Competitive Rivalry between Low-Cost Carriers Case Analysis 2 Kathleen Quiche Proof. Roseland B. Laceration Faculty, MEG 1 IA Time Context 2013 (Present) Getable is a United States domestic airline company who operates on a low-cost principle which translates into cheaper airfares to its customers. In February 2007 Getable underwent a particular event that could have been its last. Since its beginning in 1998 Getable became the 1 lath largest company in the industry within six years.
Aside from Southwest airlines, Getable was the only company who had been bled to keep its books positive while the United States had undergone a terrorist attack and all other companies were reporting loses. Song airline was a low cost carrier subsidiary of Delta airlines that started in 2003. It was formed to compete with Getable and other low cost airlines for the Florida market. Summary of the Case Low-Cost Carriers have changed the way people fly and altered their expectations for air travel.
Most followed the same Low-Cost Carriers’ formula: “high quality, low-fare air travel” whose target market is “Price conscious-leisure travelers”. Like many businesses, competitive rivalry is a normal situation. Getable and Song are one of those many. Since both are Low-Cost Carriers with the same goal, they almost offer the same thing to their market. What makes them different from each other is how they step up their game. Both Getable and Song offer additional commodity to their flights along with their low-fare air travel.
For instance, Getable offers free live satellite with 24 channels at each seat. And as a response, Song offers personal touchstones video monitors at each seat. As direct competitors, Getable and Song are expected to closely monitor each other and continuously give responses to each other’s advances in an attempt to decompose the other. Current Performance In 2010, Getable reported net income of $97 million and an operating margin of 8. 8%, as compared to net income of $61 million and an operating margin of 8. 6% in 2009.
The year-over-year improvement in financial performance was primarily a result of an 8% increase in our average fares and 7% increase in capacity, offset by a 10% increase in our realized fuel price. For 2010, Getable had a ROI of 14. 7%. Mission “Our mission is to bring humanity back to air travel” Mission Statement Jet Blue’s mission is to be the leading low-fare, low-cost passenger airline offering sigh quality customer service to undeserved markets and customer who are looking for the best value in their flight.
We have the newest most advanced planes that are reliable, fuel efficient, utilizes paperless cockpit technology, live in-flight satellite TV and security cameras. Our philosophy is to give customers the best price value for their ticket, offering things our competitors don’t offer. At Getable we feel that hiring educated employees that are highly motivated and well trained will provide a better experience to the customers. We feel that our high-value, high quality service hilltop’s will lead the way to our becoming the number one in the industry.
Vision At Getable our goal is to provide the best, most affordable flight experience of any air carrier while providing superior service. Core Values The Core Values are: * SAFETY: We commit to “safety first”, comply with all regulatory agencies, set and maintain consistently high standards, ensure the security of creamers and customers and never compromise safety. * CARING: Maintain respectful relationships with creamers and customers; strive to be a role model at work and in the community; embrace a healthy balance between work and family; take accessibility for personal and company growth. INTEGRITY: Demonstrate Honesty, Trust and Mutual Respect; Give the Getable Values a “Heartbeat”; never compromise the values for short-term results; possess and demonstrate broad business knowledge; commit to self improvement. * FUN: Exhibit a sense of humor and the ability to laugh at self; Add personality to the customer experience; Demonstrate and create enthusiasm for the Job; Seek to convert a negative situation into a positive customer experience; Create a friendly environment where taking risks is okay. * PASSION: Strive to meet the diverse needs of Creamers and
Customers; Champion team spirit; Crave and deliver superior performance; Enjoy overcoming barriers to good service; Look for innovative solutions to business issues. L. Statement of Objective * To be able to distinguish each of the two company’s competitive edge against each other * To be able to know the different strategies on how to survive in the competitive business world over rival companies. * To be able to know competitive actions occurring between competitors without incurring much cost and sacrificing its profit. II.
Central Problem How would the company continuously improve their services to be able to maintain TTS edge against their rivalries? How would the business immediately respond to the needs of their customers without sacrificing its profit? Ill. Areas of Consideration SOOT Analysis – Getable Strengths 1 . Functional Structure: Low Cost Carrier with a board and multiple departments. 2. The company’s combination of low fares compared to other airlines and superior customer services. 3. New York-based Getable Airways has created a new airline category based on value, service and style. . High commitment to hiring better employees. 5. Through their current workings, they are able to build good brand loyalty. 6. The company’s five key values: safety, caring, integrity, fun, and passion. 7. In their Operations and Logistics: Paperless cockpits, pilots were equipped with laptops to access flight manuals and make calculations. Weaknesses 1. Relative new company 2. Concentration on middle class 3. Old aircraft resulting in increased maintenance costs 4. Fuel prices have increased sharply over a short time, increasing operating costs for the aviation industry 5.
Low fares could mean less money being made and less profit. Opportunities 1. Increasing demand for air travel. 2. Legacy’s Laics allowed connecting flights to their parent’s airlines, shared their request flier programs and had access to parent’s gates and landing/takeoff slots. 3. Power of Other Stakeholders: Quality, safety, and environmental regulations are increasing. 4. Automation of ticketing and self check-in services lowers overhead costs. 5. Technological Enhancement: Company internet websites account for the majority to sales.
Thus, decreasing operating costs 6 Bargaining re to Buyers: Price is going to dictate with whom buyers spend their money. Since it renders low cost, it will have more customers. The more buyers a company has, the more source of potential revenue there is. Threats . Threat of New Entrants: The growing number of Low Costs Carriers (Laics) in the aviation industry, and the attempts of the Full Service Airlines (Fast) to take away market share from the Laics had led to a fall in the average fares. Legacy airlines launched low-cost subsidiaries of their own, to compete with Laics. . Rivalry among Existing Firms: Many airlines that were operating began to recapture the market share. These airlines were able to undercut competition by offering very low fares, taking advantage of the protection of the bankruptcy laws. 3. Threat of Substitute Products or Services. . Bargaining Power of Suppliers: Aircraft manufacturers would sell aircraft at higher interest rate because of a limited number of substitute goods. Aircraft would also arrive to airlines later than agreed, causing delays and loss of revenue and image. 5.
Terrorist attacks like the 9/11 incident cause scared passengers away from flying for many years after. 6. Increasing number of safety and environmental regulations increase operating costs. 7. Changing needs and tastes of customers. SOOT ANALYSIS – SONG 1 . The basic marketing strategy of Song Airlines was to reduce cost and increase illume through operational efficiencies and hence increase profits. 2. Value pricing strategy with fares that is simple and transparent. 3. Extensive use of low cost channels of distribution primarily internet. 1 . Technology dependence on operation. . No clear mission and vision. 3. Differentiation 1. To compete with traditional airlines like American Airlines and upstarts like Getable, Song completely altered the common way of flying. Song got rid of sky-high airfare rates and priced the flights between $79 and $299 and increased utilization of the same fixed cost asset by flying planes more hours a day, using gates more recently, and driving distribution to lower cost channels like the Internet. 2. Song bought large planes, removed first class seats, and added 70 percent more economy seats. 3.
They increased the number of flights per day by turning the planes faster. 1 The market environment at the time to the case was extremely difficult Witt rising costs of fuel, increasing security requirements after 9/1 1 and customers’ expectations of lower fares. It has forced many big players in the airline industry into bankruptcy. 2. The operational costs which include gate fees, ground operational costs etc. Ere increasing causing even more problems for the airlines. 3. The fares in the Florida route were decreasing while the costs were ever increasing making it difficult to remain operational in that space.
IV. Alternative Course of Action There are possible solutions to the problem with corresponding advantage and disadvantages. Alternative Action #1 : Consider other services that will be more needed by the customers according to their preferences. Advantage 1 . The taste and preferences of the customers are known to be able to create and innovate new product lines. 2. It will increase more of its profit and revenue. . It will create a competitive edge over its rival in the markets. Disadvantage 1. It can incur material amount of investment and time consuming.
Alternative Action #2: Management should perform extensive research and development to enhance its service and operations to outcome its rival 1. It will give enough information about the rival companies. 2. It will decrease the risk that underlies in entering into a new idea or proposals without thorough study. 3. The result of the research will serve as a guideline or criterion that can be use in the long-run. 4. It is a good investment of the company. . It is costly for the company to conduct extensive research. 2. The research requires time to observe and analyze the data gathered.
Alternative Action #3: The Company should also adapt to the changes that the other competitors used in their own operation. 1 . The company will not be outdated when it comes to the latest trends and technological innovations happening in the market. 2. It will serve as an strength of the company 1. The company will invest more capital in lieu of the changes that will be adapted. 2. The company will not have its distinguishing mark against its rivals because they’re just imitating them, Just going with the flow and not taking risk. V.
Strategy Formulation / Recommendation I therefore conclude that the best solution to the problem is alternative course number 2 because it will fully utilize and develop the company’s resources in a bigger market. It will also make the company more competitive and take the lead among its rivals. Conducting an extensive research allows the company to know about the ongoing set of competitive actions and responses occurring between them (the company itself and its competitors) as they compete against each other for a ore advantageous market position. VI. Plan of Action 1 .
Conduct surveys and feedbacks from customers who might have some idea on how to improve and satisfy them. 2. Train Management Personnel and employees by meaner of seminars to enhance their skills and knowledge in managing the company. 3. Make a marketing strategy that is very catchy to get the customer’s attention to patronize your product or services over the competitors. VI’. Potential Problem 1 . What if the company refuses to adapt the changes? 2. What if undergoing in an extensive research was not enough to get enough information gathered by the company?
How will they manage the circumstances? 3. What if the company can’t afford to accommodate the management and employees to attend seminars and trainings? VIII. Contingency Plans 1 . If the company refused to adapt to changes, Just continue to uphold their reputation for them to be able to maintain their customers and to prevent having losses. 2. If the strategy failed, analyze the cause of the failure and then formulate a new strategy to accommodate the failure. 3. If they can’t accommodate all, they can send at least 3 employees for a seminar and another 3 employees for training.