Strategic Positioning & Competitive Advantage | My Assignment Tutor

190.211 – Aviation Strategic Management 1Strategic Positioning &Competitive Advantage190.211-Strategic Aviation Management 1Strategic Positioning• A strategy aimed at influencing how a particularmarket segment perceives a product in comparisonto the competition.• Strategic positioning can be achieved throughPorter’s Generic Strategies (low-cost leadership,differentiation, or niche)• Strategic positioning can help a company attain acompetitive advantage190.211-Strategic Aviation Management 2Competitive Advantage• A company’s ability to outperform the competition,thereby providing customers with a benefit thecompetition cannot provide.• Based on something the company …• Has• Does• A core competency• A differential benefit–190.211-Strategic Aviation Management 31 2 3190.211 – Aviation Strategic Management 2Porter’s Three Generic CompetitiveStrategies• Low-cost leadership: Being the overall low-costprovider in the industry• Differentiation: Provide a difference to theproduct/service, a difference for which the customersare willing to pay extra• Niche: Concentrate on a narrow buyer segment andoffer a customised product/service that meets therequirements of the customers better than rivals190.211-Strategic Aviation Management 4Low-Cost Leadership• Containing costs to the lowest levels relative to rivals– thereby creating a sustainable cost-basedcompetitive advantage over the competition.• Strip costs out of every function the organisationperforms.• Low price drives market share and is sustained bylow cost of supply and production.• LCCs use a low cost leadership strategy• Southwest Airlines, Ryan Air, Easyjet, Jetstar190.211-Strategic Aviation Management 5LCCs Use a Low Cost StrategyHow LCCs achieve cost advantage:• Low product distribution costs– mainly use online sale channel, reducingcommissions to travel agents• Not issuing paper tickets– save admin costs & related expenses• Homogenous aircraft type– lower costs in pilot training & aircraft maintenance190.211-Strategic Aviation Management 64 5 6190.211 – Aviation Strategic Management 3• Lower fixed costs through negotiations– lower lease charges for aircraft, lower long-termmaintenance costs, lower airport fees, lowerinsurance fees• Less in-flight services– not providing meals• Short-haul destinations served– short sector < 3 hrs190.211-Strategic Aviation Management 7• Target secondary airports– avoid higher airport charges, but still serving mainhubs facing less convenient schedules• Limited luggage allow onboard– a significant impact on fuel burn (Pax can carrymore luggage subject to extra fees)• High utilisation rate• Quick turnaround times• Higher seating density190.211-Strategic Aviation Management 8• Lower personnel or staff costs– self check-in kiosk at airports requiring less airportcustomer service staff / lower pilot salary• Not joining alliances– avoid the potential costs for joining allianceactivities & the costs for handling interline luggage• No airport lounges & other amenities190.211-Strategic Aviation Management 97 8 9190.211 – Aviation Strategic Management 4Low Cost Strategy : Examples• Video : How LCCs Work190.211-Strategic Aviation Management 10Differentiation Strategies• Provide a product/service with some distinguishablefeature or benefit that customers perceive as beingmore valuable, and are consequently willing to pay apremium for.• Can be a “real benefit” eg. More leg room or superiorquality meals …• Or a perceived benefit eg. Brand or “friendliness”190.211-Strategic Aviation Management 11• The distinguishable feature or benefit provides apoint of difference, something unique that meets theneeds and wants of a particular market segmentbetter than the competition.• Some differentiation strategies can be easily copied,some are sustainable.• Differentiation strategies work best when the needsand wants of customers are very diverse.• Different … services, facilities, seating, aircraft,routes, destinations, schedules, meals, brand valuesetc190.211-Strategic Aviation Management 12101112190.211 – Aviation Strategic Management 5Differentiation Strategy : Examples• Air New Zealand – Skycouch• Air New Zealand – Safety Video190.211-Strategic Aviation Management 13Niche Strategies• Targeting a small market segment that is largelyignored by the main competition• Closely tailoring the product or service to meet theneeds of the customers in the segment• Building and relying on strong customer loyalty• Building barriers to competition• Staying very “close” to the customers• Also known as a Focus Strategy”.190.211-Strategic Aviation Management 14The Basis of Niche Strategies• Geographical niche: Concentrate services in a specificregion or locality(e.g. Interisland flight)• Customer-type niche: Focus on the specific needs ofa limited or specific customer segment(eg Corporate jet operations, Concorde service)• Product-line niche: Focus on a specific and uniqueproduct line, for which the companies have theexpertise or core competency in a particular market(e.g. Flight simulator manufacturers)190.211-Strategic Aviation Management 15131415190.211 – Aviation Strategic Management 6Niche Strategy – Examples• Video : Silverjet Business Class Airline• Video : Keewatin Air190.211-Strategic Aviation Management 16Combination of Generic Strategies• A company can pursue a low-cost or a differentiated nichestrategy, or a combination of Porter’s Generic Strategies• Hybrid strategies– Low-cost niche strategy: Ensure the cost of producingproduct/service is lower than rivals in a target market– Differentiated niche strategy: Provide the uniqueproduct/service but also target a small segment market in whichthe customers are willing to pay extra190.211-Strategic Aviation Management 17Branding• What is a brand?– A mark, name, sign or symbol– Identifies the seller– A contract with the customer to consistentlydeliver features and benefits– A living entity with values and personality190.211-Strategic Aviation Management 18161718190.211 – Aviation Strategic Management 7Brand Equity• The value of the brand to the organisation– Brand loyalty– Brand awareness– Perceived quality– Brand associations– Channel relationships– Legal strength190.211-Strategic Aviation Management 19Why Brand?• Customers build a relationship with the brand• To focus promotional efforts• To generate demand pull• To reduce reliance on retailers and distributors• To segment the market• To differentiate supply• Easier for customers to process information• Customers will pay a premium for a strong brand190.211-Strategic Aviation Management 20How to build a brand• A long term process• Build awareness• Create brand associations• Build image• Capture a position in the market place• Build liking for the brand• Obtain trial purchases190.211-Strategic Aviation Management 21192021190.211 – Aviation Strategic Management 8• Create happy, satisfied customers• Build loyalty• Grow the brand• Penetrate the market190.211-Strategic Aviation Management 22Branding Strategy : Example• Virgin Airlines Branding Strategy190.211-Strategic Aviation Management 23Core CompetencyThe major value-creating activities of a company, whichmay include skills and processes, or a combination ofthemSomething that the company has,or is especially good at190.211-Strategic Aviation Management 24222324190.211 – Aviation Strategic Management 9Core Competenciesin The Airline Industry• Staff– Customer service– Training– Attitudes• On-time arrival and departure, turnaround time• Low cost purchasing• Maintenance• Relationships• Etc190.211-Strategic Aviation Management 25Four Key Questions to Determine CoreCompetency of A Business• Whether the company has better skills or corecompetency than all others or at least the vastmajority of its rivalsAre our skills andprocesses trulysuperior?• Can competitors copy the company’s corecompetency, and how long would it take?How sustainable isthe superiority?• How unique and rare the company’s coreRareness competencies compared with the competition• How reliant are we on the competency as thebasis of our competitive strategy?Is the competencyintegral to our valueproposition?190.211-Strategic Aviation Management 26Sustainable CompetitiveAdvantageMaintaining a competitive advantage over time.• Unique source of competitive advantage• Can’t be easily copied by competitors• Adds considerable perceived value to the serviceoffered• Often derived from brand, legal or relationshipsources190.211-Strategic Aviation 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