0:05
So welcome, this is our debrief on Jet Blue versus American Airlines.
Once again, as we've said in each of these debriefs to remind you that the purpose of
this debrief video is to provide you with some thoughts and insights as you've gone
through these questions that we ask about the case Once again,
if you have not read the case and have not answered those questions on your own,
I ask that you pause the video and do that right now.
Again, I will not be providing necessarily answers to the questions that we raise,
rather some things to think about as you go through your analysis and
thoughts on the case.
So let's dive in.
So for JetBlue, the first question we ask is
Do you agree with the decision by JetBlue to enter the Logan market?
Important thing here is to recognize there's really two elements to this
question.
The first is about market attractiveness.
And this is where often we think when we think about entry into different markets.
Is there sufficient demand to justify operating some flights out of
the Boston market However there's a second very important question which is,
how will your competitor's likely react?
It's really that combination that is really important when thinking about
growth through entry.
So this leads us to our second question here.
What will be the likely response by American Airlines, and
anticipating American Airlines' potential response,
what should you as Jet Blue do to prepare for this?
So, this is really the crux of the case here,
these competitive dynamics between Jet Blue and American Airlines.
And trying to foresee in Jet Blue's case How American Airlines might respond.
So we can think of a lot of specific tactics that American Airlines
might use in response to Jet Blue's announced entry.
Perhaps they engage in pricing, where they lower prices.
and induce a price war.
Perhaps engage in aggressive advertising to maintain their market share.
Perhaps they engage in rivalist behavior in other markets where they compete.
It spells over to other places and markets that American Airlines and
Jet Blue both fly.
Perhaps they pursue what we often call non-market strategies.
These are things where you might involve public officials and unions and the like.
Maybe you lobby to try to make things more difficult for JetBlue.
Blue to operate out of the [INAUDIBLE] market with local officials.
So again, if you're Jet Blue and
you can foresee that these are potential strategic actions, American Airlines might
take, then that gives you an opportunity to maybe think of ways Is to deter or
accommodate those strategies that American Airlines might pursue.
So again, this reasoning back and forth.
Now, of course,
we've simplified things by framing this as Jet Blue versus American Airlines.
The fact of the matter is,
there's a number of other operators within that environment, and
we ask in question number three, how will these other airlines react?
In particular, Delta, U.S. Air, Southwest and others So it's important to recognize
that each of these different carriers might have slightly different incentives.
They might have slightly different capabilities that they bring
to this competitive environment.
So take Southwest Airlines, for example.
Southwest Airlines is similar to JetBlue in that they're a low-cost
carrier in terms of how they position themselves.
However, an interesting question would be Who actually has the lower cost structure.
And, in fact, if Southwest has a lower cost structure than JetBlue,
they might not be as concerned as you might think about their entry there.
Take another player, Virgin Atlantic.
Now, Virgin Atlantic positioned themselves more as a premier carrier.
Especially doing transatlantic flights.
It may very well be the case that they don't see JetBlue as a threat at all.
They're not flying the same routes,
they position themselves differently in the market.
And in fact, they might be glad to see their entry to the extent that
their entry might hurt American Airlines,
who does compete with Virgin Atlantic on some of their flights.
So, this is kind of creating competition for their rivals here,
might be actually a good thing.
So again, it's important to recognize that each of these different
players has a different set of incentives and capabilities That might impact
the way they respond to the entry of JetBlue in the industry.
4:42
It's hard to put numbers to these, admittedly.
There are some numbers in the case that can be informative,
but they're not gonna be complete here.
With all that said though,
I would argue the simple exercise of going through the two by two.
And creating the payoff matrix has some value.
It has some value into getting you some sense of the degree to which
this is a threat, for example to America Airlines.
How much do we imagine American Airlines' is gonna loose if JetBlue
enters into the market here.
Now, obviously there's some scenarios, like American Airlines just simply
exiting the Logan market that seem highly unlikely.
But what we might see again is how much is American Airlines likely to fight,
depending on how much they lose by JetBlue coming in.
Similarly, Jet Blue can see how much are they likely to win if they enter and
compete successfully versus if they decide not to enter the Logan market.
So again, these two by two matrices are simplifications,
they're very hard sometimes to get the data you need.
But at the same point, they do provide some insight into how different firms
might be approaching these competitive situations.
So in general, the reason we have you do this case is to highlight when we think
about growth through entry.
It's insufficient to just think about what where's the marketing opportunity that we
could exploit.
You have to think about the competitive dynamics.
You have to think about the rivalry that exists,
and how firms are going to respond to that entry recession.
Maybe there are existing competitives in the market, how are they going to respond.
Maybe there are other firms who see the same market opportunity that you do and
are gonna try to enter into that same space.
Again, thinking about this back and forth, this competitive dynamic.
So this moves and counter moves of different players within an industry is
critical when thinking about your growth strategy,
specifically as it relates to entry.
Michael LenoxSenior Associate Dean and Chief Strategy Officer
Jared HarrisSamuel L. Slover Research Chair in Business Administration
