Business Model Generation Strategy †Free Samples to Students

Question: Discuss about the Business Model Generation Strategy. Answer: Introduction: JetBlues success has been developed on low cost and customer friendly business strategies. JetBlue presents itself as a cost-sensitive and the no-nonsense airline which is dedicated to providing convenient and quality services to the customers at a lower cost. Through its hybrid business model, JetBlue successes rebuilt itself after the 2007 snowstorm crisis that paralyzed its operations (Wei, et al., 2013, p. 88). In the intense competitive airline industry, customers enjoy a high bargaining power because of numerous choices. Customers only choose services at a lower price. Likewise, airlines use price as a competitive strategy (Brown, et al., 2007, p. 123). Hybrid business model is defined as a mix of several models with an aim of creating a competitive strategy. In the airline industry, the model is a combination of low-cost effectiveness and broader and diversified routes and services that were traditionally offered by the legacy carriers. The legacy carriers use low-cost strategies, point to point routes, and franchised regional routes to increase their load factors as well as gaining passenger traffic (Sekhar, 2009, p. 67). To compete with the legacy carriers, JetBlue, a low-cost carrier, combine both long haul and short-haul routes. Conversely, the airline has also ventured into inter-regional and international routes. Although the model is short-lived and needs to be reviewed from time to time, it has helped JetBlue to enter the markets that were previously controlled by the legacy carriers (Mazzucato, 2002, p. 55). First, there is a rise of PRASM resulting from Domestic Operations. PRASM refers to Passenger revenue per available seat mile. PRASM is a fundamental metric in the industry. During the 2015/16 period, legacy carriers such as Delta, American, and United faced the adverse decline of their unit revenue after the dollars strengthening against other currencies. Travelling from other countries to the US was expensive which led to revenue reduction by 8% compared to the previous year. However, JetBlue remained immune to the fluctuation of the foreign currency as a result of its huge presence in the domestic market. JetBlues unit revenue rose during the period while its stock grew by 56% to a high of $27.4 per share. This was an achievement considering that the shares of legacy carriers decline by approximately 10%. Therefore, JetBlues domestic presence played a major role in outperforming its competitors (Crowther Seifi , 2015, p. 55). The second factor is a low cost advantage. Considering that JetBlue relies on low-cost strategy and its dominance in the domestic market, it enjoyed a cost advantage over other competitors. Cost advantage was used by JetBlue to penetrate into territories previously controlled by larger airlines hence generating a high revenue margin. Actually, JetBlues profit margin grew by 14% as compared to 7% of the industry (Osterwalder Pigneur, 2010, p. 137). Realizing that the oil prices were likely to be non-sustainable in the long term, JetBlue invested in fuel-efficient aircraft as a strategy to keep its operations expenses low. With lower unit costs combined with low-cost advantage, there is a higher probability of JetBlue extending its margin in the future. Third, JetBlues entry into the high-value market was another advantage to its competitiveness. With its Mint premium services, JetBlue now serves the high-value San Francisco and Los Angeles markets. The services targeted towards corporate and elite passengers has enhanced the airlines passenger traffic. The popularity of the Mint premium service is associated with affordable high-quality services. With the services of the services in the two markets, JetBlue decided to venture into the Boston-Los Angeles and Boston-San Francisco routes (Crowther Seifi , 2015, p. 66). Fourth, JetBlue enjoys customer satisfaction. Customer satisfaction is a major driver of business success. When customers are satisfied, they remain loyal to the company as well as attracting new customers through the word of mouth. Loyalty and expansion of customer base translate into an increase in revenue. JetBlue enjoys highest customer satisfaction score in the industry compared to its competitors (Viardot, 2017, p. 65). Fifth, JetBlue enjoys higher aircraft utilization rate in the industry. Compared to the legacy carriers, domestic carrier airlines like JetBlue utilizes its aircraft better which results in low operating costs. Short distance trips allow a high number of trips covered in a year. High utilization of aircraft increases revenue and profit margin (Raghunath Rose, 2017, p. 39). It is believed that JetBlues domestic presence and low-cost advantage gives it the ability to outdo its closest competitors. With the hybrid business model in place, the airline has an upper hand of outperforming larger competitors in the future as well. With the Mint service and the ability to penetrate into high-value market, JetBlues sustainability in the long term is predictable. References List Brown, J., Schiling, C. Wuerffel, D., 2007. The Competitive Edge: How to Win Every Time You Compete. New York: Tyndale House Publishers, Inc. Crowther, D. Seifi , S., 2015. Corporate Governance and International Business. 1 ed. London,UK: Bookboon.com. Mazzucato, M., 2002. Strategy for Business. 1 ed. London: SAGE Publications Ltd . Osterwalder, A. Pigneur, Y., 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. 1st edition ed. New York: John Wiley and Sons. Raghunath, S. Rose, E. L. L., 2017. International Business Strategy. 1 ed. London,UK: Palgrave Macmillan. Sekhar, G. V. S., 2009. Business Policy and Strategic Management. 1 ed. New Delhi: I. K. International Pvt Ltd. Viardot, E., 2017. The Timeless Principles of Successful Business Strategy. 2 ed. Berlin Heidelberg: Springer-Verlag Berlin Heidelberg. Wei, W., Zhu, W. Lin, G., 2013. Approaching Business Models from an Economic Perspective. 1 ed. Berlin Heidelberg: Springer-Verlag Berlin Heidelberg.