Harvard Case - Surf Air Takes Flight
"Surf Air Takes Flight" Harvard business case study is written by Jeremy Dann, Steven Mednick. It deals with the challenges in the field of Entrepreneurship. The case study is 17 page(s) long and it was first published on : Jul 15, 2014
At Fern Fort University, we recommend Surf Air adopt a multi-pronged strategy focused on business model innovation, strategic partnerships, and targeted market expansion to achieve sustainable growth and profitability. This strategy involves leveraging its unique value proposition of on-demand private air travel, expanding its service offerings, and strategically targeting new customer segments while maintaining a strong focus on operational efficiency and financial discipline.
2. Background
Surf Air, founded in 2011, disrupted the traditional air travel industry by offering a membership-based model for on-demand private flights. This innovative approach targeted business travelers seeking a more convenient and efficient travel experience. The company quickly gained traction, attracting a loyal customer base and expanding its service area. However, Surf Air faced challenges in achieving profitability due to high operating costs and a relatively small customer base.
The case study focuses on Surf Air?s strategic decision-making in the face of these challenges, exploring potential paths for growth and profitability. Key protagonists include:
- Jeff Potter: Founder and CEO, a visionary entrepreneur with a strong understanding of the aviation industry and a passion for innovation.
- The Board of Directors: Responsible for guiding the company?s strategic direction and overseeing its financial performance.
- The Management Team: Responsible for executing the company?s strategic plan and managing day-to-day operations.
3. Analysis of the Case Study
Competitive Advantage: Surf Air?s core competitive advantage lies in its unique business model, offering a disruptive innovation to the traditional air travel industry. The membership-based approach, coupled with on-demand flights, provides a convenient and efficient alternative for business travelers, particularly those who value time and flexibility.
Challenges:
- High Operating Costs: Surf Air?s operating costs are significantly higher than those of traditional airlines, primarily due to the use of private aircraft and the need for a dedicated fleet.
- Limited Scalability: The membership-based model, while attractive to a niche market, limits the company?s potential for rapid growth and mass market appeal.
- Competition: The emergence of competitors offering similar services, such as JetSuite and FlyPrivate, intensifies competition and puts pressure on Surf Air?s pricing and market share.
Strategic Analysis:
- Porter?s Five Forces: The analysis reveals a highly competitive industry with high barriers to entry, strong bargaining power of suppliers, and a threat of substitutes. The bargaining power of buyers is moderate, while the threat of new entrants is relatively low.
- SWOT Analysis: Surf Air possesses strengths in its innovative business model, strong brand recognition, and a loyal customer base. However, it faces weaknesses in high operating costs, limited scalability, and a lack of financial stability. Opportunities lie in expanding its service area, targeting new customer segments, and forging strategic partnerships. Threats include intense competition, regulatory changes, and economic downturns.
4. Recommendations
1. Business Model Innovation:
- Expand Service Offerings: Introduce new service tiers, such as ?flexible membership? options allowing for more customized flight schedules and destinations.
- Develop a Hybrid Model: Combine the existing membership model with a pay-per-flight option, catering to a wider range of travelers and increasing revenue streams.
- Leverage Technology: Implement a robust online platform for booking, managing memberships, and providing real-time flight information, enhancing customer experience and streamlining operations.
2. Strategic Partnerships:
- Collaborate with Airlines: Partner with established airlines to offer seamless connections and access to a wider network of destinations.
- Form Alliances with Corporations: Offer corporate travel packages, providing customized solutions for businesses and increasing revenue.
- Explore Partnerships with Hospitality Providers: Collaborate with hotels and resorts to offer bundled travel packages, enhancing the overall travel experience.
3. Targeted Market Expansion:
- Target Niche Markets: Focus on specific customer segments, such as frequent business travelers, high-net-worth individuals, and families seeking luxury travel experiences.
- Expand Geographically: Introduce services in new markets with high demand for private air travel, such as major business hubs and popular tourist destinations.
- Develop International Expansion Strategy: Explore opportunities in emerging markets with growing demand for air travel and a lack of established private air travel options.
4. Operational Efficiency and Financial Discipline:
- Optimize Fleet Management: Implement a data-driven approach to fleet management, optimizing aircraft utilization and minimizing operating costs.
- Negotiate Favorable Contracts: Secure competitive pricing for fuel, maintenance, and other operational expenses.
- Implement Lean Management Principles: Streamline operations, reduce waste, and enhance efficiency throughout the organization.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Surf Air?s competitive landscape, its strengths and weaknesses, and the opportunities and threats it faces. They aim to:
- Leverage Core Competencies: The recommendations build upon Surf Air?s existing strengths, such as its innovative business model and customer-centric approach.
- Address External Customers and Internal Clients: The recommendations cater to the needs of existing and potential customers, while also addressing the concerns of internal stakeholders, such as employees and investors.
- Consider Competitors: The recommendations acknowledge the competitive landscape and aim to differentiate Surf Air from its competitors by offering a unique value proposition and expanding its market reach.
- Quantitative Measures: The recommendations are expected to improve Surf Air?s financial performance by increasing revenue, reducing costs, and enhancing operational efficiency.
6. Conclusion
By adopting a multi-pronged strategy focused on business model innovation, strategic partnerships, and targeted market expansion, Surf Air can achieve sustainable growth and profitability. This strategy will require a commitment to continuous innovation, strategic decision-making, and a strong focus on operational efficiency and financial discipline.
7. Discussion
Alternatives:
- Focusing solely on the existing membership model: This approach would limit Surf Air?s growth potential and make it vulnerable to competition.
- Merging with a larger airline: This could provide access to resources and infrastructure but could also lead to a loss of control and a dilution of the company?s unique brand identity.
- Going public: This would provide access to capital but would also subject the company to increased scrutiny and pressure from investors.
Risks and Key Assumptions:
- Execution risk: The success of the recommendations relies on effective implementation and execution by the management team.
- Market acceptance: The success of new service offerings and market expansion depends on customer acceptance and demand.
- Competition: The competitive landscape is dynamic, and new entrants or changes in competitor strategies could impact Surf Air?s market share.
8. Next Steps
Timeline:
- Year 1: Implement business model innovations, develop strategic partnerships, and initiate targeted market expansion.
- Year 2: Expand service offerings, enter new markets, and refine operations based on performance data.
- Year 3: Evaluate the success of the strategy, adjust as needed, and consider further expansion or strategic acquisitions.
Key Milestones:
- Launch new service tiers and a hybrid membership model.
- Secure partnerships with major airlines and corporations.
- Enter new markets and establish a presence in key international hubs.
- Achieve profitability and demonstrate sustainable growth.
By implementing these recommendations and taking a proactive approach to managing risks, Surf Air can position itself for long-term success in the rapidly evolving air travel industry.
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Case Description
A novel subscription-based airline is around 4 months into its development at a prominent Santa Monica "accelerator." The founding team, largely inexperienced in the airline industry, must assess the feasibility of their plans and make key adjustments. They must decide the business model implications of developing a mid-market vs "first class" level of service. They also must address significant risks concerning the location of their first base of operations in Southern California after local residents protest to local officials.
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