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FACULTAD DE CIENCIAS EMPRESARIALES

CARRERA DE MARKETING

PLANEAMIENTO Y DIRECCIÓN DE MARKETING

CASE: YUNNAN LUCKY AIR

TEACHER: IGNACIO DE LA PIEDRA PORTELLA

Members:

❖ Selene Carrizales
❖ Brando Cuya
❖ Angie Atocsa
❖ Bianca Rueda
❖ Leonardo Luján

2019-1
SUMMARY
1. Hypothesis…………………………………………………………….
2. Group Of Facts………………………………………………………..
2.1. Company Summary……………………………………………….
2.2. Philosophy Of The Founder………………………………………
2.3 Mission…………………………………………………………….
2.4 Vision………………………………………………………………
2.5 Values………………………………………………………………
2.6. Mcc……………………………………………………………….
2.6.1 Market …………………………………………………...
2.6.2 Competition ……………………………………………...
2.7 STP…………………………………………………………………
2.7.1 Segmentation……………………………………………..
2.7.2 Targeting ...........................................................................
2.7.3 Positioning………………………………………………..
2.8. Branding…………………………………………………………...
2.9 Marketing Mix…………………………………………………….
2.9.1 Product ………………………………………………….
2.9.2 Price …………………………………………………….
2.9.3 Place/Distribution………………………………………..
2.9.4. Promotion……………………………………………...
2.10 Human Resources……………………………………………….
3.10.1 Market Research…………………………………..…..
2.11. Stakeholders……………………………………………………..
2.12 Sales……………………………………………………………..
2.13 Innovative Technology…………………………………………..
2.14 Finance…………………………………………………………..
2.15 Production……………………………………………………….
4. Identifying The Problem…………………………………………………..
4.1 SWOT Analysis
5. Alternatives Solutions …………………………………………………….
6. Analysis Of Alternatives Solutions ……………………………………….
7. Recommendations………………………………………………………...
8. conclusion………………………………………………………………...

1. Hypothesis
What we should do in this case is to check if the strategy carried out by Lucky Airlines

is sufficient to face the possible existing and future integrity.

According to the reading, we can say that they are a company that in China has a

competitive advantage that is to have a platform of e-commers well developed for

consumers, and we must analyze if this sale will be sustainable over time.

2.1. Company Summary

Backed by China's Hainan Airlines, Yunnan Airlines was founded in 2004 as one of

the most profitable national airlines operating from its center in Kunming, in Yunnan

Province. The limited route license was added to the airline's competitive advantage

and maintained its monopoly within the region. Its main competitors include Air China

and China Southern Airlines among others. As Yunnan is one of the most attractive

tourist destinations in southern China, the airline attracted many customers and

started producing profits in only three years since its inception. This great success was

the result of a viable strategy of the company that included only one type of aircraft.

The executive team of Lucky Air must take into account many factors. A poorly

designed or poorly implemented marketing plan would not only hinder the growth of

the company, but would also result in the loss of the advantage they have over the

other companies. The four cost components of the airline industry: fuel, landing fees,

aircraft leasing and taxes, have made the operation of Lucky Air a productive way a

constant challenge. Although the company has a high competitive advantage linked

to Hainan Airlines, it still needed to update its commercial strategy on a regular basis

to ensure the maintenance of the leadership they had over the other airlines. The

company, like all its counterparts, faces a large number of restrictions that include
heavily regulated government laws, limitations on price reduction, a low potential for

rapid expansion due to government restrictions and heavy taxes. Lucky Air is new to

the field and operates in a small geographic area and has to bear many costs. The

restriction to the expansion of the company makes it necessary for airlines to rent

aircraft at a high cost and taxes ranging from 2% to 10% make it a challenge to manage

their finances. The monopoly of "civil aviation oil" for fuel and the "National

Development Reform Commission" for the leasing of aircraft represents a burden on

the budget of the airlines, since they can dictate the terms of their services as best

they can.

So to solve this in 2008, Lucky Air, a low-cost domestic airline, modeled after

Southwest Airlines in the United States, was looking for new competitive advantages

in China's increasingly competitive regulated airline industry. Electronic commerce

was considered as a growth strategy giving greater opportunities and varieties at a low

price having a great impact. The goal of learning is to explore how businesses and

consumer environments affect the ability of a company in a developing market to copy

a western "best practice".

2.2. Philosophy

The business philosophy from the beginning has been to “retain satisfied customers

and happy employees, and create maximum value for shareholders and society.”

The importance of People orientation, Assumption of responsibility, Resolve to get

ahead and loving to fly that’s what the company want for their clients and when they

travel, they feel a very good sensation and this at the same time becomes a constant

consumption of our services gaining loyalty.


2.3. Mission

A leading airline in the world within everyone’s reaches. To be a highly competitive

company in terms of safe operations, service capabilities and brand recognition.

2.4. Vision

Cutting edge technology and security, keeping prices within reach of our clients,

providing good services, achieving constant growth, helping our employees to pursue

a successful career and fulfill responsibilities.

Lucky Air aims to be the first choice of customers and the favorite airlines of

employees. It will continue based in China, focus on Asia and connect the world, while

offering sustainable economic values with global impact and will become the best

airline in China under its competitive advantages, gaining recognition worldwide.

2.5 Values

Sincere service, convenient travel experience, and substantial tickets and packed

products are all the core brand essence; besides, Yunnan area feature is also its

distinctiveness. In a word, Lucky Air is aiming to develop as a new high-quality

distinctive aviation company with features of Yunnan area.

2.6 MCC

2.6.1 Market
The company was focused on the young public, which was focused on leisure

travelers, businesses and people looking for a low-cost solution with direct

flights.

This had the benefit of a 15% growth of flights each year this benefited the

market and was taken advantage of with Yunnan when making their entry

strategies.

On the other hand, the Market Size was intrinsically affectionate with the

company and this is why following the expansion of Lucky Air began to exist

more competition. In 2011 there were 11 low cost competitors.

It can be said that the competition began to review Lucky's proposal and sought

to offer a similar approach by seeking to obtain part of its Market share.

Analysis:

According to a statement from the World Tourism Organization, the

phenomenon of youth tourism is emerging as one of the fastest growing trends

in the future. At present it means 20% of the movement of tourists and the level

of average expenditure has grown.

The concept of youth tourism is defined today as a matter of style rather than

age. A way to live the trip, more independent, closer, adventurous, but not risky.

That is why the average age of these young tourists rises year after year.

The company had a good market study and thanks to it a more youthful

approach, since this public is growing and the characteristics it presents are

that they look for a good, cheap and attractive service, since their economy is

not yet so stable.


2.6.2 Competition

What explains the case is that during the first years of 2000 began to emerge

more and more competitors in China, thus growing the airline market, we can

say that directly gave the creation with a similar approach to Lucky's, which was

to attract passengers by offering a low cost strategy and to provide the loyalty

of future customers through this low cost strategy.

With the passing of time more companies studied what Yunnan offered and

sought to implement failed so far e-commers strategies for customer loyalty.

According to what was explained in the case, it can be said that in order for the

competition not to reduce the Market share obtained, it is necessary for the

loyalty strategy to be more effective.

Analysis:

The discounted products serve to attract the customer and encourage him to

buy it again in future purchases, regardless of whether the rebate continues or

not. This can be a good strategy to publicize a brand by promoting a high

demand product that acts as a demand tractor for the rest of the portfolio.

This low cost trend is what has put the Chinese company at the forefront and

has become a differentiating strategy that its main competitors try to imitate.

2.7 STP

2.7.1 Segmentation

Lucky air Demographic Characteristic from age factor is more significant than

the gender issue as the number of passengers by both genders is almost the

same. The passengers cover a broad range of age groups from 19 to 54, while

older people who aged above 55 are more likely to prefer full-service airlines.
Within the industry, there are also age differences between companies. While

Lucky air is attracting more young consumers.

There we have the ones that get leisure travel, business travelling all of them

have a relation with price which is the also engage with the behavioral and

conduction terms. Promotion, prices in a good price.

Then is crucial to find effective ways to counterstrike domestic threats one way

could be e-commerce which is the key to change. Lucky air currently offers

many flights, which is a good start to expanding and catering to global demands.

However, the key must be to effectively provide great service to global

passengers – given that China is rapidly rising. Lucky air has much to gain from

positioning itself to be the top airline to fly on a Chinese destination.

Air China must also expand its target segment to Chinese passengers. Tapping

into this market is a huge untapped opportunity. However, the growth of China

has also brought rise to discount carriers, which have increased passenger.

Lucky air must find a way to maintain excellent service and quality, while

keeping costs at a reasonable level in order manage customer expectations on

flight prices.

Analysis:

The segmentation that Lucky Air has is crucial in its business, and that is based

on them are created the different strategies that will be implemented,

destinations in English, promotions, etc. other segments of the side, since the

market of the routes is very well segmented in that sense.


2.7.2 Targeting

Lucky air is low cost airline which market themselves mainly to leisure

passengers and price sensitive passengers. Low cost airline are target

business travelers as well. This is to grow their market to a more large

perspective. A good and effective marketing strategy of low cost airline plays

an important role to position their product to the public and to gain competitive

advantage as well. Low cost airline will have a short haul which fly from point

to point with high frequency. Moreover, low cost airline would likely to become

the number one or two on most routes operated.

Analysis:

According to data collected by the Institute of Tourist Studies (IET) of Spain,

more than 80% of airline tickets sold since 2012 to date correspond to low cost

flights, which places these sales seven points above the companies standard

air.

Of this 80%, most tickets were sold by the leading low cost airlines in Europe:

easyJet and Ryanair. Thus, this revolutionary business has been echoed

around the world and more and more low-cost airlines are emerging.

That is why this market is extremely attractive: it is growing.

2.7.3 Positioning
So, for all this, the positioning of the brand: to be a professional and reliable

airline with world class standards, with low-cost and high-efficiency airline price

within everyone's reached.

Just with a single type of aircraft it reduced maintenance and operational

complexity. It offered only one seat class and simple one-way pricing. There

were no seat assignments or in-flight entertainment. Most of its routes were

short haul and point-to-point to increase on-time departure and arrival. It

operated mostly in secondary cities to avoid congestion and reduce landing

costs. So that's why Lucky air gain this positioning for their clients and its known

in this way.

Analysis:

The company must be careful and not have to do with the objective and

especially in the confidence and passengers.

2.8 Branding

Lucky Air had positioned itself as a low-cost, high-efficiency airline and adopted most

of the key components of the Southwest Airlines model. By using a single type of

aircraft it reduced maintenance and operational complexity. It offered only one seat

class – coach – and simple one-way pricing. There were no seat assignments or in-

flight entertainment. Most of its routes were short haul and point-to-point to increase

on-time departure and arrival. It operated mostly in secondary cities to avoid

congestion and reduce landing costs.


2.9 Marketing Mix

2.9.1 Product

Lucky Air is an airline based in Yunnan, which provides flight service in China.

The company has models: Airbus A319-100, Airbus A320-200, Boeing 737-

700, and Boeing 737-800


Analysis: Initially, there was only one model in order to reduce maintenance

costs.

2.9.2 Price

Customers could buy and refund tickets online, paying 5% to 20% less than

anywhere else. They could also validate their tickets online, a service formerly

available only through TravelSky, and obtain flight information, news updates

online, and detailed descriptions of travel destinations inside and outside

Yunnan.

Analysis: Yunnan offers ease of use and information to keep passengers

satisfied with a specialized service.

2.9.3 Place/Distribution

Lucky Air started with its headquarters in Yunnan where they offered domestic

flights from Dali to Kunming and Xishuangbanna, later Lucky Air has expanded

its network quickly. For now, it covers 51 national cities, 8 foreign cities and 2

regional cities.

- Vietnam

- Malaysia

- Indonesia

- Philippines

- Rusia

- Taiwan

- Brunei

- Tailandia
Analysis: They wanted to expand their travel distances in order to increase

demand and capture more passenger segments.

2.9.4. Promotion

Lucky Air encourages online shopping by constantly offering discounts from 5%

to 20% cheaper than anywhere else, the site provided a home for a LuckyAir

community, allowing customers to create blogs and share experiences,

although information on why they chose or enjoyed Lucky Air was lacking.

Lucky Air offered bonus points for returning customers, which they could

exchange for gifts.

Analysis: We believe that this can benefit in a way that Yunnan customers can

interact with the company and with the same frequent customers about the

good service it offers.

2.10 Human Resources

Analyzing the issue of human capital present in Lucky air, it is observed that the

company has taken an orientation to systematize the operations, in such a way that

customer service workers, sales and other areas that have direct contact with the client

practically disappear. All this is due to the decision to encourage the use of your

website as the largest and only point of contact with the company before taking the

service, in order to reduce costs, be more effective, and provide a better experience

for the consumer.

In this way we can affirm that Lucky air has changed its own human capital for an
"external" human capital or as it is required in the reading "Customer Self-Service";

giving the user an important role in the process by making the consumer self-care.

Analysis:

Based on the analysis of human capital, Lucky Air opted for a systematization of

operations so that employees would not have problems when contacting the direct

client. With the purpose of being able to increase their sales through their web page

and to reduce their costs and improve the shopping experiences by consumers. In

which, what the company was looking for was to be able to make the customer feel

part of the process.

2.10.1 Market Research

With regard to the development and research that Lucky air is carrying out, we can

appreciate that like all companies, it must innovate, in this way it is looking to develop

new features in its services, new services, and better attributes that can increase its

competitive advantage , since, with time, the incorporation of new Low-cost airlines

threatens the good situation experienced by Lucky.

Likewise, the development is not only in the level or characteristics of the service, they

also carried out CRM initiatives, in order to develop better experiences for their clients,

specifically when purchasing the tickets, using their own virtual platforms, with online

payments; thus representing a mutual benefit, greater satisfaction in the process of

decision making and purchase by the client and lower costs for the company. Fulfilling

this a win to win.


Analysis:

Based on the research, it is analyzed that Lucky Air seeks to develop new services

that can satisfy consumers and at the same time obtain benefits for the company and

thus be prepared for any strategy on the part of its competitors. Likewise, they not only

focused on looking for developments for their services, but also took into account the

development of interacting directly with customers, for which they analyzed the CRM

and thus be able to obtain their own virtual platforms in order to obtain benefits.

2.11. Stakeholders

E-commerce is still not the norm of the business sector as there is a constant threat

of fraud and errors in online buying, along with the high process being charged by the

banks for using their services for payments. The executive team needs to take this

factor into consideration and formulate a plan that would help keep Lucky Air exploit

the resources as the e-commerce becomes more common in the country.

Analysis:

Based on the analysis, it is considered that even the e-commerce is not a completely

stable to strengthen trade platform, since there are still many threats to develop

effective fomra, while taking into account the high payments processes of banks . By

which, is that these factors is that the development of trade is not constant.

2.12 Sales

In 2006, it carried roughly 500,000 passengers for 5,746 total flight hours with a

load factor of 74.7%. On the other hand, in 2007, it carried roughly 1.2 million

passengers for 17,875 total flight hours with a load factor of 81.4%. Over the same
period Lucky Air more than tripled its operating revenue, from US$31.2 million

to US$104.3 million, and achieved profitability just three years after it was founded.

On the other hand, Some airlines opted to expand beyond offering flights alone.

Spring Airlines, launched in 2005 and based in Shanghai, flew to 23 destinations

within China and had achieved US$72 million in revenue and US$4.3 million in

net profit by the end of 2006.

Also,Lucky Air sold about 80% of its tickets through agents, paying them a 2%

commission, and the rest through its own website. Among tickets sold on its website,

95% were bought by reseller agents who turned around and resold the tickets to

individual consumers. Only 1% of the total tickets were purchased directly by

consumers on luckyair.net.

Analysis:

Based on the analysis of sales, the growth potential attracted many new entrants and

competition intensified. Government regulations restricted airlines' ability to reduce

ticket prices, however, the abundance of low-cost carriers pushed each one to lower

ticket prices as much as possible.

Likewise, Lucky Air managed to sell 80% of its tickets through its agents, when in

general it was not a positive thing for the company, since they were looking for growth

in market penetration on the internet but only obtained 1% of the total of your tickets.

2.13 Innovative Technology

Technological advances allowed customers to obtain standard air services through

telephone, kiosk, Email, or Internet without human help. So it means that customers

did not need any middleman to get to Lucky air, they did it directly by these means.

People perceived it as simple and efficient since it was not necessary to wait so long
and have a response from third parties without buying them themselves in a Lucky air

e-commerce agent, producing greater customer satisfaction. If the airline's e-

commerce really took off in China, Lucky Air could take advantage of it by establishing

itself as the leader in online travel. In the beginning there was a low internet penetration

and inadequate payment methods which hindered the development of the online travel

business, but the situation changed as the Internet penetrated deeper and deeper into

China. E-commerce generates loyalty, increases communication and reduces costs,

all thanks to the investment in the bet of e-commerce generating great rewards.

Analysis:

The analysis of the factor focuses on the development that Lucky Air had over time, in

which it explains that each time customers made their purchases without the need of

someone else, which was beneficial for the company because of the experience it

offered to its customers. Consumers helped the clients to have a positive vision when

living the experience as something quick and easy to perform. But as is known, to

reach this benefit, the company at the beginning had to go through a process of low

internet penetration.

2.14 Finance

Lucky Air’s four largest cost components – fuel, landing fees, aircraft leasing, and

taxes – comprised about 70% of its operating cost, in the case of FUEL, a small airline

like Lucky Air had to pay for its fuel in advance until it proved itself as an established

airline, adding to the firm’s financial burdens. Fuel price also differed from region to

region and Yunnan happened to have a higher price than the national average.

Furthermore, carriers in China were not allowed to hedge oil price risk through financial

instruments. Route optimization, another way to reduce the fuel expense, was also

prohibited in China due to safety concerns.


Analysis:

As you can see, the cost of fuel is a big variable that weighs on the company because

it generates a lot of money and investment, what it could do is ally with outside financial

companies that give it facilities or opt for other options. They could also offer other

services on the trip such as selling jewelry online catalog in which they earn

commission for sales made, which could increase their profits.

2.15 Production

Lucky Air’s four largest cost components – fuel, landing fees, aircraft leasing, and

taxes – comprised about 70% of its operating cost, in the case of FUEL, a small airline

like Lucky Air had to pay for its fuel in advance until it proved itself as an established

airline, adding to the firm’s financial burdens. Fuel price also differed from region to

region and Yunnan happened to have a higher price than the national average.

Furthermore, carriers in China were not allowed to hedge oil price risk through financial

instruments. Route optimization, another way to reduce the fuel expense, was also

prohibited in China due to safety concerns.

Analysis: Lucky Air’s four largest cost components – fuel, landing fees, aircraft leasing,

and taxes – comprised about 70% of its operating cost, in the case of FUEL, a small

airline like Lucky Air had to pay for its fuel in advance until it proved itself as an

established airline, adding to the firm’s financial burdens. Fuel price also differed from

region to region and Yunnan happened to have a higher price than the national

average. Furthermore, carriers in China were not allowed to hedge oil price risk
through financial instruments. Route optimization, another way to reduce the fuel

expense, was also prohibited in China due to safety concerns.

4. Identifying The Problem

The problem that we consider to be the most important in this report is that, although

the approach taken by Yunnan Lucky Air is correct and differentiating, as the same

case indicates, one cannot simply expect that the Low Cost strategy will be sufficient

to make its proposal to consumers.

4.1 SWOT Analysis

Strengths

● Strong position in the mind of consumers.

● Has a simple design and his pricing is accessible for everyone.

● High capacity of usage in their airplanes.

Weaknesses

● More participation in another countries

● Communication for customers only in some states.

Opportunities

● Enter to new markets, developing a new way to see this business

● Increase the market share by doing new promotions.

Threats

● Appearance of new competitors

● Technology adapt to new kind of business


Yunnan lucky air has already a position in customers, people know that they are a

good company to fly, they have a good service and their cost is accessible for

everyone, but, what company should know is that competitors are always appearing

in market so they need to improve their service and increase their promotions to

always have the attention of people.

5. Alternatives Solutions

1. Consumer loyalty

2. expand routes

3. offer new services

4. Segment according to the strategies

6. Analysis Of Alternatives Solutions

1. We seek to create a strategic alliance with a certain group of brands such as

"star alliance" to jointly offer a value proposition that is attractive to the segment

of customers who are users of loyalty programs, thus establishing a competitive

advantage. Providing them with better attention, preferential rates and seats,

exclusive promotions, etc.

2. After a feasibility study, Lucky could incorporate new routes, to have a greater

volume of passengers, in order to have a greater presence in the Chinese

market.

3. Add upgrade options to your services without losing your low-cost approach.

These new elective attributes for the client will have an additional fee but will

help improve the customer experience on the flights and the value proposition
of Lucky. In this way obtain a differentiating advantage with respect to other

low-cost airlines.

4. Become a travel wholesaler, segmenting your market in b2b and b2c. Through

which you can develop different pricing strategies, communication, service, etc;

depending on which segments you are targeting. Even within the b2b segments

it is possible to divide it by corporate companies, travel agencies, etc.

7. Recommendations

Invest more in marketing to publicize the new proposals and strategies of the flights,

another serious recommendation evaluates the offers that your competition offers, to

attract the customers of the competition so that you obtain for your company.

It is also recommended that for more than the company proposes strategy, you must

provide training to your staff so that everyone is focused on the same goal and know

the procedures to provide a good quality of care, should retain their employees

because the more identified they feel with the largest company will be the level of

satisfaction that end customers will have

8. Conclusion

Yunnan Lucky Air will increase its competitive advantage if you use these specific

strategies to make the airline more efficient. Making the airline more profitable will

attract those who travel by plane, in addition to obtaining more benefits for the

company. The use of the company's website and the direct purchase of your flights

will keep the rates low when making a direct transaction between the client and the

airlines, as well as creating a more solid use for electronic commerce. These factors
will make the company grow in general and will make Lucky Air have more total

income. The expansion of flight routes could increase problems in the short term, but

in the long term it will overcome these small problems because of the additional benefit

obtained. Addressing those traveling on business trips will increase the demand for

seats and give the airline a steady customer base. In that way, companies will want to

partner with the company to transport those traveling on business. In general, Lucky

Air will gain a competitive advantage over the competing airlines in China through the

use of electronic commerce and the expansion of its company worldwide.