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Roth4_SM_Lecture_PPT_C06_Final_rev_10_10_18.pptxCHAPTER 6
Business Strategy: Differentiation, Cost Leadership, and Blue Oceans
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Be sure to see the NEW integrated Teacher’s Resource Manual located in the Connect Library under Instructor’s Resources.
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The AFI Strategy Framework
Exhibit 1.3
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Learning Objectives
LO 6-1 Define business-level strategy and describe how it determines a firm’s strategic position.
LO 6-2 Examine the relationship between value drivers and differentiation strategy.
LO 6-3 Examine the relationship between cost drivers and the cost-leadership strategy.
LO 6-4 Assess the benefits and risks of differentiation and cost-leadership strategies vis-à-vis the five forces that shape competition.
LO 6-5 Evaluate value and cost drivers that may allow a firm to pursue a blue ocean strategy.
LO 6-6 Assess the risks of a blue ocean strategy, and explain why it is difficult to succeed at value innovation.
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What Is Business Level Strategy?
Goal-directed actions:
To achieve competitive advantage
In a single product market
“How should we compete?”
Who: which customer segments?
What: customer needs will we satisfy?
Why: do we want to satisfy them?
How: will we satisfy our customers’ needs?
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Instructors:
The digital companion to this book McGraw-Hill Connect has an application exercise on this section of the textbook. It builds student confidence on business level strategy (LO 6-1).
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Industry and Firm Effects Jointly Determine Competitive Advantage
Exhibit 6.1
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Strategic Position
Profile based on value creation and cost
In a specific product market
A valuable and unique position, which:
Meets customer needs
At the highest possible product value
For the lowest possible product cost
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Strategic Trade-Offs
Choices between a cost OR value position
Tension between:
Value creation and
Pressure to keep cost in check
Purpose to maximize the firm’s:
Economic value creation
Profit margin
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Generic Business Strategies
Differentiation
Seeks to create higher value vs. competitors
Offers unique features
Charges higher prices
Cost Leadership
Seeks to create similar value vs. competitors
Charges lower prices
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These two business strategies are called generic strategies because they can be used by any organization—manufacturing or service, large or small, for-profit or nonprofit, public or private, domestic or foreign—in the quest for competitive advantage, independent of industry context. Differentiation and cost leadership require distinct strategic positions, and in turn increase a firm’s chances to gain and sustain a competitive advantage.
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Focused Business Strategies
Narrower competitive scope
Focused Differentiation
Ex: Mont Blanc: exquisite pens at several hundred dollars
Focused Cost Leadership
Ex: BIC: disposable pens and lighters at low cost
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The automobile industry provides an example of the scope of competition. Alfred P. Sloan, longtime president and CEO of GM, defined the carmaker’s mission as providing a car for every purse and purpose. GM was one of the first to implement a multidivisional structure in order to separate the brands into strategic business units, allowing each brand to create its unique strategic position (with its own profit and loss responsibility) within the broad automotive market. For example, GM’s product lineup ranges from the low-cost-positioned Chevy brand to the differentiated Cadillac brand. In this case, Chevy is pursuing a broad cost-leadership strategy, while Cadillac is pursuing a broad differentiation strategy. The two different business strategies are integrated at the corporate level at GM.
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Strategic Position and Competitive Scope: Generic Business Strategies
Exhibit 6.2
SOURCE: Adapted from M.E. Porter (1980), Competitive Strategy. Techniques for Analyzing Industries and Competitors (New York: Free Press).
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JetBlue attempts to combine a focused cost-leadership position with a focused differentiation position. Although initially successful, JetBlue has been consistently outperformed for several years by airlines that do not attempt to straddle different strategic positions, but rather have a clear strategic profile as either a differentiator or a low-cost leader. For example, Southwest Airlines competes clearly as a broad cost leader (and would be placed squarely in the upper-left quadrant. The legacy carriers—Delta, American, and United—all compete as broad differentiators (and would be placed in the upper-right quadrant. Regionally, we find smaller airlines that are ultra low cost, such as Allegiant Air, Frontier Airlines, or Spirit Airlines, with a very clear strategic position. These smaller airlines would be placed in the lower-left quadrant because they are pursuing a focused cost-leadership strategy.
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Differentiation Strategy
Unique features that increase value
Consumers pay a higher price
The focus of competition:
Unique product features
Service
New product launches
Marketing and promotion
Competitive advantage achieved when:
Value – Cost > competitors
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Several competitors in the bottled-water industry provide a prime example of pursuing a successful differentiation strategy. As more and more consumers shift from carbonated soft drinks to healthier choices, the industry for bottled water is booming—growing about 10 percent per year. In the United States, the per person consumption of bottled water surpassed that of carbonated soft drinks for the first time in 2016. Such a fast-growing industry provides ample opportunity for differentiation. In particular, the industry is split into two broad segments depending on the sales price. Bottled water with a sticker price of $1.30 or less per 32 ounces (close to one liter) is considered low-end, while those with a higher price tag are seen as luxury items. For example, PepsiCo’s Aquafina and Coca-Cola’s Dasani are considered low-end products, selling purified tap water at low prices, often in bulk at big-box retailers such as Walmart. On the premium end, PepsiCo introduced Lifewtr with a splashy ad during Super Bowl LI (2017), while Jennifer Aniston markets Smartwater, Coca-Cola’s premium water.
Instructors:
The digital companion to this book McGraw-Hill Connect has a brief case analysis exercise on this section of the textbook. It builds student confidence on understanding the value drivers of a differentiation strategy (LO 6-2).
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Differentiation Strategy: Achieving Competitive Advantage
Exhibit 6.3
SOURCE: Adapted from M.E. Porter (1980), Competitive Strategy. Techniques for Analyzing Industries and Competitors (New York: Free Press).
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Under a differentiation strategy, firms that successfully differentiate their products enjoy a competitive advantage. Firm A’s product is seen as a generic commodity with no unique brand value. Firm B has the same cost structure as Firm A but creates more economic value, and thus has a competitive advantage over both Firm A and Firm C because (V − C)B > (V − C)C > (V − C)A. Although, Firm C has higher costs than Firm A and B, it still generates a significantly higher economic value than Firm A.
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Economies of Scale and Scope
Economies of Scale
Decreases in cost per unit
Achieved as output increases
Economies of Scope
Producing two outputs at less cost
Shares resources or technology
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Economies of Scale:
Reaping economies of scale and learning is critical for the airframe-manufacturing industry in order to ensure cost-competitiveness. The market for commercial airplanes is often not large enough to allow more than one competitor to reach sufficient scale to drive down unit cost. Boeing chose not to compete with Airbus in the market for superjumbo jets; rather, it decided to focus on a smaller, fuel-efficient airplane (the 787 Dreamliner, priced at roughly $250 million) that allows for long-distance, point-to-point connections. By 2017, it had built over 530 Dreamliners with more than 1,200 orders for the new airplane. Boeing can expect to reap significant economies of scale and learning, which will lower per-unit cost. At the same time, Airbus had delivered 210 A-380 superjumbos (sticker price: $430 million) with more than 100 orders on its books. If both companies would have chosen to compete head-on in each market segment, the resulting per-unit cost for each airplane would have been much higher because neither could have achieved significant economies of scale (overall their market share split is roughly 50–50).
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Three Drivers That Increase Perceived Value
Product features
Enables differentiation
Customer service
Complements
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Example of customer service: Zappo’s offers free shipping both ways, they do not outsource customer service, and they don’t use pre-determined scripts for service. Trader Joe’s stores stock local products as requested by the community.
Example of complements: smartphones and cellular services. A smartphone without a service plan is much less useful than one with a data plan. Traditionally, the providers of phones such as Apple, Samsung, and others did not provide wireless services. AT&T and Verizon are by far the two largest service providers in United States, jointly holding some 70 percent of market share. To enhance the attractiveness of their phone and service bundles, phone makers and service providers frequently sign exclusive deals. When first released, for instance, service for the iPhone was exclusively offered by AT&T. Thus, if you wanted an iPhone, you had to sign up for a two-year service contract with AT&T.
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Differentiation Strategies: Summary
Focused on adding value
Unique features
Customer service
Effective marketing
Can increase costs
R&D / innovation needed
Customers willing to pay a premium
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Cost Leadership Strategy
Goal:
Reduce cost below competitors
Offer adequate value
Reduce prices for customers
Optimize the value chain for low cost
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As an example, GM and Korean car manufacturer Kia offer some models that compete directly with one another, yet Kia’s cars tend to be produced at lower cost, while providing a similar value proposition.
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Cost Leadership Strategy: Achieving Competitive Advantage
Exhibit 6.4
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Under a cost-leadership strategy, firms that can keep their cost at the lowest point in the industry while offering acceptable value are able to gain a competitive advantage. Firm A has not managed to take advantage of possible cost savings, and thus experiences a competitive disadvantage. The offering from Firm B has the same perceived value as Firm A but through more effective cost containment creates more economic value (over both Firm A and Firm C because (V − C)B > (V − C)C > (V − C)A. The offering from Firm C has a lower perceived value than that of Firm A or B and has the same reduced product cost as with Firm B; as a result, Firm C still generates higher economic value than Firm A.
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Cost Drivers That Keep Costs Low
Cost of input factors
Raw materials, capital, labor, and IT services
Economies of scale
Decreases in cost per unit as output increases
Learning-curve effects
Less time to produce output with experience
Experience-curve effects
Improvements to technology and production processes
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Cost of input: In the market for international long-distance travel, the greatest competitive threat facing U.S. legacy carriers—American, Delta, and United—comes from three fast-growing airlines located in the Persian Gulf states—Emirates, Etihad, and Qatar. These airlines achieve a competitive advantage over their U.S. counterparts thanks to lower-cost inputs—raw materials (access to cheaper fuel), capital (interest-free government loans), labor—and fewer regulations (for example, regarding nighttime takeoffs and landings, or in adding new runways and building luxury airports with swimming pools, among other amenities).
Learning curve effects: Learning drives down cost, because it takes less time to produce the same output. Professionals learn how to be more efficient with cumulative experience, for example: writing computer code, developing new medicines and building submarines.
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Economies of Scale
Exhibit 6.5
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Firms with greater market share might be in a position to reap economies of scale, decreases in cost per unit as output increases. This relationship between unit cost and output is depicted in the first (left-hand) part of this image. Cost per unit falls as output increases up to point Q1. A firm whose output is closer to Q1 has a cost advantage over other firms with less output. In this sense, bigger is better.
The output range between Q1 and Q2 in the figure is considered the minimum efficient scale (MES) to be cost-competitive. Between Q1 and Q2, the returns to scale are constant. It is the output range needed to bring the cost per unit down as much as possible, allowing a firm to stake out the lowest-cost position achievable through economies of scale.
Benefits to scale cannot go on indefinitely, though. Bigger is not always better; in fact, sometimes bigger is worse. Beyond Q2, firms experience diseconomies of scale—increases in cost as output increases. As firms get too big, the complexity of managing and coordinating the production process raises the cost, negating any benefits to scale.
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Economies and Diseconomies of Scale
Economies of Scale:
Spreads fixed costs over a larger output
Employs specialized systems and equipment
Takes advantage of certain physical properties
Diseconomies of Scale:
Firms too big
Complexities of too much coordination
Inflexible and slow
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Spread fixed costs over a larger output example: Microsoft spent $25 billion on R&D for Windows 7 before a single copy was sold
Employ specialized systems and equipment example: Demand for Tesla’s Model S sedan allowed it to employ cutting-edge robotics
Take advantage of certain physical properties example: Big box stores can stock more merchandise and handle inventory efficiently
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Gaining Competitive Advantage Through Learning Curve and Experience Curve Effects
Exhibit 6.7
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Firm A produces eight aircraft and reaches a per-unit cost of $73 million per aircraft. Firm B produces 128 aircraft using the same technology as Firm A (because both firms are on the same [90 percent] learning curve), but given a much larger cumulative output, its per unit-cost falls to only $48 million. Thus, Firm B has a clear competitive advantage over Firm A, assuming similar or identical quality in output. Firm C realizes a positive impact of change due to technology and process innovation.
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Cost Leadership Strategies: Summary
Focus on:
Offering lower costs than competitors
Maintaining acceptable quality
Appeals to the bargain-conscious buyer
Attracts an increased sales
Can be profitable over a long period of time
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Benefits & Risks of Competitive Positioning
| Competitive Force | Differentiation Benefits | Differentiation Risks | Cost Leadership Benefits | Cost Leadership Risks |
| Threat of Entry | Protection against entry due to intangible resources such as a reputation for innovation, quality, or customer service | Erosion of margins Replacement | Protection against entry due to economies of scale | Erosion of margins Replacement |
| Power of Suppliers | Protection against increase in input prices, which can be passed on to customers | Erosion of margins | Protection against increase in input prices, which can be absorbed | Erosion of margins |
| Power of Buyers | Protection against decrease in sales prices, because well-differentiated products or services are not perfect imitations | Erosion of margins | Protection against decrease in sales prices, which can be absorbed | Erosion of margins |
| Threat of Substitutes | Protection against substitute products due to differential appeal | Replacement, especially when faced with innovation | Protection against substitute products through further lowering of prices | Replacement, especially when faced with innovation |
| Rivalry Among Existing Competitors | Protection against competitors if product or service has enough differential appeal to command premium price | Focus of competition shifts to price Increasing differentiation of product features that do not create value but raise costs Increasing differentiation to raise costs above acceptable threshold | Protection against price wars because lowest-cost firm will win | Focus of competition shifts to non-price attributes Lowering costs to drive value creation below acceptable threshold |
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Reference section 6.4 for additional details.
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Successful Business Strategy
Leverages the firm strengths
Mitigates firm weaknesses
Helps the firm:
Exploit external opportunities
Avoid external threats
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There is no single correct business strategy for a specific industry. The deciding factor is that the chosen business strategy provides a strong position that attempts to maximize economic value creation and is effectively implemented.
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What Is Blue Ocean Strategy?
Differentiation and cost-leadership activities
Uses value innovation to reconcile trade-offs
Blue oceans represent:
Untapped market space
Creation of additional demand
Opportunities for highly profitable growth
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In red oceans the rivalry among existing firms is cut-throat because the market space is crowded and competition is a zero-sum game. Products become commodities, and competition is focused mainly on price. Any market share gain comes at the expense of other competitors in the same industry, turning the oceans bloody red.
Instructors:
The digital companion to this book McGraw-Hill Connect has an application exercise on this section of the textbook. It builds student confidence on blue ocean strategy and value innovation (LO 6-5).
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Value Innovation Accomplished Through Pursuing Differentiation and Low Cost
Exhibit 6.9
Source: Adapted from C.W. Kim and R. Mauborgne (2005), Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant (Boston, MA: Harvard Business School Publishing).
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Lowering a firm’s costs is primarily achieved by eliminating and reducing the taken-for-granted factors that the firm’s rivals in their industry compete on. Perceived buyer value is increased by raising existing key success factors and by creating new elements that the industry has not offered previously.
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To Achieve Successful Value Innovation
Lower costs
Eliminate: Which of the factors should be eliminated?
Reduce: Which of the factors should be reduced?
Increase perceived consumer benefits
Raise: Which of the factors should be raised?
Create: Which factors should be created?
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Consider IKEA:
Eliminated: sales people, and after sales service
Reduced: warranties
Raised: offers tens of thousands of home furnishing items
Created: a new way to shop for furniture
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Value Innovation vs. Stuck In the Middle
Exhibit 6.10
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Being stuck in the middle leads to inferior performance and a resulting competitive disadvantage.
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The Strategy Canvas
Graphical depiction of a company’s performance
Relative to its competitors
Shows focus or divergence
Viewed across the industry’s key success factors
Provides insights into strategy
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JetBlue’s Strategy Canvas
Exhibit 6.11
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Legacy carriers tend to score highly among most competitive elements in the airline industry, including different seating class choices (such as first class, business class, economy comfort, basic economy, and so on), a high level of in-flight amenities such as Wi-Fi, personal video console to view movies or play games, complimentary drinks and meals, coast-to-coast coverage via connecting hubs, plush airport lounges, international routes and global coverage, high customer service, and high reliability in terms of safety and on-time departures and arrivals. As is expected when pursuing a generic differentiation strategy, all these scores along the different competitive elements in an industry go along with a relative higher cost structure.
In contrast, the low-cost airlines tend to hover near the bottom of the strategy canvas, indicating low scores along a number of competitive factors in the industry, with no assigned seating, no in-flight amenities, no drinks or meals, no airport lounges, few if any international routes, low to intermediate level of customer service. A relatively lower cost structure goes along with a generic low-cost leadership strategy.
JetBlue value curve follows a zigzag pattern. JetBlue attempts to achieve parity or even out-compete differentiators in the U.S. airline industry along the competitive factors such as different seating classes (e.g., the high-end Mint offering discussed in the ChapterCase), higher level of in-flight amenities, higher-quality beverages and meals, plush airport lounges, and a large number of international routes (mainly with global partner airlines). JetBlue, however, looks more like a low-cost leader in terms of the ability to provide only a few connections via hubs domestically, and it recently has had a poor record of customer service, mainly because of some high-profile missteps as documented in the ChapterCase
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Appendices Descriptions of Visual Graphics to Support Student Accessibility Needs
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Appendix 1 The A F I Strategy Framework
The graphic shows the interdependent relationships in the A F I strategy framework. The specifics follow.
The important inside circle is titled "Gaining and Sustaining a Competitive Advantage" that is at the very center of the image, with five different circles on the outside of it. Arrows go back and forth from the center circle to each of the five outer circles. The five outer circles are labeled: (1) Getting Started, (2) External and Internal Analysis, (3) Formulation: Business Strategy, (4) Formulation, Corporate Strategy, and (5) Implementation.
Each of these outer five circles have a brief description beside them to explain what the circle means:
Under the first outer circle titled "Getting Started," it says: Part 1, Strategy Analysis, "What is Strategy (Chapter 1)" and "Strategic Leadership: Managing the Strategy Process (Chapter 2)."
Under the second outer circle titled "External and Internal Analysis," it says: Part 1, Strategy Analysis, "External Analysis: Industry Structure, Competitive Forces and Strategic Groups (Chapter 3)," "Internal Analysis: Resources, Capabilities and Core Competencies (Chapter 4)," and "Competitive Advantage, Firm Performance, and Business Models (Chapter 5)."
Under the third outer circle titled "Formulation: Business Strategy," it says: Part 2, Strategy Formulation, "Business Strategy: Differentiation, Cost Leadership and Integration (Chapter 6)" and "Business Strategy, Innovation and Entrepreneurship (Chapter 7)."
Under the fourth outer circle titled "Formulation: Corporate Strategy," it says: Part 2, Strategy Formulation, "Corporate Strategy: Vertical Integration and Diversification (Chapter 8)," "Corporate Strategy: Strategic Alliances, Mergers and Acquisitions (Chapter 9)," and "Global Strategy: Competing Around the World (Chapter 10)"
Under the fifth outer circle titled "Implementation," it says: Part 3, Strategy Implementation, "Organizational Design: Structure, Culture and Control (Chapter 11)," and "Corporate Governance and Business Ethics (Chapter 12)."
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Appendix 2 Exhibit 6.1 Industry and Firm Effects Jointly Determine Competitive Advantage
Both industry and firm effects go through a process that leads to competitive advantage.
Exhibit 6.1 shows the interdependence of industry and firm effects. The process map begins with Industry Effects and Firm Effects, which are both linked with a two-direction arrow. Industry effects points to another box titled "Industry Attractiveness" (Five Forces Model, and Complements), which points to a box titled "Within Industry" (Strategic Groups). Firm Effects points to two boxes, one titled "Value Position" (relative to competitors) and the other is titled "Cost Position" (relative to competitors). Both of these boxes point to a box titled "Business Strategy" (Cost Leadership, Differentiation, Value Innovation). Both the "Within Industry" box from the Industry Effects side and the "Business Strategy" box from the Firm Effects side point to a final box titled "Competitive Advantage.“
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Appendix 3 Exhibit 6.2 Strategic Position and Competitive Scope: Generic Business Strategies
The image shows how combining a firm’s strategic position with the scope of competition results in the two major broad business strategies: cost leadership and differentiation.
This image shows four squares: Cost Leadership (broad scope and focused on cost), Differentiation (broad scope and focused on differentiation), Focused Cost Leadership (narrow scope and focused on cost), and Focused Differentiation (narrow scope and focused on differentiation).
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Appendix 4 Exhibit 6.3 Differentiation Strategy: Achieving Competitive Advantage
On the left, at a disadvantage, is Firm A that offers the lowest amount of value. On the right are two companies that are at an advantage. Both firm B and firm C have higher value than Firm A, however firm B extracts higher value because it has lower costs.
Firm A in this image produces a generic commodity. Firm B and Firm C represent two efforts at differentiation. Firm B not only offers greater value than Firm A, but also maintains cost parity, meaning it has the same costs as Firm A. However, even if a firm fails to achieve cost parity (which is often the case because higher value creation tends to go along with higher costs in terms of higher-quality raw materials, research and development, employee training to provide superior customer service, and so on), it can still gain a competitive advantage if its economic value creation exceeds that of its competitors. Firm C represents just such a competitive advantage. For the approach shown either in Firm B or Firm C, economic value creation, (V - C)B or (V – C)C, is greater than that of Firm A (V - C)A. Either Firm B or C, therefore, achieves a competitive advantage because it has a higher value gap over Firm A [(V - C)B > (V - C)A, or (V – C)C > (V – C)A], which allows it to charge a premium price, reflecting its higher value creation. To complete the relative comparison, although both companies pursue a differentiation strategy, Firm B also has a competitive advantage over Firm C because although both offer identical value, Firm B has lower cost, thus (V - C)B > (V - C)C.
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Appendix 5 Exhibit 6.4 Cost Leadership Strategy: Achieving Competitive Advantage
On the left, at a disadvantage, is Firm A that offers higher cost and lower value. On the right are two companies that are at an advantage. Both firm B and firm C have lower costs than Firm A, however firm B extracts higher value.
In both approaches to cost leadership in this image, Firm B’s economic value creation is greater than that of Firm A and Firm C. Yet, both firms B and C achieve a competitive advantage over Firm A. Either one can charge prices similar to its competitors and benefit from a greater profit margin per unit, or it can charge lower prices than its competition and gain higher profits from higher volume. Both variations of a cost-leadership strategy can result in competitive advantage. Although Firm B has a competitive advantage over both firms A and C, Firm C has a competitive advantage in comparison to Firm A.
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Appendix 6 Exhibit 6.5 Economies of Scale
In the Economies of Scale phase, cost per unit falls as output increases up to a certain point. A firm whose output is closer to this point has a cost advantage over other firms with less output. In this sense, bigger is better. The second part of the curve is the Minimum Efficient Scale phase. In this phase, returns are constant and are flat, as further economies of scale cannot be achieved. In the third phase of the graph, towards the right side, diseconomies of scale are realized as additional output results in per unit cost increases.
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Appendix 7 Exhibit 6.7 Gaining Competitive Advantage Through Learning Curve and Experience Curve Effects
In a 90 percent learning curve, per-unit cost drops 10 percent every time output is doubled. The steeper 80 percent learning curve indicates a 20 percent drop every time output is doubled.
There is an increase in learning that occurs as a result of changes in technology and process innovation.
It is important to note that the learning-curve effect is driven by increasing cumulative output within the existing technology over time. That implies that the only difference between two points on the same learning curve is the size of the cumulative output. The underlying technology remains the same. The speed of learning determines the slope of the learning curve, or how steep the learning curve is (e.g., 80 percent is steeper than a 90 percent learning curve, because costs decrease by 20 percent versus a mere 10 percent each time output doubles).
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Appendix 8 Exhibit 6.9 Value Innovation Accomplished through Pursuing Differentiation and Low Cost Strategies
This image depicts two triangles, one facing down and the other facing up. The triangle facing down says “costs” with an arrow pointing down. The triangle facing up says “total perceived benefits” with an arrow pointing up. In the middle of these two overlapping triangles is a diamond image that says “Value Innovation.”
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Appendix 9 Exhibit 6.10 Value Innovation versus Stuck In the Middle
This image shows four squares: Cost Leadership (broad scope and focused on cost), Differentiation (broad scope and focused on differentiation), Focused Cost Leadership (narrow scope and focused on cost), and Focused Differentiation (narrow scope and focused on differentiation). In the middle of this graphic is a square that says "Blue Ocean Strategy vs. Stuck in the Middle."
This image suggests how a successfully formulated blue ocean strategy based on value innovation combines both a differentiation and low-cost position. It also shows the consequence of a blue ocean strategy gone bad—the firm ends up being stuck in the middle, meaning the firm has neither a clear differentiation nor a clear cost-leadership profile. Being stuck in the middle leads to inferior performance and a resulting competitive disadvantage.
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Appendix 10 Exhibit 6.11 Jet Blue’s Strategy Canvas
On the X axis are the key industry metrics of price, seating class, in-flight amenities, meals, connections (via hub), lounges, international routes, customer service, reliability and convenience. On the Y axis are the words "Low" and "High."
Scoring mostly on the high end of this graph are the Legacy Carriers, who pursue a differentiation strategy. Scoring mostly on the low end of this graph are the Low-Cost Airlines who pursue a cost-leadership strategy. In the middle, is Jet Blue, who oscillates from low to high in a number of categories, indicating a lack of effectiveness in its strategic profile.
©McGraw-Hill Education.
