Week 2 Business Case Analysis
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MBA526 Excellent work Jacqueline. With the airline industry, we have to be really current with articles leading up to 2012 (time period of the case study). And the de-bundling effort isn’t all profit but revenue. The difference between carrier operating costs is pretty low, so how does a continuing sustainable advantage get built when most customers do not differentiate? – Professor Becraft
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106). To survive and drive an overall industry profit, the legacy carriers must re-evaluate and address the competitive factors of their industry.
Relevant Factual Information about the Problem or Decision the Organization Faced
Five major passenger airlines dominate their industry by size (Grant, 2013, p. 479). But their size, legacy costs and hub and spoke business model created significant exit barriers (Grahm & Vowles, 2006, p. 108). New competitors not only started with no entry barriers but also few if any exit barriers. Legacy carriers had to identify new innovative strategies to augment their core business models to profitably compete.
Explanation of Relevant Concepts, Theories and Applications Derived from Course Materials
Porter’s five forces are competition from substitutes, from new entrants, from established rivals, the bargaining power of suppliers and bargaining power of buyers (Porter, 2008, p. 2). By its nature, flying to a destination faces few substitute competitors. The bargaining power of suppliers such as labor unions and fuel run high within the legacy carriers (Whitelegg, 2003, p. 247). The bargaining power of buyers, the people who purchase airline tickets, drives all carriers in the industry (Mertens & Vowles, 2012, p. 67). Competition from established rivals diminishes as mergers and alliances form (Porter, 2008, p. 13). The