BA (HONS) BUSINESS AND MANAGEMENT (TOP UP)

Business Strategy
Class: Friday Afternoon
Lecturer: H.M.Tri
Strategy as Choice 2: Fit
Case study: JetBlue Case Study
Name IU-ID UWE-ID

Nguyễn Đặng Tú Oanh BABAWE19081 22086505

Đặng Hoàng Thảo Nguyên BABAWE19151 22086531

Huỳnh Thị Mỹ Ngọc BABAWE18464 22086393

Tô Nguyễn Gia Hân BABAWE19004 22086474

Nguyễn Tuấn Anh BABAWE18666 22086436

1. Identify the unique value proposition

 a. Which customers?
With this model, JetBlue distinguished itself by focusing on leisure travelers from major
eastern cities (e.g., New York, Boston, and Washington DC) who desired nonstop service to
vacation destinations in Florida or on the west coast. Moreover, the company catered to
customers who traveled relatively long distances and frequently used eastbound overnight
flights, which were shared among legacy carriers.

b. Which needs?
A business plan would increase margins and returns because JetBlue is still under
competitive pressure, and investors' financial concerns have not subsided. In the past, a
blizzard disrupted airline operations in February 2007; the company was hard hit and
estimated $30 million in losses due to the cancellation of 1,700 flights. Furthermore, when
the company began purchasing aircraft from Embraer in 2005, it opened new, less
competitive routes to smaller regional cities. On the other hand, the new Embraer aircraft
necessitate significant training, staffing, and operations changes. As a result, the airline must
concentrate on operational activities.

c. What relative price?

They can keep the lowest fares.

⇒ Strategy theme:
The proposed change is aimed at the premium air travel market. When analyzing
JetBlue Airways' relative performance on US transcontinental flights, the company
discovered that they generate more revenue per flight for economy class passengers than
their competitors. However, because the premium class is unavailable on its flights, the total
revenue per flight is less than 10%, which puts the company at a revenue disadvantage.
Therefore, JetBlue devised a new strategy. The A321 has 16 flat seats, including four
suites with sliding doors. Additionally, Mint passengers will receive multiple large flat
screens, priority security checks, flight kits, drinks and dinner service, and a signature mint
cocktail. While the company wishes to downplay the move, it is clear that JetBlue intends to
expand Mint to other routes.
 However, the premium service will not address performance issues on its own. Hence,
Hayes updated several other expected changes to increase revenue and decrease costs.
These include fare families with the first baggage charge, more primary seats on the A320
(which means less legroom), and the option of 'even more seats' (for passengers, extra
charge for extra legroom and priority boarding). Other changes include route reductions and
closures, postponing new aircraft deliveries to reduce capital commitments, and various
operational efficiency measures.

2. What themes/activities translate the choice into a tailored value chain (1st
Order Fit = Consistency)?
1. Support Activities:
a. Firm infrastructure: JetBlue is a classic example of an organisation that has
made a clear strategic choice on what its strategy is and what it is not - in Porter's
words it has made its Trade Off' choice. This choice and how it has aligned the
activities in its business operations have led to the airline being a uniquely
profitable business in an intensely competitive industry.
b. Human resource management: JetBlue Airways may be able to meet its cost-
cutting goals by weighing the relative returns of hiring and training expenditures
against one another. Cabin crew members received additional benefits in addition
to lower pay than other airline employees. They provided discounts, opportunities
for training and development, participation in corporate sharing initiatives, and a
flexible benefits package. JetBlue Airways' reliance on employee talent
emphasises the importance of maintaining this value chain.
c. Technology development: The case study takes the story of JetBlue through
into 2014 and a decision they are making about introducing the new Mint Service
- a move that seems to stray away from aspects of the strategy that has made
them Successful. As we discussed in previous seminars the starting point for the
case activity should be identifying how to use the appropriate theory in the
analysis - so in this case the Strategy as Choice perspective and ideas of Michael
Porter. As we did in the last seminar a key step is to map the key activities of the
airline onto the value chain model
d. Procurement: JetBlue has taken on resources, outsourcing vertically integrated
strategy and processes using its size advantages.

2. Primary Activities:
a. Inbound logistics : Its pro-customer attitude, spacious seating and fee-free fares
made the airline a passenger and media favourite. Accordingly more frills were
added to differentiate the firm – roomy leather seats, seat-back TV screens and ‘all
you can eat’ gourmet snacks
b. Operations : JetBlue continually made changes to enhance its operating model and
its customer proposition. The firm rapidly grew its fleet of Airbus planes but from
2005, it also started buying planes from manufacturer Embraer. It formed a code
sharing partnership with Lufthansa, introduced free Wi-Fi on flights and continued to
expand the number of destinations served, including international flights to the
Caribbean and Central America. JetBlue continually looked to improve its services
c. Outbound logistics: Mint introduced 16 fully lie-flat seats on its A321 planes -
including four ‘suites’ with sliding doors. Mint passengers also get much large flat
screens, priority security screening, flight amenity kits, drinks and dinner service and
a signature mint cocktail. The airline was expecting the 16 Mint seats to more than
make up for revenue lost in removing 47 coach seats
d. Marketing and sales: Significantly these included: fare families that introduced a
first bag fee, more core seating on the A320s (which meant a reduction in leg room
although remaining just ahead of JetBlue’s peers), and the ‘even more space’ option
(for an additional fee passengers gained extra leg room and priority boarding). Other
 changes included reductions and closures of routes, a slowing in delivery of new
aircraft to reduce capital commitments and a range of operational efficiency
measures.

3. What significant trade off choices have been made in the value proposition
and/or activity themes?

Trade off Choice What does choice stop?

1 increasing the number of seats on With the firm seemingly reluctant to make
each flight – reducing passenger changes, Barger’s leadership was
legroom – and to charge a fee for ‘first questioned and the share price was
bag’ depressed.

2 Under Barger, although growth was By 2010 and the celebration of its 10th
slower, JetBlue continued to evolve its anniversary, the firm felt the issues
operations. It formed a code sharing highlighted by the 2007 storms had been
partnership with Lufthansa, introduced resolved. However, competitive pressures
free Wi-Fi on flights and continued to continued to grow, and the financial
expand the number of destinations concerns of investors had not gone away.
served, including international flights
to the Caribbean and Central America.

3 The firm was founded with the mission The firm had been non-unionised from the
of ‘bringing humanity back to air travel’ start, with Neeleman believing that not
and has 5 core values: safety, caring, having unions created a more equal team
integrity, passion and fun. While any environment. Unionisation and incoming
firm can adopt a set of values, JetBlue regulatory changes potentially meant
made them the foundation of its JetBlue would no longer benefit from the
business. lowest salary costs in the industry.

4 Mint introduced 16 fully lie-flat seats The design of the A321 meant JetBlue could
on its A321 planes - including four avoid the curtaining off of a business class
‘suites’ with sliding doors. Mint section usual on many flights. It made use
passengers also get much larger flat of this to insert a help-yourself kiosk for soft
screens, priority security screening, drinks and snacks that anyone could use.
flight amenity kits, drinks and dinner Seat back screens in the rear cabin also got
service and a signature mint cocktail. a size upgrade – although smaller than in
The airline was expecting the 16 Mint Mint.
seats to more than make up for
revenue lost in removing 47 coach
seats (core seats as the airline
insisted on calling them). While keen
to underplay the move, it was clear
that JetBlue was expecting to expand
Mint to other routes.

4. Map themes and activities to activity map and determine how do activities and
themes reinforce each other (2nd Order Fit – Activity Map shows reinforcing)?
The activity map shows third order of fit
5. What is the evidence that the organisation continually seeks to improve fit (3rd
Order Fit - optimising)?

- The introduction and roll out of Mint impact on Jetblue:

+ The change that had caused most disagreement within the board was Mint, a
proposed change to target the premium air travel segment.
+ The lack of a premium class on its flights meant that total revenue per flight
was 10%+ lower and so the firm was at a ‘significant unit revenue
disadvantage
+ With the introduction of Mint, JetBlue is looking more like a legacy carrier with
each passing day. In fact, Mint is not the only new source of revenue. JetBlue
now charges for checked luggage, priority boarding, and extra legroom.
+ Together the changes were expected to increase annual revenues by $450m,
keep rises in cost per seat-mile below 2% p.a. and reduce year-on-year
capital expenditure by around $1bn.
+ With the introduction of Mint, JetBlue is looking more like a legacy carrier with
each passing day. In fact, Mint is not the only new source of revenue. JetBlue
now charges for checked luggage, priority boarding, and extra legroom.
- Jetblue has successfully developed Mint. JetBlue's low prices and experience attract
leisure travellers. Target creates higher-end brands to compete with Walmart and
Nordstrom. Since JetBlue has a product for business travellers, they should adapt
their operations to incorporate dynamic fleeting and pricing while maintaining a low
cost process.