CONTEMPORARY ISSUES IN

STRATEGIC MANAGEMENT

CASE STUDY 1

“JETBLUE: LOSING THE MAGICAL

TOUCH”

NAME:
ID:

“JETBLUE: LOSING THE MAGICAL TOUCH”

1. JetBlue is pursuing an integration strategy of both cost leadership and differentiation

strategies. Neelman previously worked at Southwest Airlines, one of the cheapest fare
providers, where he had gained skills and knowledge about the right areas to exploit and
gain advantage over its competitors. One such area is the cost, JetBlue seeks to provide
tickets at a cost as low as possible and also by keeping operational cost to a minimum,
maximum profits can be achieved. The other strategy is differentiation, where the company
seeks to be unique from its competitors by providing extra and special features along with
 its service to add value, like, Wi Fi in the flight, digital inflight radio system, comfortable
seats, etc.
2. Companies following integration strategy often face the challenge of striking a balance
among their opportunities and tradeoffs. As of JetBlue, it can be noted that JetBlue, rather
than using offshore services, went for home sourcing their customer service. Whereas,
offshore services would have given them a opportunity of low cost with high flexibility.
3. The remarks on the company can be given as that the management has been able to be very
productive through high innovation, especially by recognizing the actual needs and wants
of the customers. Although JetBlue implements an integration strategy, it must be noted
that focusing specifically on cost leadership will benefit the company even more
considering that certain crucial loopholes may be fixed. While customers enjoy the add-
ons and additional perks of flying with JetBlue, which focuses more on customer
satisfaction rather than company benefit, it is assumed that the major reason of customer
flying with JetBlue, is the cost itself.

FIVE FORCES ANALYSIS

1. Threat of new competitors:
JetBlue faces a high threat of new competitors considering the competition in the market
among the companies. A new company may emerge with much more creativity and
innovation, reasonable prices, or other more advanced competitive factors than JetBlue.
Another issue to be considered is the fact that the regulations of airlines and aviation
industry are much more flexible now compared to the past, which makes it easier to set up
and form new business in the market. Thus, to get over this threat JetBlue must formulate
and implement more advanced and up-to-date strategies.
2. Bargaining power of suppliers:
The airlines market faces a high risk when it comes to the suppliers as they have the upper
hand over the companies, considering there are only two manufacturers of aircrafts (Boeing
and Airbus). The suppliers can control prices and other factors which will have a significant
impact on the attractiveness and profitability of the company.
3. Threat of rivalry:
 The market of airlines and aviation includes a high number of airlines companies. Thus,
competition is cut throat all over the world. Besides, it’s easy for new entrants to enter the
market which will add to the competition.
4. Negotiating Power of buyers:
The customers of the company possess a high level of negotiating power. One major reason
of this fact is assumed to be the quality and standard of services provided in the aviation
industry. The industry includes many aviation companies (competitors) and can easily
switch to other competitors.
5. Threat of substitutes:
As mentioned previously, the aviation industry has many companies providing standard
and quality services. Customers can easily substitute one company for another in case of
any dissatisfaction. Thus, the threat of substitution is high along with low switching cost.

COMPETITIVE STRATEGIES
a) Focus strategy:
The company’s focus strategy focuses on providing standard services at a reasonable or
low cost. Initially, after the company was set up, the prices of the tickets and itinerants
were very reasonable but with quality service. The company had only a single model of
flight which enabled them to operate at a low cost.
b) Cost leadership:
The company follows an integration model of both strategies (cost and differentiation). As
mentioned earlier, the company focuses on keeping their operational costs as low as
possible to maximize profits even if their tickets are reasonably priced. This strategy
enables them to apply low cost rivalry at an international level.
c) Differentiation strategy:
The second strategy in the integration is differentiation. Here, the company differentiates
and tries to be unique from its other competitors in the industry by adding certain additional
updates to its services, for example, free Wi-Fi in the flight, individual TV, radio stations,
good quality and comfortable seats.