Jetblue Airways: Managing Growth Case Analysis

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Threat of Substitute: As the distance travelled decreases, the threat of substitute increases. This is due to the fact that there are more options to choose from in terms of transportation, including cars and buses. Differentiation operating strategy is JetBlue’s best approach to resolve this threat. For example, even though JetBlue moderately lower fare prices, the company was still be able to assign satellite TV on individual screens in every seat for A320. Passengers’ comfort was always prior taken into consideration for E190 as well. It’s worth noting that; however, JetBlue’s policy of avoiding flight cancellations should be changed. Otherwise, it will definitely lose some business passengers and hurt its performance and reputation. The threat of substitutes is obviously high.

Degree of Rivalry: Airline industry has always been in full of fierce competition. JetBlue focused on LLC segment by product differentiation to compete with other airlines. Competitors never stop looking for other advantages in attracting and retaining passengers from one another. Airlines usually have many players, even if the industry experience minimal growth competition, the airlines will still compete with each other for passengers to keep strong financial performance. Bankruptcy protections for unprofitable airlines lift rivalry higher.

Next I will continue external analysis by demonstrating the “PESTEL” Model.

PESTEL Model

Political Factors: The industry is influenced by political factors greatly, because they affect passengers' confidence and expenditure behaviors directly. For example, the 911 terrorist attacks led to the domestic airline yields dropped almost 20% and brought huge loss to the entire airline industry. The 911 incidents showed the defects of the airline on emergency management, and let them aware of the importance of the passenger’s safety thereafter.

Economic Factors: The industry is also impacted by economic factors. On one hand in peak tourist season, there is a greater demand for travel. On the other hand, during downtime, the demand will drop sharply and the competition in the industry will rise. Although airlines will always favor peak season, predict and track economic trends could help them operate more effective and efficiency.

Social Factors: Social factors connect people’s daily life everywhere, and the airline industry has no exception. Airlines are always under the supervision of social media and public citizens, so that make JetBlue keeps crisis consciousness all the time, constantly improve the service quality and make outstanding contributions to the society.

Technological Factors: Technological factors affect the industry either. The development of high-tech brought both opportunities and threats for airlines. The online reservation system that provided by JetBlue not only brings convenience to passengers, but also save a lot of time for both parties. However, the online bookings let customers could compare prices along different airlines, which potential threat JetBlue’s profit margin.

Environmental Factors: The industry is also influenced by environmental factors. During the six-day event of Valentine’s Day Crisis, over 1,100 flights were cancelled due to the unexpected weather conditions that impacted more than 131,000 passengers during that period. Undoubtedly, environmental factors affect profits a lot.

Legal Factors: Legal factors may affect the industry in implicit ways. The deregulation of the airline industry in 1978 gave an opportunity for new companies to enter the market. In addition, the new point-to-point system that was developed by Southwest Airlines attracted many new passengers at that time. As of October 2006, five major US airlines were still operating under Chapter 11 bankruptcy protection. Without legal protection, some airlines might already disappear.

Internal Analysis

In the process of the strategic plan and implementation, enterprise must know competitors as well as themselves, in order to achieve the final victory. Therefore, the enterprise should not only carry on objective analysis of external environment, but also conduct subjective internal analysis. Internal analysis is the extension of enterprise operating activities and strategic vision for JetBlue. The purpose of internal analysis is to find its strengths and weaknesses based on current resource and capabilities, especially competitive advantages. Here I will also use two classical theory models for JetBlue’s internal analysis: VRINE Model and Value-Chain Analysis. Let’s first look at VRINE Model.

VRINE Model

Valuable: JetBlue’s ability to distinguish itself from competitors through its unique resource and capabilities provide the company great value in the niche market.

Rare: JetBlue offers rare service to the passengers of A320 aircraft such as adopt LCC (Low Cost Carrier) as well as assign satellite TV on individual screens in every seat, even in short-haul routes.

Inimitable / Non-Substitutable: JetBlue actually has very unique resources and capabilities that competitors are difficult to imitate. Through continuous learning experiences and improving service quality, the competitive advantage of JetBlue will always lasted. Although some passengers prefer cars and buses on short trips, other airlines may also replace it for long-distance travel; JetBlue can always attract customers through low fares and comfortable service. In a word, it is all based on customers' preferences.

Exploitable: JetBlue could exploit since the domestic market continues to grow. Domestic market still has room, especially related to medium-sized cities, which gives JetBlue the potential opportunities for future long-term growth.

Next I will continue internal analysis by conducting Value-Chain Analysis.

Value-Chain Analysis

Primary Activities: Primary activities have 5 components: Inbound logistics, operations, outbound logistics, marketing, and service. The inbound logistics which involved online booking allow JetBlue have greater control on aircraft seat management. For operations, JetBlue adopts LCC (Low Cost Carrier) strategy to keep the lowest costs. In addition, due to the booking agents work part-time at home, outbound logistics costs are also low. For marketing perspective, the introduction of JetBlue’s Customer Bill of Rights after the 2007 Valentine’s Day Crisis was a successful story. The regulation might make the company loss profit in short period,