High standards for low cost

New Delhi: India is gaining a global reputation as a talented producer of a range of low-cost goods from automobiles to machine tools. This is not just a case of leveraging a cost arbitrage on labour but also a product of value engineering and research which is, in turn, the result of an inherently resource-saving mindset.
The question is why this same outlook and expertise cannot be extended to the services sector — that is, services outside of information technology where the business is still largely driven by value arbitrage. The emergence of India’s low-cost or budget airlines suggests that it is eminently possible to do so.
Much is being made of the fact that the budget carriers are making the profits this year in contrast to their more lavish full-service counterparts because of the downturn. Collectively, they now have a 55 per cent market share, up from 45 per cent last year.
It could be argued that these gains were only to be expected in the downturn when cost-cutting is the mantra in vogue. But the bigger point to note is their overall service standards.
Ever since Jet Airways raised the bar on airline service standards when it started in 1993, air travellers in India have overcome the trauma of state-run Indian Airlines’ appalling service standards during its monopoly heyday. Most passengers now take efficient and friendly service for granted on full-service carriers. The fact that they also exist on budget carriers, however, is worth noting.
17/09/09 Kanika Datta/Business Standard

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Categories: Low Cost General Sep 2009