Discussion: Substitute Products & Services

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Discussion: Substitute Products & Services

Discussion: Substitute Products & Services

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Airline JetBlue adopted a differentiation strategy based on low costs coupled with unique customer experience. It might be called a “value‐based strategy.” It is not the lowest cost carrier in the airline industry; at 12.3 cents per passenger seat mile, JetBlue has one of the lowest costs, but Virgin America, Spirit, and Allegiant had even lower per seat mile costs in 2013. But JetBlue manages its operational costs carefully, making decisions that keep its per passenger costs among the lowest in the business, such as a limited number of airplane models in its fleet, gates at less congested airports, paperless cockpit and many other operations, and snacks instead of meals on flights. Jet- Blue has one of the longest stage length averages (the length of the average flight) in the industry, and the longer the flight, the lower the unit costs. Competing network carriers, who are more well known and established, may have different pay scales because they’ve been in the business longer and have a different composition of staff. These carriers also have higher maintenance costs for their older, more diverse fleets. If it could realize its plans for growth while maintaining its low cost structure, JetBlue could move from its cost focus based on serving a limited, but growing, number of market segments to a cost leadership strategy.9

While sustaining a cost focus

While sustaining a cost focus, JetBlue’s chairman believes that JetBlue can compete on more than price, which is part of its unique differentiation strategy. It is why the airline continually strives to keep customers satisfied with frills such as extra leg room, leather seats, prompt baggage delivery, DirectTV, and movies. It has been recognized with many awards for customer satisfaction in the North American airline industry.

Dynamic Environment Strategies Porter’s generic strategies model is useful for diagnostics, for understanding how a business seeks to profit in its chosen marketplace, and for prescriptions, or building new opportunities for advantage. It reflects a careful balancing of countervailing competitive forces posed by buyers, suppliers, competitors, new entrants, and substitute products and services within an industry. As is the case with many models, dynamic environment strategies offer managers useful tools for thinking about strategy.
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