Delta Air Lines is one of the top five domestic airlines in the United States, and amongst the top 20 in the world today. The key to Delta being so successful today is their focus on human relations (Anthony, Kacmar, & Parrewé, 2010). An agricultural extension agent by the name of C.E. Woolman founded Delta. Mr. Woolman was not a financier, so Delta has not historically relied on financial strategies to create competitive advantage (Anthony, Kacmar, & Parrewé, 2010). Delta has had the fewest number of customer complaints of any major carrier for 20 years straight. This excellent customer service could be partial due to the fact that Delta was strongly committed to its employees. With loyal employees and excellent customer service Delta was able to be very competitive in the airline industry and still is today. One of Delta greatest challenge today is differentiating itself from its competitors while cutting cost, but through their continual strong focus on human relations and superior customer service Delta will continue to be amongst the top in the airline industry.
Economic factors: Inflation has increased and the world economy has dealt with financial issues. There is a lot of potential growth in the emerging economies. Airlines merging not only affect those involved in the merger, but also the other airlines that stand to lose market share. Socio-culture: Factor varies among societies. The airline industry serves all kinds of customers. There have been issues with obesity and airlines because of having to purchase an additional seat for being larger. Political-Regulatory factors: Airlines have to consider are security issues because of terrorist attacks and deregulation of airlines. Also, there are fuel regulations to consider (Anthony, Kacmar & Perrewe, 2010). Technological factors: Technology has changed the industry drastically. Travel agencies are completely obsolete because of websites like hotwire, Orbitz and Priceline. Airlines have mobile applications for phones and ipads that allow you to check-in and get flight updates. You do not even need a paper-boarding pass; there are electronic boarding passes. Demographic factors: The airline industry serves customers all over the world. Typically serving adults, even though children fly. Shares of the market are customers traveling for business purposes.
Airline Industry. The airline industry is a major economic and social force. The impact air travel has had on related industries, manufacturing, and tourism is on a global scale. Few industries have created the amount of technological advancement or gained such attention from federal governments. The industry has high and low cycles largely dependent on time of year and socioeconomic factors. The industry is fairly concentrated with only a small handful of majors competitors in North America, but each competitor has attached themselves to joint ventures with numerous global corporations, such as Sky Team, which contains Delta Air Lines. Airlines compete on a global scale, offering flights from Washington D.C to South Africa to Tokyo, Japan. Companies that limit themselves to a certain region struggle maintain a large portion of the market share. The airline industry is somewhat difficult to break into due to a high learning curve and the number of major competitors already established in the field. The industry is in a mature phase, which means it is a well-established commodity that has seen little growth into untapped markets.
Technology is rapidly growing to make planes larger, more efficient, quieter, and easier to manage. Technology has allowed air travel to become safer and more cost effective than driving. The use of the internet has enabled consumers to purchase seats easier than ever. The capital requirements of an airline are very large. Planes, hangars, hubs, and a massive support staff are always needed to maintain even a small operation of flights. The industry can be very profitable as long as competition is maintained and people have a need for more rapid transportation.
5 – Force Analysis
New Entrants. The significant start-up costs and capital requirements make entering the airline industry difficult. Government regulations also make a new or unknown company struggle internationally, as many governments strictly control who has authority to land within the country. Foreign competitors are more of a threat than new competitors. Foreign competitors are always looking to increase their market share in the U.S. and North America. Suppliers. Suppliers have a large amount of power within the industry. Boeing and Airbus dominate the manufacturing industry related to the airlines, which limits competition and rivalry. There is a lack of intensity within the industry due to this lack of competition. The other high priced commodity for airlines is fuel. The Organization of Petroleum Exporting Countries is very strong and can easily influence the price of fuel. These suppliers can demand the prices they want because the airline industry has limited options otherwise.
Buyers. Buyers have relatively low bargaining power within the airline industry. This is in part due to the high costs of switching airlines and the fact that airlines have the ability to set their own prices without fear of taking losses. Buyer power has recently grown with the use of travel/booking websites such as Travelocity, Kayak, and Hotwire. These sites enable buyers to instantaneously peruse numerous airline ticketing costs. The consumer then has the option to select the airline with the lowest offered price. Delta has introduced a way to lower ticket costs and maintain a loyal customer base. They offer lowered prices to consumers who buy directly from the Delta website. Substitutes. The increased efficiency of other travel modes do offer some threats of substitutes and also forces the airline industry to remain vigilant about having constant technological upgrades of their own. The threats offered from other services, such as motor vehicle, train, and boat, have been declining since the rise of air travel, but they remain as a constant within the tourism and travel industries.
Increased costs of fuel/oil prices have decreased the number of consumers who travel for pleasure, which has increased the percentage of those who travel for business needs. Airlines remain the favorite for international or transoceanic traveling due to the speed of transportation. Existing Rivalry. Rivals have created increased intensity within the market and the need for joint ventures and new business contracts on a regular basis. The most profitable hubs are ones setup within major traffic cities with a high demand for air travel. This means that the major airlines have to compete with one another to seize the larger markets. The larger markets typically cost more to get into, but yield a higher return on investments, so it is beneficial to become involved.
Companies need to offer more flights and more time flexibility through these larger markets to keep up with the demand of their rival companies. Fixed costs from suppliers, low differentiation of services, and price wars contribute to rivalry as well. Net profits are lower overall due to this competition, but it ensures that one company is unable to seize a monopoly of the market share. Offering “frequent flyer miles” is one way to differentiate from the competition and increase a loyal customer base.
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