...EWMBA 299 – Competitive Strategy Southwest Airlines Introduction The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being acquired or going out of business. Analysis of the airline industry To determine the profitability of the airline industry, we will do an industry analysis using Porter’s five-forces framework. This industry analysis will help us in understanding the size of the Potential Industry Earnings (PIE), and how much of this the different participants can extract. Rivalry among competitors There is intense rivalry among different airlines. In the pre-deregulation days, airlines competed mostly on things like service, meals and in-flight movies etc., since prices were mandated by the Civil Aeronautics Board. In the post-de-regulation era, this rivalry has taken on the form of severe price competition, with airlines ruthlessly undercutting each other...
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...EWMBA 299 – Competitive Strategy Southwest Airlines Introduction The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being acquired or going out of business. Analysis of the airline industry To determine the profitability of the airline industry, we will do an industry analysis using Porter’s five-forces framework. This industry analysis will help us in understanding the size of the Potential Industry Earnings (PIE), and how much of this the different participants can extract. Rivalry among competitors There is intense rivalry among different airlines. In the pre-deregulation days, airlines competed mostly on things like service, meals and in-flight movies etc., since prices were mandated by the Civil Aeronautics Board. In the post-de-regulation era, this rivalry has taken on the form of severe price competition, with airlines ruthlessly undercutting each other...
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...highly competitive industry of manufacturing commercial aircraft. Over the years they have each controlled the market at differing times due to competitive advantages – an ability to create value through a company’s strategies and operations that its competitors cannot (ref – Strategic Management textbook , pg 22) Boeing, formed in 1916 by William Boeing and George Westervelt, dominated the industry until the 1970’s, when Airbus was organized through a collaboration between Britain, France and West Germany. Airbus began manufacturing the A-300 series which enabled them to capture 10% of the market share by 1975 (ref article), no small feat considering they were competing against the giant Boeing. Airbus’s ability to compete with Boeing and gain market share will be analyzed using the following business models: PESTEL Analysis, SWOT Analysis, Porter’s Five Forces, VRINE Analysis and Porter’s Model of Competitive Advantage. PESTEL ANALYSIS Political – Airbus was a product of a merger between three European countries; Britain, France and West Germany. In the 1970’s the political climates of all three were relatively stable. The three countries worked together in order to compete with the US. They did have to adhere to international trading policies and agreements (NAFTA, GATT). Economic – As they were competing largely in the US market, Airbus needed to constantly keep an eye on interest rates; their aircraft were manufactured in Europe but sold primarily to US airline companies...
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...above. Students: Please note there is no need to place the basic strategy models in the appendices e.g. Porter’s (1985) Five Forces, SWOT analysis, etc.. It would be more beneficial to apply the models directly to the organisation and place them in the appendices and discuss the main identified issues in the main text. 2 Corporate Strategy: Emirates Airline By Student How has Emirate airline managed to remain competitive in such a saturated industry? Emirates Airline “An exceptional journey from start to finish” (Emirates, 2010). 3 Introduction: ............................................................................................................................... 4 Background to Emirates Airline: ............................................................................................... 4 Competitive Advantage: ............................................................................................................ 5 Porter’s five forces: .................................................................................................................... 5 Competitive Rivalry: .............................................................................................................. 6 Threat of new entrants:...
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... Introduction This document presents an analysis of one case presented in the textbook (Thompson, A.A., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin.), entitled “JetBlue: A Cadre of New Managers Takes Control”. The case describes the reasons for the success of JetBlue, a three-year-old, low-cost airline, operating in the USA. Trends in the U.S. Airline Industry and their Impact on Company’s Strategy Since 2001, the US airline industry has faced an unprecedented set of challenges. Following the terrorist attacks of September 11, 2001, the airline industry reported tremendous losses and several of the largest US airlines went into bankruptcy. To recover from this situation and try to remain financially viable, many measures have been taken by airlines. As a result, the airline industry has been a very dynamic industry over the last few years. U.S. legacy carriers said international air travel boosted sales in March but that they are losing ground at home to low-cost airlines, a trend that is pushing them into the role of what the industry calls trunk carriers....
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...I. Company background Southwest Airlines is one of the US based major air carrier based out of Dallas Texas where it commenced operations on June 18, 1971. It was founded by Rollin King and Herb Kelleher got together and decided to start a "different kind of airline”. " They began with one simple notion: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline" (1). Southwest started with three Boeing 737 aircrafts with focus of serving mainly three cities in the state of Texas; Houston, San Antonio and Dallas. By summer of 1993 Southwest already became the 7th largest airline in the US. Today Southwest operated more than 3,400 flights a day serving 93 destinations across the US and five other countries in the Americas with over 665 aircrafts in its fleets. Southwest strategy is clear and simple, it’s a three headed monster strategy that focuses on, short-haul, high -frequency and low-cost. The NYSE symbol for the company is LUV, which indicated the home of the company at the Dallas Love Field airport and the theme of the cordial relationship created and maintained between Southwest employees and its customer. On Jan 22nd 2014, CEO and chairman of the board announced a record annual income of $1.1 billion or $1.64 per diluted share which is 20 cent higher than the industry average return per share during the same period. This...
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...Critically examine the impact of political, economic & legal factors affecting the airline industry. The airline industry has had its fair share of ups and downs the following are the factors that are affecting the airline industry Economic factors A huge amount is spend in landing fees, time spend in foreign lands and all these fees are paid in US Dollars and it might expensive to some airlines especially if the exchange rate is weak. Fuel prices are also in US Dollars so the stronger the currency of origin against the US Dollar the cheaper it becomes to reduce overall operational costs for the airlines however the sad story is that only a fewer currencies are stronger than the US Dollar. Fuel prices have consistently increased and is likely to continue into the future while price wars between airline companies have become ever more intensive due to increased competitive levels in the industry. Fuel costs as play a significant role in the day to day running of an airline as fuel costs constitutes 30% of total operational cost. This is due to existing rivalries as well as new entrants within the discount airline market segment. In contrast to its rivals SIA has preferred policies of adding extra value through customer service rather than ones of pure discounts on prices. Similarly investment in technology such as the development of an e-ticket system enhanced its strength in terms of cost effective sales and billing systems. These developments have been supported by skilled...
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...I. Company background Southwest Airlines is one of the US based major air carrier based out of Dallas Texas where it commenced operations on June 18, 1971. It was founded by Rollin King and Herb Kelleher got together and decided to start a "different kind of airline”. " They began with one simple notion: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline" (1). Southwest started with three Boeing 737 aircrafts with focus of serving mainly three cities in the state of Texas; Houston, San Antonio and Dallas. By summer of 1993 Southwest already became the 7th largest airline in the US. Today Southwest operated more than 3,400 flights a day serving 93 destinations across the US and five other countries in the Americas with over 665 aircrafts in its fleets. Southwest strategy is clear and simple, it’s a three headed monster strategy that focuses on, short-haul, high -frequency and low-cost. The NYSE symbol for the company is LUV, which indicated the home of the company at the Dallas Love Field airport and the theme of the cordial relationship created and maintained between Southwest employees and its customer. On Jan 22nd 2014, CEO and chairman of the board announced a record annual income of $1.1 billion or $1.64 per diluted share which is 20 cent higher than the industry average return per share during the same period. This...
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...Introduction: Porter Airlines has managed to find success where many small carrier airlines have not. The company has survived predator competition from Air Canada to become a recognized brand in South Eastern Canada for the time-sensitive business traveller segment. The company has developed a loyal customer base and continues to capitalize on its strengths which include it location, ownership of the Billy Bishop Airport. Despite its success the company is currently focused on expanding its operational efforts both nationally and cross-border to the US and must consider a variety of options which can achieve this. Situational Analysis: External Environment: PESTEL: Political: Porter operates largely within Canada. Its home terminal is located in Toronto so it largely affected by the political environment in Canada, at large, but more specifically by the political environment in Ontario. The local and national political environment in Canada is relatively stable as there are no significant unrests in the country to impact the operations of the Porter Airlines. Economic: The economic environment in Canada has also been stable in recent years. Inflation rates are currently decreasing and lower than the GDP growth rate of 2.63% . The stabilization of oil prices will lead to savings for companies since fuel costs are a major expense for most airlines. Tax policies are favourable for Canadian corporations. However, the Canadian dollar has been experiencing recent instability...
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...21715 - Strategic Management (Summer Session 2012) Individual Written Case Analysis Case 32 – JetBlue Airlines: Getting “Blue” Again? Sam Lui (00039469) 21715 – Individual Case Analysis Table of Contents Executive Summary................................................................................................................................. 3 1. General and Industry Environment................................................................................................. 4 1.1 The General Environment ....................................................................................................... 4 1.2 The Industry Environment ...................................................................................................... 5 2. Internal Resources and Assets (JetBlue) ......................................................................................... 7 3. Competitive Advantage (JetBlue) ................................................................................................... 9 4. Recommendation for JetBlue ....................................................................................................... 11 5. Lessons and Insights for Tiger Airways ......................................................................................... 12 6. References ..................................................................................................................................
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...Question 1: Southwest competes with firms within the airline industry by aligning all company activities in order to achieve the lowest cost possible within the industry, and thus adopting a cost leadership strategy. According to Porter, a cost leadership strategy emerges when a company can design all its activities in such a way that all of them align under the premise of low cost operations. If these activities are properly aligned, then the firm can gain a competitive advantage over its rival firms (CITE strategy article). A firm’s activities can be divided into primary and support activities, each of which has specific organizational resources associated with it. As a whole, the sum of primary activities and support activities a firm does, and the relation they share between each other, is called a value chain (cite Barney book). Southwest has been mindful in the design of their value chain, so that all activities reinforce their low cost strategy. All of Southwest’s primary activities were designed in a way that reinforced its cost-leadership strategy. When they began to operate in the early 70’s, they counted with as few as 3 planes in their fleet and only focused on short 90-minute flights. It was imperative for the survival of the airline to have the planes be operational for as many hours as possible (11-12 hours a day). This meant that planes needed to have a short a turn-around time between destinations, in order to maximize aircraft utilization. The “10-minute turn...
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...Professor Edward Desmarais BUS 470 Business Policy and Strategy Spring 2004 SOUTHWEST AIRLINES CASE ANALYSIS Presented by: The Stategizers Lawrence Bluemmel, Irene Johnson, Dennis Mackey, Dorothea Morgan, Elaine Pereira, Jeff Piecuch, Heather Pontifex, Nicole Soucy TABLE OF CONTENTS I. Executive Summary 3 A. Mission 3 B. Vision 3 C. Objectives 3 D. SWOT Summary 6 E. Recommendations 7 II. Current Situation 8 A. Current Performance 8 B. Strategic Posture 9 III. Corporate Governance 25 A. Board of Directors 25 B. Top Management 25 IV. External Factors 27 V. Internal Factors 118 VI. Action Plan 178 Appendix A. Stakeholders Worksheet 206 Appendix B. Answers to Panel’s Questions 212 I. EXECUTIVE SUMMARY A. Mission To provide a low-cost/low-price/no-frills, reliable, friendly service with “more value for less money” mode of transportation for consumers traveling short distances for business and/or leisure. B. Vision ...
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...Bachelor of Science (Hons) in Aircraft Engineering Competitive position of Singapore Airlines Module No : EG3080 Module Title : Business Application in Engineering Submitted by : Chia Kok Kwang Alvin (K1068496) Table of Contents Page 1. Abstract 3 2. Introduction 4 3. Background 5 4. Singapore Airline’s Macro Environment (PESTEL Analysis) 6 5.1 Political Factors 6 5.2 Economic Factors 7 5.3 Socio-cultural Factors 7 5.4 Technological Factors 8 5.5 Environmental Factors 8 5.6 Legal Factors 9 5. Competitive forces and firm strategy (Porter’s 5 Forces Analysis) 10 6.7 Threat of new entrants 10 6.8 Threat of substitutes 10 6.9 Power of buyer 11 6.10 Power of supplier 11 6.11 Competitive rivalry 12 6. Strategic Capabilities (SWOT Analysis) 13 7. Strategic Choices (Porter’s Strategies) 14 8.12.1 Cost leadership 14 8.12.2 Focus 14 8.12.3 Differentiation 14 8.12 Strategic choice of Singapore Airlines 15 8. Challenges ahead of Singapore Airlines 16 9. Conclusion 17 10. References 18 & 19 1. Abstract Singapore Airlines leaves a deeply positive impression in many people’s heart as a leading airline that is dedicated to bring the highest level of products...
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...1. Briefly describe the trends in the global airline industry. a) Increasing travel demand Two of the top six U.S. airlines saw their best traffic results in 18 months this past November. While Southwest recorded a 12 percent increase, Continental registered a 2.8 percent increase, respectively, in miles flown per passenger. These figures represent absolute increases in ‘warm bodies’ flown – a more reliable metric than passenger load factor. Clearly, the slump in air travel is ending. IATA has now revised its passenger traffic estimates for 2010 upwards by 4.5 percent (as against the previous forecast of 3.2 percent in September 2009). An estimated 2.28 billion people are expected to fly in 2010, bringing the total passenger numbers back in line with the peak recorded in 2007. b) Airline-supplier consolidation As airlines improve services while implementing aggressive pricing strategies, many plan to forge new links with distributors, including travel management agencies that don’t rely on the traditional GDS connections. A trend that first started two years ago, airlines are expected to continue to implement direct-connect models to manage products and inventories, and establish closer ties with their customers. For example, last October, American Airlines indicated its plans to move all indirect volume to direct connections. This will change the nature of Airline-GDS relationships. One notable potential by-product of this trend could be GDS / TMC consolidation...
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...FEU MBA 209 Case Study Jetblue Airways: A Cadre of New Managers Takes Control Case Background JetBlue is a low-cost domestic airline in the United States following a rather interesting combination of ‘low-cost and differentiation’ as its strategy. From its inception in 1998, the airline grew to become the 11th largest player in the airline industry in a short span of 6 years. It had been the only other airline apart from Southwest airlines, to have been profitable during the aftermath of the September 11, 2001 attacks on World Trade Center, and at a time when the entire airline industry was experiencing losses. In 2001, JetBlue planned to launch an IPO to fund its expansion plans. The IPO had to be postponed in light of the terrorist attacks, but JetBlue continued with its expansion plans using its share of the $15 billion bailout ($5 billion in direct compensation and another $10 billion in loan guarantees) the US government granted to the aviation industry, and a fresh infusion of funds from its original investors. Jet Blue is facing the same problem as nearly any company in any industry; that of competition. The most important task at hand for the company of Jet Blue is to maintain the quality of their product so as to ensure that they are able to garner customers, their product being superior to that of their competition. Thus far, Jet Blue has done this quite well, establishing a name for themselves as a low-cost provider of an exemplary air-travel experience...
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