Value Chain Framework and Competitive Advantage in Kenya Airways Ltd

Abstract

Given today‘s economic environment, greater operational cost efficiency is key to all organizations. This has driven a significant change in hiring demand and requirements for most businesses, causing companies to re-evaluate their recruitment process and cost structure. Companies must reduce costs in order to provide a product or a service. Reduction in labor costs is one way to reduce costs of production. A value chain is a set of activities that an organization carries out to create value for its customers. It is the whole series of activities that create and build value at every step. The total value delivered by the company is the sum total of the value built up all throughout the company. Value chain framework identifies a firm‘s primary and support activities that add value to its final product or service, and then analyse these activities to reduce costs. It is essentially improving business value chain to strengthen its competitive advantage. Understanding how your company creates value, and looking for ways to add more value, are critical elements in developing a competitive strategy (Michael Porter, 1980). Porter proposed a general-purpose value chain that companies can use to examine all of their activities (primary and support activities) and see how they're connected. The way in which value chain activities are performed determines costs and affects profits, so this tool can help one understand the sources of value for your organization. In deep debt and registering losses since 2013, our national carrier Kenya Airways Ltd currently uses Hines Model, whose approach is on customer-focused value chain. The airline‘s key focus now and its main strategy should be to gain competitive advantage in the airline industry. It needs to gear itself back to profitability and this can only be achieved by applying Porter‘s Value Chain whose approach is driven by profitability. It separates useful value-creating activities that allow the firm as a whole to gain competitive advantage, from the wasteful activities that hinder the company from getting a lead in the market. The data was collected using an interview guide, and the targeted respondents were sectional heads in operations, marketing, commercial, customer relations and human resources departments. The data collected was analysed using content analysis. Conclusion drawn from the study of the application of Porter‘s value chain model by Kenya Airways may point at the key areas that require urgent management attention because the process of adopting the Porter‘s value chain (‗push‘ strategy) is still on-going. This study has revealed the extent to which Kenya Airways has adopted the Porter‘s value chain model (‗push‘ strategy) in execution of its core competencies. As the study focused on the various parameters of the value chain model; business process, structure and direction, primary activities, and secondary activities; from the responses the practices in relation to these parameters supporting the ‗push‘ strategy have been effected but the analysis of the specific practices under each parameter revealed a number of possible value chain aspects that may be improved. The study will assist Kenya Airways management match their organization strategy to ensure direct impact on profitability initiatives. This will be realized from the cost reduction programs realized by outsourcing the non-core functions in the organization. An improvement in service delivery and customer satisfaction will be realized when the customer facing functions are empowered with the right skill and rewards, thus lead to increased revenue. With expected increase in revenue, versus reduction in cost, we will expect turnaround to profitability. In conclusion, adopting Porter‘s value chain model in Kenya Airways will go a long in improving the operational productivity, reduce cost, enhanced customer experience, and take the company to a turnaround drive to profitability. The creation of value chain by adopting this model it will ensure creation of a unique service model to enable Kenya Airways gain competitive advantage, leading to an increase in sales, hence making it possible to return to profitability.