Strategy and implementation frameworks

Porter's Generic Strategy

Porter's Generic Strategies relate to the strategies that different airline companies follow in order to be profitable; e.g., to keep their position as a low-cost, no-frills airline, or a more costly airline with plenty of comforts, or a small company with specific routes that others may not have. Porter's three generic strategies are "cost leadership," "differentiation," and "focus" (IFM).

Cost leadership relates to when a company sets out to be the lowest cost airline in the industry; in other words, the airline leading all others in low fares. However they do that, whether it is using "proprietary technology," or exclusive access to the raw materials needed to fly commercial planes, they are cost leaders when it comes to economic fares (IFM).

Differentiation is setting an airline apart from others because it offers certain "attributes" that other airlines don't offer. It may for example offer sleeping facilities for overseas flights, or meals (which are rare in the airlines now). And focus means that the generic strategy of an airline is to serve something that is exclusive or specialized in a "niche market" (IFM). There is a "cost focus" (giving an airline an advantage because its fares are 12% below the average), and there is "differentiation focus" (pursuing "strategic differentiation within a focused target market) (IFM).

US Airways Strategies

By merging with American Airlines, U.S. Airways is following a strategy of "expedience rather than out of love" (Lawton, 2013). While the merger was driven at least in part by trade unions and the "senior management of U.S. Airways," it embraces a strategy that involves the improvement of "operational efficiencies" of U.S. Airways, writes Thomas Lawton in U.S. News & World Report. Both the companies in this merger are considered "buoyant" and financially strong, Lawton explains. The combining of their assets means customers on American Airlines (which is what the new airline will be called) will have "a broader network, more choices, and better service" (Lawton, p. 2).

Which of Porter's generic strategies applies to this strategy of U.S. Airways to join forces with American Airlines? The likely answer is Porter's "Differentiation" principle, which means that travelers will have more routes to choose from on a global scale than any other airline. The merger will make American Airlines the largest airline in the world. No doubt "cost management" and "operational efficiency" are issues that both airlines involved see as a benefit. What is challenging, Lawton explains, is to see that the new airline company can improve "…the customer value proposition." In other words, is the customer going to benefit, either from a cost perspective or from the perspective of having more options in terms of destinations.

Craig Le Clair writes in Forbes that the success of the merger will depend on "how prepared the combined airlines are in dealing with change in their markets and ecosystem" (Le Clair, 2013). What strategy will the new company pursue, now that it is clear that the strategy of U.S. Airways is to form a partnership with giant American Airlines? Le Clair warns that big companies tend to think they are "immune to change" and hence they fail to become aware of "change strategies." What happens when there are few behemoth competitors to go head to head with a giant like the new American Airlines is they get arrogant and become "less agile" -- and they don't pay close enough attention to the markets (Le Clair, p. 2).