Vertical Integration In The Caribbean Airlines Case Study

Value Chain

According to Lynch (2010) to better understand the activities through which a firm develops a competitive advantage and creates shareholder value is, it is useful to separate the business system into a series of value-generating activities referred to as the value chain. Therefore, analyzing the value chain is one of business’s most valuable tools to gain an edge on competitors. Oxford Dictionary.com defines value chain as the process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales service.

Furthermore, how can the value chain be described? Katherine Arline business daily news contributor describes “the value chain is the full range of activities including design, production, marketing and distribution businesses go through to bring a product or service from conception to delivery”. She further states the value chain represents all the

outsourcing. Vertical integration can be described as growing or reducing the level of control a firm has over its inputs and distribution of outputs. By performing the role of aircraft maintenance and in-flight catering, the airlines in the Caribbean have been practicing vertical integration. In recent times airlines in the Caribbean are increasingly looking to outsource some of their operating functions in order to make their operations as efficient and profitable as possible. Some examples of outsourcing done are Caribbean Airlines have outsourced their revenue accounting system and their airport customer service operations likewise LIAT have outsourced their Cargo and Quikpak operations and their Ground Handling Service. Both airlines said that outsourcing the above operations was a direct response to a challenging economic environment and escalating cost faced by the