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Provide the basis for new products and services, new markets
or other new business opportunities
Porter Competitive Model
Potential
New Entrants
Substitute
Products
and Services
TECHNOLOGY DEVELOPMENT
PROCUREMENT
PRIMARY ACTIVITIES
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from
COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright Figure 3-6
1985 by Michael E. Porter.
Value Chain Model US Department of Justice
Competitive Strategies
Supporting Strategies:
Innovation: In both business processes and the use of
information systems.
Growth: Sales volume growth adds to their ability to leverage
purchasing discounts from suppliers and gain operational
productivity.
Alliances: Joint efforts with suppliers to implement leading
edge e-business processes.
Possible Exam Questions
1. To date we have addressed three models developed by
Michael Porter: Diamond of National Advantage,
Competitive Model and Value Chain. Explain the
objective to be gained from using each of these models.
Benefits:
1. The creation of new jobs and lower fares.
2. More Americans were flying so airplane
load factors were up.
3. There was increased competition and a
wider choice for passengers.
Does the airline industry have basic structural
problems or is it just a collection of poorly
managed companies?
1. Southwest Airlines
2. Singapore Airlines
Importance of IT
Convenience to Customers.
Knowledge of Customers.
Providing a Foundation of Other Systems.
Building a Base for other Business.
Robert Crandall
Former CEO
American Airlines
We must look at the world as it
is versus how airlines would
like it to be.
Robert L. Crandall
Sales Strategy
Business Strategy
Reservation Agents Travel Agents Web Page
Model
Routes and Route Structure Strategies
Route Selection Ticket Counter Baggage System Promotion Lost Baggage Service
Passenger Service Operations Flight Advertising Complaint Follow-up
System Gate Operations Connections Advantage
Yield Management Aircraft Rental Car and Program
System (Pricing) Operations Hotel Reservation Travel Agent
Fuel On-board Service System Programs
Flight Scheduling Baggage Handling Group Sales
Crew Scheduling Ticket Offices
Facilities Planning
Aircraft Acquisition
Adapted with the permission of Michael E. Porter from Competitive Advantage: Creating and Sustaining Superior Figure 4-3
Performance, copyright 1985 by Michael E. Porter.
Impacts of a Weakened Airline Industry
Airline Industry
Carriers, General Aviation, Airports
Travel &
Suppliers Services Passengers Tourism
Aircraft Insurance Business Travelers Travel Agents
Financing Tourist Attractions
Engines Leisure Travelers
Conferences and
Electronics Distribution
Conventions
Computers Telecom
Hotels
Chemicals Maintenance
Restaurants
Fuel Retailers
Induced
Costs
Lower Lower Decreased Productivity Lost
Sales Sales & Weaker Relationships Revenue
Airline Related Statistics
The total economic impact of the airline industry is
approximately $900 billion or 9% of the U.S. GDP.
Singapore Airlines
Geographic Locations, National Strategies, Shrewd Management and
Leadership in IT, Competitive Strategies
Southwest Airlines
A U.S. carrier success story.
Commuter airline that concentrates on city pairs.
(Average flight is 541 miles and takes about one
hour)
CEO Herb Kelleher, a Connecticut attorney turned
Texan, had the best labor relations in the industry
and an excellent company culture.
Lowest cost structure in the industry.
31 years of consecutive profitability
Why Southwest is Successful
1. The success of Southwest starts with the following
three important factors: 1) Focus, 2) focus and 3) focus.
Warren Buffett
Charles Lindbergh's
Transatlantic Flight
By the end of 1949, PSA was operating two DC-3s and had
carried 15,011 revenue passengers over 321,112 plane miles.
The fact that low-cost carriers have been able to mature this
far says as much about what's wrong with the majors as it
does about what's right with their low-cost counterparts,
and begs the question: does the underlying strategy or
business model employed by the large hub-and-spoke
airlines still work?
Analysts and other industry observers believe it does, but to
function properly carriers must reduce their costs and
restore the balance between supply and demand.
Benefits of Information Systems
to an Airline
1. Convenience to Customers.
2. Knowledge of Customers.
3. Providing a foundation for other
systems.
4. Building a base for other businesses.
Computer Reservation System:
Business Traveler Choice?
Impact on constituents.
International routes.
Continuing Concerns
1. Fuel costs
2. Decisions regarding passenger services like
whether to charge for food, the need for more
electronic capabilities.
3. Upgrading aircraft.
4. Route strategies.
5. Union relations.
6. Relations with travel agents.
Needed for the Industry
1. Changes in tax laws as they relate to airlines.