Proprietary know-how
Installed customer base
Reputation of the firm
Brand equity
Capabilities refer to the firm's ability to utilise its resources effectively. An example of a capability is the ability to bring a product to market faster than competitors. Such capabilities are embedded in the routines of the organisation and are not easily documented as procedures and thus are difficult for competitors to replicate. The firm's resources and capabilities together form its distinctive competencies. These competencies enable innovation, efficiency, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.
Value Creation
The firm creates value by performing a series of activities that Porter identified as the value chain. In addition to the firm's own value-creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members. To achieve a competitive advantage, the firm must perform one or more value creating activities in a way that creates more overall value than do competitors. Superior value is created through lower costs or superior benefits to the consumer (differentiation). (Source: http://www.hi.is/~joner/eaps/porter1.htm)
Source: http://www-mmd.eng.cam.ac.uk/people/ahr/dstools/paradigm/valuch.htm
Airline Industry
On the whole the airline industry is a service industry. Airlines are primarily concerned with customer service, and look to add value to the customers experience at different stages in the value chain. Aerlingus, for example, is a full service airline that charges premium prices for the high levels of service they provide; by comparison easyJet positions itself at the other end of the scale. Herein we are primarily concerned with customer service, and Value added throughout the process. Some may argue that this should not be so in the case of easyJet, since it is a ‘no frills – low cost’ airline. However, Stelios the founder of the airline understands that they have to meet and exceed customer satisfaction –or expectations. He is quoted as saying:
“If you create the right expectations and you meet and exceed those expectations, then you will have happy customers”
EasyJet
EasyJet aims to maintain its competitive advantage by concentrating on keeping costs down. As one of the pioneers in the low cost airline market, easyJet bases its business on a number of principles:
- Minimise distribution costs by using the Internet to take bookings. About 90% of all easyJet tickets are sold via the Web. This makes the company one of Europe's largest Internet retailers.
- Maximise efficient use of their assets, by increasing turn-around time at airports
- A 'simple-service model' means the end of free on-board catering
- Ticketless travel, where passengers receive an email confirming their booking, cuts the cost of issuing, distributing and processing tickets
- Intensive use of IT in its administration and management, aiming to run a paperless office
Easyjet seeks to be unique in its industry along some dimensions that are widely valued by buyers. They aim to provide its customers with safe, good value, point-to-point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this they will develop their people and establish lasting relationships with their suppliers.
Singapore Airline
Singapore Airlines (SIA) aim to maintain their competitive advantage by using differentiation strategies. They offer the same services as such airline as British Airways but their mission is to exceed and excel.
As a World Class Carrier, SIA is a marketing success. Today, SIA is internationally recognised as one of the world's leading carriers. Its route network spans over 90 cities in more than 40 countries, SIA flies the most modern fleet in the industry and is the world's largest operator of Boeing 747-400s, called MEGATOPs. But it never forgets that it owes its size and commercial success to its customers. Singapore Airlines was the pioneer of in-flight services such as free drinks and complimentary headsets. With innovations like its revolutionary KrisWorld interactive entertainment system, SIA are still setting the standards today - standards which have made the name of Singapore Airlines synonymous with impeccable service around the globe. (source http://home.netvigator.com/~sylviall/other/singapore_air.htm)
Positioning of Good Quality: Superior branding
The advertisement of SIA transmits the message: SIA provides high quality services. For example the homepage of SIA shows the 'New First Class'. It conveys a clear message to consumers that SIA is proud of its First Class services. This imposes a superior branding effect.
First Class services
Palatial Comfort
Every aspect of SIA seats have been designed with space and sumptuous comfort in mind. It can recline to any angle, including a completely flat bed. As it reclines, the seat bottom automatically articulates to provide better support.
An especially innovative feature is the new built-in "optimum comfort" position which provides the most comfortable angle to support the body whilst reading or relaxing. And in case you like to work, you'll also find a laptop power supply source which can be used with the appropriate adapter.
A wealth of features guarantees ultimate comfort from head to toe.
Taking long time journey is a no comfortable experience. On the contrary, the advertisement intentionally stress comfort of its seats. It tells you one thing - its First Class service is really 'first class' (high quality).
Professional Recognition: Competitive Advantage
Singapore Airlines wins many awards and recognition in the profession. Such prize winning results is a competitive advantage in the airline profession.
Ever Improving Services: Market Leader Strategy
SIA always innovates some new services to suit the need of customers as a market leader in the market. It can improve the relationship with customers continuously.
Electronic Ticketing
Electronic ticketing provides greater convenience for passengers, who need only a credit card to book their flights and purchase their tickets.
Electronic ticketing will be especially useful for passengers having to travel at short notice, as they can purchase their tickets by telephone up to three hours before flight departure.
Internationalisation of the Services: International marketing
SIA is able to recognise the constraint of the global environment and adopt relevant response. SIA succeeds in maintaining the market leadership in a global arena.
Singapore Airlines has built a strong reputation for excellence in customer service, attention to detail and a progressive stance in designing strategy. It has established a well-orchestrated system that nurtures significant sources of competitive advantage that are used to support a strategy of differentiation.
Southwest Airlines
Southwest Airlines is currently the fourth largest airline in the United States. It flies over 64 million passengers a year, traveling to 58 cities. Southwest is the only major carrier to remain profitable in every quarter since 9/11, opposed to many other companies who have declared bankruptcy. It is an influential company that has greatly contributed to the development of the commercial airline industry.
This industry has grown at an average rate of 5% over the past 20 years. Of course several uncontrollable economic and environmental factors, such as the events of September 11th and the current war on Iraq, have caused this growth to fluctuate. But, as market competition keeps increasing, airline management is trying to improve productivity, using different methods to reduce unit costs, and increase total network revenues without raising fares.
What helps keep Southwest so successful is its company’s well-organised, efficient management and superior attitude. They do a very good job of concentrating on keeping their customers happy. They do this through treating their employees how they would want their customers to be treated, and committing themselves to constantly cut-down on costs.
Southwest Airlines has a few strengths that keep them successful. The first one is that they are the only major carrier to remain profitable in every quarter since September 11, 2001. The airline industry has been going through a tough phase over the past couple of years and some airlines have even had to declare bankruptcy. Southwest keeps on generating profits and will continue for the next couple of years. Another one of their strengths is that they have never laid off anyone in their existence-thus promoting a good management to employee relationship. Southwest has the most productive workforce in the industry with 2,400 customers served per employee annually, once again double its competitor's average.
Southwest's strategy is based on 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.
To achieve that goal, Southwest emphasises an easy-going, relaxed corporate style that provides employees with extensive operational independence. Southwest has experienced an extraordinary 133% in traffic growth over the past five years, about 20-30% annually. When the company performs well employees are generously rewarded through the profit sharing program, and many employees realise big gains in their stock ownership. (Source: http://www.fed.org/onlinemag/sep98/briefcase.html)
Cost Focus
Southwest Airlines is very good at recognising how to cut down cost, which makes them a very efficient company. The only type of airplanes that Southwest Airlines uses is Boeing 737. By standardising the airplanes, it cuts down on the cost of maintenance. Passengers are able to travel without tickets, which saves on cost in the office. They operate their own reservation system so they don’t have to pay travel agencies and they also provide the purchase of tickets online.
Customers can fly to over sixty cities in 30 states and they also get to choose where they sit because of Southwest’s open-seating policy. By rewarding customers that get there first to sit anywhere they want, they save time because customers no longer have the hassle of finding their seat number. The airline can unload and reload a plane in 15 minutes while it takes other airlines 45 minutes.
Innovation
Southwest was the first airline to create a home page on the internet, they reported that approximately $2.5 million or 49% of its passenger revenue for 2002 was purchased via the internet. Southwest was the first airline to offer a frequent flyer program, senior discounts, “Fun Fares”, “Fun Packs”, a same-day air freight delivery service, ticket-less travel, and other programs. It is a prestigious company that has really contributed to the development of the commercial airline industry.
(source:http://marge.uvm.edu/jmoy/Southwest%20Airlines.htm)
Because of Southwest Airlines innovative ideas and attention to employer and customer care they keep their competitive edge by retaining customer loyalty which results in repeat orders.
Webliography
http://home.netvigator.com/~sylviall/other/singapore_air.htm
http://marge.uvm.edu/jmoy/Southwest%20Airlines.htm
http://riccistreet.net/dwares/plaza/galka/southwest.htm
http://www.airlinequality.com/2003/group_results.htm
http://www.bized.ac.uk/compfact/easyjet/easyindex.htm
http://www.fed.org/onlinemag/sep98/briefcase.html
http://www.hi.is/~joner/eaps/porter1.htm
http://www.quietlyconfident.co.uk/easyjet.doc
http://www.t-bird.edu/pdf/about_us/case_series/a07010012.pdf
http://www-mmd.eng.cam.ac.uk/people/ahr/dstools/paradigm/genstrat.htm
Assessment 1 Group Presentation and Portfolio Hope University
Andrea Coyle 28 November 2003
Bernardine George
