Introduction
JetBlue Airways Corporation is the eighth largest Airliner in U.SA JetBlue is most recognised for its low fares especially on point-to-point air routes in U.S.A. At the close of year 2007, JetBlue operated more than 550 daily flight services and has 134 aircrafts in its fleet. This part of the research essay deals with JetBlue’s current position in the airline industry of U.S.A in detail.
External environment
The general environment is comprised of elements that are external to the business. Though the degree of effect varies, these environmental elements impact each industry and its all firms. The braves to firm are to monitor, scan, forecast and evaluate those ingredients in each segment that are of the greatest significance. (Ireland et al 2009: Chp 2 p.39).
U.S airline industry consists of 43 mainline carriers and 79 regional carriers.
In this age of globalization, firms must understand how to fight in markets that are new to them. For this, the firm has to develop such knowledge either locally or to be transferred from its headquarters to the newly established subsidiaries in other countries. If a firm wish to over diversify beyond its capacity, it may create severe negative impacts on its overall performance. Even leaders like GE and Toyota should employ the strategic management process if they want to be success in their globalized business activity.
Firms operating in an industry do not have control over the general environment’s elements and segments. The leaders in the industry collect the information required to appreciate each segment and its impacts for the selection and execution of the suitable strategies. For instance, majority of firms have lesser individual effect on the economy or economies in which they function, although each economy has a major impact on each firms’ capacity to function and even prolong. Thus, business all over the world is challenged to appreciate the effects of individual economies decline on the present and future strategies when it happens. (Ireland et al 2009: Chp 2 p.35).
Industry Environment
On the other hand, the industry environment is the mixture of factors that directly impacts a firm and its competitive deeds and competitive reactions like the challenges from new entrants, the muscle of both suppliers and buyers, the challenges from product substitutes and the quantum of competition among its rivalries. Thus, the above five element will be the deciding factor for any industry’s profit capacity. The brave is to locate a status within the industry where a business can positively manipulate those elements or where it can victoriously guard against their influences. (Ireland et al 2009: Chp 2 p.35).
It is to be remembered, though Wal-Mart is an industry leader yet it is being challenged by its competitors like Costco, Target, Safeway, Kroger, CVS, Walgreen and Best Buy. Likewise, the greater the JetBlue’s capability to emphatically influence its industry environment, the greater the chance that JetBlue will earn more than the above –average returns. JetBlue should collect and interpret information about its competitors by the process known competitors analysis. (Ireland et al 2009: Chp 1 p.9).
Study of the general environment helps to foresee the future; Study of the industry will helpful to spotlight on the conditions and factors impacting a firm’s revenue within its industry; and examination of competitors will be helpful in estimating the mechanism of its competitor’s role, intentions and responses. The function of a business improves when the firm incorporates the perceptivity derived by analysation of general, industry and competitor’s environment.
Competitors Environment
There are several players in the passenger airline industry in U.S.A like United Airlines, American Airlines, Northwest Airlines, Delta Airlines, US Airways and Southwest Airlines.
Competitor’s future objectives
Though Southwest Airline is the major competitor for JetBlue, other traditional airliners are becoming more aggressive especially in low-fare market. Due to recent bankruptcies in U.S airline industry, the legacy airlines are coming out with clean chit financial outcomes and low cost structures. Low cost airlines find it very difficult to operate in new markets as major U.S airlines has become more competitive and enlarging their domestic business. Further, success of a firm depends more in its system and intellectual potentials rather than in its fixed or physical assets. (Ireland et al 2009: Chp 3 p.78).
Competitor’s current strategy
JetBlue’s main competitor is Southwest Airlines as it offers very low airfare with no-frills.It flies more than 63 cities in U.S.A. It is the first airline in U.S to offer online ticketing and also first to introduce unassigned seats. With its fleet strength of 481 Boeing 737, Southwest is well known for its customer friendly approach. However, recently it has shifted its strategy of serving underserved destinations and is concentrating on major markets like Philadelphia and Denver.
American Airlines (AMR) is one another competitor of JetBlue. AI operates in Latin America, Caribbean, North America, Asia and Europe. It survived the 9/11 debacle and expanded its routes in Asia and streamlined costs so as to return to profitability.
Regional carriers in U.S also act as a competitor by associating with the major airlines to share routes, costs and risk. For example, Mesa partners with United Airlines and functions as United Express, with Delta Airlines as Delta Express and when with U.S Air, it function as US Air Express. Further, Mesa operates in new local routes in barter for an agreed proportion of revenue with its partners.
Of late, the regional airlines in U.S are functioning well than the national airlines by achieving almost 200% increase in revenue. Since the competition in U.S air industry is increasing, most of the major airlines are renegotiating their joint collaborative agreement to operate independently as what had happened in the case of Atlantic Coast, an erstwhile partner of United Airlines.
United Airlines also survived 9/11 tremor and is now concentrating in both low-cost off-shoot and expansion plans to Pacific / Asia destinations.
Further , American airlines in partnering with the international airlines like Quanta’s, British Airways has made improvement in number of tickets booked by 7.5% on short-haul flights which has direct impact on U.S local airlines like JetBlue.
JetBlue
Initially, JetBlue operated from New York to Fort Lauderdale in 2000, later it expanded its market to other destinations like Florida, California, Utah, New York and Vermont. JetBlue also operates in also in Mexico, the Caribbean and Puerto Rico. JetBlue is the single largest airline especially at JFK International Airport, New York as gauged by passenger volume handed and it is equivalent to all other domestic airlines combined together. Immediately after 9/11 attack , airline industry in U.S witnessed a turmoil as all almost all the airlines struggled for their existence whereas the JetBlue was able to post 18 consecutive quarterly profits in the aftermath of 9/11 attack.
JetBlue major overhead is fuel cost which is dependent upon international fuel prices and it is subject to wide variations due to geopolitical factors. This can be termed as JetBlue external environment which affects its business substantially. It is to be observed that airline industry in U.S is subject to wide legal and regulatory compliances and involve major compliance cost. Congress in the recent years have enacted many laws and FAA, DOT and TSA regulations have been periodically released and many new regulations pertaining to operation of airlines are published which involve major overhead to airline industry including JetBlue. Like Southwest airlines, JetBlue should hedge its fuel demand to minimise exchange losses and continuous supply of fuel. JetBlue’s culture is to focus on helpful, friendly, customer-focused and team-oriented employees. It strongly believes that if it is unable to find such employees or fail to sustain their culture, their business may be affected in the long run;
JetBlue poor performance in the year 2005 and 2006 has become poor due to increased maintenance costs on its age old planes , increase in employee benefits and there are scarcity for more new profitable routes which are difficult to find out. JetBlue lagged behind its competitors like AMR and Continental during the above period..(Bosley year:159).
A firm can use Six Sigma techniques which is a chain of management mechanisms intended to minimise production defects and enhance efficiency. It is used to identify problems and employ precise measurements to minimise production discrepancies and remove defects. To enhance the profitability, Six Sigma is used to minimise waste and to increase firm’s efficiency. In 3M, focus is given to generate at least 33% of its annual sales from products introduced in the recent five years. 3M is well known for its innovation oriented activities and ending in product success. 3M substantiates that innovation may be a crucial way to efforts to foster sustainable competitive advantage. 3M also proves that resources must be well administered to permit production efficiency and capacity to form competitive edge like ongoing efforts to develop innovative products. (Ireland et al 2009: Chp 3 p.69)..
Costly to duplicate
Mustang Engineering’s culture enables it a business that is expensive to duplicate. If there is a connection between a firm’s competitive advantage and its capabilities which is casually ambiguous, then it is said to be costly to imitate. Southwest airline is well known for its low-cost technique and many of its competitors failed in their attempt to copy the Southwest’s distinctive culture. (Ireland et al 2009: Chp 3 p.83).
Threat of substitute products
Some of the JetBlue’ competitors also offer like paperless cockpits, ticketless travel and website booking. If there is merger or consolidation among JetBlue’s competitors which could end in having a more competitive route structure and with minimised operating cost that could facilitate them to compete more vigorously.
Slow industry growth
Recent economic recession in U.S.A will generally affect the airline industry in U.S.A. Recession may reduce the air travel as lot of working force is being laid off and this will naturally impact JetBlue.
High strategic stakes JetBlue is able to add many feathers to its caps. In 2002, JetBlue received the “Market Development Award” and was christened as “Best Overall Airline “by Onboard Service Magazine.
JetBlue to globalize its activities
Presently, JetBlue is concentrating on only one market.i.e. in U.S.A alone. To remain competitive, a business has to devise a competitive advantage by introducing a strategy which is difficult to be copied by its competitors as it involves massive investment. It should try to expand its operations in EU, China and India as what GE is practicing now as it will help it to be more competitive in the future. For example, Wal-Mart is attempting to accomplish global sourcing, logistics and pricing. This is evidenced from the fact that Wal-Mart has expanded its operations in Canada, Europe, Asia, Mexico and South America. As of 2007, Wal-Mart had about 3444 retail units in U.S.A and about 2761 retails units outside of the United States. This substantiates how Wal-Mart is preparing for the future by expanding its operations in other market areas to be more vibrant in the near future also. Hence, I strongly suggest that JetBlue should follow the style of Wal-Mart, GE by expanding its operation in emerging economies to be more aggressive and competitive in the future.
Opportunities
An opportunity is a situation in the general environment that, if utilised, assists a company to attain strategic competitiveness. For instance, if the number of older people in the age group is likely to increase by 34% in 2017 as compared to the figure in 2007, then retailers may target this market segment with the products that is useful to this age group. For instance, Amazon.com employs unique software that assists with the organisational scanning of its clients. Thus, scanning and monitoring helps the firm to collect new information about market and how to judiciously commercialise new technologies that the firm has fostered. (Ireland et al 2009: Chp 1 p.38).
Likewise, forecasting is significant to adjust sales appropriately to cater demand. Assessing helps to know whether a trend in the environment signifies a threat or an opportunity. The challenge to a business is to forecast, scan, monitor and asses those ingredients in each segment that are of the greatest significant. (Ireland et al 2009: Chp 2 p.37).
Cost savings efforts initiated by JetBlue are really helping it to be the leader in the industry. Some of the cost savings efforts perused by JetBlue are paperless cockpit, electronic ticketing, laptops to its crews to ensure pre-flight load and balance calculations. JetBlue’s BlueTurn is a strategy which facilitates its crew members to decrease ground time and to minimise turnaround time for the aircraft. It is to be remembered that though the JetBlue is engaged in cost cutting strategies, it never compromised in offering superior service to customers through its contended employees.
Threats
A threat is a state in the general atmosphere that may hamper a company’s initiatives to attain competitive competitiveness. For instance, Polaroid was one among the top 50 firms in U.S.A before 2001. Its competitors edged Polaroid by switching to digital photography technology. Polaroid failed to respond to the situation and filed bankruptcy in 2001. Later, it was resurrected under Bank One’s management. Polaroid case study illustrates opportunities pave the way for competitive possibilities while threats are probable constraints. (Ireland et al 2009: Chp 2 p.37).
JetBlue has to bear general performance deficiencies as it operates in highly traffic congested areas like in the north-eastern United States. Thus, airport congestion in these provinces impedes JetBlue’s performance statistics. Annual weather patterns and natural disasters affect the JetBlue’s annual performance statistics. Further, JetBlue employees are nonunionised as of now. However, in airline industry about three-fifth employees is unionised. Thus, JetBlue labour cost may soar if it is affected by airline industry atmosphere. JetBlue’s strategic business brand offering like low-air fare, Direct TV, unlimited quality snacks, unassigned seats and computer reservation are prone to be impersonated by its competitors.. (Bosley year: 157).
JetBlue’s declining inconsistency of net income and return on equity seems will be having negative impacts for JetBlue in the near future.
Conclusion
In the year 2007, JetBlue achieved a net profit of $ 18.1 million and an operating profit of 6.1% as contrasted to a net loss of $ 1.1 million and an operating profit of 5.5% in 2006.(Bosley year:157).
JetBlue growth in 2007 was accomplished mainly through amplifying its present air routes by introducing more number of services and new air routes between current destinations. Thus, JetBlue remain as the leader in the low air fare travel industry and working continuously to sustain it.
Judge whether JetBlue’s current capabilities are likely to lead to a future strategic competitive advantage or result in the forming of core-rigidities
Introduction
JetBlue announced in 2006 its strategies to slow down growth by rescheduling the delivery of some of its earlier ordered aircrafts, disposing off the non-productive planes and by eliminating some of its cross-country flights. However, in the words of Neeleman, it remains to be witnessed how JetBlue will continue to grow in the face of increasing strategic challenges.
Analysis
Business employs the strategic management process to attain strategic competitiveness and to earn more returns. Strategic competitiveness is attained when businesses has fostered and discovered how to introduce a value-creating strategy. (Ireland et al 2009: Chp 1 p.26). Appreciating how to leverage the firm’s distinctive bundle of resources and means is a key result decision maker’s need when analysing the internal organisations. For instance, Apple employs pioneering product design and very easy to handle appliances for its products as a competitive advantage. (Ireland et al 2009: Chp 1 p.12).
Companies with a competitive benefit create value to clients that is superior to the value the competitors offer. Firms foster value by productively by leveraging and bundling their capabilities and resources.
The following figure depicts how firms utilise them to foster strategic competitiveness.
Capabilities are frequently footed on fostering, carrying and transforming knowledge and information through the business human capital which are essential to the building of competitive advantage. Further, capabilities are frequently fostered in particular functional segments like R&D, manufacturing and marketing or in a division of a functional segment like advertising. The under mentioned table illustrates a grouping of organisational capabilities and functions that some business are deemed to own in terms of all or some segment of such functions. (Ireland et al 2009: Chp 3 p.80).
Table 1: Examples of Firm’s Capabilities
Table 2: Outcomes from Combinations of the Criteria for Sustainable Corporate Advantage
A firm’s value chain is divided into support and primary activities. Primary activities are those which relates to a product physical development, its sale and distribution to customers and after sales service. A support activity is one which relates to the help necessary for the primary activities to take place. The following diagram substantiates this concept.
Core competency is being acquired by a company over a time by an organisational process of learning and accumulating how to utilize varied capabilities and resources. For instance, Xerox was first to introduce the mouse with the graphical user interface of a PC but it was Apple Computer that originally identified the far-fetched value of this invention and derived benefit out of it. (Ireland et al 2009: Chp 3 p.81).Along with innovation, at Xerox, service expertise, technological skills and employee talent are considered to be core competencies combined together with innovations. (Ireland et al 2009: Chp 3 p.81).
It is to be remembered that whenever selection of a strategy is involved, companies select choices between competing available alternatives. Thus, Airbus decided to spotlight on supply of jumbo jets as its core strategy in gambling on its future where Boeing spotlighted on medium capacity but with long range perspective. This is how Boeing started to outperform in its performance in 2006 whereas Airbus was victorious in the competition in between 2001 to 2006.
Further, a business has to devise a competitive advantage by introducing a strategy which is difficult to be copied by its competitors as it involves massive investment. Further, the strategic management process is the whole set of actions, decision and commissions for a business to realise strategic competitiveness and to realize more than average returns. For instance, Lenova of late acquired the IBM’s PC division. It is to be remembered that IBM is no longer is having competitive advantage in personal computers and now have lost it and hence no competitive advantage is permanent. (Ireland et al 2009: Chp 1 p.7).
Though GE is headquartered in U.S.A , it has estimated that about three-fifth’s of its total revenue growth in the one decade between 2005 to 2015 will be achieved by competing in fast developing economies like India and China. This is due to by necessity to remain strategically competitive and not rather than by choice. GE has estimated that by 2004 China will be the globe’s largest electricity consumer and with that in mind, GE is making its strategic decisions today by investing considerably both in India and China.
Likewise, U.S.A is said to be lost its position as the largest market so many decade it held to European Union now which is the single largest market with about 700 million customers. Further, EU’s GDP growth is higher by one-third as compared to U.S.A’s GDP. This corroborates U.S.A is no more an economic power as it has lost strategic position to EU. (Ireland et al 2009: Chp 1 p.7).
Conclusion
For JetBlue’s current capabilities are likely to lead to a future strategic competitive advantage, it has to do the following;
Like Apple, it has to employ pioneering product design or specialise its service more. Though Southwest airline is the pioneer in the low-cost air fare, JetBlue should supersede it by offering quality customer service as what had happened in the Apple computer in the case mouse with the graphical user interface of a PC. JetBlue should prioritise its service component as Boeing outperformed Airbus by focusing on medium capacity but with long range perspective
In the year 2007, JetBlue achieved a net profit of $ 18.1 million and an operating profit of 6.1% as contrasted to a net loss of $ 1 million and an operating profit of 5.5% in 2006.This clearly corroborates that JetBlue’s current capabilities are likely to lead to a future strategic competitive advantage
Pl answers both the questions
- Given the competitive dynamics of the airline industry devise a set of recommendations for JetBlue to pursue future domestic growth,
- Which recommendations would select for immediate implementation and why?
- Porter’s five forces
- Threat of new entrants
- Porter’s five forces
For success and survival by a business, a business external environment is so crucial. A firm’s appreciation of the external environment will be gauged with knowledge about its internal environment particularly how it establish its vision , to expand its mission and to recognise and introduce actions that end up in strategic competitiveness and its quantum of returns.
The U.S airline industry was deregulated in 1978. This has opened up U.S airline market for new entrants as governmental control over routes and fares were eliminated. Though, JetBlue is famously known as low cost air carrier but stiff competition from traditional airlines like United, Delta and American Airlines have emerged which also resorted to offer low-cost air fare so as to compete on low-cost routes. One of the business strategies is that creating a value by a product’s low cost and added with high differentiation features or a mixture of low cost and high differentiation as contrasted with competitor’s offerings. JetBlue’s strength is that it is continuously exploiting the firm’s core competencies and competitive advantage on continuous basis. Core Competency is nothing but capabilities that act as a basis of competitive advantage for a firm over its competitors. (Ireland et al 2009: Chp 1 p.17).
There are attempts for consolidation of major airlines in U.S.A.For instance, US Airlines made an unsuccessful attempt to merge Delta Airlines during 2006. If consolidation among major airlines in U.S materialises, it would increase the bargaining power of airlines in U.S (suppliers). Consolidation will result in more efficient airline industry with less major players and it also results in higher airfares and may impact the flight paths offered by airlines in U.S. Hence, it is to be noted that consolidation will impact all competitors with in U.S air industry.
JetBlue does not have any alliance either with any international or local airlines as it strongly believes that it will increase its overheads. However, it is trying to forge an alliance that will result in increase in traffic but does not end in increase in cost.
A firm can accomplish strategic competitiveness and earn above-average revenues when their distinctive competencies are efficiently developed, bundled and influenced to take benefit of opportunities in the external atmosphere in ways that foster value for clients. It is to be remembered that only when business expand its continuous flow of capabilities that end in competitive advantages will attain the strategic competitiveness , earn more returns and will remain well ahead of its competitors.
For instance, employing a global vision, Volkswagen’s top management decided that the company should develop facilities in Slovakia. Entering in to Slovakia and other adjoining countries has led to a distinct competitive advantage for Volkswagen later.
It is to be remembered that competitive advantage is derived by distinctive bundling of various resources. For instance, Amazon.com mingled both distribution and service resources to foster its competitive advantage. Borders do not have Amazon’s mixture of resources found it arduous find it difficult to have strong online presence.
It is tough to derive extra business or value from a tangible resource. For instance, JetBlue cannot use a single airplane on various routes at the same time. (Ireland et al 2009: Chp 3 p.7).
Wal-Mart is trying to increase its gross revenue by increasing its business activities across the globe. GE anticipates that more three-fifth of its revenue is to originate from the emerging markets in the near future. Thus, these companies are able to appreciate the necessity for culturally sensitive judgements when employing the strategic management process in the globalised environment. (Ireland et al 2009: Chp1 p.8).
Due to globalization, Toyota is able to capture a sizeable size in the American automobile market due to its superior customer service and product superiority. As a result, GM, Ford and Chrysler have been forced to adopt the same to maintain their market share.
To increase its overall performance, JetBlue has initiated various strategies like adding more number of flights in busy routes, entering new markets which are currently served by high-cost operators, to introduce higher-fare airlines.
JetBlue should concentrate in international routes in addition to local routes in U.S. Global business transactions have offered more discretionary income for consumers and thus resulted in lower airfare due to greater efficiencies in international travel. International business is more lucrative than domestic market as airlines can include not only fuel surcharge in the airfare but also can recover certain cost related to higher –priced fuel. However, the current aircraft strength of JetBlue does not permit to operate in international routes. Hence, I suggest that JetBlue should seriously think of making alliance with some reputed airlines to operate international flights to enhance its profitability.
Conclusion
Thus, JetBlue remain as the leader in the low air fare travel industry and working continuously to sustain it. In the year 2007, JetBlue achieved a net profit of $ 18.1 million and an operating profit of 6.1% as contrasted to a net loss of $ 1 million and an operating profit of 5.5% in 2006.This clearly corroborates that JetBlue’s current capabilities are likely to lead to a future strategic competitive advantage JetBlue is aiming to make its workforce more competent through the deployment of technology without compromising its commitment to customer service.
It operates only two types of aircrafts mainly to reduce maintenance costs, savings in spares and inventory cost, simplifying the schedules and minimising the training costs.
Further it operates only new aircrafts for achieving maximum fuel efficiency.
With these initiatives, JetBlue should try to increase its market share in the domestic airline market in U.S.A.
List of References
Bosley Theodore et al (please fill up the year) Bosley JetBlue Airways: Challenges Ahead.Case Study. Arizona: Arizona State University
Ireland, Hoskisson and Hitt (2009) The Management of Strategy (Concepts and Cases). South-Western Cengage Learning