The airline industry was established many decades ago with the arrival and departure of many airline companies. Although there were not a lot of them, some early entrants still do exist today and are holding a stable position in the market despite the volatility of the airline industry. According to Porter (Thornton, 2011), the airline industry is known to be one of the least profitable industry by companies due to its “high level of rivalry, high bargaining power of the buyer, high level of substitutes, high bargaining power of suppliers and the high treats for new entrants” (UNCChapelHill, 2013). Hence, it is difficult for an airline to succeed in the marketplace. Porter also stated that by doing something different through a competitive advantage, the company would then be able to provide a unique factor to the customer (UNCChapelHill, 2013). This is because, through this competitive advantage, companies would then craft out a strategy, which they will hold dear and execute. The ultimate purpose for a strategy is to ensure that the competitive advantage is sustainable (Flouris & Oswald, 2006) so that the airline company may succeed. Hence, through this statement, we can agree that a sustainable competitive advantage is a crucial factor for an airline to succeed in the marketplace.
Having a competitive advantage allows the organization to be ahead of its rivals. Flouris & Oswald (2006) stated that having a core competency is important to competitive advantage and there is also a need for companies to make full use of these competencies and derive benefits from it in order to achieve a sustainable competitive advantage. Although core competencies are important towards achieving a competitive advantage, trade-offs are as important in order to keep the competitive advantage sustainable (Flouris & Oswald, 2006 & Porter, 1996) and gives the company a “unique position” in the marketplace, allowing them to be more advantages than their fellow competitor as they are able to provide a “unique value” to their customers. As stated by Porter (1996), trade-off will allow firms to have limits and at the same time protecting the firms form “repositioners and straddlers”. The former are usually companies that do not hold a strategic position and are always changing its position in the market, without a clear concrete strategy, while the latter are companies that do have a strategic position and keeps its position in the marketplace but at the same time, engage in new positions in order to gain benefits from it. Continental took a straddling position when it established Continental Lite, by copying the strategic position of Southwest Airlines (Flouris & Oswald, 2006). Continental had also shown us the importance trade-offs in order to achieve a sustainable advantage, leading to success.
Competitive strategy is derived from the competitive advantage that a company has. As stated by Flouris & Oswald (2006), competitive strategy is where “firms engage in activities that are different to that of its competitor”. Addition to that, in order to succeed in the strategy, there is a need for company to follow one of the three distinct approaches introduced by Michael Porter, namely the low-cost leadership, differentiation strategy or the niche strategy (Flouris, & Oswald, 2006). By using a low cost strategy, the company would keep the cost of operation low without removing the essential requirement. Companies that could charge provide a service that customers deem valuable without much concern in terms of the cost would then choose to differentiate and works towards it to hold a sustainable position in the marketplace. Niche strategy allows a company to place their focus to serve “geographical, customer type or the product line” (Flouris & Oswald, 2006).
Most of the companies all around the world may not have a competitive strategy, but those who do, would most likely focus on only either low-cost leadership or differentiation...
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