Question

Critically discuss the components of JetBlue’s competitive advantage, and what are the merits and demerits of these components? (400 words)

Answer 1

A competitive strategy is linked to the value chain, and supported by intangible assets. JetBlue has some operational strength in its activities, and possible social capital through its alliance relationships. These activities and assets might allow JetBlue to offer services that are unique and valuable to customers.

In order to achieve a sustainable competitive advantage, JetBlue had to assess its ability to contend with other airlines. The question of how to compete in a given business to attain competitive advantage requires an assessment of the types of competitive strategies, including the three generic strategies that are used to overcome the five forces and achieve a competitive advantage:

• Overall cost leadership
  • Low-cost-position relative to a firm’s peers
  • Manage relationships throughout the entire value chain
• Differentiation
  • Create products and/or services that are unique and valued
  • Non-price attributes for which customers will pay a premium
• Focus strategy
  • Narrow product lines, buyer segments, or targeted geographic markets
  • Attain advantages either through differentiation or cost leadership

Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The overall cost leadership and differentiation strategies strive to attain advantages industry wide, while focusers have a narrow target market in mind.

The two bases of JetBlue’s competitive advantage were cost leadership and differentiation. Therefore, JetBlue chose a combined strategy.

JetBlue achieved cost leadership by attaining efficient operations. New planes minimized maintenance and fuel costs, larger planes ensured more revenue per flight, longer hauls on an average as compared to other point-to-point services keep planes longer in air. No-meals served helped quicker turnarounds and reduce costs.

Firms pursuing low-cost strategy generally get trapped in focusing on too few of value chain activities, or lack parity on differentiation with competitors. The low-cost advantage also gets eroded when the competitive pricing information becomes available more easily. The strategy can be imitated too easily.

The other component of JetBlue’s strategy is differentiation. Differentiation is achieved through a strong brand image, the various features including entertainment through LiveTV and comfort due to more legroom.

The problem with differentiation strategy is that differentiating features could be easily imitated. Firms may also get entrapped in too much differentiation, which customers may not value.

Firms employing combination strategies should have a much stronger strategy to outperform rivals. They can achieve superior performance by successfully integrating low-cost operations with differentiation, thereby avoiding the pitfalls of either of the strategies.

JetBlue employed a combination of these two strategies and that gave it a distinctive competitive advantage. It combined low-cost services with a differentiated offering. The company invested in technology for efficient operations right from its inception and, therefore, was able to provide high quality services at low-cost. Going forward, the extent to which JetBlue can maintain this integration of low-cost and differentiation will determine whether its competitive advantage is sustainable.

The mutually reinforcing components of JetBlue’s strategy are critical to assess. Any change in one of the components has an impact on all interconnected activities.

Currently, the key activity appears to be JetBlue’s degree of differentiated service. The only current differentiators JetBlue have are the LiveTV and in-flight social networking, the extra legroom, and the new planes with leather seats. These are all easy for other airlines to imitate. It remains to be seen if customers will perceive these services valuable enough to pay the premium of $20 for extra legroom, and $7 for a pillow and blanket.