Jetblue Strategic Management
Industry Profile:
Market Size: Approximately $95 billion
Market growth rate: Domestic 2.9%, International 5.0% (forecasted to 2017)
Stage in life cycle: mature for domestic, growth for international
Number of companies in industry: 43 mainline carriers and 79 regional airlines
Scope of competitive rivalry: primarily major carriers (revenue more than $1 billion). Legacy carriers developing low-cost offshoots
Customers: 661 million domestic passengers. Expected growth in business customers
Degree of vertical integration: mixed; some have low cost reservation systems, alliances with regional and international airlines as well as hotels. Hedged fuel costs. Sabre Holdings and Galileo International connect airlines with travel agents. No mention of airlines employing in-house catering.
Learning curve effects: not a factor in this industry
Ease of exit/entry: aircraft, terminals, infrastructure and staffing are expensive
Technology/Innovation: R & D essential in creating efficiencies and reducing expenses with turn-around times, fuel costs, reservations etc
Product Characteristics: diverse; customers can receive top end service through to low cost travel and ongoing international hook-ups.
Scale Economies: the industry contains several very large players and multiple medium to small players
Capacity utilisation: high rates required to achieve suitable profitability
Industry profitability: subpar to above average; fuel and maintenance costs, a growing senior staff division, unionisation of employees and competitive price wars are margins concerns.
Porter’s 5 forces
Threat of New Entrants - Moderate – Deregulated industry. Threat of new entrants higher during downturns in industry (e.g. JetBlue’s entry point). Existing airlines may encroach on an opponent’s major or regional market-share. High cost of entry into industry
Bargaining Power of Buyers – High – No or very low cost in switching airlines
Bargaining Power of Suppliers – High – two key
Market Size: Approximately $95 billion
Market growth rate: Domestic 2.9%, International 5.0% (forecasted to 2017)
Stage in life cycle: mature for domestic, growth for international
Number of companies in industry: 43 mainline carriers and 79 regional airlines
Scope of competitive rivalry: primarily major carriers (revenue more than $1 billion). Legacy carriers developing low-cost offshoots
Customers: 661 million domestic passengers. Expected growth in business customers
Degree of vertical integration: mixed; some have low cost reservation systems, alliances with regional and international airlines as well as hotels. Hedged fuel costs. Sabre Holdings and Galileo International connect airlines with travel agents. No mention of airlines employing in-house catering.
Learning curve effects: not a factor in this industry
Ease of exit/entry: aircraft, terminals, infrastructure and staffing are expensive
Technology/Innovation: R & D essential in creating efficiencies and reducing expenses with turn-around times, fuel costs, reservations etc
Product Characteristics: diverse; customers can receive top end service through to low cost travel and ongoing international hook-ups.
Scale Economies: the industry contains several very large players and multiple medium to small players
Capacity utilisation: high rates required to achieve suitable profitability
Industry profitability: subpar to above average; fuel and maintenance costs, a growing senior staff division, unionisation of employees and competitive price wars are margins concerns.
Porter’s 5 forces
Threat of New Entrants - Moderate – Deregulated industry. Threat of new entrants higher during downturns in industry (e.g. JetBlue’s entry point). Existing airlines may encroach on an opponent’s major or regional market-share. High cost of entry into industry
Bargaining Power of Buyers – High – No or very low cost in switching airlines
Bargaining Power of Suppliers – High – two key