TITLE OF ASSIGNMENT CRAFTING AND EXECUTING STRATEGY STUENT MOHAMMAD HOSSAIN INSTRUCTOR DR. RHONDA POLAK COURSE TITLE STRATEGIC MANAGEMENT –BUS 599 DATE: - OCTOBER 16, 2011 Discuss the trends in the U.S. airline industry and how these trends might impact a company’s strategy. Trends in the US airline industry have an impact the performance and strategies of the airlines. As a result, the Jet Blue has struggled to survive. The trends of U.S. airlines industries are discussed as follows: (1) Increased crude oil pricing: fluctuations crude oil price lead to passenger fees for revenue generation, This dramatic price increase caused airlines to struggle to offset the cost of fuel. Presently, gas prices have dropped.
Based on the book when there are competitive markets such as airlines, a company certainly needs to look at costs and revenue very closely. (Brickley, Smith, & Zimmerman, 2009, p. 180) In this case I believe that the flights from San Francisco t Washington DC should be discontinued. Even though United Airlines is a large company and profitable if they continue these flights in the long run they will lose money. The other option that they would have would be to increase the fares to cover those costs, but since the airline industry is a competitive market people are more likely to go with a lower cost airline. The first thing the airline must do is look at the firm supply.
Going public when the airline industry are still suffering from 9.11 attack is adventurous, especially it is even harder when the competition of the airline industry is severe, given the fact that 87 new-airline failure over the past 20 years. However, JetBlue has good management team with strong capability, and it has considerable competitive advantage compared to comparable companies, hence there are more opportunities and strengths than threats and weaknesses. JetBlue’s executive management team have rich experience in the airline industry. CEO David Neeleman has extensive experience with airline start-ups and worked in various low-fare flights. COO David Barger and CFO John Owen had worked in airline companies before joining JetBlue.
What are the forces driving competition in the airline industry? Using this approach to industry analysis discussed in this chapter, evaluate each of the six forces in the task environment to ascertain what drives the level of competitive intensity in this industry. Threat of New Entrants – Low Larger, and more established airlines can achieve economies of scale since they can spread costs among a larger fleet of airplanes and more routes. Smaller firms and new entrants will have to make do with specific routes; otherwise, they can run into logistical problems if they take on a wide variety of routes while they are still starting up. Most airline customers travel for vacation or holiday, and plane fares are a more important criterion rather than product/service differentiation between the airlines.
Exploitable- JetBlue could design the interior of the aircraft to improve passenger comfort and use E190 as an useful tool to expand market and attract new customers. Implication: The E190 provided a unique opportunity for the growth of JetBlue. However, this plane did not completely match the company’s current capabilities and costed a lot. Thus the CEO of Jetblue must change their strategic strategy to either keep E190 as a VRINE resource or sell it. Capability 1: High level of service (Bill of Rights) Valuable-
In 2008, fliers can expect to see fewer flights and fewer seats as airlines cut costs and reduce growth to counteract rising fuel prices. In essence, peak flying season is becoming a year-round affair. Bailey observes that, “Because full flights cause airlines all sorts of operational problems, travelers should also brace for continuing problems with delays and misplaced bags. That means the chance of being bumped from an oversold flight could be greater, and finding a seat on a later flight will take longer.” Paul S. Hudson, executive director of the Aviation Consumer Action Project said, “It’s not a good thing,” about airlines reducing capacity. “You’re going to degrade the reliability of the system.” Experts say it is
Question One: The airline industry can be broken down into three primary segments: major airlines, regional airlines, and low-fare airlines. JetBlue Airline is a domestic airline in the United States using a combination of low cost and differentiation as its strategy. In order to know the key forces in the general and industry environment that affects its choice of strategy. Based on Porter’s Five Forces Model, the key forces directly influences are: The threat of new entrance is low. In JetBlue case, the current economy situation creates high market entry barriers, which consists extremely high fixed cost and numerous capital requirement.
As stated in the report itself JetBlue, "provides high-quality customer service at low fares, primarily on point-to-point routes" (JetBlue, 2005). Further evidence of the company’s success is their efforts to offer low-cost alternatives to customers by serving "underserved and large metropolitan areas that have had high average fares" (JetBlue, 2005). Due to reasonable and fair customer service measures like this, JetBlue has aircrafts with the highest number of seats occupied in any given period. What business risks does JetBlue face that may threaten the company’s ability to satisfy stockholder expectations? What are some examples of control activities that the company could use to reduce these risks?
Brief description of airline industry context: Initially, the main players was Europe’s national governments, as a result of merging small private-owned airlines into national “flag carriers” (service focused on international routes from each nation’s capital to colonies). The aviation advances in the WWII aftermath made air travel much more affordable. A new player, United States, soon became a dominant force in the industry as they have free competition on international routes contrasting with public, “flag carriers” in Europe. To prevent this predicted dominance, IATA emerged and “pooling agreements” become a common resource to create entry barriers. Later on and as a result of the collapse of European Empires, most profitable target routes were mainly to North America and private charters airlines took advantage of their discounted charges to put Europe’ system of regulation in pressure.
Introduction In just over a century since the first airplane flight in 1903, aviation has become one of the fastest growing businesses in the world. As such, it has become extremely complex environment which requires precisely defined rules and regulations in order to keep the business organized and maintain required safety performance, desired efficiency and development rate. Therefore, legislators have had a challenging task to impose precise laws and bylaws under which will aviation transport system operate. Change from regulated to deregulated airline market in last decades of 20th century has forced the air carriers to compete for passengers and market share and also required them to change business strategies, to merge and make alliances.