Since its beginning, the airline industry has undergone several stages of evolution. Industry returns, however, have been remarkably low. While intense rivalry among traditional airlines took place with strategies that appeared more or less similar, and with a growing focus on product differentiation, changes in the regulatory framework have allowed new entrants to adopt a different business model, first in the USA and more recently in Europe. Such strategy appears based on a self-supporting loop where low break-even points (thanks to low costs) allow to practice low fares and to activate new routes, exploiting a favorable elasticity of demand. This paper examines in detail the drivers of such low-cost strategy, identifying four major set of elements (business focus and product redefinition, process management, marketing and distribution, human resource management), discussing their inter-relationships, showing how they form a well-balanced and consistent strategic mosaic, and a radically different approach from the strategy of traditional airlines.
Reinventing strategy in 'mature' industries: the case of low-cost airlines
BUZZAVO, Leonardo
2007-01-01
Abstract
Since its beginning, the airline industry has undergone several stages of evolution. Industry returns, however, have been remarkably low. While intense rivalry among traditional airlines took place with strategies that appeared more or less similar, and with a growing focus on product differentiation, changes in the regulatory framework have allowed new entrants to adopt a different business model, first in the USA and more recently in Europe. Such strategy appears based on a self-supporting loop where low break-even points (thanks to low costs) allow to practice low fares and to activate new routes, exploiting a favorable elasticity of demand. This paper examines in detail the drivers of such low-cost strategy, identifying four major set of elements (business focus and product redefinition, process management, marketing and distribution, human resource management), discussing their inter-relationships, showing how they form a well-balanced and consistent strategic mosaic, and a radically different approach from the strategy of traditional airlines.File | Dimensione | Formato | |
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