(9 pages of text)
The case focuses on the profitability of the Indian aviation industry and explains how Indigo Airlines, a new entrant in the Indian aviation space, registered profits within three years of its inception while its competitors continued to struggle with losses. The case demonstrates how a firm incorporating innovative business practices can not only survive but also earn abnormal profits. The strategies adopted by Indigo Airlines to reduce its operational cost and enhance its revenue are discussed in the case. The case also explores whether the profits earned by Indigo are sustainable in the long run and focuses on the changes in the competitive positioning of Indigo Airlines as it switches from the position of a low cost player to a hybrid player in the aviation industry.
The case is designed for an advanced MBA elective course on competitive strategy, but can also be used as a challenging case in a general business strategy course. The case first examines the capabilities developed by Indigo Airlines from the context of sustainable competitive advantage, with a specific emphasis on Barney’s theory of VRIS (valuable, rare, inimitable and non-substitutable). This theory can be used to investigate whether Indigo has some capabilities to provide it with a sustainable competitive advantage and abnormal profits over a long period of time.
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