1.

Conflict in Generic Strategy & effects on Kingfisher’s

Acquisition of Air Deccan

 Kingfisher Airlines pursued a strategy of inorganic growth to increase its market share.
 Witnessing the growth of the low cost carrier market in the Indian Aviation Industry, they
were lured into acquiring the low cost carrier Air Deccan, which was looking for a buyer
at this stage.
 The pressing issue, however, was the fact that Kingfisher itself was an airline whose
strategy was built around its mission and vision of providing experiential and luxurious
service to its customers, whom they treated as guests.
 Kingfisher was considered India’s only 5-star airline carrier and had carved out a niche
for itself in this segment with significant loyal customers whom they considered as fans.
 With this strategic move, which resulted in deviation from its mission and vision,
Kingfisher faced a lot of operational difficulties.
 Managerial difficulties increased with the task of post-merger integration
 Kingfisher’s crew and Air Deccan’s crew were significantly different in terms of skill
sets and abilities, with Air Deccan offering no frills flights and Kingfisher offering flights
laden with facilities aplenty.
 Operating both these segments proved difficult and Kingfisher had to operate two
different set of aircrafts in order to accommodate the newly acquired carrier. The
personnel required were also twice in number before the deal.
 Post merger, there were marketing issues aplenty , with Kingfisher Airlines having to
enter into a price war post the acquisition. However, marketing strategies of Air Deccan
were trashed to reduce operational costs, leading to a conflict.
 Kingfisher’s loyal customer base were disapproving of this strategic move and felt that
the airline had been compromised with. They started opting for Jet Airways for their air
travel, which though cash strapped had a sustainable business model at the time and was
true to its value of providing experience of luxury travel to its customers.
2. Consequences of Producing at Lower than Opportunity Cost of
Capital

 Kingfisher Airlines in a bid to increase its market share, and to venture its operation into
foreign shares, made a strategic decision to acquire Air Deccan way back in 2007.
 This acquisition was laden with difficulties aplenty, with immense confusion being
created amongst the several stakeholders, and the society at large.
 Employees of both airlines faced distress and confusion, with different skill sets required
to serve the customers of both airlines. Facilities provided prior to the merger was also
different, with Air Deccan’s crew being provide accommodation in low cost hotels while
Kingfisher crew being provided the same in big hotels.
 Post-acquisition, Kingfisher automatically entered into a price war with other LCCs.
However, existing marketing activities of Air Deccan were trashed to reduce operational
costs, thus causing direct conflicts.
 Post the merger, managerial headaches increased, with duplicity of several tasks. The
company now had to manage 2 different aircrafts, which needed different skills and
added to the financial burden.
 Additionally, loyal business fliers of Kingfisher felt that the airline had been
compromised with and started going to Jet Airways.
 At this point, Kingfisher increased the prices of Kingfisher Red, the rechristened form of
Air Deccan, and realized that it had become a lost opportunity. Even the management
was confused whether to call it a normal carrier or low cost one.
 All these suggest that the primary reason for the acquisition failure was a deviation from
generic strategy in their actions, which led to confusion amongst all stakeholders
involved, thereby eventually leading to the company’s decline