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Strategic Analysis of United States Airline Industry

   

Added on  2021-06-15

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Running head: STRATEGY AND CASE ANALYSISSTRATEGY AND CASE ANALYSISName of the Student:Name of the University:Author note:

STRATEGY AND CASE ANALYSIS1Table of Contents1. Introduction............................................................................................................................32. Overview of the US airline industry......................................................................................33. Five Forces analysis of US airline industry...........................................................................4Analysis:.................................................................................................................................4Advantages and disadvantages of porter’s five forces tool:...................................................64. Economic performance..........................................................................................................65. Identifying strategies for the airline profitability...................................................................76. Discussion..............................................................................................................................77. Conclusion..............................................................................................................................8References:.................................................................................................................................8

STRATEGY AND CASE ANALYSIS21. IntroductionThe airline industry have rapidly expanded over the last two decades and is stillexpanding its routes both domestically and globally. However, there are still many airlineindustries in different parts of the world that have yet not grown to their fullest. The UKindustry is one of them and it is significantly known for one of the industries that arestruggling hard to make profits from many years. This report is going to present a briefanalysis of the US airlines industry. It will shed light on the primary factors that have assistedto low profitability in this industry along with discussing the principle advantages anddisadvantaged of using the five forces framework in assessing the macro industrial factorsaffecting the industry. Furthermore, the paper will also discuss upon the economicperformance of this industry in order to address significant questions on the provided casestudy. After briefly analysing the entire thing, the report will present few strategicrecommendations for the industry in order to improve its chances of being persistentlyprofitable in the national as well as the international market. The main aim of this reportrevolves around assessing the strategic position. 2. Overview of the US airline industryThe competitive structure of the US airline industry has went through many changes rightafter the deregulation in the year 1978 (Borenstein and Rose 2014). Since then it hasexperienced much flexibility in its networks of routes and the pricing strategies of it. Afterthat it has become very easy to enter to the routes which were once highly regulated throughthe Civil Aeronautics Board. This have resulted in an influx of entry in the last two decadesthrough low-cost carriers. The U.S airlines consists of the AirTran Airways, SouthwestAirlines, JetBlue Airways and the Spirit Airlines (Tan 2016). They are capable of charginglow prices because of their efficient cost structure. They are benefitting from the usage of

STRATEGY AND CASE ANALYSIS3non-unionized labour, implementation of point to point networks and the operation of samekind of aircrafts. In contrast to that the legacy carriers that implements a network of hub andspoke, make use of the most unionised labour and they operates with numerous differentaircrafts. This type of carriers include the Continental Airlines, Delta Airlines, US airways,United Airlines, and Northwest Airlines. They get their so called name as they were operatedand are founded before deregulation. 3. Five Forces analysis of US airline industryAnalysis: Threats of New Entrants- The threats of new entrants for the United States’ airline industry isvery high. There is an involvement of bureaucracy in the new airline set up. It needs hugecapital investment for entering and even exiting the sector. The exit barriers are subject toregulations as well because the regulators in the U.S do not allow airlines to exit the industryuntil and unless they are sure of the fact that there is a genuine business reason for the same. Threats of the substituteCost of changing to rail is quite expensiveThe low cost airlines of U.S offers very less price as compared to the high speed trainsSupplier powerVery little or no control over the rise of fuel or oil prices (Carter et al. 2014)It is boosted by presence of Airbus, Bowing and a duopoly upstream. Staff and labour cost contributes to more than 40% of the total costs of the airline.Buyer PowerThey are very price sensitive It is increased in the presence of online booking systemThreats of New EntrantsEconomies of the scaleThe threat of new entrants and the entry barriers for the U.S airline industry are very highInvolvement of bureaucracy Competitive RivalryThe exit barriers are very highCustomers could easily switch to different airlines (Gregoire, Salle and Tripp 2015)High competitive rivalry due to low cost airlines

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