Jet Blue Airways - Case Study Example

Jet Blue Airways In a competitive market, for a provider to be successful they would need to have an edge above competitors. This edge is acquired by either offering a good or a service that others do not offer; offering the same goods or services as they do but differently; or by offering value added services that competitors do not offer. In a volatile market however, flexibility to changing situations is even more important than all other competitive strategies as it ensures that the business in question will adapt more easily to market fluctuations without unnecessary and avoidable losses. Trends in the US airline industry and their impact to company strategies The US airline industry was undergoing many and varied changes that an investor was quoted saying that it was better to stash ones money under the pillow than invest in the airline industry. This is because airline fortunes change quite quickly and by large margins that if one made a profit, it is appealing but a loss if incurred, it is devastating. There are many airlines competing in the US market most of which register losses for years. This has proved difficult especially for companies with limited resources that compete with those with enough resources to afford less travel charges for customers and higher pay packages for employees. These two factors result in mass exodus of customers and staff from poor performing airlines. The more financially able firms were also the ones that could offer high quality service, more value addition services and subsidized rates. Aviation colleges were not graduating enough pilots and other airport staff to cater for the high demand in this industry. Thus, the airlines that could not afford the high cost of hiring more staff had to do with grounding their planes since there is an official limit of hours that an employee should work per day. The high number of airlines in the US causes congestion in the JF Kennedy International Airport (JFKIA). Congestion results in delays and flight cancellations that in turn resulted to loss of customers for airlines who had no alternative strategies for dealing with these inconveniences. Airlines undergoing financial difficulties could only obtain limited financial assistance from well-off multinationals since the law required that a Non-US company can only have a maximum 25% stake in a US airline. No US airline could obtain foreign financial assistance beyond 25% of its value. The only other option left for these companies were mergers and cost cutting especially with the steep rise in cost of crude oil and by extension, jet fuel. Strategic Intent Jet Blue had planned to expand mainly by increasing the number of destinations that it had direct flights. This was achieved by identifying an alternative hub since JFK Airport was overly congested. In addition, the company provided discounted services that included low fares, snacks during flights and speedy clearance to travel. Value addition was another strategy used to attract customers mainly by offering services like private massage, manicure, hair styling, a children play area and a big screen TV. Jet Blue put these fine details into consideration and they paid off well making customers want to seek their travel services. Financial Objectives Before offering low cost services, the company had to cut down its operation costs. First, it bought economical planes for its fleet by replacing Boeing 737 with Airbus A320 that is easier to operate and maintain. Second, it used IT to cut operational costs by use of Open Skies software to manage internet bookings, electronic ticketing and revenue management. Use of IT also included phone bookings and use of PayPal to pay for their tickets. These strategies worked well for Jet Blue as it continued expanding at a faster rate than competition. Jet Blue had its staff assist in areas for which they did not specialize in and this enabled reduction of operational costs by not hiring extra staff. It can therefore be said that Jet Blue succeeded in applying these financial and operational strategies successfully as they were used during the period that the company experienced exponential growth. However, these strategies did not work well in the end as they did not cushion the company against the harsh wave of financial recession. Strategic Elements of Cost, Organizational Culture, and Human Resource Practices The company was organized such that customers benefitted from the core company values of safety, caring integrity, fun and passion. These values made both customers and employees feel that they were an active and vital part of a healthy and effective system. The company raked in considerable profits while employees received satisfaction, value and other benefits. The Human Resource made employees, passengers and vendors feel special and important by referring to them as crewmembers, customers and business partners respectively. This ensured that company values become an integral part of the company’s Human Resource Management achieved in the three core functions of the HR department; hiring, training and paying. During the hiring process, recruiters ensured that after sifting through the multitude of resumes received, they ended up recruiting team players. To supplement the shortage of graduates Jet Blue collaborated with universities to train pilots who were then absorbed into the system. In the period that operating costs spiked due to rising jet fuel prices, the company responded by freezing its hiring to save on costs. All in all, these strategies, though they did not cushion Jet Blue from making losses, they played a huge role in keeping them in business when many airlines were closing up or being declared bankrupt. Jet Blue opened a university to instill leadership skills into employees. Jet Blue University was started when the company got into financial complications due to poor management Though the company paid its employees at much lower rates compared to other airlines, it provided them with better health coverage, ensured they were on the profit sharing plan and they had elaborate and workable retirement plans. All these ensured that not only were staff well qualified for their jobs but they also felt personally responsible the success of the airline (Rovenpor and Michel 2007). Strategies for 2008 And Beyond Jet Blue management by 2008 had learnt a great deal from the recession and it came up with new strategies to reduce costs. Reducing the total operational costs has the effect of maximizing profit and minimizing losses. Secondly, the company’s spending was to ensure that company assets were used maximally but sustainably. The third strategy in the new era was market specialization coupled with gradual air fare increase. The fourth strategic plan was to create packages that would attract business travellers mainly from the corporate world because corporations have more to spend compared to other businesses and once a working relationship has been formed with them it can be sustained for years. The fifth strategy was to attract strategic partners especially those that would ensure the company survived hard economic times. The final strategic plan was to increase ancillary revenues to supplement what was earned by the main business. All these strategies work if applied to the letter especially the last one due to the limitless possibilities it represents especially if the management remains innovative and focused. Reference Rovenpor, J., & Michel, M. (2007). JetBlue Airways: A cadre of new managers takes control. Manhattan College. Read More