Harvard Case - The Hawaiian Airline Industry, 2001-2008
"The Hawaiian Airline Industry, 2001-2008" Harvard business case study is written by Brett Saraniti. It deals with the challenges in the field of Strategy. The case study is 6 page(s) long and it was first published on : Jan 1, 2008
At Fern Fort University, we recommend that Hawaiian Airlines adopt a multi-pronged strategy to navigate the turbulent Hawaiian airline industry. This strategy should focus on innovation, strategic alliances, and product differentiation to achieve sustainable competitive advantage. It should also prioritize environmental sustainability and corporate social responsibility to resonate with the environmentally conscious Hawaiian market and attract a broader customer base.
2. Background
The case study focuses on the Hawaiian airline industry between 2001 and 2008, a period marked by significant challenges including the 9/11 attacks, the rise of low-cost carriers, and increased competition. Hawaiian Airlines, the dominant carrier in the state, faced pressure from both established airlines and new entrants, forcing them to adapt their business model and competitive strategy.
The main protagonists are:
- Hawaiian Airlines: The incumbent carrier with a strong brand and existing infrastructure.
- Low-cost carriers: New entrants like Aloha Airlines and ATA Airlines, challenging Hawaiian Airlines on price and service.
- Established airlines: Carriers like Continental and United Airlines, competing for inter-island and international routes.
3. Analysis of the Case Study
To analyze the situation, we employ a combination of frameworks:
Porter's Five Forces:
- Threat of new entrants: High, due to the low barriers to entry in the industry.
- Bargaining power of buyers: Moderate, with price-sensitive customers but limited alternatives.
- Bargaining power of suppliers: Low, with readily available aircraft and fuel.
- Threat of substitute products: Moderate, with potential for alternative modes of transportation like ferries.
- Competitive rivalry: High, with intense competition from both low-cost carriers and established airlines.
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty.
- Established route network and infrastructure.
- Experienced workforce.
Weaknesses:
- Limited financial resources compared to larger competitors.
- High operating costs due to isolated location.
- Lack of a robust loyalty program.
Opportunities:
- Growing tourism industry in Hawaii.
- Potential for international expansion.
- Increasing demand for sustainable travel options.
Threats:
- Competition from low-cost carriers.
- Economic downturns impacting travel demand.
- Environmental regulations impacting operations.
Value Chain Analysis:
Hawaiian Airlines' value chain needs to be optimized for cost efficiency and customer experience. This includes:
- Inbound logistics: Streamlining procurement and supply chain management.
- Operations: Utilizing technology and analytics for optimal flight scheduling and fuel efficiency.
- Outbound logistics: Efficient baggage handling and customer service.
- Marketing and sales: Leveraging digital marketing and social media to reach target audiences.
- Service: Providing a unique and memorable customer experience.
4. Recommendations
Embrace Innovation: Hawaiian Airlines should invest in disruptive innovation to differentiate itself from competitors. This could involve:
- Technology and Analytics: Implementing advanced IT systems for dynamic pricing, personalized marketing, and improved operational efficiency.
- Product Development: Introducing new routes, innovative cabin configurations, and enhanced in-flight entertainment.
- Business Model Innovation: Exploring new revenue streams like ancillary services and partnerships with local businesses.
Strategic Alliances: Hawaiian Airlines should form strategic alliances with other airlines and travel companies to expand its reach and offer more comprehensive travel packages. This could involve:
- Code-sharing agreements: Offering seamless connections to international destinations.
- Joint ventures: Collaborating with airlines in Asia and the Pacific to tap into emerging markets.
- Partnerships: Collaborating with hotels, tour operators, and other travel-related businesses.
Product Differentiation: Hawaiian Airlines should focus on product differentiation to attract and retain customers. This could involve:
- Brand Management: Strengthening its brand image by emphasizing Hawaiian culture, hospitality, and environmental sustainability.
- Marketing Strategy: Utilizing digital marketing and social media to target specific customer segments.
- Customer Experience: Providing exceptional customer service and creating a unique and memorable travel experience.
Environmental Sustainability: Hawaiian Airlines should prioritize environmental sustainability to appeal to the environmentally conscious traveler and meet growing regulatory requirements. This could involve:
- Fuel Efficiency: Investing in fuel-efficient aircraft and implementing operational improvements to reduce fuel consumption.
- Carbon Offsetting: Partnering with organizations to offset carbon emissions from flights.
- Waste Reduction: Implementing recycling and waste reduction programs throughout the airline.
Corporate Social Responsibility: Hawaiian Airlines should embrace corporate social responsibility to build trust with customers and stakeholders. This could involve:
- Community Engagement: Supporting local charities and initiatives in Hawaii.
- Employee Welfare: Promoting a positive and inclusive work environment.
- Ethical Sourcing: Ensuring ethical sourcing practices for all products and services.
5. Basis of Recommendations
These recommendations are based on a careful analysis of the Hawaiian airline industry and Hawaiian Airlines' unique strengths and weaknesses. They consider:
- Core competencies and consistency with mission: The recommendations leverage Hawaiian Airlines' existing brand strength and focus on its commitment to Hawaiian culture and hospitality.
- External customers and internal clients: The recommendations address the needs of both price-sensitive and luxury travelers, while also promoting employee satisfaction and engagement.
- Competitors: The recommendations differentiate Hawaiian Airlines from competitors by focusing on innovation, sustainability, and customer experience.
- Attractiveness: The recommendations are expected to improve Hawaiian Airlines' profitability and market share by capturing new customer segments and increasing operational efficiency.
6. Conclusion
By embracing innovation, forming strategic alliances, differentiating its product offerings, and prioritizing environmental sustainability and corporate social responsibility, Hawaiian Airlines can navigate the competitive Hawaiian airline industry and achieve sustainable growth. This strategy will position Hawaiian Airlines as a leader in the industry and ensure its long-term success.
7. Discussion
Other alternatives not selected include:
- Cost leadership: Focusing solely on price competition, which could lead to a price war and erode profitability.
- Mergers and acquisitions: Acquiring competitors, which could be costly and face regulatory hurdles.
- Vertical integration: Expanding into related businesses like hotels or tourism services, which could require significant investment and expertise.
The key risks and assumptions associated with the recommended strategy include:
- Economic downturn: A downturn in the economy could negatively impact travel demand.
- Competition: Competitors could adopt similar strategies, leading to increased rivalry.
- Technology disruption: New technologies could emerge that disrupt the airline industry.
8. Next Steps
To implement the recommended strategy, Hawaiian Airlines should:
- Phase 1 (Year 1): Develop a detailed strategic plan, invest in new technology, and launch a pilot program for sustainable practices.
- Phase 2 (Year 2): Implement strategic alliances, launch new product offerings, and expand marketing efforts.
- Phase 3 (Year 3): Continuously monitor performance, adapt the strategy based on market conditions, and expand international operations.
By taking these steps, Hawaiian Airlines can position itself for long-term success in the dynamic and competitive Hawaiian airline industry.
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Case Description
Two Hawaiian airlines' cooperative environment is disrupted by the entry of a third competitor, Mesa Airways. The price war leads to fares as low as $0 and causes more than $100 million in losses in the first year with no end in sight. Industry risk factors for price competition were reduced in 2001 when the government granted a one-year reprieve from anti-trust laws, but increased dramatically after Mesa's announced entry.
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