University of Westminster
Question 1
The Airline Deregulations Act in America in 1978 which affected the aviation market brought about
the removal of restrictions over costs, routes and timetables. This led to the variation of prices and
the exposure of incompetences in the industry due to the pressure from possible and present
competition (Morrison and Winston, 1987; Borenstein, 1992). Although, there was high competition
in the years to follow post the deregulation of 1978, it was apparent that the aviation industry had
started to mature once more (Walker et al., 2002). The period of maturity with airlines that is
determined by the low-priced discrepancy is one that can potentially showcase less competitors,
higher resemblance of operations, simulation and more dependence on habitual methods (Klepper
and Graddy, 1990). These types of climates doubtlessly put the relationship between aviation
companies’ strategy and their performance to the test which, according to Rumelt at al. (1994), is
what makes up the contemporary strategic management study.
The resource-based view (RBV) hypothesizes that if the resources and capabilities of a company are
valuable, rare, inimitable and non-substitutable, which formulates the VRIN analysis, then that
means that they are able to guarantee a sustainable competitive advantage (SCA) (Wernerfelt, 1984;
Barney, 1991). D’Aveni (1994) debates whether the competitive advantage of a company gained,
and especially in the airline industry, can be observed as progressively open to attacks and thus this
company is left with no choice but to look for additional capabilities to stay atop the competition.
Specificity and scarcity in RBV are considered to be key economic powers which restrict the
magnitude of which the competitive advantage of a company can be copied via the actions of other
companies which for short is called isolating mechanism (Rumelt, 1984). Aviation carriers are
distinctly outlined but are also part of an akin market. Customers are seen as something to be
delivered and which make up for the revenue of the airline company. The magnitude of competitors
in the airline market can be influenced by overlaps in supplies in the industry (Chen, 1996; Gimeno
and Woo, 1996).
The resource-based view defines the company as an array of capabilities and resources (Peteraf and
Barney, 2003). Through the perspective of the aviation industry, this can be seen as the operation of
perplexing system of connections instead of the navigation of a single airplane (Helfat and Winter,
2011). Resources are defined as tangible or intangible assets and are specific to a company which
ensues a type of continuity (Wernerfelt, 1984) and these resources have to be regulated by the
specific company as per Barney (1991). He also claims that they are the same as, or at least contain,
capabilities. According to Makadok (2001), resources are regarded to as tangible assets while the
capabilities are seen as intangible ones and Teece et al. (1997) claims that the core capabilities of a
firm are considered to be at the center of the company’s main actions. Nonetheless, there is a
possibility that those could become constrictions for the company in the airline industry when a
period of maturity arises intertwined with overlaps of industry and resources. According to Helfat
and Peteraf (2003), companies direct their attention to efficiency when the capabilities become
mature as well as per analysis of the life course of the latter.
It is almost impossible for air travel companies to gain competitive advantage on American soil. This
is due to the market being extremely homogenous when it comes to aspects of cost, quality as well
as passenger load factor which are supposed to have major impact on the performance of any given
company. The US market overlaps and the companies in the country attain their resources from
2

+13062052269

info@desklib.com

Strategic Management : University of Westminster

Contribute Materials

Related Documents