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    The student provides answers to 4 questions about the US airline industry. For question 1, the student explains that low profitability is caused by economic fluctuations, fuel and labor costs, and new low-cost competitors. For question 2, the student identifies larger carriers like United, Delta and American as one strategic group that competes differently than smaller carriers. For question 3, the student says the cyclical performance is due to economic fluctuations and increased competition from new entrants driving up demand for scarce resources. For question 4, the student recommends strategies like decreasing fares, increasing loyalty programs, and merging with other airlines to reduce competition

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    The student provides answers to 4 questions about the US airline industry. For question 1, the student explains that low profitability is caused by economic fluctuations, fuel and labor costs, and new low-cost competitors. For question 2, the student identifies larger carriers like United, Delta and American as one strategic group that competes differently than smaller carriers. For question 3, the student says the cyclical performance is due to economic fluctuations and increased competition from new entrants driving up demand for scarce resources. For question 4, the student recommends strategies like decreasing fares, increasing loyalty programs, and merging with other airlines to reduce competition

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    115 views2 pages

    Case Study No.1

    Uploaded by

    Marjon
    The student provides answers to 4 questions about the US airline industry. For question 1, the student explains that low profitability is caused by economic fluctuations, fuel and labor costs, and new low-cost competitors. For question 2, the student identifies larger carriers like United, Delta and American as one strategic group that competes differently than smaller carriers. For question 3, the student says the cyclical performance is due to economic fluctuations and increased competition from new entrants driving up demand for scarce resources. For question 4, the student recommends strategies like decreasing fares, increasing loyalty programs, and merging with other airlines to reduce competition

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    of 2

    Rafael Luis C.

    Pamonag November 6, 2020


    BSBA-3E TTh(6:00-7:00pm)
    CBM130:Strategic Management
    Case Study No.1

    1. Conduct a competitive forces analysis of the U.S. airline industry. What does this analysis
    tell you about the causes of low profitability in this industry?

    Answer:
    The causes of low profitability for this industry vary. Before the addition of lower
    costing entrants into the industry the reason for low profitability was the fluctuation of the
    economy and the costs of fuel and labor. As lower priced entrants entered the industry the
    price of the airlines was effected greatly. With lower costs now being a variable the airlines
    that once dominated the industry were forced to adjust to the competition.

    2. Do you think there are any strategic groups in the U.S. airline industry? If so, what might
    they be? How might the nature of competition vary from group to group?
    Answer:
    Yes, I believe there are strategic groups within the U.S. airline industry. I think the
    largest group would be those companies that are larger, like United, Delta and American.
    These companies have different strategies than the smaller companies because they are
    required to use their profits in a different way. Because of the vast difference in company
    strategies the competition would vary. Before the entrants became a part of the industry there
    would be a higher competition level between the larger companies. However, after the
    smaller companies joined the industry the completion wasn’t just between the larger
    companies but between the larger companies and the smaller companies. When it comes to
    the competition between the larger companies it would be more for the acquisition of the
    smaller companies. However, when large companies and smaller companies engage
    competition
    3. The economics performance of the airline industry seems to be very cyclical. Why do you
    think this is the case?
    Answer:
    There are two reasons why the performance of the airline industry seems to be very
    cyclical; the first is that the economy fluctuation plays a great deal into the success of the
    airlines, the second is that the addition of smaller companies effects the economics
    performance. With the fluctuation of the economy comes increases and decreases in the
    prices of resources such as jet fuel and maintenance. When smaller companies join the
    industry it causes a new cycle to begin, not only are there fluctuations in the economy but
    there is competition for the resources that are already available. With more companies
    involved in the industry there is more demand for the already scarce resources.

    4. Given your analysis, what strategies do you think an airline should adopt in order to
    improve its chances of being persistently profitable?

    Answer:
    I feel the best strategy to persistently be profitable would be to decrease fares as much
    as possible whilst adding incentive programs for consumes in order to increase sales. There
    are many airline companies that have teamed up with or bought out credit card companies in
    order to include them in their incentive programs. Another strategy is to merge companies
    with another airline company to decrease competition and to increase profitability by having
    two companies together.

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