Its original routes were all located in Western Canadawhich gave the airline its name. Initially, the airline served CalgaryEdmontonKelownaVancouver and Winnipeg with a fleet of three used Boeing aircraft and employees.
To strive in this competitive environment the firms should have an edge over the competitors. To develop competitive advantage, the firms should produce good quality products at minimum costs etc. Therefore, it becomes necessary for the firms to have a strategic edge towards its competitors.
One such competitive strategy is overall cost leadership, which aims at producing and delivering the product or service at a low cost relative to its competitors at the same time maintaining the quality.
According to Porter, following are the prerequisites of cost leadership Cherunilam, To sustain the cost leadership throughout, the firm must be clear about its accomplishment through different elements of the value chain.
Figure-1 shows a matrix of the three generic competitive strategies and their interrelationship given by Porter. Three Generic Competitive Strategy This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive customers.
This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio price compared to what customers receive. To succeed at offering the lowest price while still achieving profitability and a high return on investment, the firm must be able to operate at a lower cost than its rivals.
There are three main ways to achieve this. The first approach is achieving a high asset turnover. In service industries, this may mean for example a restaurant that turns tables around very quickly, or an airline that turns around flights very fast.
In manufacturing, it will involve production of high volumes of output. These approaches mean fixed costs are spread over a larger number of units of the product or service, resulting in a lower unit cost, i.
For industrial firms, mass production becomes both a strategy and an end in itself. Higher levels of output both require and result in high market share, and create an entry barrier to potential competitors, who may be unable to achieve the scale necessary to match the firms low costs and prices.
The second dimension is achieving low direct and indirect operating costs.
This is achieved by offering high volumes of standardized products, offering basic no-frills products and limiting customization and personalization of service. Production costs are kept low by using fewer components, using standard components, and limiting the number of models produced to ensure larger production runs.
Overheads are kept low by paying low wages, locating premises in low rent areas, establishing a cost-conscious culture, etc.
Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features.
This could be achieved by bulk buying to enjoy quantity discounts, squeezing suppliers on price, instituting competitive bidding for contracts, working with vendors to keep inventories low using methods such as Just-in-Time purchasing or Vendor-Managed Inventory.
Wal-Mart is famous for squeezing its suppliers to ensure low prices for its goods. Dell Computer initially achieved market share by keeping inventories low and only building computers to order.This article examines Amazon’s current corporate strategy and evaluates its suitability going forward.
This analysis is based on the drivers of corporate strategy including the need to grow quickly and more importantly sustain such growth, the need to not lose sight of either longer term profitability and the shorter term results and the balancing of both, and its focus on cost leadership.
Vacation costs have been rising, and the number of trips taken by Americans have gone way down. A large majority of American households report no expenditures on out-of-town trips at all. Check out the typical cost components of a vacation and see how your travel spending compares.
Low Cost Carriers: How Are They Changing the Market Dynamics of the U.S. Airline Industry? management moved away from its original low cost business model and changed As shown in Table 1, Southwest Airlines’ low cost business model was based on.
IntroductionIn recent years, the entry of low-cost carriers has totally revolutionised the air passenger transport industry. The low-cost business model was introduced by Southwest in . RYANAIR STRENGTHS 1. Low costs. Ryanair has the lowest unit costs of any European airline and one of the lowest of any airline in the world.
Whether measured by cost per available seat kilometre (CASK), cost per seat, or cost per passenger, Ryanair's production of capacity and traffic costs it less than that of any of its competitors.
WestJet Airlines Ltd. is a Canadian airline founded in It began as a low-cost alternative to the country's competing major airlines. WestJet provides scheduled and charter air service to destinations in Canada, the United States, Europe, Mexico, Central America and the Caribbean..
WestJet is currently the second-largest Canadian air carrier, behind Air Canada, operating an .