Jetblue Airways: Managing Growth

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Jet Blue Airways; Managing Growth

1. Jet Blue´s Business- level strategy; value and cost drivers Jet Blue uses to create and maintain ist competitive position Founded by the discount airline veteran David Neeleman in 2000, JetBlue Airways has quickly become one of the largest discount airlines in the United States. Starting primarily by serving the East Coast, the airline has since expanded throughout the country and entered the international market. The reasons for its early success are numerous: JetBlue entered the market with one of the largest levels of liquidity of any start-up airline; it met the needs of customers’ whose primary concerns are price and route; and it successfully defined its brand and differentiated itself from competitors by offering an above average customer experience and amenities for a discounted price. They are offering fares with the “point to point” system. JetBlue´s business-level strategy is therefore a mix of cost-leadership and differentiation. David Neeleman’s idea behind JetBlue was to start a company that combined the low fares of a discount airline carrier with the comforts of a small cozy den in people’s homes. His vision involved both business and leisure customers to have cheap and affordable flights throughout the United States and abroad on newer aircraft that are not only comfortable, but are equipped with modern entertainment options, and a customer centric business model which makes customer service a number one priority. In contrast to its competitors, for example, JetBlue offers fares up to 65% lower but added comfort features such as assigned seating, leather upholstery and satellite TV on individual screens in every seat. Moreover, they are practicing a “get-to-the-destinations-at-all-costs” culture, which makes it their declared aim never to cancel a flight. JetBlue Airways does not operate to a traditional mission statement; rather, it operates to a set of core values: Safety, Caring, Integrity, Fun, and Passion.

2. Strategic group map of the airline industry; positioning to create a strategic competitive advantage

company| Routes serviced| Prices| size|
Continental | 292| 1,586| 44939|
Delta| 587| 1,009| 118856|
Southwest| 97| 0,775| 77693|
JetBlue| 71| 1,371| 14729|
American| 336| 0,186| 745700|
United| 180| 1,706| 67000|

The biggest and simultaneously oldest airline companies are United, American, Delta and Continental Airline. This is why they are referred to as legacy carriers. Their strategic competitive advantage is the hub and spoke system. In this system, airlines created hubs at specific airports where thousands of passengers were shuttled to their connecting flights, the so called spokes. In doing so, these airlines can ensure to keep costs low and protect market share. Another argument strengthen this strategy is that passengers can travel between numerous destinations without changing airlines. Delta uses this strategy to dominate geographical segments of the market, for example Atlanta. Southwest Airlines on the other hand established a completely different strategy. They take passengers direct between cities, which is referred to as point to point. Additionally, Southwest is using secondary airports serving major metropolitan areas. With their different strategic advantage, they are able to attract another target market. Because they offer fares between cities that are often less than 500 miles apart, they targeted customers that would have otherwise traveled by car. In this way Southwest maintains high levels of plane utilization while keeping its operating costs low enough to support its discounted fares. Another part of their strategy is their reliance on a single type of plane, the Boing 737. This allowed them to standardize ground and flight personnel training which decreased the airline´s average turnaround time between landing and starting again. Moreover, Southwest focuses on customers...
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