Professional Management Skills Assessment - Essay Example

Introduction This paper is an analysis of the case of Jet Blue Airways, focusing on the key management factors, or strategic considerations the company has undertaken in order to succeed. The different way Jet Blue Airway has come as a startup proved it is not like any other startup company in the airline industry. Body/Analysis Jet Blue’s Key Management Factors Key strategic consideration: Vision Jet Blue, like any other startup company, started with a vision. When David Neeleman dreamt of an airline that would offer “[…] high quality airline services at affordable fares, (Gittel & O’reilly, 2001, p.2)” it was the birth of the idea that would be the starting point for everything. With David Neeleman started out his career in the airline industry, he had learned and had become accustomed to the ins and outs of operating an airline. While spending time with airlines such as Southwest after his first entrepreneurial venture, Neeleman saw the immense opportunity in the industry in the form of the growing dissatisfaction in the market due to poor service and high fares. Coupled with the information that was publicly available regarding the operations related to the industry, he came to justify the dissatisfaction as an opportunity by looking at its market potential. Neeleman then saw that there was sufficient demand to back up this opportunity. The vision of an airline with high quality service and low fares was not entirely what Jet Blue was about when Neeleman conceived the idea in his mind. It was built on the Southwest model, only that with the use of technology it would aim to differentiate itself, as well as its way of doing things as a player in the airline industry. According to the founder, this new airline would “leverage technology for safety and efficiency and with a commitment to people. (Gittell & O’Reilly, 2001, p.3)” Key strategic consideration: Marketing The overall market for the airlines most especially in New York City as stated in the case, experienced dissatisfaction given the current level of services at the price level in which they are offered. Due to this, an enormous opportunity for an airline that could offer lower costs for air travel with high quality service awaited as a promise and reward. This one Neeleman had observed and taken advantage of using of information technology as one of the differentiating factors. Jet Blue’s marketing was strategic in a way that it aimed to support the goal of the company to become a different sort of player in the airline industry. For one, in line with Neeleman’s vision which was to provide high quality service at affordable fares while improving the experience of customers with the use of technology, Jet Blue wanted all of its efforts to be directed towards the customers, as it claims to be a company of people who are “customer advocates,” in the founder’s term. The airline industry can be segmented using many variables. One of these includes segmentation by usage, which segments the market into business passengers and leisure passengers. Another way of segmenting the market is through the benefits: in terms of the level of the quality that is sought, the prices of the airfare, the routes that the airline offers etc. Jet Blue uses all these in segmenting its market and choosing its target. Thus, Amy Curtis McIntyre described Jet Blue’s target market as “…people who aren’t going to travel, people who are disgusted with their current choices, people who would drive, or people who wouldn’t go at all (Gittell & O’Reilly, 2001, p.4).” With this, Jet Blue’s target market appeals to the business segment of the market, or people who would look at air transport as really one of the immediate alternatives for transport. In order to frame the benefits that the target market would desire of Jet Blue, in Neeleman’s words, the new airline positioned itself as follows: “We are a kind of new low-fare airline, with deep pockets, new planes, leather seats with more legroom, great people and innovative thinking. With our friendly service and hassle-free technology, we’re going to bring humanity back to air travel (Gittell & O’Reilly, 2001, p.3).” In order to understand more of Jet Blue’s positioning, let us look further at what the brand Jet Blue stood for—the promise of Jet Blue as well as its personality and values. The new airline promised safety and efficiency with the use of technology; technology would enable the company to improve passenger experience that aimed to add value. Being the first “paperless” airline, as apparent in its sole use of e-tickets, it incorporated technology in order to make customers’ travel affairs go on more smoothly. Jet Blue’s personality was framed in the set of five values that the company prioritized in. According to the company, safety was the primary consideration that Jet Blue stood for. Apart from safety, the set includes such values as caring, integrity, fun and passion. In order to reinforce well a brand, its set of values should be embodied in the corporate culture, in which employees would be expected to prioritize on when dealing with customers at a touch point. In the strategic sense, this intended set of values intended to promote consistency between the brand’s promise and what it delivered to its customers. By adopting a set of values, which in essence comprised the brand personality, Jet Blue employees, with the corporate culture will reinforce the brand essence when interacting with employees at a point of encounter. Jet Blue knew that in order to create value and reinforce its brand image, the front-line people who deal with customers were the key. As would be further explained later, Jet Blue cared for its employees very well in order for them to give emphasis on being customer-oriented when doing their jobs. This had helped increase the brand equity of the company in the process. Key strategic consideration: Human Resource Management In order to reinforce its corporate brand image, Jet Blue knew that the key would be its employees. As stated in the case, Jet Blue’s success could be mainly attributed to the excellent human resource practices that enabled the company to do well in the market. Jet Blue’s human resource management was strategic: it aimed to support the overall goal of the company which was to create a new airline based on its positioning. With this, human resource management had played as a key strategic partner in areas not limited to recruitment, selection and compensation of people. Most of the company’s success was attributable to its people who reinforced the image of Jet Blue to customers by being excellent on their jobs, thus delivering what the brand had initially promised to the market. This positioning, as framed by the set of five values of Jet Blue was a product of the initiative of its Executive Vice President for People, Ann Rhoades. During a top management meeting, Rhoades encouraged fellow executives to come up with a set of values that would serve as guide for the company—something the company would look at as its personality and what it would aim to be known for as a brand, or corporate entity. The result included safety, being the airline’s top priority, followed by the four values that would be given priority equally—caring, integrity, fun and passion. In order to reinforce these values, Ann aimed to form it in the corporate culture by recruiting and selecting people that would likely reinforce these values through their behavior and attitudes. This was a crucial strategic consideration—customer experience were partly influenced by how they deal with front-line employees of the companies; how these employees would behave and serve a customer would give the company a certain impression on the mind that customer. Rhoades designed jobs in such a way that teamwork would be given emphasis within the environment. With the help of the values, the Executive Vice President for people aimed to come up with “the best place to work in town (Gittell & O’Reilly, 2001, p.10).” This was also apparent in adopting a policy contrary to probationary policy of most companies, in which Jet Blue would provide benefits to employees from the first day they were hired. Apart from key human resource practices such as recruitment and selection, she made compensation policies that were consistent with the company’s goals and values—customized compensation plans. She recognized that in order to keep employees happy, human resource departments would have to know that there are different needs and wants certain groups had as regards their compensation. She knew that in order to fill in and attract the best people, the compensation packages should be tailored to them in such a way that they reflect the employee’s preferences—some would give preference to current compensation while others would emphasize on retirement. Thus, preference for stock options was also available to some jobs such as for the pilots. Apart from keeping employees satisfied for a fun place to work, Jet Blue’s customized compensation policy was designed to keep the firm union-free. The company knew that until the time its employees would remain satisfied and happy, it would remain union-free. Key strategic consideration: Operations In line with its positioning as an airline that emphasizes safety and efficiency, as well as customer experience, by the use of technology, Jet Blue’s operations strategy was to be the first “paperless” airline. The company intended to remove the traces of paperwork for pilots in matters such as flight planning and aircraft maintenance. Jet Blue, to live up to its positioning, gave pilots laptop computers “into which was loaded all the required flight and operations manuals, software to do the load and flight planning, and communications software (Gittell & O’Reilly, 2001, p.8).” In traditional airlines, all these paper works were done by a number of people. By cutting down all these paperwork, not only did Jet Blue increased its efficiency, it enlarged and enriched the job of the pilots by giving them additional responsibilities, which in turn added to their motivation. In order to keep its promise, Jet Blue aimed for better than average targets for operational performance, and it impressively did. As for the complaints, the Department of Tourism noted of its having 0.6 per 100,000 passengers, as compared to 2.99 for major competitors. It also had an on-time record of 80% as compared to 74% of some of those of the largest US airlines. As Jet Blue strived to live up to its promises, it did deliver better than average performance as apparent in its operational measures. Low-cost positioning at a period of fierce competition David Neeleman had a long experience in the airline industry, long when he started his first venture with Morris Airways until the time he quitted Southwest and became consultant with other foreign airlines. This experience gave him an insight about the current state of the market: while the competition was fierce, and there were a number of players in the industry, an opportunity, in the form of dissatisfaction was neglected by the other players. One airline who could address the growing dissatisfaction due to poor airline service and high fares would make the difference—as the opportunity was proven to be backed up by strong demands. Neeleman knew he could address this with the help of information technology. By looking at the market, Neeleman knew the places where people wanted to fly. And looking at these places, Neeleman knew that people who would likely be his passengers were passengers that would find air travel a direct and immediate substitute for land travel—through lower cost air fares and high quality service. Noticing this gap, Neeleman knew this could be a place to seize for Jet Blue. The low-cost air travel that Jet Blue was able to offer in order to address the opportunity—the demand for more affordable fares, was made possible by technology which induced efficiency. Low-cost positioning at a period of fierce competition was made possible by Jet Blue’s careful analysis of the market, choosing a segment that was underserved, satisfying that segment of the market by giving them what they wanted at the price they were willing to pay. Neeleman knew that this was what customers wanted, and by sticking to it and delivering it, Jet Blue stood a success amidst competition. Information Technology: A strategic factor to create value As discussed earlier, information technology played a key part in Jet Blue’s positioning as a new airline. Information technology was a key to Jet Blue’s success, as it was a key ingredient to improve customer experience, induce efficiency and boost the productivity of its workforce while living on its promise. In order to see the value information technology had provided with Jet Blue, let us look at the value chain of the customer. From reservation up to utilization of tickets, the company relied on information technology. Customers can purchase e-tickets, which aimed to minimize the queues the customer had to encounter. Reservation agents worked from home as they were connected by a system of computers and required to work for a minimum of 20 hours a week. Then flight planning and aircraft maintenance scheduling, done in traditional airlines with enormous amounts of paperwork, were done by the pilots themselves with the help of laptop computers that contained all the necessary information. Jet Blue’s positioning was to be a different airline, and to deliver this difference, uniqueness it capitalized on the use of technology. With technology, it not only aimed for efficiency, but for the overall course of doing things within the company. Jet Blue’s Top Management One of the factors that contribute to the success of Jet Blue was Neeleman’s ability to choose the best people in the industry in order to support his vision. The composition of the top management was especially important. In terms of character and competency, we can look at Jet Blue’s top management in order to assess its strength. As for competency, the founder had been in the airline industry for some fifteen years at the time Jet Blue started—started off as an entrepreneur in the airline industry and succeeded in selling its business to Southwest; had held a key position in an airline such as Southwest; and had been a consultant to a Canadian airline West Jet. Dave Barger, the company’s president and chief operating officer had spent some years in the New York Air and ten years running a hub of Continental Airlines. Thomas Kelly, executive vice president and general counsel had been with Neeleman since his days with Morris Air and Open Skies. Jack Owens, the chief financial officer of the company had spent 14 years as treasurer of Southwest Airline. And Ann Rhoades, executive vice president for people had a considerable experience in service businesses, and spent years in Southwest and the airline industry for. This alone proved the competency of Jet Blue’s top management. With the veterans of the industry, who knew the ins and outs of operating and managing an airline, who saw the changes that took place in the industry over the course of the years, who witnessed mistakes that had taken place which made the other airlines fail in their operations—with a team with such track record, Jet Blue could count on their immense experiences. But apart from competency, the character of the top management team—those who believed in the vision Neeleman had about a new airline with a distinct set of values, had contributed to the harmony of the company and creation of a strong corporate culture to support the company’s image. $130 million venture capital funding for a startup airline According to Neeleman’s original business plan, the estimate of its capitalization Jet Blue needs to spend for it to start is at US$30 million before the business becomes cash flow positive, which can be used further for reinvestment. However, Neeleman believed that for his airline to thrive, he needed to have a good start about the funding, which he was able to pool through venture capital. Neeleman’s vision could very well stretch into the future, which could be one of the reasons why he needed as much as $130 million from the start. For one, Neeleman intended Jet Blue to grow in a much faster rate that it would need more accessible funds without going through the hassles of getting public or large interest payments from banks and other ways of financing. It had established equity well enough, so it would not have any trouble with financing as it intended to grow at a certain rate. Neeleman said that an airline had to get the funding right at the start—deep pockets, as he stated. In his experience with the airline industry, it could be possible that the main reason why startups either face bankruptcy or sluggish growth during the subsequent years was lack of access to funds sufficient enough to sustain fast growth of the company. A very capital-intensive industry such as the airlines would need huge amounts of capital for a single purchase of equipment such as plane, but the salability of these planes as assets to be liquidated when the firm would get into trouble made it less attractive to investors such as banks; thus, Neeleman should know that the only way to get financing would be to more than enough financing from the start. In any way that the company may need to borrow funds for further expansion, it had established a good deal of equity already so as not to encounter trouble in its financial position in the future. Factors that differentiate the case There are a lot of factors that differentiates this case from any other cases: the nature of the case, given that it is an entrepreneurial venture; but it was a huge success as an entrepreneurial venture—it started big, although it all started only as an idea, backed up by the founder’s reputation and track record in the airline industry that enabled him to raise funds to get started. Also, the immense focus on the human side of the business, as well as the management’s expertise in the industry, can be attributed to success. Indeed this case is an entrepreneurial venture. The difference it has with the other cases is that a lot of entrepreneurial ventures start small, then eventually survives the competition, dominates the market, attracts other sources of funding until they become giants. This is different in a way that it is an entrepreneurial venture, but backed up only with a single idea it is already able to pool up funds worth $130 million which intends to go big from the start. The success of the startup is a different success story for a startup, even different for a startup airline. One key factor to this success is the long track record and expertise of the founder, as well as the top management. Being in the airline industry for long, the key people in the top management of Jet Blue are able to learn from the past mistakes of others and knew what to focus on in order for the company’s growth not to be impeded. This strength in the top management team reflects the company’s strategic considerations such as its human resource practices in order for strategies to be carried on, and goals to be translated into reality. The emphasis that is given in the case with human resource management as crucial to any business’s success, especially a startup makes this case different. Recommendations Consider partner airline or continue to go it alone? What I would recommend to Jet Blue is to stick to its target market and give what they want—in which case to continue providing its current services. This does not require the company to consider a partner airline, and enables it to go alone. The main thing about considering a partner airline is the differences in corporate culture, which could significantly affect a customer’s experience and satisfaction level in the process. The company cannot control the experience outside its operations, which can impact the customer experience, and in turn level of satisfaction, therefore I would recommend it to just go alone in order to ensure consistency of its promise. Developing relationship with New York government or seeking to develop relationships elsewhere? The main thing about developing relationship with New York government is that Jet Blue’s target market is mainly found in New York, such as business travelers. One reason for this is that the Jet Blue’s headquarters is situated in New York, and its main market is in the city. Until Jet Blue has saturated this market and in turn looks for other markets with similar customer profile, can Jet Blue develop its relationships elsewhere. The New York government can provide Jet Blue immense help, especially in the period of its fast expansion, in which the company can be a trigger for other forces within the industry. As the New York government appears enthusiastic in helping Jet Blue because of its positioning and its potential to in turn bridge the gap of dissatisfaction in the market, Jet Blue should only develop this relationship as the government is part of the immediate environment of the company, and one of its stakeholders in the process. Conclusion Jet Blue’s success as a startup company had told a different story from other startup stories, even startups within the airline companies. One of the keys to success of the new airline lay on the long track record of the company founder which enabled him to gain trust, and in turn access to enormous funds through venture capital funding even though all he had was an idea. Another key to its success was the strength of its top management—mainly composed by veterans in the airline industry who aspired to create something new, something they long wanted to start which was framed in the vision of the founder, David Neeleman. This top management which was strong in competency as well as character to influence the corporate culture which was to reflect Jet Blue’s image as a brand made strategic decisions that was crucial to the startup’s success. Lastly, by leveraging human resources, or by the emphasis and care of the company for its employees in order to care for the customers in turn had proven to be a significant effort in order for the company’s strategies to materialize into reality. Bibliography Bartol, K., Martin, D., Tein, M., & Matthews, G. 2001. Management: A Pacific Rim Focus. McGraw Hill Company, Australia. Duncan, T. 2005. Principles of Advertising & IMC. International ed. Philippines: McGraw-Hill. Gittell, J. H. & O’reilly, C. 2001, October 29. Jet Blue Airways: Starting from Scratch. Harvard Press: Harvard Business School. Kotler, P., & Armstrong, G. 2004. Principles of Marketing. 10th ed. Philippines: Pearson Education Asia Pte Ltd. Noe, R., Hollenbeck, J., Gerhart, B. & Wright, P. Human Resource Management: Gaining a Competitive Advantage. 5th ed. Philippines: McGraw-Hill. Pickton D., & Broderick A. 2002. Integrated marketing communications. Philippines: Pearson Education Asia Pte Ltd. Robbins, S. 2005. 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