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Case 5 JetBlue Airlines: Getting Over the “Blues”? Naga Lakshmi Damaraju Alan B. Eisner Gregory G. Dess

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JetBlue Discussion Question

What are the components of JetBlue’s competitive advantage, and what are the merits and demerits of these components?

5-2

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JetBlue Discussion Question

What are key forces in the general and industry environments that affect JetBlue’s choice of strategy?

5-3

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JetBlue Discussion Question

What internal resources and assets does JetBlue have that may give it a competitive advantage?

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JetBlue Discussion Question

Is JetBlue’s competitive advantage sustainable?

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JetBlue Q2. External Environment, cont.

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Based on the external environmental factor analysis, the airline industry has many competitors trying to carve out a piece of the “profit” pie.

Rivalry

Very High

Substitutes

Threat

High

Buyers’ Power

Low

Suppliers’ Power

High

Suggested: there are numerous competitors; low switching costs for consumers.

Suggested: buyers are not concentrated; there is no threat of backward integration.

Suggested: there are only two major suppliers: Boeing and Airbus

Suggested: the threat of substitutes such as car, limo, bus, train, is high, especially when distances traveled are short.

Threat of New Entrants

Med-Low

Suggested: there are low barriers to entry, especially for the low-cost airlines, with low switching costs, therefore a medium threat of new entrants into the industry

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Let’s apply Porter’s Five Forces of Competition to the airline industry. See the Case Notes for further details. For instance, the intensity of rivalry among existing competitors in the airline industry is very high. There are numerous competitors, and in times of low or moderate industry growth, the competition gets fiercer as each one tries to nab customers from the other in order to keep their capacity utilizations at acceptable levels. The exit barriers are high because it is difficult to dispose off grounded planes, as there would be few buyers. Also, due to the bankruptcy laws, even the loss-making companies might still be around for a long time thus intensifying competition. So, it is easier to get into the industry but might be difficult to get out. The only solution for many companies is to merge, which is why there has been so much consolidation in this industry over the years. Based on the external environmental factor analysis, the airline industry has many competitors trying to carve out a piece of the “profit” pie. In addition, The gap between low-cost airlines and the traditional network-based carriers was diminishing rapidly. JetBlue was caught in this squeeze, forcing it to evaluate its operational decisions even more carefully.