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Extant literature demonstrates that macroenvironment factors basically imply the major external and uncontrollable factors that either positively or negatively influence an entity’s decision-making processes, performance and strategic orientation (De Toni & Tonchia, 2003).
In the case study, some of the general economic macroeconomic conditions that continue to affect regional carriers such as SkyWest Airlines and Atlantic Southeast Airlines include economic recessions, misaligned partnerships with national carriers leading to delayed flights and unaccounted baggage, high and unstable fuel costs, acrimonious relationships with labor unions, weather-related flight cancellations, heightened competitive pressures from low cost carriers, and regulation issues (Thompson et al., 2011).
From the case scenario, it can be demonstrated that the U.S. regional airline industry is a subset of the national airline industry as it acts to satisfy the needs and demands of national carriers through partnership agreements.
The U.S. regional airline industry forms a critical component of the global airline industry in that it provides domestic and international air transportation of passengers and/or cargo over regular routes on pre-determined schedules (Thompson et al., 2011). These relationships imply that the U.S. regional airline industry is affected, either positively or negatively, by turbulences occurring in the national and global airline industries.
Five Forces Analysis
Competition within the U.S. regional airline industry is at all-time high if analyzed using the lens of Porter’s Five Forces Model, in large part due to the threat of substitute products (cheaper routes established by competing regional carriers), threat of established rivals (many regional carriers competing for the same resources), and the threat of new entrants (new regional carriers either merging or partnering with national carriers on vital routes to sustain competitiveness).
The Porter Five Forces Model has two other vertically integrated elements that can be used to demonstrate intense competition prevalent in the regional airline industry. The first of these elements – bargaining power of suppliers – is demonstrated as high by the way regional carriers are forced to partner with national carriers and act as their subsidiaries to be able to penetrate the market.
Additionally, the switching costs from one regional carrier to another are low, and the market is dominated by a fragmented source of regional brands (e.g., Continental, Delta, Midwest, etc.) and operating partners (e.g., SkyWest, Express Jet, Atlantic Southeast Airlines, etc.).
The other element of the model – the bargaining power of customers – is high due to the concentration of customers within the routes, large number of small airline operators, customer price-sensitivity, and simplicity demonstrated by customers in switching to another carrier (Pehrsson, 2011).
Change is inevitable if organizations are to successfully deal with issues within their internal and external environments in their attempt to maintain competitiveness (Gil-Padilla & Espino-Rodriquez, 2008). In the case, change is being fuelled by the felt need to demonstrate quality service to win customer confidence, need to provide efficient services devoid of baggage mishandling and flight cancellations, and financial troubles experienced by established national carriers (Thompson et al., 2011).
Change is about survival (Gil-Padilla & Espino-Rodriquez, 2008), hence individual airline carriers, including SkyWest Airlines, have been pressured to alter existing structures, policies and practices if they are to prosper in a volatile, uncertain and increasingly complex environment.
Individually and collectively, the changes witnessed in the regional airline industry have necessitated regional carriers to spend huge amounts of resources with the view to develop quality customer service, maintain strong safety image, maximize on-time arrivals to enhance customer satisfaction, and acquire new aircraft to reinforce safety standards (Thompson et al., 2011).
From the case study, it is clear that there are a number of factors that determines success for companies in the regional airline industry. Most of these factors arise from the macroenvironment and include the capacity to guarantee customer safety, capacity to provide customer-sensitive services, capacity to create fruitful cooperation and partnership with national carriers, capacity to satisfy employees to avoid trouble with labor unions, and capacity to have faster, more efficient commuter jets (Thompson et al., 2011).
Other factors include strong management principles, capacity to provide service promotions and in-flight services, non-stop flying, strong financial management principles, efficient management of costs, and efficient route system.
Strategy for SkyWest, Inc
Moving on to SkyWest’s strategy, it is clear that the fierce competition witnessed within the industry has led the corporation to consider enhancing their competitive advantage by identifying new strategies to help improve performance (Pehrsson, 2011). From the case, it can be concluded that SkyWest Inc. is keen to expand its current geographic presence by pursuing more partnerships with national carriers to achieve the status of airline and employer of choice.
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Consequently, it can be argued that SkyWest, Inc. is attempting to achieve the competitive advantage of focused and continued growth and expansion in its regular passenger transport and scheduled charter businesses so as to maximize efficiency (Thompson et al., 2011).
Resources & Capabilities
Extant literature demonstrates that an organization’s business model and strategy must be intrinsically tied to its collection of competitively important resources and capabilities (Thompson et al., 2011), and that any attempt by management to develop and deliver customer value in a way that relies on resources or capabilities that cannot be readily acquired is a recipe for failure (Pehrsson, 2011).
Flowing from this argument, it can be argued that SkyWest Inc.’s competitive resources and capabilities include non-unionizable employees in its SkyWest Airlines domain, reliable conventional airline service with high safety standards, stability of earnings as witnessed in its financial statements, and a growing market as more business travelers now prefer to use low-cost carriers.
In contrast, its resource weaknesses and competitive deficiencies include fierce competition from low-cost carriers, sensitivity of airline industry to the state of the economy, increasing price of fuel, increased government regulations, labor union interference in Atlantic Southeast Airlines, and overreliance on outsourced routes from major national carriers.
The corporation’s financial statements, particularly its consolidated balance sheets and statements of income, demonstrate a resilient company that has been able to post profits where others are making losses.
The figures demonstrate that the company has not only been able to use its assets and operating capital to generate sustainable earnings over time but has continuously paid back its short-term liabilities using its short-term assets and another portfolio. This orientation implies that the corporation is on the verge of breaking through in terms of performance and competitiveness.
Lastly, in recommendations, SkyWest, Inc. should add new partnerships with national carriers while expanding existing ones to include new routes to increase customer base and profitability, expand its flight operations outside the United States, work on its customer satisfaction and security initiatives, adopt employee satisfaction initiatives to avoid union upheavals, and seek approval with relevant agencies to initialize more scope clauses.
De Toni, A., & Tonchia, S. (2003). Strategic planning and firm’s competencies: Traditional approaches and new perspectives. International Journal of Operations & Production Management, 23 (9), 947-976.
Gil-Padilla, A. M., Espino-Rodriguez, T. F. (2008). Strategic value and resources and capabilities of the information systems area and their impact on organizational performance in the hotel sector. Tourism Review, 63 (3), 21-47.
Pehrsson, A. (2011). Product/customer scope: Competition antecedents, performance effects and market context moderations. European Business Review, 23(5), 418-433.
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A. J. (2011). Crafting and executing strategy: The quest for competitive advantage: Concept and cases (18th ed.). New York, NY: McGraw-Hill/Irwin.