Strategic Choice and Evalulation
Strategic Choice and Evalulation
In the strategic management process the company mission gives a general idea of what interests and goals the company has. These goals need a more specific target to evaluate the firm progress towards achieving that goal. The strategic management purpose is to define a general goal to sustain the corporate growth and to be profitable. There are different approaches to get there. Companies establish long-term objectives; usually over three to five years and by formulating grand strategies they achieve those long-term objectives. Following the value discipline model or Porter’s generic strategy model companies had successful achievements.
As this paper will explain, the formulation of grand strategies that follow generic strategies to provide specific actions will help companies to maximize their competitive advantage. As an example, the company JetBlue Airways has implemented several of the strategies in their strategic management approach and the results show their continuous growth in the airline industry. The analysis of those value discipline, generic strategies and grand strategy alternatives will give a general idea of their importance for business growth.
JetBlue Airways incorporates in their operations some these strategies at all levels which resulted on their rapid growth. JetBlue Grand Strategy, Generic Strategies and Value Discipline The definition of grand strategy refers to the means, how is going to be achieved the long term objectives. The principal responsibility of developing the strategies falls on the corporate managers and business managers. Grand strategy consists of the selection of different approaches, which executives understand is the best approach.
Some of the grand strategies discussed in business are, growth, innovation, concentration and joint ventures (Pearce 2011). The selection of any of them or a mix of them should maximize the company profits. A combination of generic strategies will also support the company goals. Generic strategies are several “fundamental philosophical options for the design of strategies” (Pearce 2011). This type of strategies are based on two different philosophies on how to develop those strategies, following Michael Porter’s generic strategy idea or the Michael Treacy and Fred Wiersema alternative approach of value disciplines.
Michael Porter, expressed the importance for the companies to develop strategies, he said, “strategy delineates a territory in which a company seeks to be unique” (Hammonds 2001). Porter generic strategies focus on cost leadership, differentiation and focus. Experts say this approach help the firms to produce above average returns for the organization and the starting point to get there is the grand strategy “the means by which objectives are achieved” (Pearce 2011). Michael Treacy and Fred Wiersema, business consultants, recommend a different method to generic strategy, they called it, value disciplines.
They believe that strategies must center on “delivering superior customer value through one of three value disciplines: operational excellence, customer intimacy, or product leadership” (Pearce 2011). Even though there are similarities between the two models, their difference is that in the value discipline model “one discipline will be the focus of attention while the other two that are not selected must be maintained” (12 Manage 2013). Reviewing David Needleman’s decision to start JetBlue Airways constructed at New York’s JFK Airport it shows that from the beginning his business developed based on the strategy of concentrated growth.
This grand strategy reflects the management decision to “direct the resources to profit on one single product, in a single market” (Pearce 2012). The company started by offering high quality customer service. As a result, they became a great competition to Southwest Airlines and American Airlines. JetBlue Airways used the low cost generic strategy to reduce cost and this gave them the advantage to charge lower prices for the same routes of competitor Southwest Airline. In a short period they gain market share and benefit from returns, as the 2001 annual report shows.
When all other competitors showed financial reports with loss, JetBlue reported $38. 5 million in net income (JetBlue Annual Report 2002). In the case of JetBlue, concentrated growth is in fact a grand strategy. This firm placed all their investments to get profits out of a single product, airline service at low price to new routes. The goal of providing economical air service has been met by minimizing costs by installing more seats into the planes, selling tickets directly to customers no agent needed to complete this task (JetBlue 2013). Another area were they worked to minimize costs is by shortening ground delays.
This discount airline is well-known by their new planes, the radio and satellite television on every seat and the leather sitting. JetBlue vision of product innovation and excellent service provides a low fare and low cost to passengers, it’s an airline that provides high quality customer services (JetBlue 2013). Differentiation is a business strategy that gives competitive advantage with its service. Being different from the competition also gave the company the distinction of being the airline with low cost with amenities for passengers. This was possible due their startup capital of $100 million (David 2011).
The use of new planes, their leather seats, individual monitors with DIRECTV programming, was a few of the things they included on their low coast fare. They focused on service and that gave them the competitive advantage. The generic strategies of differentiation and low cost leadership at functional level produced the JetBlue Experience, network expansion, low fares, low operating expenses and investment in new and more efficient planes (JetBlue 2013). Another strategy JetBlue Airways use is focus to what they identified as the underserved but overpriced market (JetBlue 2002).
They concentrated on U. S. cities from their main base New York that serves the largest travel market. They have grown from 1 route to serve almost 80 destinations across the US, Caribbean and Latin America (Nasdaq 2013). Pricing is another JetBlue strategy, that’s how they are winning new customers. By developing the image of low fare airline with high quality service, even though they offer only one class services, their high quality service create a new opportunity in the airline travel, including business travelers.
Innovation is present in JetBlue company growth; they are the latest airline to give pilots IPads to cut back on paper manuals. The introduction to new technology will bring the capabilities to download weather images, also access updated flight documents (Sawers 2013). JetBlue Airways ability to perform tasks less expensive than competitors also keeps them as the top leaders. The airline fleet of, Airbus 320 and Embraer 190 permits them to offer lots of legroom, great entertainment and leather seats (JetBlue 2013). They keep maintenance and training costs down.
For example, management can reinvest in growth opportunities, or commit to their employees training (Pearce 2011). JetBlue has focused on a strategy of serving customers how want low cost flights from place to place. That has been the consistent need of their clients. What JetBlue has done is assimilate new ideas to deliver that service, basically serving the same customers. Conclusion JetBlue competitive advantage is a combined strategy of cost leadership and differentiation. Their low cost position in relation to their competition supports the fact of their efficient operations.
The introduction of new planes, allowed them to reduce their fuel costs and maintenance, and with large planes, there is more revenue for the company. They decided not to serve meals; this is another tactic that helped to reduce costs. Differentiation is another part of the combined strategy. Their strong image, TV entertainment, more legroom, and other amenities for the passengers, are evidence of the implementation of this strategy. This combined strategy, provides the company with excellent results, as they keep expanding their operation, partnering with other airlines, and starting new routes and destinations.
Even in times of economic crisis and high fuel costs, “one of aviation’s most acute problems: the price of jet fuel”(Bachman 2012), they maintain their number one (1) ranking for nine consecutive years according to the 2013 North America Airline Satisfaction Study (JD Power 2013). This recognition confirms that all the efforts that JetBlue does by combining strategies to be a low cost airline with excellent customer service, are giving them the leadership in the airline market.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 29 November 2016
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