Merits and Demerits of Competitive Advantage Components:
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Cost leadership and differentiation strategies have been the bases of JetBlue’s Competitive Advantage since its inception in the airline industry. Moreover, its value chain analysis shows its ability to win the competitive battle in several key areas relative to the bases of competition. Thus JetBlue has continuously created value for its customers through fair pricing, high-quality services, customer care, point-to-point routes etc, by focusing on the process that reduces cost and at the same time give quality oriented traveling experience to customers
JetBlue has become operationally an efficient airline to implement its cost leadership and thus providing the lowest possible fares in the domestic markets of the U.S and certain other countries. Maintenance and fuel cost is reduced by bringing a new same type of planes (Airbus 320) into the existing owned fleet of the company. In addition, these larger planes serve the company’s purpose of being a cost leader as they ensure more revenue per flight, longer hauls on average rather than point-to-point services. Furthermore, the cost is reduced by offering no-frills services which result in quicker turnarounds. As most of the reservation agents work at home, this reduces the need for physical infrastructure, and thereby overhead cost is reduced. In addition, maintenance checks and turnaround times have been reduced by creating first paperless cockpit. Moreover, agents’ commission has been minimized by offering online tickets. JetBlue chose the niche markets which have been ignored by major carriers nationwide and thus it does not compete for head to head with major airlines. In this way, rather than supporting a costly hub-and-spoke system to reach all markets, it offered point-to-point services in high volume corridors .
One of the demerits of such lean low-cost strategy is that firms put too much focus on too few of the value chain activities, or sometimes lose the grounds of differentiation with competitors. Moreover, as the people are increasingly becoming internet savvy, they will have competitive pricing information easily available, and this may cause the low-cost advantage to get eroded. It has been seen over the years that the low-cost strategy can be imitated too easily.