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Airline Industry value-curve analysis and strategic positioning analysis

AirlineIndustry value-curve analysis and strategic positioning analysis

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Airlinesare companies that provide air transport services for travelingpassengers and carriage of cargo by use of aircraft. Delta Airlinesis an American company whichstarted in 1924.During the initial years of its operations, this company experiencedtremendous growth through successful strategies. For instance, itmerged with North East Airlines in 1972. However, the companyexperienced tough times such as, in 2003, they made losses and it hadto cut labor costs. (Ireland, Hoskisson, and Hitt, 2008). This paperlooks at the value curve analysis and strategic positioning analysisof a company in airline industry taking a case study of DeltaAirlines.

Value-curveAnalysis

Thisis an analysis tool which allows for comparison of plans and thatwhich is already in place. It involves the determination of what isoffered and what customers really want. This seeks to examine the keysuccess factors of Delta Airlines, which include price, service,destination, time, and innovation. Airlines business strategies haveled to significant success and recognition in the competitive airlineindustry.

Thefollowing are income comparisons of Delta Airlines with some of itscompetitors in the year 2008:

Continental

$ 585 million

American

$ 2 billion

US Airways

$ 2.2 billion

Delta

$ 8.9 billion

Source:WSJ DAL Financial Reports

DeltaAirlines charges a higher price than its competitors. This can beattributed to higher quality service to its passengers. For instance,a wide range of entertainment services to the passengers. Thismaximizes returns to the company while maximizing value to thetravelers. The following is a comparison of its price with that ofthe competitors from Atlanta to New York, USA in November 2016:

Delta airlines

$207

American

$154

Frontier

$163

Spirit

$157

United

$164

Source:FareCompare online

Thecompetitiveness of the airline industry makes it necessary to keepabreast customers of their needs, expectations, and preferences.Delta Airlines performs well in customer satisfaction as revealed byresearch such as JD Power 2016 North America Airline SatisfactionStudy. Delta Airlines covers more destinations in the world than itsrival airlines such as United Airlines, JetBlue, and SouthwestAirlines.Thismeans ithas a greater market share, making more profits than the rivals. Forinnovation, the company teamed up with Westin Hotels to create‘Heavenly Bed’ pillows and comforters that made their passengersfeel more comfortable (Kollau, airlinestrends.com 2013).

Strategicpositioning analysis

Acompany achieves superior profitability in its industry by attainingeither higher prices or lower costs. (Porter, 2008). CostLeadership-Delta Airlines sells its tickets at a higher price thanits competitors. This is justified by the high quality of itsservices compared to the rival firms. As a generic strategy, thecompany relies on economies of scale where it has extensive flightsto many destinations across the world. The airline company is able tocharge higher prices without losing its customers by offeringhigh-quality service which creates brand loyalty.

Differentiation

DeltaAirlines is known for brand legacy and its coverage of manydestinations. It also operates many flights at a time between twodestinations than its rivals. For instance, it covers moredestinations across the world than any other US airline and also ithas many domestic flights in the US. Furthermore, it offers premiumin-flight offerings and reward programs for people who fly frequentlyusing the airline.

Costfocus

TheCompany has minimized costs by eliminating unnecessary expenses onits flights such as the use of plastic cups.

Differentiationfocus

Dueto the profitability of international business, the company hasinvested more in international expansion than in domestic growth.

Conclusion

Properuse of analysis tools such as value-curve analysis and strategicpositioning analysis is vital for airline industry companies. Thestudy of airline firms, specifically Delta Airlines, has led to thededuction that this analysis helps in identifying areas which needimprovement and corrective action taken in an organization foroverall success.

References

JDPower 2016 North America Airline Satisfaction Study. Retrieved from

https/www.jdpower.com

MichaelE porter, 2008 (book) On Competition, Harvard Business Press

RaymondKallou on 30 December 2013 on airlinetrends.com Best airline productand service

innovationsof 2013 (article) retrieved from https/www.airlinetrends.com

RDuane Ireland, Robert E Hoskisson, Michael A Hitt 2008 (Book),Understanding Business

Strategy:Concepts and Cases.

RickSeane How to find cheap flights, August 2016 retrieved from https/

www.farecompare.com/travel-advice.

WSJDAL Financial reports, 2016 retrieved fromquotes.wsj.com/DAL/financials