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Serving short distance and budget fare, the airlines were able to do away with some luxuries which consumers were not interested in like first-class, seat numbering, in-flight meals, and baggage transfers. The budget airlines are able to compete with other major airlines by focusing solely on the consumers who want to travel cheaply, and for short distances. The larger airlines are focused on providing premier services like business lounges, business-class and first class. This way they cater for elite consumers.
Focused strategy based on differentiation
This strategy is aimed at differentiating the product in order to appeal to some unique needs and preferences of a narrow group Arthur a. Thompson, 2010.
In order for this strategy, to be successful there needs to be buyers who are looking for certain product attributes. This buyer segment is always willing to pay a premium price in order to obtain the product, and a company will definitely increase its profit margins if it successfully uses this strategy. A company has the opportunity to focus on catering for the needs and preferences a narrow group, which has the potential to provide it with some competitive advantage over its rivals Arthur a. Thompson, 2010.
According to Lewis et al. (2006)
focusing on a smaller group allows a company to specialize and create products that satisfy this market instead of catering for a broad market.
The airline industry has managed to focus on a narrow group of business travelers. These are guys who have to travel because of business purposes and they need to travel in comfort. Airlines have developed business lounges where the travelers can relax as they await their flight or transfers. At this lounges, they have the facilities to check their emails and relax. Airlines also offer business classes that are geared towards the business traveler. The consumer is willing to pay the premium price charged to travel in comfort away from all the other travelers. Business-class offers premier services and seats that can lie flat, which allows the travelers to relax and be prepared for their next meeting location.
Using this focused differentiation,...
This class is not aimed at all consumers, and it has a higher cost than the other classes, which restricts it access. Airlines have also launched business-class clubs where their frequent business-class travelers can enjoy specific facilities. This attracts consumers though the charges are mostly paid for with their air tickets.
Conclusion
According to Arthur a. Thompson (2010)
the process of deciding on the generic strategy to be used within a company is the most important commitment that managers can make for the company. The managers should avoid taking the middle ground as this would only hurt the company's competitiveness. Analyzing the different strategies, and focusing on what the company wants to achieve will allow the company's managers to decide on the best generic strategy to suit the company's needs. Picking a generic strategy will lay down the guidelines on how a company conducts its business, how it manages its value chain, its reaction to market forces, defensive and offensive strategies for competition.
References
ARTHUR a. THOMPSON, J., a.J. STRICKLAND III, JOHN E. GAMBLE 2010. Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases, 2445 McCabe Way, McGraw-Hill.
BLAHA, V. 2003. Low Cost Carriers - Evolution, Strategies and Performance, Santa Cruz, CA 95060, GRIN Verlag.
FLOURIS, T.G. & OSWALD, S.L. 2012. Designing and Executing Strategy in Aviation Management, 110 Cherry Street, Ashgate Publishing, Limited.
HILL, C.W.L. & JONES, G.R. 2012. Strategic Management Theory: An Integrated Approach, 10th ed.: An Integrated Approach, Cheriton House, North Way, Andover, Hampshire, SP10 5BE, South-Western/Cengage Learning.
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