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2. JetBlue Airways Naga Lakshmi Damaraju John R. Gaetz Marilyn L. Taylor Gregory G. Dess McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. JetBlue Airways 1. Analyze the industry environment of JetBlue. McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

4. JetBlue Airways 2. Analyze the internal environment of JetBlue. McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

5. JetBlue Airways 3. Discuss the bases of JetBlue’s competitive advantage, and the merits and demerits of both the components.  Are combination strategies better?  Is JetBlue’s competitive advantage sustainable? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

6. JetBlue Airways 4. How will the new Embraer jets impact the firm’s strategy? How should they handle it? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

7. JetBlue Airways Additional Question  What are the salient aspects of JetBlue’s culture? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

8. Q1. Industry Environment McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. SUPPLIERSBUYERS SUBSTITUTES POTENTIAL ENTRANTS INDUSTRY COMPETITORS Barriers lowered by deregulation and availability of funding; hub-and-spoke leads to diseconomies of scale; lack of brand differentiation; no switching costs Only two suppliers – Boeing and Airbus; no credible threat of forward integration by suppliers Buyers not concentrated; buyers have choices; Internet allows buyers to compare prices; due to recession, business travelers becoming more price sensitive Car, bus, rail – important when distances are shorter High; numerous competitors; low-moderate growth; high exit barriers; bankruptcy laws allow loss makers to be around

9. Q2: JetBlue’s Value Chain McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Value Chain Activity How does JetBlue create value for the customer? Primary: Inbound logisticsWeb-based booking; Customers won’t get bumped OperationsPaperless cockpit; no meals; single aircraft Outbound logisticsNew larger, more efficient A320s; less congested airports Marketing and sales Web-based ticketing; market segment properly identified, effective pricing ServiceConstant communication with customers; CEO travels frequently to get feedback, training

10. Q2: JetBlue’s Value Chain (cont.) McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Value Chain Activity How does JetBlue create value for the customer? Secondary: ProcurementWell-conceived aircraft procurement plan to support growth Technology development Investments in technology from beginning; process initiatives – e.g., automated baggage handling Human resource management Non-unionized workforce; stock option plans; profit sharing; culture promotes camaraderie General administration Top management with expertise in airline business; ability to coordinate across value system, highly visible to inculcate organizational culture

11. Q3. JetBlue’s Cost Leadership Advantage McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Efficient operations  New planes minimize maintenance/fuel costs  Larger planes ensure more revenue per flight  Longer hauls keep planes longer in air  No meals served helps quicker turnarounds and reduce costs  Reservation agents working from home reduce need for physical infrastructure, and thereby reduce overhead costs

12. Q3. JetBlue’s Differentiation Advantage McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  Strong brand image  Various features such as  DirectTV at each seat  More legroom