Competitive Analysis of American Airlines in Air Travel Industry

This report provides a comprehensive analysis of American Airlines' competitive positioning within the air travel industry. It begins with an introduction to the airline and the importance of competitive positioning, followed by an in-depth examination using Porter's Five Forces model to assess the bargaining power of buyers and suppliers, the threat of substitutes and new entrants, and the intensity of rivalry. The report then analyzes key functional areas, including human resources, marketing, and supply chain management, highlighting how American Airlines can leverage these areas for competitive advantage. Recommendations are provided, emphasizing the importance of value-added services, customer satisfaction, and strengthening functional areas. The report concludes with a summary of findings and insights into the airline's competitive landscape.

RUNNNG HEAD: BUSINESS ESSENTIALS 0
2020
Business Essentials
Student’s Details-

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Introduction
Business needs to position itself in front of the competitors as this can help the
organization to overcome the competitors and get the desired profits. Moreover, this
requires the organization to undertake the certain methods and techniques through the
identification of their strengths and focus on certain functional areas which are essential
for the organization in terms of getting the competitive advantage (David & David ,
2016). Here, the report is prepared on the American Airlines is the largest airlines of the
world which has airline tickets and vacation packages. The company has regional
partners with which the company maintains the flights of number 3400 daily having 240
destinations in the US, Canada and Mexico (AA.com, 2020). The report will determine
the competitive positioning through the Porter’s Five Forces Model which will determine
the positioning of the industry in front of the other firms into the same industry. For this,
the competitor selected is the British Airways which is the second largest airways which
is the flag carrier of United Kingdom headquartered in London. The report will discuss
the use of the competitive positioning of American Airways which will be used against
the competitor and also the analysis of the combination of functional areas which are
marketing, human resources and supply chain management.
Competitive Positioning through Porter’s Five Forces Model
Competitive positioning is related with the efforts of the company to differentiate
themselves in front of the customers by providing unique value to the customers. The
competitive positioning strategy can be used through the analysis of the concerned
industry in order to determine the level of profitability to be made by the company in
comparison to other competitors (Anthony, et al., 2016). American Airlines can position
themselves in the commercial air travel industry which can be helpful for the company to
determine the size of the market and also the identification of growth stage where the
company can make the profits. For this, Porter’s Five Forces Model is used for the
identification of the intensity of the competitors and also the profitability levels within the
concerned industry. It is the framework that determines the strategic decision making
within the industry by analyzing the competitive forces (Moreno-Izquierdo, et al., 2016).

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The following is the explanation of five forces of the model which can be used by the
company.
Bargaining Power of Buyers
Buyers demand lower prices from the company and often make the company
responsible to provide the reasonable services. The bargaining power of buyers is
immense which requires cost and effort for switching from one carrier to another. The
strategy in this context can be used by having a control over the prices. Moreover,
American Airways make the reasonable prices of the air tickets which helps the
company to make the high bargaining power which will compel the customers to not to
switch to any other company. Also, facilitation of discounts and the offers which can
attract the customers and is also helpful in the streamlining of sales or production
process (Nenem, et al., 2020). Also, the use third party enablers can help the company
to increase the sales of flight tickets allowing the company to get a competitive stake
and increase the profitability.
Bargaining Power of Suppliers
The bargaining power of suppliers is expected to be strong in case of American Airlines
as the company is the largest airlines the world which has created an opportunity for the
company to maintain the competitive position. The company maintains the good terms
with the suppliers in order to get the required support the industry with the quality of
product and service delivery. Specifically, American Airways has started Supplier
Diversity Program for building the relationships with the large group of suppliers
(AA.com, 2020). Through the use of this program, the company strives to enhance their
ability to deliver the quality services which meets the industry standards and also
making the contracts with the suppliers which are competitive to the company.
Threat of Substitutes
Substitute is defined as the company’s offering which competes directly with the offering
of the competitor. British Airways can be the substitute of American Airways as this can
directly have an impact on the sales. When the customers get the services of another
company easily and without any hassle then they might shift the attention towards the
substitute available into the air travel industry (Varelas & Georgopoulos, 2017).

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American Airlines can reduce the threat of the substitutes through innovating a unique
value proposition for the customers which can lead the company to get the profits. For
example, the company has introduced AAdvantage program which benefits to travelers
of United States and other countries in order to fly around the globe which gives award
miles which can be collected to make the everyday purchases (US News, 2020). This is
considered as unique value proposition to get the desired market share.
Threat of New Entrants
There is threat of new entrants when any new market player comes into the market
which persuades the company to lower the prices in order to earn the profits. Moreover,
the case of air travel industry, there are higher barriers of entry as the operating cost of
the industry is higher and there are also higher government regulations for navigating
the travel business around the globe (Baxter, 2019). Also, American Airlines has an
established brand name which provides that there are lower risks of new entrants as the
company competes on the basis of low-cost carriers which is the strategy for the
company to get the competitive position into the marketplace (Das, 2019).
Intensity of Rivalry
Increase in the competitive forces within the industry can compel the company to down
the prices and can also lead to the decrease in the overall profitability. In terms of
Airlines industry, there is an increased level of competition between the existing firms as
there are same prices of the flight tickets. This requires a sustainable differentiation in
terms of other value-added services provided by the company apart from the prices.
Also, collaborating with the competitors can help the company to remove the
competition and building the scale of competition. For example, American Airways has
been a member Oneworld alliance which is the effective partnership for removing the
competition and have also included Japan which was the effort made by the company to
overcome the competition (Oneworld, 2020).
Analysis of Functional Areas
The functional areas include the human resources, marketing and supply chain which
can be the strengthened to get the competitive advantage. The company can

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strengthen the functional areas which can be helpful in getting the strategic competitive
advantage. The following are the combination of functional areas which American
Airlines can improve for getting strategic advantage over the competitors.
Human Resources
Human resources are considered as the assets of the company which seek to make the
process easier by employing efforts and which also leads to the increased productivity
of the company. Moreover, American Airlines can create a competitive advantage by
hiring of the skilled people which will add to the efficiency of the company to fight
against the competitors (Nawaz & Koc, 2019). Also, it also requires the facilitation of
culture and making engagements with them which can be helpful for the company to get
the competitive advantage. For example, in light of making good relationships with the
employees, the company has made the culture strong by making sure the inclusion and
diversity which has made the company to hire people from various backgrounds
(American Airlines, 2020). The company has made the recruitments and selected the
skilled employees which can add to the increased potential of the employee through the
use of inclusive work environment.
Marketing
This functional area is related with the promotion of the company’s services for creating
the awareness. This is the best way to create a competitive advantage through making
efforts for building a brand image of the company. Similarly, American Airlines can
create the competitive advantage through the use of initiatives in this functional area.
The company has been adopting for marketing sponsorships for the customers and also
provide the customer service plans for making the satisfaction of travel needs of the
customers and also create the customer’s interests in the services of the company
(aa.com, 2020). Also, the company aims to increase the sales through increasing the
services being facilitated. The company has provided the assistance to the customers
in terms of making reservation and also helping and informing the clients about the flight
delay. This can be helpful in differentiating themselves from the competitors.

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Logistics and Supply Chain
In this area, the company aims to deliver the services the services to the customers in
such a way that it reduces the cost and also make the customers satisfied with the
quality of the services provided. American Airlines can make available the quality of the
services through the appropriate supply chain networks (AA.com, 2020). The company
can make use of the business integration with the online applications which can
facilitate the company to utilize the efforts for the on-time delivery of the services and
sell the tickets through the online channel. In this way, the company can create the
competitive advantage and also lead to the higher customer satisfaction which is the
main aim of supply chain.
Recommendations
On the basis of above analysis, certain recommendations which can be given to
American Airlines. Firstly, the company should make the competitive positioning through
the evaluation of the certain competitive factors and preparing the strategies for the
gaining of the higher competitive advantage which can make the company ready for
fighting the intense competition in Airlines industry (Evren & Kozak, 2018). The
company can use the Porter’s model for the identification of the forces which reflect the
level of profitability within the industry. In order to maintain the competitive positioning,
the company should provide the additional value-added services to the customers which
can create the competitive advantage over the competitors. American Airlines should
provide the affordable services to the customers and also make use of the means to
reach the customer satisfaction which is the key for the development of competitive
spirit and which can certainly lead to the higher satisfaction of the demands of the
customers. The company should also make the functional areas stronger which can be
helpful for differentiating their brand image in front of the customers. This could involve
the management of the human resources, strengthening marketing services and
facilitation of the supply chain management which can be helpful in the successful
positioning of the company.

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Conclusion
To conclude, this can be said that competitive positioning is an important aspect of the
business in which the company can make the brand recognizable which later
differentiates it from the competitors. Also, the company should be aware of the market
forces and the close competitors which is helpful in getting the competitive advantage
and also helpful in making the higher profits. The report is prepared on the competitive
positioning of the American Airlines and the significant ways by which the company can
make themselves higher from the British Airways which is the competitor of the
company. The report has made use of the Porter’s Five Forces Model for identifying the
different market situations which are helpful in the determination of the actions which
will be determined in terms of strategizing the activities which can be used against the
competitors. Finally, the report has identified the functional areas which will be
determined in order to get insights of the human resources and logistic and supply
chains.

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