JetBlue - New Phase of Development - Case Study Example

JetBlue

Airline industry is one of the most profitable, yet it is heavily influenced by a number of external as well as internal factors which encourages specialist call it “the most turbulent”. Nevertheless, there are several stories of great success that can be witnessed in this field. While many may have heard about SouthWest Airline, it may also be important to state that JetBlue has been extremely successful as well. This paper will analyze the latter company, providing a careful examination of its external and internal environment as well as outlining several strategic options.

To begin with, it may be important to introduce the important players. The first and the most obvious figure that should be identified is the founder – David Neeleman. He has a vast experience in the industry and dreamed of creating a company that would take the successful model of SouthWest airlines and improve it even more. Other essential players include Thomas Kelly, executive vice president and general counsel; Dave Barger who is the president and chief operative offices; John Owens who is chief financial officer; and Ann Rhoades – executive vice president of human resources.

It must be noted that the founder of JetBlue has had extensive experience in the airline industry before setting up this company. He worked with Southwest Airlines, was responsible for a number of successful initiatives and left it, signing the non-compete agreement. However, after it expired, Neeleman decided to improve the model that was used by Southwest Airlines, find a significant amount of financial funds and hire the most experienced and open-minded professionals. This is how JetBlue was set up. As it was mentioned by the founded, the company positioned itself “as customer advocates”: it wanted to attract people to flying and encourage them to use their services. The result was extremely positive: the company was profitable from the very beginning. Its popularity is growing and people started to appreciate what JetBlue did for them and for the entire airline industry. The engagement of technology and some unconventional approaches to the organization of work resulted in unprecedented growth and now the start-up it resembles a fully-developed company. However, the biggest issue at hand is the growth itself. When JetBlue was started, the staff (“crew members”) was only 10 people and now it is 100 times bigger. The same can be said about the fleet. It is obvious that under three conditions it is impossible to retain the feeling of a small company that wants to do everything in its distinct way. So, ironically, the growth itself has become the biggest issue and it threatens to dilute the corporate culture and the unique way of the company.

The big question that the company is trying to answer at the present moment is whether it will be able to sustain the growth and refrain from losing its atmosphere of a small company. So, the primary issue that it faces it growing too big. Speaking of the challenges, one should note that recruitment has been mentioned as the most challenging part. The problems of this company rise from the vagueness of its options.

It is obvious that all the negative elements which were mentioned above emerged because of several factors. First of all, you should not forget that Jet Blue is a relatively young company, especially if compared to the major players of the market. Secondly, it is in its critical phase of development where every step has long-lasting consequences. Finally, JetBlue is an innovative company; so, experimentation is in its nature.

A careful analysis of the external environment will reveal the following. In terms of politics, there is evidence that several governors have supported JetBlue and its initiatives. Economically, it has a rather strong basis. In terms of social aspects, it is determined to serve the people of New York and those who live around. The company is known for its appreciation of technology and innovativeness. As a result, its environmental record is rather impressive. Finally, airline industry has been deregulated so there are few legal restrictions that JetBlue will face. Another point that should be mentioned is that the company in question was able to develop a unique corporate culture which is customer-oriented. In other words, people of New York are likely to be supportive of the activities of the company. Moreover, those who live within a reasonable radius from the city will experience the benefits as well; that is why it is most certain that the people will approve of the company in question. What is also important is that nowadays air travel has ceased to be something that reserved for the wealthy: it is open for everyone. As a result, there is a continuous trend, according to which the number of people using these services is increasing. Therefore, the dynamics of the industry is positive. JetBlue should not anticipate big changed in the demand in the future since as technology is developing, air travel becomes the choice of more and more people.

If one analyzes the industry using Porter’s Five Forces, one will see that the power of suppliers is extremely big since they provide aircraft and any delays cause significant negative consequences. The buyers also have a serious power since they vote for the best airline using their wallet. It is highly unlikely that new entrants will appear since it takes a lot of resources to start an airline company. However, the risk of substitution is quite big since there are several major players which dominate the market. As a result, the rivalry is quite intense.

One should not forget about opportunities and threat. Speaking of the former, it may be important to keep in mind that there are several routes from and to New Yorker and have not been served; so, this might be a suitable direction for expansion. As for the threats, the peculiarity of the airline industry lies in the fact that a single negative event might ruin the wonderful image that has been built over the years.

Now, it may be logical to turn to examination of strengths and weaknesses. As for the first, it is obvious that the company enjoys a strong image as well as wide public support. However, it is still young and until it becomes mature, it is inevitable that mistakes will be made. The competitive advantage lies in the combination of factors such as price, comfort, and a wide variety of routes served. The distinctive competence of it lies in the elimination of the needless paperwork both for the pilots and the passengers.

It is rather understandable that if one was formulate several strategic options, one should gather some additional information which was not mentioned in the case. The first important element would focus on the employees. In spite of the fact that JetBlue tries to hire the right people, there have been some mistakes in the past; therefore, they need to be avoided. Secondly, certain economic predictions must be made to deterring the purchasing power of the people.

One would make no mistake suggest that the fact that the company in question is customer oriented was able to contribute to its wonderful performance. The major opportunity for revenue for JetBlue is the desire of the people to travel around the country, trying to pay less. Speaking of costs, it is obvious that fuel as well as fleet maintenance would be the biggest cost drivers. As for uniqueness, one should point out the peculiar approach towards service which is unmatched.

There are several primary strategic services that should be considered by the company. First of all, it is further expansion in the United States. In this case, the company should follow the course that it is on right now. In spite of the fact that its major hub is located in New York, it might connect different parts of the country, attracting more customers and increasing the profits. On the other hand, JetBlue might try to do something that it has never done before, namely to serve international flights. It is obvious that this will bring up certain problems that it used to avoid, for example, sharing corridors with transatlantic flights. However, it is quite obvious that the business model that the company is using might appear to be so successful that it would not be logical to limit it by a single country. One would make no mistake, suggesting that this would truly mark a new chapter in the development of the company.

Speaking of the first option, one should point out that it will call for certain actions in terms of strategy and marketing. Thus, it would be essential to find the routes that are currently underserved and capitalize on the desire of the people to travel there. This might result in a slight change of marketing and a shift from positioning JetBlue as inherently New York Company to a regional company. Nevertheless, the primary focus will be made on routes to this city. As for the second option which was mentioned about, it will require even more dramatic changes. First of all, JetBlue will have to choose the routes that it will serve. Secondly, it will have to compete for the available slots. Finally, it will have to explain its transformation from a domestic airline company to one which serves international flights. It is rather obvious that this change will require full effort of the staff and will condition hiring even more people. However, if implemented correctly, it might raise the performance to a literally new level.

As for the baseline assumptions, it would be beneficial for the company to assume that it will increase expenditures in the future; that is why it should accumulate the sufficient amount of funds before expansion. If one considers the risks, one should note that economic recessions as well as acts of terrorism present the biggest risks to the company. Nevertheless, it is obvious that something can be done to minimize the risk; for example, JetBlue might accumulate funds that will serve as a cushion which protects it from unexpected turns of the market.

Having examined all the points which were mentioned in the paragraphs above, one should note that JetBlue is currently at the threshold of its new phase of development; that is why it should carefully weigh all the available options and think several steps ahead. The biggest focus should be placed on the recruitment since employees are largely considered to be the most important asset and it cannot afford investing in the wrong people.