U.S. Airways Strategy the Three

U.S. Airways Strategy

The three generic Porter strategies encompass the market scope and level of competency companies have in the markets they compete in. There are three generic strategies, which include Cost Leadership, Differentiation and Segmentation (Porter, 1990). When a company is pursuing a Cost Leadership strategy, they are seeking to become a low-cost leader in a very broad market. Examples of companies in the airline industry pursuing this type of strategy include Southwest Airlines. A Differentiation Strategy is based on a highly unique competency and broad market scope. United Airlines, Delta and U.S. Airways are all competing with a Differentiation Strategy. A Segmentation Strategy is based on a narrow market scope and a broad scope of competencies that traverse uniqueness and low cost. This strategy is one of the most expensive to maintain profitability with and increasingly being relied on transaction-centric business models where costs of fulfillment are relatively low (Akan, Allen, Helms, Spralls, 2006). Organizations that align the Porter generic strategies to their specific needs and requirements from a business model standpoint have shown to increase Return on Invested Capital (ROIC) and other measures of asset utilization and financial performance (Allen, Helms, 2006). The reliance on generic strategies also gives companies significant flexibility in defining the current and future strategic initiatives and plans over time as well (Allen, Helms, 2006). The decision to move from a Differentiation Strategy to Cost Leadership is often irreversible for companies that have an expensive asset cost structure and a relatively low ROIC (Porter, 1990). In attempting to move across these generic strategies, companies must redefine their business models or start entirely new divisions to enable the greatest competitive and market advantages possible (Allen, Helms, 2006).

US Airways competes with a Differentiation Strategy on a global scale. As this airline has a very broad market scope, as evidenced by the myriad of routes, aircraft, service and loyalty levels the company has in place, the Differentiation Strategy aligns best to their business model. The Differentiation Strategy for U.S. Airways is also supported by hwo the company chooses to use price optimization and code sharing throughout the airline industry. As U.S. Airways serves many secondary markets through routing from their hubs and secondary hub route configuration models, the airline is able to reach many cities larger competitors cannot. U.S. Airways sees these service options and flight availability as a significant competitive advantage, pricing their flights at a premium in underserved markets in the process. By doing this, U.S. Airways makes their differentiated service strategies further drive higher levels of profitability.