1. Identifying Strategic Groups in the U.S. Airline Industry: An Application of the Porter Model Author: JAMES A. KLING and KEN A, SMITH 學生 : 魏國凱 指導老師 : 任維廉教授 1

2. Agenda 2  Background  Porter’s generic strategic  Data  Methodology  Groupings and validation of results  Conclusion  Discussion

3. Background 3  Deregulation(1978) Some airlines have disappeared Financial nosedive into oblivion  Temporary Equilibrium (1991~1994) The nine major U.S. passenger air carrier  Southwest, Northwest, USAir, American, TWA, Continental, America West, Delta, United  These airlines account for 90%

4. Background 4  It is valuable to classify airlines based on their competitive strategies.  This type of identification can suggest future strategic directions for airline managers to target or avoid.  We first group the nine major airlines by competitive strategy, using Porter's typology of generic strategies.  Then assess financial performance to validate the appropriateness of the initial strategic groupings.  Finally, discuss the implications.

5. PORTER'S GENERIC STRATEGIES 5  Cost leadership  Produce goods or services at a lowest cost  Differentiation  Being unique and for which buyers are willing to pay a premium price  Focus  Serve the needs of specific customer group or market segment  Stuck in the middle  No basis for competitive advantages

6. Data 6  Cents per Available seat mile (ASM)  Cost / ASM (X-axis)  Cost to fly one seat one mile  Airline quality rating (AQR) (Y-axis)  Weighted by nineteen factors

7. Domestic sector financial and operating data 7

8. Methodology 8 Quality (AQR) (III) Cost Leadership (IV) Stuck in the middle Cost Per ASM (Mean of 8.8) (I) Differentiation (II) Focus

9. Groupings and validation of results 9

10. Conclusion 10  (I)Differentiation: American, United, and Delta  Intense competition  (II)Focus: Southwest  Short and high density routes  Low cost and high quality  (III)Cost Leadership: America West

11. Conclusion 11 The suggestion to “stuck in the middle” firms  Continental  Improve quality to follow Southwest  TWA and USAir  Hard to survive

12. Conclusion 12  Northwest  Better financial than other stuck firms  May focus on market segment which doesn’t have severe competition  Porter’s U-shaped relationship Stuck in the middle-3.57 USAir-4.28 Northwest0.43 Continental-3.85 TWA-6.60

13. Discussion 13  本文在最後提到 Porter 的 U 型曲線有點突兀  這樣的群組分析在台灣則無法進行，因為台灣航空公 司少，且資料也不容易取得  為何西南航空的指標會比其他家大型航空公司的服務 品質指標要高？  散佈圖為何再針對載客旅程做成本方向之調整？調整 幅度？作者並未明確說明。

14. 14  Thank you for your listening