Strategic Capability And Position Of Jet Blue

Given the limited data, it would be matter of keen interest how different type of strategy perform in different context and also how these strategy relate to those defined in terms of specific content. As in the case of Porters generic strategy, will cost leadership strategy would be more deliberate (more often planned), differentiation strategy more emergent (perhaps umbrella in nature) or perhaps entrepreneurial? Or using Miles and Snow (1978) typology, will defender prove more deliberate in orientation and would be inclined to use planned strategies whereas prospectors tend to be more emergent and more tends to depend on Umbrella, process or unconnected strategies. It may be possible that highly deliberate strategy making process will be found to drive the organization away from prospecting activities and towards cost leadership activities whereas the emergent ones may encourage the opposite posture.

Jet Blue has been positioned as a colourful and fun airline. Although it has been designated as low cost carrier (LCC), and is said to be “Value Player”. In order to assess the strategic capability of Jet Blue the external and internal analysis of Jet blue will done so that we know the competitive capability of Jet Blue. In order to know about the strategic capability the SWOT analysis are done so as know the internal capability and external opportunities that lies with the Jet Blue. The internal capabilities are assessed through the careful analysis of Strength and Weakness and external environment inform us about the opportunities and threat with the organization. Also, PESTAL analysis is done so as to have a careful assessment of external environment. In order to know about the strategic capability and the competitive advantage of Jet Blue the analysis of (Value Chain) are done to know the organization capability and there is a discussion on resource, capabilities and competence in the appendices section. After then the competitive analysis are done by using the Porters five force model.

External Analysis- The external environment can be assessed through the PESTAL analysis

The PESTEL framework analysis of Jet Blue Business

According to Kotter (1995), in order to survive in competitive market, firms need to adapt and to convert the threats created by the changing environment into opportunities in order to avoid strategic drift. It would be wise to have a Jet Blue core resources and competences.

External Analysis- The external environment can be assessed through the PESTAL analysis

PESTAL analysis-

Political Factors- The September 11 attack had hit the aviation industry hard during which many companies went for the bankruptcy protection. The US government proactive measure in the time of emergency depicts the congenial political environment for the aviation industry. During the year of 2007 there is no such political issue that concerns the aviation industry. So there is overall stable political condition during this period.

Socio-Economic Factors-

The year 2007 high labour cost is was a deep concern for the aviation industry that was making the operational cost exorbitantly high. The increasing competition for the Jet Blue due to increasing incorporation of LCC airplanes was putting pressure on the total operational cost of Jet Blue.

Technological Factors-

During the year 2007, airline managed to control its distribution cost by achieving 80% of its booking through its website. Also, the use of single-engine taxi technique by the airline can save the high fuel consumption by the aircraft, and that has been used by the Jet Blue aircraft. The advancement in the technology and its application allowed Jet Blue to lower the rising cost of the operation by Jet Blue.

Legal Factors-The year 2003 compensated Jet Blue $23 million under the Emergency War Time Supplemental Appropriation Act, but by the year 2007 the condition were stable for Jet Blue to get any of such benefits.

The external assessment for Jet Blue is same for other companies operating in the aviation industry.

Jet Blue Value chains

Firm Infrastructure: The best and most costly facilities and technology will only be effective if the operation also has an appropriate infrastructure (Slack et al., 2004). Jet Blue benefits from a long tradition and rich heritage as a high quality LCC .The company distinctive competencies is the high quality services that it provides to the customer at acceptable cost, quality services and the strong brand name. The solid operations base, supported by the strong brand, provides the company with a good platform for future growth in sales and profit.

Human Resource Management: It is imperative to maintain employee relations and performance management, a wide range of HR activities was employed: core benefits of remunerations, pensions, life assurance health and safety. They also offers a flexible benefits programme, training and development programmes, discounts and participations in company share schemes offers. Employment policies are designed to provide equal opportunity, irrespective of age, sex, religion or race and employment by disabled persons are given full and fair considerations.

Technology development: The addition of first tier engine to save fuel and make operation cost efficient and apart from that online booking has been an initiative from the Jet Blue to lower cost and manage efficiency. 80% of the bookings in the year done through the use of internet technology in the year 2007.

Procurement: Not Applicable. (Data not sufficient)

Operations: Jet Blue has shaped its brand mission to provide its customers with products that combine with the quality service and offering quality products. The total operating aircraft of Jet Blue airline in the year 2006 has been 119 in which five of the older one sold (in the data given) and 12 were deferred that are to be used during the year 2007-2009, this resulted in the remaining aircraft left to 119 i.e. same for the year 2007. Jet Blue avoided old planes and instead it preferred to operate A-320. The Airbus A-320 was chosen over much popular Boeing-737 so that they are more fuel efficient in the long run and could save cost. The planes also came with 5 years warranty. Also Jet blue operated a uniform fleet of planes that enabled them to save pilot training, maintenance and spare part cost of the whole operation. Apart from that the configuration of single class enabled Jet blue to accommodate maximum number of seat possible in the planes. Jet Blue has also been smart in choosing secondary city that were neglected by the major carrier and they choose secondary airport as the base for their operation that had less traffic. This enabled them to earn better business terms than the main ones. Jet Blue also tried to operate maximum number of flights per day and tried to fly only point to point flight so as to avoid major complication and was able to operate with lesser staff. The use of e- ticketing also allowed them to save expenses in booking and cutting the cost of back end operation. Automation and further technological harnessing allowed them to save further cost. The operational efficiency that had been boon to functioning and profitability of Jet Blue, lately, turn out to be a disaster during the year 2007.

Inbound and outbound logistics: Data not available for the supplier of different products used in refreshment and services.

Marketing & sales: Jet Blue do not advertise in the Aviation sector, however advertising is centred on the credentials of the its slogan: showing value carrier (Mintel, 2003). Jet Blue own-brand continues its quest in building consumer trust in terms of pricing, breadth of service range, and customer offering. Being known to serve as a low cost carrier it caters for all socio-economic market. They communicate their brand and products by promotions, conferences, events, seasonal gifts guides, leaflets, national consumer magazine and regular liaison with journalists and features writers. 80% of the customer booking of ticket sales is done through the online or e-ticketing.

Services:

Jet Blue offered a range of hot and cold beverages and variety of cocktail at $5 in the year 2007. Further, the passengers travelling on red eye flights were given complimentary spa amenity kits containing mint lip balm, body butter, eye shade and ear plug. They also made provision of complimentary snack bar for overnight passenger; arrangements of hot towel, Dunkin Donuts, coffee or tea, orange juice or bottled spring water were done before they landed in the morning. These refreshment services were in unlimited quantities that made them different from other airlines providing services in limited quantities.

JET BLUE VALUE CHAIN

Firm’s infrastructure: Hierarchical and family oriented business, development &investment in sustaining the potential of its brand image, quality control, financial control, financial statement of each year, significant process improvements, skilled management personnel, licensing with third party manufacture.

Human resource management: quality training and development programmes, health and safety and welfare schemes, maternity/paternity/adoption leaves, employees feedback and its implication for future developments, discount and participation in company share schemes offers, equal opportunities and employment of disabled persons, remuneration policy, taxable benefits, annual performance related payments according to the statutory compliance of US federation.

Technology development:Substantial annual reinvestment in assets, New product like use of first tier engine technology, successful market research and innovative initiatives, product design, R&D including product &system designs involves listening to customer.

Procurement: acquisition of resource, efficient use of its economies of scale by outsourcing vertically integrated strategies and processes.

Swot analysis:

Strengths & weaknesses

The internal resources and competences help in developing sustainable competitive advantage by analysis the strengths and weakness of the company. Jet Blue had rich manufacturing experience of over a decade as discussed in above value chain and its resources were well arranged including its employees. Jet Blue acts as and is a symbol of quality, trust and it was well ingrained in public memory with its good brand image. Their strategy was to produce high quality service under a well known, recognised brand name. They promote an image of strong corporate ethics and social responsibility, they argue in order to earn and keep the trust of their customers. Some of the activities demonstrate this like honestly in labelling, high quality service, operational innovation. Jet Blue is renowned for its fundamental principles and personal control over the business and its services. Jet Blue was once most admired and irresistible airline with its customer taking 4th place in the business week.

Nevertheless, due to the adversity of operational activities and increasing pressure on cost, the company has to face different emerging crises. It can be seen from the case study, the increasing price of fuel and other expenses led to the financial pressure on Jet Blue. Firstly operational cost is high because of the high fuel prices and wage and salary expenses that form the major portion of operational expenses. The advent of storm also hit the operational cost all time high in the year 2007 and the way the management responded to the whole contingency situation indicates the loopholes in the operational efficiency and preparedness during the time of emergency. Therefore strategy is to be reviewed, as there were fears that further crisis could push increase the operational cost.

Oppurtunities & Threat

Jet Blue should consider evaluating further secondary cities and new areas from where it can operate. This would not only allow the Jet Blue to operate in the most cost effective way but also would enable to get the advantage in establishing the brand early so than its competitors. The other opportunities lies with the Jet Blue are to expand in the areas of international flight where it has yet to make a mark.

The threat with the Jet Blue lies in the ever increasing competition with the new domestic airlines entering every year. The high fuel cost is another matter of concern for the Jet Blue that is increasing pressure on the operational costs.

Porter’s five forces framework (Porter, 1980)

In order to fully understand the operating environment of the airline industry, Porters (1980) five forces has been applied which indicates high (competitive rivalry, threat of substitutes as a other transportational modes, bargaining power of customers) and high barrier of entry & low on bargaining of suppliers. Jet Blue compete with a wide range of services provided by other competitors like Ted, Bird etc. more directly into competition with large companies like Virgin Airlines (late entry in the year 2007) in the LCC segment. The market is dominated by these three giants; Virgin airlines, FSA and Delta airlines each with higher turnovers and market shares make them the direct competitive rivalry of Jet Blue (Jennings, 2001). Moreover rising ticket rates and increased awareness of service offering of different airlines are likely to cause some consumers to switch over to other airline companies. It makes the competition and threat of substitutes high with other competitors and transportation facilities such as bus, train etc. (Lewis and Stubbs, 1999). The bargaining power of buyers is also high because of high volume of service airline, quality service and shifting loyalties of customers. Although bargaining power of suppliers is low due to many players on the suppliers side. Jet Blue, brand image with low cost strategy makes hurdles for new entry but due to the high competition lots of emulation in adopting the Jet Blue business model is taking place in the market. Therefore they have exhausted in all the ideas they can bargain and there ability to differentiate its service is vanishing which makes low barrier of entry.

Recommendation

The general situation of the Jet Blue in the year 2007 was that it was in the awful form of the economic condition that can be advanced or improved using the right measures at the right time. The following are the few of the strategies which can be applied after the careful analysis of the company’s situation for the acquired operational effectiveness which would help Jet Blue’s financial upliftment.

After the careful study of the case studies, it is learnt that the major expenses of the Jet Blue comes from the fuel expenses, salaries to the employees employed. The first and the foremost strategic decision that should be taken is that to negotiate the fuel cost that would balance the cost instability in future. Secondly in alignment to command on the costs on human asset they should trim the non-operational workforce and boost their effectiveness by providing them with proper training and development program. The cost cutting measures can be used to gain Competitive advantage on cost leadership (Porters generic model)

2. Jet Blue should furthermore recognise other geographical paths in US, where it can function. They should investigate the company’s viability by critical evaluation of PESTAL analysis of the geographical position and should furthermore strive to get lesser groundwork that can be economical to the cost of their operation.

3. Managing chair configuration in such a way that it does not put seating burden pressure or does it compromise with the income lifetime from their customers.

4. Training and development program should be provided to the operational employees in order for them to be prepared for the unforeseen circumstances so that that it can avoid the situations or the case of storm strike during the first quarter of the year 2007 which had an adverse effect on organisation’s performance.

5. Getting rid of the planes that are old by trading them on time in order for the Jet Blue to relieve from the maintenance and fixing cost.

All these recommendations have to be used by applying centre strategic notion and ideas that can support the recommendation of strategic activity taken. Since we understand that Jet Blue is designated as LCC, the aim of strategic activity should be to relentlessly find modes to smaller the operational cost of the airline and to be innovative in supplying service to the customers, so as to convey expanded grade of customer satisfaction. The future would glimpse more competitors and may be the ones with capability and competence to take head on head with that of Jet Blue. Therefore in order for one to deal with such position it a necessary that Jet Blue endeavours to find out centre competence that would give comparable benefit in considering with such situation. The general investigation of Jet Blue is its reduced cost per accessible chair mile (CASM). This should take the outlook of advancing the “service quality” of the customers and the administration should take up premeditated scheme of relentlessly advancing the method of service by the use of the “Kaizen principle” right from the entry of the customer inside the plane till they reaches the designation. The value can be in the pattern of free two tickets for world cup football for the first two first customer’s these ticket would be taken as a very affirmative sign from the customers. So continuous improvement is the buzz words, which is in the core concept of Kaizen principle. The other principle that can bring formidable change is the concept of Total Quality Management. It is through practise of this concept that the zero tolerance on defects could be achieved weather on products or related to service provision in the aircraft.

The theory of agility is the notion that encompasses the concept of flexibility, balance, adaptability, and co-ordination under one roof. The enterprise understanding of agility, is that the enterprise should rapidly respond to the external environment alterations in the creative and cost effective ways. On the advent of new affray from all the bends it is significant for any enterprise to keep and appeal new customer. This can be administered by the notion of Customer Experience Management (CEM) connected with that of the Customer Relationship Management (CRM). Well the CEM is helpful in profiting the insight of general journey know-how of the customers, on the other hand CRM would deal with the decreasing the cost or supplementing worth to the service availed by the customers. Company’s presentation has to be frequently followed and checked by utilising the notion of benchmarking. This would direct the business place in esteem to its competitors. Re-engineering or Process strategy can be directed if the business expectation is not good in the distant future. The business should make productive use of the premeditated and emergent schemes holding the aim and the dream of the association intact and use productive and effective use of their assets and natural forces to accomplish those goals.

Appendices

Resources, competences and competitive advantage of Jet Blue Airlines

Jet Blue unique resources and threshold competences critically underpin the firm’s competitiveness so that it can improve their performance (Johnson and Scholes, 2005). From the SWOT analysis it can said that Jet has got some unique resources like its premium brand name, company history and its reputation, high quality service which acts as key success factor and a good competitive advantage for them. Barney et al., (2001) argue that competitive advantage can be gained through exploitation of resources & competences.

Threshold

Capabilities

Threshold resources

LCC Brand

Skilled labour

Marketing

Operational process

Threshold competences

Innovation in service and cost

Mode of Flying (Secondary region &Secondary base)

Wide range of products

Quality service &reliability

Capabilities for

Competitive

Advantage

Unique resources

Unlimited refreshment

Customer database

One-tier engine for fuel efficiency.

On-line booking (E-Ticketing)

Core competences

Historical powerful Brand as LCC

Fresh &high quality products in service

Quality Service

Operational efficiency.

Cultural Web Model:

Source: http://interactive.cabinetoffice.gov.uk/strategy/survivalguide/images/img/org1.gif

Strategy Cube by Wyn Jenkin

Source:http://www.bs.teilar.gr/mtol/images/files/v2008/jenkins%2078-94.pdf

Source: http://tutor2u.net/business/images/Ansoff%20Matrix%20w500.gif

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Jenkins, W (2009) Managing Strategy Custom textbook, Pearson Education, (pages 192 – 203)

Mintzberg, H; Waters J. A. 1985. Of Strategies, Deliberate and Emergent, Strategic Management Journal, 6: 257 – 272

Pascale, R. T. (1990) “The Honda Effect” California Management Review, Vol. 38, No. 4, 81 -91

Porter, Michael E., (1985). “Competitive Advantage”. Ch. 1, pp. 11-15. The Free Press, New York.

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