Strategic Analysis of the Impact of Low Cost Carriers on the Competitive Position within the EAI: According to the Bowman’s strategy clock, Easy-jet and Ryan Airline can be classified as implementing a low-cost and differentiation strategy. Both these airliners have tailored their operations in a way that have allowed them the luxury of implementing these two strategies…
Thus, it has become imperative for airliners to re-engineer their operations to fit the requirements of strategies like low-cost and differentiation. According to the Porter’s five forces model, the industry situation has led to a decline in the attractiveness of the industry for new entrants. These new entrants would come up with some sort of an edge to beat the entrenched airlines of the industry. The industry is also overseeing a period in which the bargaining power of suppliers and customers both are high. Customers are demanding additional benefits at low cost, whereas suppliers like Oil companies are seeking high prices for fuel. The dynamics of the industry are such that the rivalry amongst competitors is high. Since the customer base has shrink as a result of the world recession, therefore airlines are competing to attract customers towards them by offering differentiated services. Moreover, recent investment by the government on the infrastructure of railways and road network has lead to a situation in which threat of substitute is high for this industry. The results of these two strategic analysis tools show that the airline industry is overseeing a period of unprecedented level of competition and operating environment. Therefore, each airliner needs to come up with operational excellence that allows it to run low cost operations, which has become imperative for the industry participants. How the Airlines are maintaining low cost operations: Airlines, which have adopted a low cost operational mode, have been very stringent when it comes to spending their resources. They have expanded their operations in to new regions only when they were confident that they had the resource to support this initiative. These carriers never go into a head-to-head battle with long distance carriers. Moreover, these airlines try to keep their debt position very strong by not taking too much debt to fund their fleet operations. These airlines have designed an operational method that allows them to be short haul, high frequency, and low fare and point-point carriers. In addition, these air carriers have identified a market niche that is a best fit to their style of operations, which enables these airlines to serve them efficiently and economically. Most importantly, these airlines have ripped away the costs associated with extravagant customer servicing. Such costs are associated with frills, lunch and ticketing material. All such costs have been taken away from the operations of these airlines. Conclusion: Harsh economic conditions coupled by rising cost of fuel have made it imperative upon airlines to streamline their operations. Airlines have to come up with a cost structure that is effective and efficient. This cost structure should be incorporated in the operational design of these airlines so that the airline can generate profits from its operations. In this regards many airlines have adopted a low cost strategy under which they have taken certain actions that have been discussed above. Strategic Evaluation of the Strategic Options for Future Growth for the EAI Companies: Recent economic crisis have led airliners in a messy situation. These airliners are now facing a situation in which they have revenues declining at an exponential rate. Moreover, ...
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