Straight and Level: Practical Airline Economics, 3rd Edition by Stephen Holloway;

By Stephen Holloway;

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Extra resources for Straight and Level: Practical Airline Economics, 3rd Edition

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11 to the purchase decision. These benefits therefore generated costs uncompensated by incremental revenues, and were one factor (among several) contributing to Debonair’s subsequent failure. In contrast, jetBlue’s service offer was designed at launch to incorporate benefits that were both well-communicated to target customers and considered by those customers to be relevant to their purchase decisions. Value created by a service is the customer-perceived benefit as just defined, less all the input costs that have been spent right along the value chain in order to create the service and deliver value to the customer.

If all the firms in a market are located along the indifference curve, consumers will have liĴle incentive to switch and market shares will be largely stable. One way of shi ing market share is to locate away from the curve by offering a new price–benefit trade-off – that is, by making a new service–price offer. However, positions off the curve raise further questions. 4 and using airline A as a benchmark: • Airline B is offering fewer benefits at a lower price. The question is whether there is a subsegment of demand willing to forgo benefits in return for that lower price.

If a resource is to be a sustainable source of competitive advantage, it must be difficult for competitors to acquire, imitate or substitute (Bogner and Thomas 1994). In other words, resources need to be protected by ‘isolating mechanisms’ (Rumelt 1984). In practice, most tangible resources can in fact be acquired, imitated or substituted – albeit perhaps over time rather than immediately. Such resources, common to more than one competitor serving a particular market, are likely to be no more than ‘enablers’ rather than true sources of competitive advantage.

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