In order to fully understand competitive advantage and its application with in the aviation industry, it is first important to consider its definition. According to Chaston (2012), a sustainable competitive advantage is long-term strategic thinking adopted by a firm through which they exceed the other firm’s performance dealing with the same customer(s) and same market area(s). An alternative definition is, the power of an organisation to do something that its competitors cannot achieve. This means the organisation should: ensure customer retention; expand its business by attracting additional customers and on a basis that is more profitable than the business’ counterparts over a long period of time (The Fallible Investor, 2010). Porter (1998) identifies three generic strategies for a sustainable competitive advantage. These include: cost leadership, differentiation and focus. Through the cost leadership strategy, the business aims to become the low cost provider with in that market (Porter, 1998). Cost leadership gives firms a competitive advantage as decreased costs allow for higher profitability (Sørensen, 2005). In order to implement this strategy, the firm has to devise methods to create cost-effective amenities, apply cost minimising techniques in terms of service, sales and marketing and so forth (Sørensen, 2005). However, it is important to note that this strategy works best in a market where passengers are more price sensitive, thus prefer cheaper airfares (Flouris & Oswald, 2006). In the context of the aviation industry, this strategy has had an influence on Low Cost Carrier’s business model. LCC have to reduce costs significantly in respective to their FSC counterparts in order to build a sustainable competitive advan... ... middle of paper ... ...eritage.org/index/country/unitedarabemirates http://www.emirates.com/english/images/Airlines%20and%20subsidy%20-%20our%20position%20new_tcm233-845771.pdf http://www.airlineleader.com/this-months-highlights/accelerating-airline-business-model-realignment http://bsr.london.edu/files/364/BUSR299.pdf - journal http://kcubbin.tripod.com/id36.html http://www.forbes.com/sites/stevedenning/2013/06/02/its-official-the-end-of-competitive-advantage/ http://books.google.co.nz/books?id=qgg6AQAAMAAJ&pg=PA11&lpg=PA11&dq=Airline+Competition:+Options+for+Addressing+Financial+and+Competition&source=bl&ots=NlS6Yg4GMr&sig=b_Uc5KVlC_OekhhP9zH95bk5IW4&hl=en&sa=X&ei=XPcvU77uGcafkQW6koDYAg&ved=0CDcQ6AEwAQ#v=onepage&q=Airline%20Competition%3A%20Options%20for%20Addressing%20Financial%20and%20Competition&f=false http://www-05.ibm.com/innovation/nl/pdf/highlights/integration/crm_airline.pdf
The following value chain, which focuses on Spirit Airlines, is representative of most of the firms in the Ultra Low-Cost Airline industry. Spirit is the industry leader in many areas such as operational efficiencies/cost structure, aircraft fleet management, brand/network and growth. The firm, however, trails industry foes in areas such as customer service and operational reliability and recoverability. While most in this segment pursue the cost-leader competitive strategy, Spirit has demonstrated the most effective model to date – whether the model is the most sustainable remains to be seen.
One of the many influences that affect Qantas is the presence of globalisation, which has heavily affected the airline both positively and negatively. Globalisation is a process which refers to the increased integration between different countries and economies as well as the increased impact of international influences on all aspects of life and economic activity. Globalisation is responsible for the removal of many trade barriers and the increased level of competition that Qantas has been exposed to. The increased levels of competition has increased consumer sovereignty and forced Qantas to implement strategies to gain a competitive advantage in order to redirect consumers towards their business. Qantas has implemented a cost leadership strategy as a response to globalisation and the influence of cost based competition. One way that Qantas achieved this was by using Globalisation itself to the business’ advantage. Globalisation ha...
It has stayed relevant to the market through its propelled philosophy of relationships to generate profits in the business. Since its establishment in Monroe, Louisiana the once tiny airline has stretched to greater heights serving in 6 continents. It has also established a distinguishable name among its competitors with a reputation of leading customer services. However, even as an established venture, the company needs to maximize its profits in order to stay in business and expand in to new territories beyond its conquered boundaries. A strategic analysis was carried out by our team to establish the company’s current situation. A SWOT analysis was performed to come up with three referenced, strategic alternatives. This alternatives are meant to act as a strategic guidance to the company in order to enhance growth. The strategic recommendation provided will improve and enable the business to cope with the competitors while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
To accomplish competitive advantage, and differentiation three elements are crucial; stating the strategies and practicalities, focusing on knowledge based behaviour, and improving the customer relationship management.(Slater and Narve 1995).
Competing through cost leadership, jetBlue spreads fixed costs over a large number of flights and seat miles, operates their company’s fleet roughly twelve hours a day (the longest in the industry), applies state-of-the-art scheduling services to minimize aircraft ground time, and hedges fuel orders in an optimal fashion to incur less operating costs as a whole. Economies of scale exist through these proficiencies, reducing costs and driving profit margins, while the operation of only two jet models (A320 and E190) expands cost-based advantages from aircraft production and service from the well-developed learning curve. Combining this "efficient asset utilization strategy" (Datamonitor, 2011) with jetBlue’s core customer service competencies makes jetBlue a tough, sustainable competitor in the domestic airline industry (shown in Appendix A). In a recent letter to shareholders, President David Barger announced, “We will continue to build a low cost culture by maximizing asset utilization and running efficient operations” (Letter to ...
The seventh largest major domestic airline in the United States (US), Southwest Airlines, is commonly known or referred to as a low-cost carrier. Southwest Airlines is the only major airline that provides short-haul, point-to-point service in the United States. In fact it was the first airline of its type ever started; it has become the archetypical low-cost airline. The idea has proven itself so well, that other start-up airlines have based their company strategies upon the basics of Southwest. Today, there are two other low-cost air carriers (the other two airlines are considered national airlines and not major airlines) that are actively and aggressively competing with Southwest Airlines for business and profit turning. The three American low-cost air carriers are currently posting profits even in light of the US economy’s current state of affairs, with Southwest Airlines first, JetBlue second, and Air Tran third, in profits. How is this possible when the major six airlines are reporting losses of millions and millions of dollars each quarter? The answer to this question begins about 30 years ago.
When a firm sustains a profit that exceeds the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage (SCA). (QuickMBA, 2007) Michael Porter identified basic types of advantages used by businesses. Cost and differentiation advantages are positional advantages used by organizations to achieve that competitive through creating superior value for its consumers and thus increase profits for itself. In this session long project I will discuss strategic plans including; low cost, differentiation, focus, and preemptive. By comparing each strategic plan with one of Kraft’s SWOT elements, I will discuss a tactic for taking advantage of strength, opportunity, or managing a threat or weakness, and ultimately recommending which strategic plan in order to achieve SCA.
Arthur, A., Thompson, Margaret, A., Peteraf, John, E. Gamble, A., J., Strickland III. (2014). Crafting & Executing Strategy: The Quest for Competitive Advantage 19e: Concepts & Cases. C6-C25.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
Competitive advantage is the advantage for the competitors and gained by the offerings from the consumers that have the greater value either by the low prices of the products and by providing the benefits and services to the consumers that denotes the high price. It is a set of the innovative and different features of the company and the products and services sale to the consumers so that company can achieve the targets what they have decided and it is the betterment for the enterprise in the competitive market (Porter, 2011). There are three determinants which can be used in the competitive advantage that what the company produce for their consumers, their target market that what they have to achieved and the competition from the other entity
Cost leadership strategy involves the business winning the market share by appealing to cost-conscious and price-sensitive consumers. This is achieved when you have the lowest prices in the target market. The lowest price of value ratio (price compared to what consumers receive). To be successful at offering the lowest price while still achieving profitability and a high return on investment, the business must be able to operate at a lower cost than its competitors. There are three main ways to achieve this.
A different perspective of approaching competitive advantage is its relationship with different business models, the degree of innovation and the information systems present. A competitive advantage is imminent if the current strategy of a company is value adding and is not in the present moment being implemented by its would-be competitors. The sustainability of a competitive advantage
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.
Porter, M. E., 1999. The Five Forces that Shape Competitive Strategy. Harvard business review, p. 80.