Yunnan Lucky Air

Yunnan Lucky Air Case Study

University of the People

Bus 5117: Strategic Decision Making and Management

Week 5 Written Assignment, Term 2, 2020

Instructor; Karl Thompson

December 13th, 2020

 Yunnan Lucky Air

Case Description

This case is about the Yunnan Lucky Air in Chinese airlines, which headquarter is in
Kunming city, it operate in domestic passenger flight which is a subsidiary of another airline
HNA Group. Lucky Airline as a domestic airline has made effort to go International market
because it felt, it has made good contribution that has developed Yunnan and its neighbors
(Berenguer et al. ,2008) The airline has been able to achieve 45 airplanes and several routes,
it missions are; High efficiency, low prices, no frills, prompt response to customers request
delivery directly to destination without transit airports ((Berenguer et al. ,2008)

Challenges of the Yunnan Lucky Air as they relate to costs

The airline industry in china is regulated because that they cannot reduce price arbitrarily, the
aviation sector in china began to grow the middle class, and the authorities expected the
passenger to grow that was why Lucky air strategize plans to increase their customers
through tour packages. Because their business environment is regulated and they have
already bought its fuel up front and paid the bill “until it proves itself as an established
airline, adding to the firm’s financial burdens” (Berenguer et al, 2008) and it is vulnerable to
fuel hikes.

Not all cities in china have two airports because of landing fees, even in the leasing of the
Airplane the expansion is regulated it must go through central management, small airlines
like luck Air usually don’t quickly obtain new aircraft sometimes it takes as long as five years
to get one. Also, the price of the ticket controlled and regulated by the travel agents. The
travel agents collect their commission every ticket sale or call centers that books travel.

The Airline burden was increased with additional taxes, Lucky Air was to pay from 2% t0
10% with so many restrictions lucky air was “also subject to strict pricing regulations as well
as fee imposed by travel agents and china’s ticket distribution system”(Berenguer et al, .
2008)

There was a time that ticket prices fell, and the bigger the aircraft the more fuel it consumes,
it becomes more expensive to run the newer technology. That is why companies that are
increasing despite the challenges will have a strategy to drive cost and maintain low-cost
(Saxon, 2017)

In China, when passengers bought tickets directly from an agent, the airline will pay a Global
Distribution System fee (GDS) to TravelSky that is the Government-owned agent. Many big
airlines began to invest in call centers in large amount to handle ticket booking, other agents
like Lucky air had to pay 5-20% because they now book online and refund online on their
website, they went as far as give points to customers that use their airline for returning
customers that be redeemed as gifts.
 Yunnan Lucky Air

Analyze the costs and, using specifics, develop a cost-centered business strategy for Lucky
Air to move forward as a profitable firm.

In other for Lucky Air to move forward it will deal with other low-cost companies that will
be a threat to the firm, these competitors of Lucky air can imitate Lucky air’s strategy if it is
not rare. The firm needs to consider rare strategic plans to sustain itself in the industry
according to porter which are; Cost leadership, Differentiation, Focused cost leadership,
focused differentiation.

Cost Leadership

This plan enables the firms to give the lowest cost in the industry while still maintain their
standard to the average customer, Lucky air will make headway if they applied this method
because the largest customers are the average customers.

Differentiation

This is the strategy that Lucky air can work with that will make them stand out among other
smaller airlines. They need to make a difference in the industry by being unique in their
services. Their uniqueness can be through their services or through their gift points to
customers.

Devise a tactic to differentiate the firm and to support the cost-focused strategy you
developed for lucky air

Chinese customers like every other customer are looking for cheap flights that will give them
a quality journey. To change the present strategy of Lucky air could cause some uncertainties
and confusion. Despite their challenges, the present strategy of low-cost is a good plan
because it has grown its revenues any potential can be disastrous for the firm.

The second plan is the Differentiation strategy plan that can make the firm unique in its
operations:

 Lucky Air should make a rare strategy by adding chat assistance to their customer on
their site that will enable customers that needs help to get the help faster.

 Let their IT create a unique app that captures all the features that are on the website
with small video clips on how to check-in and officers at the call centers to educate the
elderly.

 Offer some reward points that will be only for first-time travelers.

 Open some call centers for the elderly and those not too comfortable with the internet
 Yunnan Lucky Air

 To open CRM for customers to air their opinion about the Airline and why, also to give
suggestions for improvement, and to give testimonies.

 Luck air can also give free first check-in luggage as free, other luggage can be
charged.

How can the tactic be implemented within the scope of the overall strategy?

Strategy as it is defined “is a specific approach that one will take to achieve a set of goals that
have been to execute” (Wright, 2019) While tactics describes the specific actions that will be
taken to achieve the set goals (Wright, 2019). Strategy and tactics complement each other ,for
an organization to be successful it must implement these two methods, the tactics will define
how to get the set goals.

The tactics to implement the overall strategy is to make the customers feel at home, feel
welcome by Luck Air ,and to promise the customers with more comfortable, stress less
services, and other benefits.

The airline can start with the Logo and the colours of the airline. In Asian colours red id their
favourite because it symbolizes good luck, happiness, love and, nobility. This is done so to
get to the target audience mental attitude.

The sun is also very symbolic in Asian countries; it depicts the “face of reality” that brightens
and it is very vital to religious beliefs. This is another tactics to achieve the set strategic plans.

So, for an Airline it customers are mostly Buddhist the shape and colour of the logo is a good
tactics.

Conclusion

Luck Air will have to reduce their spending on customer care to gain their profits; if they
increase their lease on their aircrafts it can increase its capacity. Since the Chinese
government is building more airports, Lucky Air look for more business oriented routes
where there are business men and women, these business tycoons might travel very lights
unlike the regular family travellers, and they can pay fo their internet, and inflight meals.
 Yunnan Lucky Air

References;

Berenguer, I., Shijun, C., Liang, L., Jing, L., Wang,N.(2008). E-commerce at Yunnan Lucky
Air. Retrieved 13/12/2020 from https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-
076%20Ecommerce%20at%20Yunnan%20Lucky%20Air%20-%20Lehrich.pdf

Saxon,S.(July,2017). A better approach to Airlines cost. Retrieved

from https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/a-
better-approach-to-airline-costs

Wright, T. (October,2019) Strategy vs Tactics. Retrieved 12/12/2020 from

https://www.executestrategy.net/blog/strategy-vs-tactics/