Airline Industry Competition Discussion

1. main question:

Navigating the various websites for low fares, avoiding fees for checked bags and priority seating, and finding the right flight schedule can be a real challenge for the average airline passenger. The complexity of options and sources for purchasing a ticket have expanded significantly in recent years, and the outlook for the future is likely to be more complex. This is because new search sites are becoming available and some airlines are seeking more control over where and how tickets are purchased.

According to an independent research firm, the airlines want passengers to buy tickets based on value and not on low prices; they do not want passengers to comparison shop. One major airline even announced that it wanted to deliver fare information directly to customers and bypass search systems like Expedia and Travelocity.

In no less than 200 words, explain why you think competition in the airline industry is a cost leadership or a differentiation type of competition.

2. reply two classmates:

According to Blocher et al. (2019), cost leadership refers to a competitive strategy in which a company can stand out among its competitors in producing products or services with the lowest cost. Differentiation is defined as a competitive strategy in which a company outperforms by developing and maintaining a unique value for the product or service as perceived by its customers. The airline industry is a highly competitive, which makes the price a very important factor with respect to the decision making of customers. As such, it is obvious that the competition in the airline industry is concentrated on cost leadership for the following reasons. First of all, the demand for differentiated services for travelers is relatively low compared to other industries. There are first and business classes offered by each airline for them to choose if they would like to have better services. Secondly, taking a flight to travel is costly than other options and therefore travelers would like to choose flights with low prices. Third, the facilities required for airline companies are quite common and unified for all airline companies, which is hard to make differentiation in terms of improving customer experience. Also, the travelers focus remains with prices due to the short length of trips by air travel in general.

The cost leadership is aimed at a broad market segment and is based on the strategic advantage of low cost. The company with lower costs can create a competitive advantage in the marketplace. because they offer customers a lower price and can occupy more sales and market share. The differentiation strategy is that companies aim to serve a broad segment and offer products and services which are unique (Duhaime, Stimpert & Chesley 2012).

I think the airline industry is more proper to adapt to the differentiation strategy. first, the airline is an industry with high entry threshold and can calculate the reputation for long term business. And the cost of the route of the airline is very hard to decrease. Another cost like service is also difficult to be categories into several options in order to save cost. Moreover, cost leadership is most likely to be effective in those industries in which the reputation are less than its price. for example, if the airline launches different price tickets on different service. the cost of the service employees is almost the same.