jetblue case examination essay
External Environment
To evaluate the external environment of JetBlue airways we will use the PESTEL examination. PESTEL evaluation stands for “Political, Economic, Interpersonal, Technological, Environment and Legal analysis”.
Political Factors
How and to what extent the government does intervenes in the economy. Personal factors could be tax coverage, labor regulation, environmental regulation, trade constraints, tariffs, and political steadiness. Political elements that are present in the JetBlue case are: Government displays the air travel industry more scrupulously consequently 60% of airline market is unionized
Heightened impression of buyer information level of privacy
Air-port slot/gate aides
Security considerations seeing that 2001 episodes
Bankruptcy
Economical Factors
These types of factors have got major influence on how businesses operate and make decisions.
They consist of economic progress, interest rate, exchange rates, and inflation prices. Economic factors that are found in the case are: 1978 Airline Deregulation Work created strong rivalry between airlines Economic downturn in flight travel following 9/11 2001 affected many airlines – JetBlue reported 18 progressive, gradual quarterly profits IT Spending continued content 9/11
Energy costs spiraled, aggressive competition and improved operating costs Availability of capital raising
Interest levels
Musical legacy Airlines exiting bankruptcy and streamlining functions Strategic Units
Good Pricing is a crucial competitive aspect
JFK Expansion
Sociable Factors
Developments in interpersonal factors affect the demand for a company’s companies how the company operates.
They include the cultural elements and include overall health consciousness, populace growth level, age syndication, career attitudes and emphasis on safety. Sociable factors which have been found in the situation are: 2001 Terrorist episodes in US negatively damaged airline industry Anxiety about safety in airports
Travel has become bothersome due to safety measures
Inner Culture in JetBlue – Management is definitely hands on – a great place to work
Scientific Factors
The technological elements determine boundaries to entry, minimum useful production level and influence outsourcing decisions. They contain ecological and environmental elements, such as R&D activity, software, technology bonuses and the level of technical change. Scientific factors found in the case happen to be:
Aging fleet
Konzentrationsausgleich of Technology
Digital Revolution – internet does away with ticket real estate agents but allows price comparison Customer satisfaction working from home reduces operations costs
Environmental Elements
These elements include weather conditions, climate, and climate alter. Environmental factors that are present in the case are: War, Politics Turmoil and Natural Catastrophes drive gas prices from $30/bbl. in ’03 to $60/bbl. in ’05 Airport slot/gate allocations
Security circumstances build boundaries to ease of travel
Legal Factors
These kinds of factors can affect how a firm operates, their costs, and the demand for its products. They consist of discrimination regulation, consumer law, antitrust rules, employment regulation and health and safety regulation. Legal factors that are seen in the case will be: 1978 Aircarrier Deregulation Work eliminated federal government control over costs and routes Airport and FAA density regulations
Reliability laws seeing that 9/11
Porter’s Five Makes
In order to understand Jet Blue’s external environment, Porter’s a few forces can be a helpful tool in order to evaluation the company’s competitive environment plus the degree of competition amongst competition within the modern aviation industry. The competitive environment will be examined in terms of 4 different aspects, particularly the bargaining Power of buyers and suppliers, the risk of new entrants and new substitutes. The bargaining power of customers inside the aviation sector is rather high as there are common products and services which might be less one of a kind and can be conveniently imitated by simply competitors. Furthermore, there are just low moving over costs sustained for the buyer in general, which means that there is generally a lower amount of customer loyalty towards one single company and this customers may compare provides easily especially due to the choice to purchase entry pass online.
Suppliers generally include a moderate to substantial bargaining electricity within the market due to the limited number of suppliers which makes aviation companies to choose from the quantity available and accordingly to take their prices. In fact , fuel is the second highest cost for aviation companies. There are highly depended on supplier’s rates and the availability which indicates over a relatively substantial bargaining power of suppliers. Additionally , there are excessive switching costs which are firmly in favor of the suppliers and means that the company experiences a rise in operating costs when transitioning to another provider as traveling another type of aeroplanes leads to additional costs (maintenance, training and so forth ). Aircrafts are susceptible to delays because of the location of gate locations which leads to a decrease in use and therefore to the increase in costs. In terms of the threat of substitutes there are not a whole lot serious hazards and alternatives to products within the aviation industry, and so the threat may be rated because medium.
Yet , private aircrafts can be seen as being a substitutes in the industry. In the transportation industry there are even more alternatives intended for substitutes just like trains, chartering, cars and boats. The threats of new entrants is incredibly low as there are certain limitations to entry such as a large amount of investments which might be required and it is rather hard to build up a reliable and trustworthy from scratch while the sector is already centered by several competitors. In conclusion it is usually said that there exists a medium amount of rivalry inside the aviation market due to an extremely high amount of bargaining benefits of customers and suppliers and a rather low threats of new entrants and substitutes in the industry. One of many remedies in order to avoid high bargaining power of buyers would be to make an effort to differentiate by competitors by building a unique and favorable graphic on the market. However companies could use the technique of in reverse integration and acquire their suppliers in order to avoid the bargaining power of suppliers. Nevertheless , those financial commitment are always highly dependable on the company’s economic budget, goals and goals in general.
Economical Analysis
The subsequent graph is usually an evaluation of JetBlue Airways and Freebie southwest Airlines based on financial details found on the companies’ income assertions, balance linens, and cashflow statements:
Plane Blue
As you can see, JetBlue is consistently below South west on the ratios. JetBlue’s liquidity ratios possess decreased during the last three years and may be considered worrisome. However , we know that the fast is the aging process and the company is making investments to replace the old navy and expand the fast. This is an extremely reasonable cause for the decline in these proportions. JetBlue’s collateral multiplier is definitely higher than South west. At first, you may think this is better. However , a greater equity multiplier is not a good thing. An increased equity multiplier means that a company finances a bigger portion of their assets through its debts.
Therefore , freebie southwest has a better equity multiplier. While JetBlue’s net income margin is slightly lower than Southwest’s, it can be in line with the industry normal of 3. 2%. JetBlue’s returning on fairness is also in accordance with the market average of 8%. JetBlue has a large capital intensity ratio which can be okay mainly because, as an airline, they require a large amount of capital to operate. Total, the financial ratios will be lower than Southwest’s but they may show any kind of problems that no longer make sense. The web profit perimeter, return in assets, and return in equity have the ability to improved during the last three years. The money coverage ratio is also increasing. The financial situation seem to show that the firm is increasing and is secure.
Advantages
When we go through the case JetBlue shows several strengths. One of the most important is customer satisfaction; they will satisfy their customers by being a low-cost airline but as well offer good experience (the JetBlue Experience). They have new planes (that maintain the operational costs low) with inflight entertainment systems, their customers get a beverage and a snack and the employers are participating and motivated. JetBlue is definitely an innovative organization, for example they were the first North-American aircarrier company that used electric ticketing plus they introduced the first paperless cockpits.
Weak points
When inspecting the company inside we also see a lot of weaknesses. From your case it became clear that the company experienced problems with facing mass cancellation; a fragile reservation system and also no baggage managing systems. The business got large debts as a result of rising fuel prices, and in addition because of the compensations that they offered their customers after making mistakes. Currently the suitcases handling system works effectively and their on-line reservation devices are also superior. Another weak spot of JetBlue is that is usually focusses around the middle class of culture, therefore they cannot have many high class people that are willing to spend more.
Opportunities
The company is also inspired by external factors, and we will first discuss the opportunities for JetBlue. The case clarified that JetBlue is getting a lot more interline negotiating with other airline companies. Due to this fact JetBlue may have more spots to travel to plus they can also produce reservations underneath each other peoples names. Hence, it is wise that JetBlue will keep making new interline deals with the greater airline firms. Another opportunity for JetBlue is technological advancements, since JetBlue is a modern company that they like to make an effort new things away such as they were doing with the paperless cockpit. Also the deregulation of intercontinental air travel and loosening regulations are chances for JetBlue. There are a lot of polices around air travel, especially following your terroristic problems on 9/11 and also the taxes laws affect the company. Whenever these can become looser the corporation will have much less expenditures.
Dangers
When we evaluate the external factors that are influencing the company we all also locate several dangers. One of the biggest threats for the airline industry are fuel rates, since they are the largest costs intended for an aircarrier company. Another threat for the flight industry are terroristic disorders, after 9/11 the customers acquired afraid of venturing by plane. Also all the safety methods make travelers rather want to use one other way of transport, such as the car or coach. Financially the high consumer taxes and currency improvements also effect the flight industry.
TOWS Analysis
After evaluating the SWOT analysis we can now look at the externally-focused TOWS analysis. The TOWS analysis matches external options and risks with inside strengths and weaknesses.
Maxi-Maxi Strategy
How could you use your strengths to take advantage of the possibilities? If we assess the advantages and possibilities of JetBlue, some of the tactics they could implement are: Focus on the technology advancements; JetBlue can be an innovative organization and they like to try out fresh technologies. They will make the JetBlue experience better yet than that already is usually. Focus on the interline negotiating; when JetBlue has more interline agreements to airline businesses their customers may have more range of countries wherever they want to get, it will also always be easier for them to make a reservation. Reduced the functioning costs; anytime the law and regulations will be in favor of the airline sector the company can easily lower their operating costs and therefore also lower all their prices.
Maxi-Mini Strategy
How may you take advantage of the strengths in order to avoid real and potential risks? The advantages that JetBlue could use to stop real and potential threats are: Give attention to technological innovations; again they must focus on this for example that they could might be develop new security examine machines which have been easier to use and also safer to steer clear of terroristic disorders Develop the JetBlue knowledge; there is strong competition in the airline market, however JetBlue should identify itself by improving the JetBlue encounter which is currently known for excellent customer service, friendly personnel, fresh planes, entertainment systems and so forth If that they improve this experience and maintain focusing on being a low-budget company they will win more customers.
Mini-Maxi Strategy
How may you use the opportunities to defeat the disadvantages you will be experiencing? There are lots of opportunities that JetBlue could use to get over the weaknesses that they are encountering, such as: Dislodging laws and regulations; whenever the rules will be looser the transformation process of the airplanes will probably be easier and faster. New-technology; the new technology could help the corporation to improve the web presence. The internet presence was at the case really bad yet currently they already better this. On the other hand E-business and M-business achievement more and more popular so it is often wise for a company to hold on track with this by improving their particular online systems.
Mini-Mini Strategy
How can you decrease your disadvantages and avoid hazards? The strategies that JetBlue should use for minimize the weaknesses and threats happen to be: Improve the devices; some of the weak points are weak baggage controlling systems and online occurrence. Also in the case it became crystal clear that JetBlue faced issues with mass cancelling. This could all be improved by simply implementing ENTERPRISE RESOURCE PLANNING systems so that it is clear what is exactly going on in the organization. For on the net presence they should have an IT department that focusses about that. Increase safety systems: there are a lot of basic safety procedures due to fear of terroristic attacks. The airplane market should spend money on have less dangerous and simpler systems to enhance the safety of its travellers. Differentiate itself from other aircarrier companies; there are countless airline firms and this triggers intense competition. However in the event JetBlue makes certain that they offer their particular product in an exclusive approach the company is going to win buyers.
Balanced Scorecard
In the subsequent we will establish a balanced score cards for Fly Blue simply by collecting and analyzing info on the business current overall performance. The overall aim of the harmony scorecard is always to analyze the gathered info and compare it to the desired functionality and strategic goals. Furthermore it is a beneficial tool to align business activities to the business current mission and eyesight. At large, there are 4 main perspectives which can be analyzed during the balanced scorecard which are the consumer, internal business, innovation& learning, and monetary perspective. With regards to the internal Business Perspective it becomes clear that Jet Green has one of its major main competencies in quick turnarounds. One of the main reasons with this is the “paperless cockpit” electricity costs and launched by Jet Blue alone. In fact , the paperless cockpit ensures faster takeoffs by lowering paperwork which will eventually causes quicker turn-around rates, and also higher aeroplanes utilization. Jet Blue’s high completion price is another significant competence of the company’s business operation (rate of 99. 6 % compared to 98. 3% in major airlines).
Furthermore, the Jet Blue would keep operating costs low by integrating a less costly airplane, the A 320, which can be significantly less expensive than the Boeing 737. Additionally , the A 320 is far more fuel-efficient, needs less repair costs, and training costs are kept at a lower level leading to an general decrease in operating costs and enables the organization to offer less expensive tickets towards the end-customer. Yet , Jet Blue aims at reviving its fleet expansion news. The flight planes to buy the A321s and A320neo. Besides, the corporation had to deal with major program issues in regards to the baggage-handling program, online rebooking system, the sabre aircarrier solution applications which brought on significant gaps in daily operations and lead to dissatisfaction among customers. Another point of view of the well-balanced scorecard that needs to be analyzed is definitely the customer perspective. The company marketplaces its services package because the “Jet Blue experience” which includes the modern aircraft, various TV channels& movies, natural leather seats plus more leg room.
Furthermore, Jet Green adds benefit to the customers by offering services such while priority boarding. The company, actually positions alone as a low-price company, yet focuses highly on clients services (the ‘Jet Green experience’) too. This strategy allows the company to differentiate themselves from their rivals and adds unique value to their products. However , after the operations meltdown of 2007, customers shed trust in the corporation. For the future, significant changes are needed to regain customer’s trust. In terms of you�re able to send financial point of view it can be said that company’s liquidity ratios have been completely decreased within the last 3 years and could be considered worrisome, however , since Jet Blue plans to replace its fleet there is a sensible cause for the decrease. Furthermore, Jet Blue’s equity to debt ratio is still below the average which indicates on a lesser amount of equity borrowed by banks and is therefore favorable.
Aircraft Blue’s go back on value and net profit perimeter are in line with the market average and so refer to stability. The net earnings margin, and return upon equity have all improved over the last three years signifies on the earnings of the company. The cash insurance coverage ratio provides improved as well which identifies Jet Blue’s liquidity. As well the come back on assets ratio have been improving and is also above the industry’s average (3% compared to installment payments on your 46 % in 2013) which identifies a more effective efficiency from the company. The finances apparently show the fact that company can be improving and is stable. About the innovation& learning Perspective it becomes obvious that Jet Green launched several solutions and systems. The paperless cockpit, for example, that has been discussed in a passage above is among the innovations that Jet Green launched out there. In addition , less-congested airports decreased the airline’s turnaround time.
Other innovations that caused operations to make services even more customer-friendly will be the tickets and mileage claims that do certainly not require paper anymore. Based on the article ‘Jet Blue airlines: getting over the blues ‘, ‘…innovation has become everywhere. ‘ Subsequent to the operations crisis and the financial breakdown from the company in 2007, Plane Blue attempted to initiated proper changes in the company by simply significant capital reduction coming from 2010 to 2011, a big change of the CEO, a restore in flight growth, partnering program former competitors, and advertising $42. 6th of common stock to the German carrier (Lufthansa). Generally, measurable important performance symptoms need to be founded in order to evaluate the company’s efficiency. The economical ratios are definitely the means within the balanced scorecard to evaluate you�re able to send perspective. The consumer perspective could possibly be evaluated when it comes to market share, client satisfaction scores, and customer devotion scores.
The interior business perspective can be measured in transformation rates and completion prices for instance. Range of innovations, a noticable difference index, or perhaps number of worker suggestions can be used to put the innovative& learning point of view into real terms. Because of this, the company must restore clients trust and loyalty, turn internal systems in order to get back former economic strength in the future. Especially, the reliability of the company’s os needs to be anchored in order to avoid another major meltdown in the future. Furthermore, the organization needs to find adequate proper changes in in an attempt to ensure compliance with Fly Blues current mission, “Bring humanity returning to air travel” which is currently pursued by a low-cost technique in combination with a very good focus on customer-services and evaluate current efficiency to preferred performance, however the company’s desired goals and focuses on do not become clear from your case.
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