Case Study Jet BlueCase Study

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Jet Blue Case Study

What impresses you the most about JetBlue and its initial strategy?

What grade would you give David Neeleman for the job that he did as CEO of JetBlue?

Evaluate his performance on the definition of strategic management as discussed in Chapter 4 utilizing the SWOT analysis technique.

What was David Neeleman's original strategic vision for JetBlue? Has JetBlue's strategy evolved since it was originally conceived?

How has it changed?

What are the key functional strategies that have enabled JetBlue's management to implement its chosen strategy?

What factors are driving changes in the airline industry?

What are the key success factors in the airline industry?

What recommendations would you make to sustain the company's growth?

References

What impresses you the most about JetBlue and its initial strategy?

JetBlue started off as a low cost carrier and initiated its journey in 1999. It started off with an initial capital investment of 160 million USD with funding from agencies like Weston Presidio Capital, J.P. Morgan and Soros Private Equity Partners. In the beginning, David Neeleman and Tom Kelly were the co-founders of the airline and emphasized providing superior customer service coupled with low fares relative to other low cost carriers. What is most impressive about JetBlue's initial strategy is that it sought to offer a host of services to passengers at the same fare as other low cost carriers and ensured greater on board comfort for travelers and immaculate punctuality (George & Regani, 2015, p 20-2). The initial efforts to maintain sustainability were also impressive. Through these measures, the company also sought to 'bring the humanity back to air travel'.

The initial market capture strategy of the airline was very different from the existing airlines. At that time, most of the domestic low cost carriers in the U.S. operated from smaller airports and from airports that mostly catered to domestic travel. JetBlue on the o the other hand choose to base its operations at the JF Kennedy airport in New York. They were awarded 75 landing and takeoff slots at the airport. Though the airport was at a longer distance from Manhattan and all the other low cost carriers avoided the airport, the business logic behind this move of JetBlue was that since the airport primarily catered to the international airport, there would be less competition initially (George & Regani, 2015, p 20-3).

The company also sought to position itself as a low cost carrier that offered superior services. For example, the company offered complimentary snacks for the passengers while meals were sold on other low cost carriers. JetBlue also provided free satellite television to all its passengers, a first for low cost carriers. The cost of these two services was just a fraction of providing free meals to passengers and yet improved the overall service of the JetBlue airline to the passengers at the same fare as other low cost carriers.

As a part of providing better service, JetBlue used new planes from Airbus instead of Boeings aircrafts that were primarily used by other low cost carriers at the time. Though the initial cost of such planes was high, the company saved on maintenance costs and also managed to gain greater punctuality in service. With the aim of providing greater comfort to passengers, the seats were leather finished instead of rubber seat covers giving greater comfort to the passengers. JetBlue configured all the seats under one class thus creating standard service and economies of scale (George & Regani, 2015, p 20-3).

The airline managed to remain sustainable and the use of Airbus A-320 aircrafts proved to be a good decision. The company saved in the long-term on count of the low cost of maintenance and spare parts, better fuel economy and pilot training. JetBlue also did not over extend itself initially. In the beginning, the company concentrated on just a few routes and chose to fly to secondary cities and airports which most of the competitors did not serve (George & Regani, 2015, p 20-3). The initial business strategies that the company undertook were impressive and allowed them to gain market leverage and a competitive edge by positioning itself in the market as a low cost carrier but with superior services.

2. What grade would you give David Neeleman for the job that he did as CEO of JetBlue?

David Neeleman, as the founder and the first CEO of the company, did a commendable job. His vision was to create an airline that would offer better services to passengers at the low-end fare segment which was competitive in the market. The vision included bringing a human touch to the low cost carrier travel niche with superior service and better operations.

As the CEO of a startup company, Neeleman was able to differentiate the airline from the competitors. The vision of the founder found apt reflection in the company policies and service that was mapped out to the passengers. As the CEO of the company Neeleman was also able to create a unique culture in the company that encouraged equality. Everyone was called a crew member, starting for the luggage staff to the CEO himself (George & Regani, 2015, p 20-5). There was also a sense of encouragement for new ideas and innovation and a system of rewards for exceptional performers. Employees were encouraged to speak their minds and this created a morale that was evident to the passengers in the way they were served.

From the business point-of-view, the company took a well thought out path of sustainability and cost curtailment right from the beginning. The use of new Airbus aircrafts instead of Boeing aircrafts reduced costs of maintenance and repairs and spare parts and fuel efficiency. As the CEO, Neeleman also created a niche for the company by choosing routes and airports that were less travelled and therefore reduced competition and increased operational profits for the company in the initial period. This helped the airways to establish the brand as a low cost but high service option which provided a foundation for a sustainable airline even after the initial few years (George & Regani, 2015, p 20-4).

As the CEO Neeleman also steered the company well through the crisis period of 2001-2003 when the airline sector was very badly hit by the terrorist attacks. The company managed to growth throughout this period, albeit with some aid package from the government. As the CEO, Neeleman also managed to bring out the company from a crisis in 2006 with a renewed plan for operations (George & Regani, 2015, p 20-5). Thus it can be said assertively that as the CEO of JetBlue, Neeleman managed the company very well and later managed to bring out the company out from the stagnations in 2006.

3. Evaluate his performance on the definition of strategic management as discussed in Chapter 4 utilizing the SWOT analysis technique.

The process that analyses the internal and external environment in which a company functions to formulate a course of action or a path for the company to follow to achieve the objectives can be defined as Strategic Management. Such objectives can either be short-term or long-term with overall mission that has been designed for the company (Nag, Hambrick & Chen, 2007). The organizational resources that are available within the company need to be kept in mind while formulating such strategies. The company stakeholders wish to achieve short-term or long-term goals or some combination which can be defined by time frame upon which the strategy is formulated. There are several different areas where a strategic management methodology can be applied. Such strategies can be formulated as a reaction to general changes in the business environment in which the company operates or for a specific project or in relation to a new market or new product. Environmental changes can relate to changes in the economy, change of taste of customers, government regulations or new competitors. Issues like employee relations or technological developments are considered as internal factors.

The SWOT analysis of David Neeleman

Strengths:

Neeleman created a differential position for the JetBlue airways.

Neeleman created a professional yet unique culture for the company encouraging innovation and employee confidence.

Neeleman designed a strategy that proved to be sustainable for the airlines.

As a CEO Neeleman steered the company through the crisis period of 2001-2003.

Neeleman positioned the company for financially stability in the first few years of operations which helped the company when it entered into a crisis post 2004.

Neeleman' strategy of Return to Profitability plan helped take out the company from the financial crisis of 2005 (George & Regani, 2015, p 20-03).

Neelaman had a vision that carved out a niche for the company among low cost carriers.

Weakness

Neeleman's adamant nature and policy not to cancel flights under any circumstances backfired in February 2007

His adamant nature also resulted in the company making huge losses due to eventual cancellation and restarting of operations.

This resulted in the company loosing image among the customers (George & Regani, 2015,… [END OF PREVIEW]

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