Stand-Alone Airlines Case Study

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Recently, many airlines have formed alliances. This paper examines the differences between members of an airline alliance and stand-alone airlines from a resource-based view. If alliance members fit well, they can benefit from access to an extended customer network and cost reductions resulting from combining assets. Therefore, being in an alliance can be identified to be a superior strategy compared to not being in an alliance. 1. Introduction The success of a company greatly depends on its access to resources which grant it a competitive advantage (Peng, Pinkham & Chen, 2009; Rugman, 1981). Resources, which can be important for a company, include “knowhow, raw materials and components, marketing and distribution services [and] financial…show more content…
An alliance is defined as “a collaboration between two or more companies designed to achieve some corporate objective” (Harvey, 2011). According to the resource-based view, the resources which a firm possesses may lead to a competitive advantage (Rugman, 1981). In the case of alliances, the resource-based view can be extended to not only incorporate assets which the company owns, but also the ones which are derived from the recombination and sharing of the alliance partners’ assets. In the airline industry, alliances are very common and nowadays, most of the large airlines are part of an alliance. This paper investigates the effect of becoming a member of an airline alliance (Topic 3), by comparing a selection of the resources available to alliance members to the ones which are available to competitors which are not in an alliance (Topic…show more content…
In the airline industry, buyers encounter low switching costs between airlines. The time and effort a customer needs to invest to find an airline which satisfies the needs is low. Nevertheless, many routes are just served by a few airlines and their travel time and service may be factors which make a specific service of an airline unique. Summarizing, the bargaining power of buyers can be determined to be relatively low, therefore, not raising high concerns of airlines. To enter the airline industry, high capital expenditures are required. Moreover, governmental regulations are numerous and complex. Furthermore, high operating costs and capacity limitations of airports can act as barriers to entry. As in the airline industry reputation plays a large role, people may reject to fly with newly establishing airlines as it is difficult for potential customers to evaluate these airlines’ safety and quality. Thus, new entrants may find it difficult to gain a foothold in the industry and may refrain from doing so if they perceive the financial risk related to the uncertainties they would be facing too

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