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Airlines and the Oligopoly Market Structure - Assignment Example

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The article “Airlines and the Oligopoly Market Structure” describes a situation in which American-based airline companies are receiving both criticism and accolades for their current operating efforts as it relates to their new business strategies in the face of deregulation…
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Airlines and the Oligopoly Market Structure

Download file to see previous pages... These advantages are witnessed in service pricing, destination services, marketing, and promotion, as well as the established hub philosophy that drives either point-to-point destination services or major hub development. Much of these competitive advantages come from establishing a market-oriented culture, defined as “delivering superior value to customers” (Narver, Slater & Tietje 1998, p.242). It is about aligning the business model based on three dimensions, having a customer orientation, a competitor orientation, and the ability to coordinate all business units with an inter-functional, systems-based philosophy and structure (Gauzente 1999, p.2). The majority of the airlines identified in the research article have established a market-oriented business model and internal culture, that provides both competitive advantages over other airlines in this oligopoly as well as a strong brand in the consumer market. A market orientation strategy “is a powerful competitive advantage, because it is an invisible asset that takes a long time to establish and one that is difficult to imitate” (Johnson & Verayangkura 2001, p.2). ...
 a market structure, constant environmental scanning occurs to witness the competitive behaviors of rival firms to avoid market share losses or loss of brand reputation in consumer markets. Nickels, McHugh & McHugh (2005) identify a competitive advantage as better development of core competencies. These are “functions that the organization can do as well or better than any other organization in the world” (Nickels, et al., p.257). In the article “the joys of oligopoly”, it is identified that the core competencies of Southwest Airlines, as one example, is the ability of the firm to structure its scheduling, labor, and point-to-point destination services to provide low-cost, no-frills service that continues to bring the business significant revenues from satisfied customers. While larger competitors with more market presence continue to provide customers better in-flight services that require a higher pricing model, Southwest is able to manage its services effectively and with limited perks for the more frugal consumer. Southwest is also able to follow an A to B flight philosophy which fills more seats daily rather than waiting at a regional hub for connecting traffic that allows for almost instantaneous departure after a flight has arrived at the airport (Associated Press 2001). The core competencies of Southwest are labor-related, flight capacity scheduling, and independence from hub philosophy. However, other airlines that do utilize a hub philosophy consider this a competitive advantage in this market structure as it provides “greater frequency, more destinations and lower fares than customers could expect without it” (Associated Press, p.3). ...Download file to see next pagesRead More
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