Note: This article is part of a series taken from Denise Harrison’s article March to a Different Drummer originally published in Compass Points in August 2002. Although this article was written in 2002, this discussion is timeless. In Part One, published July 1, 2016, we introduced the series.
Many East Coast readers fondly remember Piedmont Airlines. When airline deregulation looked Piedmont in the face, Piedmont knew that in this new competitive environment they would face challenges from larger, better-financed airlines. How could they compete?
Larger airlines chose to compete in the busiest airports. This head-to-head competition led to inevitable price wars. Piedmont, on the other hand, continued to build its network in the Southeast servicing many airports that other airlines would not even consider. Their strategy paid off as the company was voted “Best Airline,” clearly differentiating itself as the high quality service provider in the industry. Next, US Airways purchased them, and you know the rest of the story!
Market trends are some of the key factors to look at when developing a strategic plan. But in addition to studying the market’s attractiveness, a company must also look inside to assess its own strengths and weaknesses. Compete on strengths and avoid areas of weakness. All of the airlines developed their respective strategies by evaluating the markets, looking at demographics and transportation trends. But Piedmont also chose to avoid competing with better-financed airlines in popular hubs. Instead, it decided to service the area where it was already well established, an area that was less attractive to its larger competitors.
Southwest – yes, another airline story-noted the hub-and-spoke configurations of the major airlines and decided to compete with a no frills, point-to-point service. They targeted the “no frills” traveler in every route they flew-no seat assignments, no first class, no food (well, okay, peanuts) just cheap, efficient service. They developed their model to keep costs low, using only one type of aircraft to maintain, one type of plane on which to train their pilots and flight attendants. Did this service appeal to all travelers? No, of course not, but Southwest excelled at providing low-cost service for the cost-sensitive flyer. Have they been successful? Yes, they are consistently profitable, often the most profitable airline in the industry.
Alamo Rental Car identified the budget-sensitive traveler in the rental car industry. Hertz, Avis, and National were focused on the business traveler who was willing to pay for the convenience of onsite rental. Alamo saw people paying for rental cars out of their own pockets while on vacation and determined that many non-business renters were willing to trade the convenience of on-site rental for lower cost off-site rental. Here again, another success story unfolds because a company looked at the market and created new ways to serve customers whose needs were not met by current suppliers.
We will continue this series with “Don’t follow the leader!” in a future post.
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Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc. She can be reached at firstname.lastname@example.org.
© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.