, British Airways and Lufthansa experienced a significant drop in passenger numbers.

Compared to the flag carriers, however, the low-cost carriers did very well after the September 11 attacks.

In South Africa the Domestic Aviation Policy (accepted in parliament on 1 July 1990), in line with international trends, started the process of deregulation in the South African aviation industry. By December 2002 domestic airline operations in South Africa were primarily divided among four competitors. These were national carrier SAA (60 per cent market share on average across routes) with its partners SA Express (also owned by Transnet) and SA Airlink (10 per cent owned by SAA); British Airways Comair (about 22 per cent market share) with its local British Airways (BA) franchise and its no-frills arm, kulula.com (about 10 per cent market share); and the independent operator, Nationwide Airlines (8 per cent market share).

Objectives

In the year 2001, British Airways wanted to enter a low cost airline into the South African market. The proposed – Comair Lite – was to be the first no-frills, low fare airline which would offer travel opportunities to those previously unable to afford the high prices of current airlines.

Our objective was to launch the fighter brand and get people to choose Comair Lite by booking online.

Challenge

The odds were stacked against them; the market was dominated by a subsidised, well known and trusted national carrier – South African Airways; the association with an established airline was a disadvantage, and the South African market was not an ideal candidate for a low-cost airline.

Insight

Prior to the launch most airlines positioned themselves as luxury or dream-like travel options.

Reclining chairs serviced by elegant and swift hostesses classically flew through the air on the way to stunning holiday locations. Bells, whistles and a serious “trust-me” attitude were standard with consumers having to fork out large amounts of money to travel by air.

These factors led to air travel being highly inaccessible for most due to perceived high costs, complicated booking mechanics and the idea of air travel was only meant for the successful business market or higher income earners.

Solution

The overall solution was to create brand affinity rather than simply running advertising and promotions to acquire bums in seats. We needed a more holistic approach to the brand and the business. From

naming the brand to painting the plane, morrisjones applied an allvertising approach rather than a traditional advertising one.

The first challenge was to re-evaluate the name “Comair Lite”. The name lacked relevance, maintained the association with British Airways and communicated a watered-down version of an existing brand name; which steered the brand to a cheap, corner cutting and, by implication, a less safe perception than bigger more trusted airlines.

So the search for a new name began…

“Kulula” was a perfect choice as its literal meaning “easily” in isiZulu conveys the brand essence. It appealed to new markets, it promised real difference to existing ones, and best of all, met all the practical concerns. The name was also followed by .com which made it easier for people to remember where to go to book.

Furthermore, and in line with the insight, airline advertising conventions could not reflect the brand essence of simple value. This led us to a positioning of “Anyone can Fly” and a ruthlessly simple creative route emerged. If anyone could fly, then it must mean that ordinary people could become superheroes (in adland at least). The idea therefore, was to show as many types of ordinary South Africans as we could, dressed as the superheroes they could now become with kulula.com. For once, the customer really was the hero.

Creating a new category of no-frills, low cost airlines meant the brand could extend into less familiar areas; such as the cabin crew’s welcome and safety speeches. This relaxed outlook on travel reinforced accessibility and value but kept the experience engaging and, most of all, fun.

Close to half a million tickets were sold in the first calendar year of operation.

Results This launch campaign showed impressive sales figures. Close to half a million tickets were sold in the first calendar year of operation. kulula.com was profitable from the day it started flying. 2000 reservations were made on the first day of operation. High load factors also ensured profitability with load factors continually ranging between 75% and 85% per month. This exceeded the industry average of 60% by between 15-25%. These load factors remained consistently above average while capacity grew over three times greater. Following this in 2004, the agency was awarded a Silver Apex Award in the launch category.

Source: http://www.morrisjones.co.za/casestudies/055405110723.pdf QUESTION 1 (50)

1.1 As a consultant you are required you are required to develop a strategy for Kulula.com. You are given a brief as follows: Establish whether there is a link between the organisations’s leadership and the vision and mission. (15)

1.2 To evaluate Kulula’s resources and competitive position (20)

1.3 Discuss the various competitive strategies and identify the strategy of best fit. (15)

SECTION B [50] ANSWER ANY TWO OF THE THREE QUESTIONS. ALL THE QUESTIONS CARRY EQUAL MARKS QUESTION 2 (25) As a business analyst at a major consultancy, Accenture, you are asked to develop a presentation for the management team to discuss the eight generic managerial tasks that are necessary for strategy implementation. QUESTION 3 (25) Critically discuss how leadership impacts on organisational culture. QUESTION 4 (25) Evaluate the merits of Corporate Governance and the value, if any, it adds to organisations.

Assignment Format Word Limit: Your assignment (excluding index, cover page and appendices) must not exceed 5000 words. Your assignment should include a Table of Contents page. Text: Font: Arial or Times New Roman (12), Spacing: 1½ lines All text must be justified at each margin. Your answers must include any theories, charts, tables or exhibits necessary to support your analysis and recommendations. References - At least 8 sources of reference (textbooks, journals, press reports, internet, etc) must be included in your bibliography. The Harvard system of referencing and a bibliography must be used. Ensure that the readings are not merely reproduced in the assignment without original critical comments and views. It is imperative that student’s proof-read and edit their assignments prior to submitting it. Assignments must be free from errors and of a professional standard.