RESEARCH
Business Strategy and Competition for the Future in the Airline Industry
The business strategy theory is very useful to help aviation researchers and practitioners to make sense of the current competitive pressure under which airlines all around the world seem to be. As one of the key fields of administrative sciences, strategy can be envisioned as a hierarchy reflecting the organizational structure of multidivisional corporations in which corporate strategy states the general direction – in terms of scope and choice of business sectors – that the firm will follow, while business strategy is a formulation of how the business unit intends to compete in its given business sector. For example, Virgin is pursuing a corporate strategy of growth by unrelated diversification and has chosen to be active in business sectors such as air and rail transportation, holiday packages, music and entertainment, mobile phone communication, financial sevices, and “lifestyle” services. In each of these business sectors, Virgin competes by using the strength of its brand to differentiate its offerings from that of its competitors. The lower level of the hierarchy of plans reveals the instrumental character of functional strategies that are designed to support the implementation of the business and corporate strategies. Marketing strategy, human resource strategy, research and development strategy and operations strategy are examples of functional strategies. By Isabelle Dostaler and Triant Flouris
Today, air travellers seem to be looking for carriers that are able to offer high service quality, on-time arrival, and low fares all at once. Airline companies, therefore, do not have a choice but to defy the traditional business strategy theory according to which trying to achieve low cost and differentiation simultaneously is a recipe for strategic disaster. Wishing to establish stronger conceptual and empirical links between strategy theory and aviation management...