JetBlue Airways: Adding Value Essay Sample

JetBlue Airways: Adding Value Pages
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The airline industry is characterized by a high level of competitive intensity and therefore JetBlue Airways has to constantly reengineer its internal operations in order to build and maintain a competitive edge. In this respect, the strategic focus of the company is cost minimization. According to Michael Porter’s framework for strategy formulation, a business organization has three strategies at its disposal in order to build and maintain a competitive advantage. These are differentiation, cost minimization and focus. Although JetBlue might be said to be implementing all three strategies, its focus is on minimizing costs. The company is implementing the strategy of focus by targeting underserved markets while it is implementing the strategy of differentiation by adding value-added survives to its repertoire. However the reasoning behind choosing to adopt these strategies has been to locate opportunities for ensuring customer satisfaction through focusing on areas of the market which have not been targeted by competitors. As a result, JetBlue manages to charge lower prices than many of its competitors while maintaining comparable standards of quality.

JetBlue’s unique selling proposition is based on excelling in three attributes: comfort, punctuality and courtesy. As a result the company’s strategy of creating a competitive advantage is to focus on those operational aspects which are considered to be weaknesses in the industry (cited in Johnson & Weinstein, 2004). This focus has enabled the management to promote unique strengths of JetBlue Airways. The management has built these strengths in order to capitalize on the most common weaknesses of other airlines. These weaknesses on their part have caused a considerable level of customer dissatisfaction. These were the opportunities that the management identified in developing its products and services. In creating this strategic orientation, the management followed the business model of Southwest Airlines which kept its costs low by eliminating meal services. Therefore JetBlue had to focus on other things such as quality of personal service and state-of-the-art revenue management system in order to maintain customer service. The strategic focus of offering these products and services meant that customers were able to access special facilities at this airline.

Employees are the most important assets of an organization and therefore it is a critical consideration for the management to create the kind of organizational culture which aligns employee interests to organizational interests. This is particularly the case when it comes to business process reengineering through techno-structural intervention. A new technological infrastructure means that the employees will have to work in a different environment (cited in Johnson & Weinstein, 2004). This is a particularly critical issue at JetBlue Airways because it maintains advanced information technology systems in order to automate the revenue management system. Therefore it is a critical success factor for the management at JetBlue to maintain a strategic alignment process. This process becomes a critical consideration when it comes to managing change through technology. The strategic alignment process takes place among four areas: business strategy, IT strategy, organizational issues and information systems issues (cited in Hill & Jones, 2007). JetBlue Airways ensures that there is alignment between business strategy and IT strategy by maintaining low-cost procedural orientations such as focusing on those products and services which are not offered by other airlines.

Organizational issues are related to employee skills for operating advanced technological systems. This is also a critical consideration for JetBlue Airways. However the strategic focus of the company is essentially to create an organizational culture based on ownership, responsibility and accountability (cited in Armstrong, 2005). This ensures that employee interests are aligned to organizational interests. This is particularly relevant when it comes to managing change. 90% of the change management programs fail because of employee resistance. Employees resist the process of change because they are unwilling to abandon past practices in which they had built up a considerable level of experience and expertise. They are also unwilling to learn new practices. JetBlue avoids this problem by involving the employees in the decision making process. This process of empowerment acts as a powerful motivational tool in the form of giving ownership of the processes to the employees. As a result they are committed to the continuous improvement process.

JetBlue Airways’ success is in focusing on those products and services which are not targeted by the competitors. As a result, the management of the company practices the system of market segmentation. The process of market segmentation facilitates identification of those attributes which customers consider as important (cited in Johnson & Weinstein, 2004). This allows the company to charge lower prices and still maintain a competitive level of quality. However the advantage of following this segmentation process is that it enables the management to build a strong positioning strategy which creates a particular image for the company. For example, the company borrows from the Southwest business model and applies the model to those areas which are not targeted by Southwest Airlines. In this manner the company avoids direct competition with Southwest Airlines. Since cost considerations are the most important aspects at JetBlue, it could be said to be competing in the same industry as Southwest Airlines. However the areas which the two airlines serve are different. Competition with other airlines is avoided because the other airlines provide additional services such as special meals which differentiate them from Southwest Airlines and JetBlue Airways. In this manner the threat of competitive rivalry is minimized.

The process of information sharing is one of the most important strengths of the company. As mentioned before, the company maintains state-of-the-art revenue management systems. This automated system allows the company to maintain the minimum number of people on its payroll while at the same time minimizing the incidence of errors. Maintaining this structure has been facilitated by maintaining a single class service charging fares which are 65% less than competing services offered by other airlines. This has enabled the management to reduce the complexities of maintaining different brands and, through this rationalization process, to minimize the costs of operations. However the strategy of cost minimization would not have been successful without the e-commerce business model which it implements in order to facilitate greater interactions with the customers. This has enabled the employees at JetBlue Airways to provide a better level of customer service and thus create a high level of customer satisfaction.

The management at JetBlue Airways knows that its two most important stakeholder groups are customers and employees. This prioritization has led to the formulation of the three golden rules which focus on providing flawless customer service and ensuring maximum possible employee satisfaction. These two strategies have enabled the company to conduct market segmentation efficiently and effectively. This segmentation process has also been instrumental in generating a considerable level of repeat business for the company. Repeat business reduces the cost of operations by minimizing promotional expenses (cited in Johnson & Weinstein, 2004). To this end the employees are given the right tools so that they can maximize their productivity. For example pilots carry laptops in the cockpits so that they can have real-time access to information. These issues have enabled the management to create a highly advanced technological system which enables employees to collect more information about the customers and customize the products and services accordingly. This has created a sustainable source of competitive advantage for the company.

The airline industry is characterized by a fast pace of change and therefore the airlines have to maintain a continuous improvement process in order to build and maintain a competitive advantage. In this respect, sustainability is the critical issue. As mentioned before, business organizations have three strategies at their disposal: differentiation, cost minimization and focus. However the competitive advantages that can be developed from implementing these strategies cannot be sustained in the long term. This is because competing organizations can copy these strategies overnight and create the same structure of products and services. However the competitive advantage that is based in the organizational culture of a company, as in the case of JetBlue Airways, is sustainable because each organizational culture is different. These differences are based on core competencies which are unique to each organization (cited in Johnson & Weinstein, 2004). Therefore cultural orientation varies widely from one company to another and this means that a culture of innovation is a unique cultural attribute that a competitor organization cannot copy quickly (cited in Aaker, 2004). JetBlue Airways has followed this strategy in creating a sustainable competitive advantage.

As mentioned before, the company implements advanced information technology systems in order to facilitate the process of information sharing. This has enabled the company to build a state-of-the-art revenue management system which is cost-effective in terms of ensuring customer satisfaction. This system also enables the employees to collect more information about the purchase patterns exhibited by the target market. Therefore, employees can differentiate the products and services in alignment with changing customer tastes and preferences. This leads to the development of a sustainable competitive advantage. However this sustainability has been achieved only because employees are motivated to maintain innovative mindsets in terms of continuously improving the quality of products and services. The continuous improvement process is conducted in strict accordance with the strategic focus of maintaining reliability. As a result, the company has managed to generate a considerable level of repeat business.

The continuous improvement process is a critical success factor for the company because it is growing fast in terms of organizational size and this ultimately means loss of flexibility. This would be detrimental to the company’s competitive advantage as the airline industry is characterized by a fast pace of change. In this respect, it is good that the company’s core competency is the implementation of advanced information technology systems. These systems will enable the management of the company to maintain access to detailed market intelligence. This is a critical consideration in JetBlue Airways’ case because sooner or later it will be directly competing with Southwest Airlines which has a competitive advantage in the form of longer experience with operating the low-cost model. Therefore JetBlue would have to maintain the culture of innovation in maintaining the effectiveness of the continuous improvement program.

Employees are the most important assets of an organization and this is illustrated in JetBlue Airways’ case. As mentioned before the company generates a considerable level of repeat business and this had been possible because of its success in building customer loyalty. The importance of maintaining customer loyalty will increase as the company grows in terms of organizational complexity. As mentioned before, as organizational complexity increases, the company’s flexibility will decrease. In this respect, current strategies for minimizing costs will also lose some of their effectiveness. For example, as flight durations increase, meals during flights have to be offered. This will increase costs to a considerable extent. In the situation of increased costs, the company would have to raise prices and in that scenario customer loyalty and brand equity are the only two things that will keep the customers coming back. Therefore the challenge of delivering customer value at JetBlue Airways is all too real and the only way that the company can meet this objective is to conduct human resource planning.

The process of human resource planning ensures that the company has the right employees. This is a critical consideration in JetBlue’s case because it maintains a lean organizational structure to facilitate lower costs. Therefore human resource planning must be conducted strategically in order to ensure that the lean workforce possesses the necessary skills sets. In this respect, training and development programs are critical. The challenge in this respect is to determine whether the expenditures in training and development are strategically aligned. In order to ensure this alignment, the management might consider implementing the balanced scorecard methodology. According to this methodology, the organization is viewed from four perspectives: financial, customer, learning and growth, and internal business processes (cited in Evans, 2004). This is a particularly relevant solution for JetBlue Airways because this is a forward-looking performance management mechanism. Given the fast state of change in the industry, this is an ideal solution.

Ensuring employee productivity directly translates into customer loyalty in JetBlue Airways’ case. In this respect, the company is in an advantageous position relative to its competitors because implementation of advanced information technology systems enables employees to telecommute. This not only enhances employee productivity but also minimizes costs for the company in terms of minimizing the need for space and equipment. This is also a source of sustainable competitive advantage for the company because the process of telecommuting requires a specific cultural orientation without which it cannot be conducted successfully (cited in Fred, 2006). One of the issues likely to arise as a result of telecommuting is that of monitoring employee productivity. Working from home means that the employees will be responsible for organizing their time table. In this respect, it is not possible for the management to monitor the structure of their time tables. Therefore it is not possible for the management to monitor whether the employees are managing their time most productively. Therefore the alignment between employee interests and organizational interests might suffer.

The advantage of using advanced information technology systems is that the process of telecommuting becomes facilitated. This means that the contact between the customers and the employees becomes maximized in the form of greater personalization of service. Employees have greater ability to address client-related issues when they have a sense of ownership over the process. However the issues mentioned before, such as the inability of the management to monitor employee productivity means that these issues need to be worked out before implementing this structure can be considered. This is a long term advantage for JetBlue Airways because it is implementing this structure successfully. The possible adverse effects which are likely to arise as a result of employees working from home would have to be worked out by the competitors before they would be in a position to implement this business model. Therefore JetBlue Airways has a long term advantage in this respect in terms of delivering superior customer service.

As mentioned before, employee productivity is directly linked to ensuring customer satisfaction. This is because of employee motivation. As employees are more motivated, they are interested to improve their operational effectiveness and therefore they begin to take the initiative of improving the effectiveness of customer relationship management. This necessitates decentralization of the decision making process. This is also related to delegation of authority. However in order to make delegation function properly, the employees would have to be in a position to see how their efforts are connected to the strategic focus of the organization. In order to address this objective, the management has to invest in training and development programs even though the return on investment in this case cannot be determined. However the management can ensure that training and development programs are related to the strategic focus of the company by implementing the balanced scorecard methodology. This is the best strategy by which to create a framework in which employee productivity remains linked to customer satisfaction. This is done through linking financials, learning & growth and internal business processes to customers because development of skills sets remains firmly linked to the challenge of delivering superior customer value.

Because of the difficulties above related to conducting formal training and development programs, the management should consider focusing on fostering an informal learning environment. JetBlue Airways is in a particularly advantageous position to implement this strategy because of its advanced infrastructural orientation in terms of information technology systems. This orientation means that the company employees have a lot of information to work with and they can use this information from the past to improve service effectiveness in the future. This is the process of informal learning effectiveness in which means that the company can reduce its expenditures in formal training and development programs. An additional benefit is the development of human capital which is a source of sustainable competitive advantage. Therefore this is the challenge in ensuring alignment between employee learning and growth and customer-related concerns. In continuing to deliver superior customer service, JetBlue Airways should maintain this alignment and thus maintain its competitive advantage.

Currently JetBlue Airways maintains a non-unionized workforce. However as the organization grows in size and complexity, this orientation may no longer be feasible. This will mean increases in costs of operations. Fleet maintenance will also rise in costs. These increases would impair the cost effectiveness of JetBlue Airways’ business model and have negative repercussions on customer service. Therefore the company needs to find other ways of reducing costs. One of these strategies might be to continue to focus on ensuring the highest levels of customer service regardless of cost considerations. Although this might depress profitability in the short term, in the long term the costs would be recouped in the form of enhanced customer loyalty. In maintaining quality in customer service, the company would have to monitor the market in terms of client related concerns. Therefore the best strategy is to capitalize on the weaknesses of the competitors. This would facilitate implementation of initiatives which would be targeted to the changes in the market. This will ensure long-term viability of the business model.

Employees are the most important assets of an organization because they create core competencies. This situation is no different in the case of JetBlue Airways. Therefore the company would have to carefully monitor both the internal environment and the external environment. In terms of monitoring the internal environment, the management would have to maintain a constant process of learning and growth on the part of the employees. It has been mentioned before that the best strategy in this case is to foster an environment of innovation in which employees are able to participate. Employee participation is a critical success factor in terms of minimizing employee resistance to managing change. Managing change will become increasingly important as JetBlue’s cost model comes under attack both internally and externally. Therefore, employees empowered in terms of greater decision making authority would be a critical success factor. This would foster a sense of ownership which would motivate employees to embrace a culture of innovation.

Employees and customers constitute the most important stakeholder groups. Currently the management at JetBlue Airways is banking on its employees to deliver superior performance and ensure continuing prosperity. There is no mention of customers in its three key goal categories. Yet the definition of delivering superior service would depend on customer tastes and preferences. Therefore the challenge in continuing to deliver superior customer service is to involve the customers as well. As the company introduces more innovations in its business model, not only employees but also customers would have to be involved. This would generate greater customer loyalty in the form of building closer relations with the customers. They would be more interested in JetBlue’s services as they see that their suggestions are being implemented. Once the framework for combining employee contributions and customer contributions has been created, it would serve as the continuing business model for delivering superior customer service.

References

Aaker, David A. (2004). Strategic Market Management. McGraw Hill/Irwin.

Armstrong, Michael. (2005). Strategic Human Resource Management. Prentice Hall.

Evans, James R. (2004). Total Quality: Management, Organization, Strategy. McGraw

Hill/Irwin.

Fred, David. (2006). Strategic Management: Concepts and Cases. Prentice Hall.

Hill, Charles., and Gareth Jones. (2007). Strategic Management Theory: An Integrated

Approach. McGraw Hill/Irwin.

Johnson, Bill & Art Weinstein. (2004). Superior Customer Value in the New Economy:

Concepts and Cases. CRC Press.

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