The sustainability of competitive advantage depends on three conditions, the first is the particular source of the advantage, secondly sustaining advantage requires change, it demands that a company exploit, rather than ignore industry trends, it also. This is due to some lack of capacity discipline, especially involving Latin American routes, where yields have softened. While individual airlines each analyze and make decisions based on their own situations, there are overall industry similarities that all airlines face, with each endeavoring to maximize strengths and opportunities while minimizing weaknesses and threats. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest. The case of Comair airline, even after acquisition by Delta airline must recognize the above and initiate plans for aligning themselves with success factors. Consolidation is beneficial in two ways for airline companies, as it typically reduces redundant operating costs and raises revenues through higher fares.
After regulation, fare pricing became the focus of gaining a competitive advantage, with new entries becoming commonplace. Threats to Southwest include the increasing jet fuel costs, uncertainty in demand, and an increase in competition. Therefore, one can surmise that the marketing-mix or the four Ps of marketing product, price, place and promotion became crucial for U. P Morgan chase, Wachovia and bank of America. With such stability, the corporation is able to make decisions and adjust policies, which other heavily burdened airlines may not be able to imitate.
Jeff holds a Bachelor of Science in journalism from Northwestern University and a Master of Business Administration in marketing from the University of Chicago. Airtran, JetBlue and Southwest are clear examples of players succeeding at this type of strategy. Southwest uses only one type of aircraft — the fuel-efficient Boeing 737. However, despite the Airlines innovation and success in the South East Singapore Airlines Ltd. Airlines also have been upgrading their fleets with more fuel-efficient, next-generation aircraft. The industry experienced many years of difficult with relatively short durations of sustained profitability Grant, 2010.
This brought about the commonplace of new entrants and resulted in dismal profitability becoming a constant fixture since deregulation Grant, 2010. The industry has faced dire situations resulting in some airline having to file Chapter 11 Bankruptcy Grant, 2010. The airline does not serve meals on board, and there are no luxurious or first class seats offered. The economic performance of the airline industry seems to be very cyclical. It facilitates economic growth, world trade, international investment and tourism and is therefore central to the globalization taking place in many other industries Airline Industry, 2000.
The bargaining power of suppliers is high. A business strategy entails futuristic organizational planning that result in companies gaining competitive advantage. Weaknesses are the poor short-term liquidity situation, having only one established alliance, and the declining passenger revenue yields. If so, what might they be? What was the main strategy adopted by Southwest Airlines that made it successful in the airline industry? By the end of the 1980s, substantial product differentiation had occurred, with most firms offering several models, often with several versions each. Case Study: The United States Airline Industry Answer the following questions. Along with its expansion and merger with AirTran, Southwest has gradually changed its strategy. Southwest Airlines Report Core Strategy Southwest Airlines Co.
The industry has grown substantially from its beginnings in January 1975, when the first microcomputer, the Altair 8800, was introduced. Apart from anything else, the airline industry is regulated on the supply side more than the demand side, which means that instead of the airlines being free to choose which markets to operate and which segments to target, it is the fliers who get to be pampered by the regulators. Conduct a competitive forces analysis of the U. While just a few years ago fuel represented the biggest cost item for airlines, labor has recently moved into the first position among the cost categories. Such low cost model of the corporation is brought about by an effective strategy.
This includes the business cycle of a nation, monetary policy…. Intensity of Competitive Rivalry As mentioned in the introduction, the airline industry in the United States is extremely competitive because of a number of reasons which include entry of low cost carriers, the tight regulation of the industry wherein safety become paramount leading to high operating expenses, and the fact that the airlines operate according to a business model that is a bit outdated especially in times of rapid turnover and churn in the industry. Southwest Airlines provides short haul, high frequency, point-to-point, low-fare services to and from 58 cities across the United States. Airline Revenue Driver Dashboard For each of the airlines in our main report, users can isolate and analyze the individual components that drive airline revenue at the system and region level to see how that carrier performs versus the industry. This issue is industry wide, affecting most if not all firms in the industry Grant, 2010. Of course, many Americans motor down use their cars for longer travel as well which means that there is the threat of this substitute.
Although the conventional wisdom says that huge companies could achieve in an easier way economies of scale, there is little evidence of this happening in the airlines industry. While this is a positive factor, the fuel efficiency must be weighed with the cost of acquiring the equipment. Porter's Five Forces Model - Example: Commercial Airline Industry In 1979, Harvard Business Review published How Competitive Forces Shape Strategy by a young economist and associate professor, Michael E. This is just one of four important topics that will be covered in this well researched paper. On one hand, the organizations are limited by increasing fuel and labor costs, fluctuations in the economy which impact the amount of travel that occurs and capacity utilization.