Introduction
Every organization needs an effective strategic management process to make effective strategies. To sustain the business for the long run, some key strategic considerations are required to make the difference. The management of the company can use different strategic management tools to derive several insights. It is important to navigate the competitive position of the company in the competitive market and make some key decisions to sustain the business in the long run. It seems a comprehensive analysis of Alaska Airlines Inc. It is an external analysis of the company to obtain external business environment insights. It depicts the overall external business environment that also creates an impact on the internal business process.
Company Overview
Alaska Airlines Inc is a prominent airline of the United States of America. This firm was founded in 1932. Interestingly, this airline started business operations from Alaska. The firm evolved with time and expanded its flight operations in different regions. Now, the company contains flights to more than 100 destinations including United States, Alaska, Canada, Mexico, Costa Rice, and Hawaii. It is a holding company, which has strong revenue growth in the competitive airline market. According to 2017 financial reports, the revenue of the company is US$7.933 billion. The parent of this company is an Alaska air group. Due to its high-quality services, the firm exists strongly in the competitive landscape.
Industry Analysis
In the competitive US airline industry, American airline and southwest airline are two major companies. These companies have a good market share in the industry. For Instance, American airline contains 18.1% market share, and it seems the highest market share in the industry. In this airline industry, the success of the company can be measured through sales and revenues. It has been revealed that American airline was the largest airline in this industry due to 43 billion sales in 2017. The industry indicates the sixth position of the Alaska airline. The market share of this company is 5.4% (Statista.com, 2018).
https://www.statista.com/statistics/250577/
domestic-market-share-of-leading-us-airlines/
Different trends are in the limelight in the US airline industry. It has been revealed that US passengers have become the most prevalent customers. People’s mobility is quite visible. For instance, US passengers are 21 percent of customers or passengers around the globe. The key industry trend, especially in the airline industry of the United States is to streamline the passenger experience through biometrics. It is a fact that boarding, passport control, and security are triggered by the biometric systems. Airlines are responding to this trend and enhancing the passenger experience. Airlines are looking to adopt new technology and transform traditional processes. Every airline in the industry is looking to differentiate its services from other companies (Braunstein, 2017). Alaska airline is also looking to make the difference through pertinent technology integration. On the other hand, companies are getting benefits due to new corporate tax laws. The US government has reduced the corporate tax from 35% to 21% (Zacks Equity Research, 2018). It has been observed that this tax reduction caused the cash flow boosts in airlines. The international airline transport association has reported the overall profit of the global airline industry. The global airline industry contains $38.4 billion net profit, and the US airline industry has a prominent share (Zacks Equity Research, 2018). Another prominent change or trend in the industry is the development of artificial intelligence and the introduction of robotics in the service process. Companies are looking to imitate or differentiate services through pertinent integration, and it is the best way to be sustainable, competitive and profitable in the US and global airline industry (Gasca, 2016).
Competitive Analysis
As mentioned, Alaska airline exists in the competitive airline industry. Interestingly, the competitive analysis can be conducted by navigating revenues, profitability, service quality, business expansion, sales, and customer perception. Main competitors of the company are Jet Blue, Southwest airline, and American airlines. These are top competitors in this industry regarding revenue growth and rapid sales process. The comparison of these competitors with Alaska airline is illustrated in a table below.
| US Airlines | Revenue | Profitability | Market Share |
| American Airlines | $1.6B | $258 million | 18.1% |
| Southwest Airline | $15.8B | $ 3.488 billion | 17.9% |
| Jet Blue | $7.4B | $172 million | 5.5% |
| Alaska Airlines | $5.9M | $1.028 billion | 5.4% |
Alaska airline is facing stiff competition in the market. The biggest difference that these companies or competitors have made is expansion. It has been revealed that the expansion process triggers the revenue of the company. These competitors are utilizing their resources to expand the business outside the United States. Alaska regarding revenues is behind from its competitors. However, regarding profitability, it is well ahead of jet blue and America airline. American airlines, the biggest company by revenues, is struggling to maintain its profit shifts. Also, Alaska airline is just behind JetBlue regarding the market share. American airline has contained the highest market share due to its broad services for passengers and the business expansion process. Thus, Alaska airline has to depict some strategic considerations to accelerate market, share, sales, revenues, and the business expansions to make the difference and beat its top rivals effectively (Goldstein, 2018).
Now, after the competitive analysis, the use of the strategic analysis tool to derive insights regarding the internal business environment is imperative. From the perspective of business management, it is a good option for the company to make long-term decisions. Business sustainability and competitive advantage are two major goals of the company. However, before making any decision, a comprehensive analysis is required.
Techniques Analysis
The pestle analysis includes political, economic, social, technological, environmental and legal factors.
PESTEL
· Political
The business of the Alaska airline needs political stability. Due to the stable political environment, the firm operates independently in the competitive market. The political structure of the country streamlines airline services and supports the airline industry. The corporate tax has been reduced, and the airline industry is one of the top beneficiaries of this reduction. However, it is to mention that the trade regulations in different countries may increase the cost of the airline services. The political stability and political support are two important elements that can help the company grow and expand in the United States and other countries or regions (Helleloid, Nam, Schultz, & Vitton, 2015).
· Economical
Alaska airline is navigating different economic factors in U.S., Alaska, Hawaii, Canada, Mexico, Costa Rica, and Cuba to derive several opportunities and threats. For Instance, in the United States of America, the GDP growth is quite high as compared to other countries. It depicts the good buying power of buyers. As mentioned above, US customers have become more prevalent customers in the airline industry. It is due to higher income and buying power. The inflation rate in the United States and Canada is in control. On the other hand, the airline has to improvise regarding prices, services and destinations due to the difference in GDP growth, income level, and the inflation rate. These economic drivers create an impact on the business operations of the company (Hokey & Min, 2015).
· Social
Millennial turned executives in the United States and other regions have contained different perceptions about the airline industry. These people like to have the luxury or differentiated s airline services. Customization is the best option for the company to integrate with different cultural values of customers. However, based on different customer segments, Alaska airline has to stabilize the cost. The cost structure of the company should be flexible. Like other airlines, the company needs economically minded segments to facilitate the customers. On the other hand, when it comes to the business class, people like to experience good communication process. Thus, these are some key insights or opportunities, as far as the social or cultural element of this analysis is concerned (Hokey & Min, 2015).
· Technological
The adaptation of the new technology is not only beneficial for the external business environment or stakeholders. Biometrics systems and the use of artificial intelligence are in the limelight to improve passenger security and safety. Airlines in this industry intend to reduce the fuel cost, improve efficiency, and diminish the overall operational cost. The US airline industry is triggered by the technology revolution to differentiate services for passengers (Jones, 2006).
· Environmental
Environmental pollution has become the main concern in the airline industry. Every airline company is integrated with several environmental acts. The purpose is to reduce the visibility of the environmental impact. In every country, including the United States, the business or operational sustainability is linked with the water and air pollution regulations. Some key green initiatives are to be taken by firms in industry to contribute to the sustainable environment. It is a fact that 3.5% weather change is due to the airline industry, and accordingly, some prevention strategies must be demonstrated.
· Legal
Consumer protection, Data protection, discrimination act, and health and safety laws are quite visible. These are legal regulations that the aviation authority may impose on the airline. Every destination or country may have different regulations. Thus, sustainability is to be ensured through the pertinent integration.
Five Forces
· Bargaining Power of Buyers
The bargaining power of the customer in the US airline industry is quite high. It is due to the different available substitute services for customers. For Instance, it is seen that the US airline industry does not contain many service providers. However, making segments and categories for the passenger is a key trend to enhance the attraction and positioning. It reduces the switching cost of the customers. Alaska intends to make pertinent segments and attractive categories for customers to reduce the switching cost (Zacks Equity Research, 2018).
· Bargaining Power of Suppliers
The bargaining power of suppliers is high. Companies, due to long-term contracts with suppliers, focused on concentrated suppliers. Aviation service providers and manufacturers usually maintained long-term relations with the company. In this industry, numbers of suppliers are low, and it increases the bargaining power (Statista.com, 2018).
· Threats of Substitutes
The threat of substitute is moderate. Fuel prices create an impact on the pricing strategy of the companies such as delta airline, the American airline, Jet Blue airlines and Alaska airline. People may take the risk of choosing the road to reach the destination and save money. However, loyal customers usually do not take the risk. Therefore, the threat of substitutes is moderate due to substitutes such as substitutes are ride-sharing transportation, trains, and metros (Quintilone, 2018).
· Threats of New Entrants
The threat of a new entrant in the US airline industry is low due to the high capital cost. It seems rare to observe new arrivals in the year. However, international airlines may decide to expand the business due to strong financial capability and government support. It is still a threat for a company like Alaska airline because it has to do much work to increase market share and increase profitability.
· Competitive Rivalry
The competitive rivalry is high. Many competitors such as Delta Airline, American Airline, Jet Blue, Southwest Airline, sprite, united airlines, SkyWest, Hawaiian, and frontier. The competition among these countries is quite high due to differentiated offers and segments. The price difference, quality measures, and the service standard are key factors, which makes minds of customers. In other words, these are key factors to be considered in the buying decision-making process.
Five forces analysis is helpful for Alaska airlines to observe the competitive environment and take appropriate actions. Porter five forces have identified competitive factors, which are helpful in making competitive strategies.
Another strategic analysis tool is a SWOT analysis, which can indicate strengths, weakness, opportunities, and threats of the company. Interestingly, it is to be used to obtain both internal and external business insights. Based on the SWOT analysis, opportunities and threats will be analyzed effectively. Alaska airline exists in the competitive airline industry, and therefore, investigating the external business environment seems relevant.
SWOT Analysis
| Strengths
· The steady growth of the company is the biggest strength. Due to innovative culture and steady growth, the company has maintained continuous revenue growth. · Alaska airline is famous due to delightful customers. Differentiate services for customers has helped to manage loyal customer base in the competitive market · It has been revealed that the Alaska airline depicts the limited expansion process. However, localization has become the key strength of the company. The focus to the domestic market is lucrative for the company to get an edge over other local rivals. · The strength of the company is the integration with the flight norms. The firm has developed prevention measures and safety standard, which makes it a reliable airline service for people.
|
Weakness
· The big weakness of the company is the increasing cost of fuel. Due to the increase in fuel costs, the operational cost has also been increased. Increasing cost, sometimes compel the company to increase the price of flight services to keep the profit margins high. · Alaska airline is a private organization. Sometimes, it has to make harsh decisions due to lack of government support. The cost of operations, increase in prices would have been alerted by the management due to the government support. · The focus on the local or domestic routes is a big weakness. It limits the expansion capability of the company. Despite having flight operations in Canada, Cuba and many other countries, still, the company is struggling to generate revenues and expand the business. · To grab the immense range of customers, the management still focuses on the economy class. The revenue is still limited as compared to other organizations, and the firm does not recognize or identify the need of first or business classes. · The firm lacks the advertising and promotions on both traditional and digital media channels it causes the lack of positioning in the competitive market. |
| Opportunity
· As mentioned in strengths, the revenue growth of the company is increasing. Thus, based on revenue streams, still, the firm has a chance to focus on different markets, which are undone yet. The business expansion is a great opportunity for Alaska airlines to accelerate revenue streams and grab the large customer base. · Segmentation is a key opportunity. Many options can be carried by the company to overturn the slow revenue streams. Business travel is a key trend in the industry, and the firm can make a new customer segment to offer services to local business professionals or executives (Kalb, 2013). · Merger and acquisition in the best option for the company to share culture, increase market share, combine broad flight services, and increase the profitability. In the domestic business environment, the firm can find the best partner or firm to make the decisions. This opportunity seems the strategic consideration. However, a comprehensive analysis of the market and the company is required to make the final call. · The automation or technology revolution is a good opportunity to transform the process. The technological transformation process can help the company reduce the cost of operations and improve flight operations. |
Threats
· Spikes in different economies can hit operations of the company. It looks a big threat to the company. · New arrivals seem rare in this industry. However, existing competitors are big threats to the company due to increased sales, higher revenues, and differentiation. These firms have created the lower switching cost, and it may cause the immense customer conversion (Jones, 2006). · Increase in oil prices in the future may hit new pricing strategies and segments of the airline badly. Investments are at risk, and therefore, some thoughtful considerations are required. |
OT From Partial SWOT
Opportunities
Focus on different markets refers to the expansion of different countries, especially in Asia. In these markets, the management can find different companies. The acquisition or merger is the best option to enter the market. Alaska airline can use merger or acquisition as a key market entry strategy. Interestingly, the firm can enter into a separate market with some separate customers or market segments. In the competitive landscape, business expansion is the only source for the company to increase its market share and revenues. Also, technology integration is also a key source to enhance the visibility of the automation process. The firm can come up with some new trends due to technological integration. The firm may also prioritize technological transformation and streamline initiatives. The opportunity to optimize the services is always here. However, Alaska airline has to do it differently to get an edge over other competitors (Hokey & Min, 2015).
Threats
Any competitor is a threat to the company. Low-cost flight operation is a key strategy to increase sales and promote service. However, firms may demonstrate competitive strategies to reduce switching cost. Service standards and the operational process can be imitated, and frequent changes in the process may increase the cost. There is always the threat of economic recession. The sluggish economic condition may reduce or stop flight operations. The most important thing for the management of the company is to take all these threats as risks. Accordingly, by keeping insights in mind obtained from industry, competitive and strategic analysis, risk mitigation strategies can be shaped. In the competitive market, the firm aims to survive instead of giving up.
External Factor Evaluation (EFE)
| Opportunities | Weight | Rating | Weight Score |
| The business expansion
Segmentation Merger and acquisition The automation or technology revolution
|
0.08 | 4 | 0.32 |
| 0.05 | 3 | 0.15 | |
| 0.06 | 3 | 0.18 | |
| 0.08 | 4 | 0.32 | |
| Threats | Weight | Rating | Weight Score |
| Stiff competition
Economy Spikes Increasing Oil Prices
|
0.08 | 4 | 0.32 |
| 0.07 | 2 | 0.14 | |
| 0.08 | 3 | 0.24 | |
Competitive Profile Matrix
Trends Significant to the Industry and Company
The high-flying trend in the airline industry is increasing the demand of passengers. Forms are making several customer segments in the competitive market to attract and grab the attention of customers. It is quite pertinent to the company, and accordingly, it has to shape the operational process and make key strategies. Despite having technology integration, global airline industries, including US industry, have depicted improved operational metrics. In another world, it can be said that the company must create some key measures to assess the operational efficiency. In this contemporary business era, Alaska airline cannot afford to increase operational cost. Other competitors such as Delta airline and southwest airline, despite having some challenges, have created prevention measures. From the perspective of the company, it is beneficial to enhance business sustainability. Another key industry trend is to create a social pace. The company has to portray emotional and sentimental attachments with customers to make them loyal and satisfied. Also, maneuvering the online platform is a key trend that can shape the behavior of customers. Airlines are aligning with online travel agencies to save time and reduce the cost of the sales process. Many firms have shifted online to sell tickets through the official websites of travel agencies. When it comes to online platforms to interact with customers, airlines can streamline online call centers. Alaska can develop its customer service center or transform to make it a top tough point. Another key trend is data analytics. Business administration is using data analytics to derive modern customer and market trends (Sabre.com, 2018).
Based on these trends, Alaska airline is in the best position to form effective marketing and business strategies. Alaska Airline is quite capable of the adaptation process to become a better airline company in this industry.
Key Areas of Uncertainty Related in Trends or Events
The company should consider key areas of uncertainty related to trends or events. Being a final airline operator in the industry, it seems easy for the company to identify business risks or threats. For Instance, the development of online platforms such as customer service centers is always a huge risk for the company due to cyber security attacks. Cybercriminals are active to steal customer information in the form of debit and credit card information, home addresses and contact numbers. The possible business uncertainty can emerge in the form of disasters such as plane crashes and many other related things (Sharma, 2013).
Impact on the Company’s Strategy
These trends and possible business uncertainties can create an impact on the company’s strategy. In this contemporary business era, the firm may change the strategy due to evolvement or new trend integration. For Instance, the busiest day in the United States is Christmas or Black Friday. The firm may change the pricing strategy to facilitate people. Conversely, the firm may change the business model when changing or shaping services for people. The business uncertainty may be due to traditional business approaches. Thus, any change or impact regarding the business strategy due to business uncertainty or industry trends is obvious.
Conclusion
In the end, it is to conclude that Alaska Airlines is capable of adopting new trends and making different strategies according to complex circumstances. This comprehensive analysis depicts some learning aspects. Strategic analysis tools are helpful for the company to investigate strengths, weaknesses, opportunities, and threats. Industry and competitive analysis are supported for the airline business in the competitive industry. Alaska airline aims to rebuild its growth and revenue streams through some workable strategies. Alaska airline is still behind its competitors. However, the administration is determined to evolve with time and set the tone to gain and sustain the competitive advantage.
References
Braunstein, L. (2017, May 12). CEO Conversations: Why Alaska Airlines Is Flying High. Retrieved from https://urbanland.uli.org/economy-markets-trends/ceo-conversations-alaska-airlines-flying-high/
Gasca, P. (2016, December 16). Virgin America Just Lost Its Soul. What This Means for Your Next Business Trip. Retrieved from https://www.inc.com/peter-gasca/alaska-airlines-and-virgin-america-two-great-things-that-dont-go-great-togeth.html
Goldstein, M. (2018, June 13). Alaska Airlines-Virgin America Merger Still A Work In Progress. Retrieved from https://www.forbes.com/sites/michaelgoldstein
/2018/06/13/Alaska-airlines-virgin-america-merger-still-a-work-in-progress/#712e8e346a31
Helleloid, D., Nam, S.-H., Schultz, P., & Vitton, J. (2015). THE U.S. AIRLINE INDUSTRY IN 2015. Journal of the International Academy for Case Studies; Arden, 21 (5), 113-125.
Hokey, M., & Min, H. (2015). Benchmarking the service quality of airlines in the United States: an exploratory analysis. Benchmarking; Bradford, 22 (5), 734-751.
Jones, M. B. (2006). Journal of Applied Management and Entrepreneurship; Sheffield. The Entrepreneurial Executive; Arden, 11 (3), 102-125.
Kalb, I. (2013, May 7). Why Alaska Airlines Has One of the Best Corporate Images in the Industry. Retrieved from https://www.businessinsider.com/alaska-airlines-outperforms-the-airline-industry-with-more-effective-marketing-2013-3
Quintilone, D. (2018, September 12). Alaska Air Group: Industry Leading Airline Performing Despite Tough Fuel Environment. Retrieved from https://seekingalpha.com/article/4205889-alaska-air-group-industry-leading-airline-performing-despite-tough-fuel-environment
Sabre.com. (2018, May 1). Alaska Airlines successfully migrates Virgin America into their Sabre passenger services system. Retrieved from https://www.sabre.com/insights/releases
/alaska-airlines-successfully-migrates-virgin-america-into-their-sabre-passenger-services-system/
Sharma, A. (2013, July 15). Alaska Airlines’ Remarkable Revenue Strategy. Retrieved from https://www.fool.com/investing/general/2013
/07/15/alaska-airlines-remarkable-revenue-strategy.aspx
Statista.com. (2018, January 1). Domestic market share of leading U.S. airlines from August 2017 to July 2018*. Retrieved November 5, 2018, from https://www.statista.com/statistics/250577
/domestic-market-share-of-leading-us-airlines/
Zacks Equity Research. (2018, February 1). Airline Industry Outlook – February 2018. Retrieved November 5, 2018, from https://www.nasdaq.com/article/airline-industry-outlook-february-2018-cm915045
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