Low cost and innovative businesses

It is always possible to look at your existing business practices and simplify and/or innovate these. Unfortunately most people do not do it unless there is a competitive pressure or some regulatory demand. Innovation and simplification require both lateral thinking and courage.

Intercity bus service in our country was terrible before Korean company Daewoo started its service and set the standards of quality service and punctuality. It still seems the only buss service which has a regularly updated website. I tried but could not find the website of the biggest local intercity bus service, New Khan.

PIA started offering e-tickets only after Air Blue launched its service in Pakistan with e-tickets.

The picture below (click to enlarge) shows how low cost airlines (In Europe and US) are able to lower their fares compared to expensive airlines. Some of the strategies (from the picture) include:

  1. Higher seat density with single class cabin.
  2. Fast turnarounds (up to 25 minutes) – higher utilization of the plan.
  3. Direct flights – point to point; no transfers, short routes.
  4. Smaller airports – cheaper and simple ground facilities.
  5. Tickets sold directly mostly by internet (easyjeb – 95%)
  6. No frills – no additional costs
  7. Standardized fleet (only one aircraft type) – cheaper maintenance, training
  8. High variable proportion of salary (up to 26%) – better HR utilization. Ryanair is serving 9679 passengers per employee
  9. compared to 715 passengers by employee by Air France.

If you are having trouble making your business profitable in these difficult times, reconsider your strategies.

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