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Analysis on Delta Airline's Strategy

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by

Yawei Luo

on 28 April 2014

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Transcript of Analysis on Delta Airline's Strategy

Strategy Analysis
Recommendations

Mixture of cost leadership and differentiation
Price competition with LCC
"Our ability to compete effectively depends, in part, on our ability to maintain a competitive cost structure."
-- 10k
Busniess Level Strategy
Resources & Capabilities
Membership in Skyteam
Relationship w/ other foreign carriers and regional carriers
Trainer Refinery
Human resource
Low union rate
Resources
Industry Analysis
Porter's Five Force Analysis
Company Info
History
Corporate Level Strategy
Global route network
Flying to over 170 countries
Hedge against crack spread
Customer service
Capabilities
Delta
Southwest
United
American

C4 Ratio=60.3%
Big Four
Market Share
Analysis on Delta Airline's Strategy
Presented by:
Yawei Luo
Econ 401
Agnes Scott College

1924
1928
Huff Daland Dusters
C.E. Woolman
Merger
Global Expansion
1950-now
What is Delta?
It provides air transportation for passenger as well as cargo operations.
Hub and Spoke
system
Maximize capacity
Fixed cost
Sense of global community
Specialization in int'l flights
2013 Pre-Tax Income
http://www.sec.gov/Archives/edgar/data/27904/000101968714000777/delta_8k-ex9901.htm
Bring back Song Airlines
-When indebtedness alleviates
Grow into Asian Martket
From 2008, capacity between US and China has increased threefold.
Thank You for Flying Delta
Industry Rivalry
Highly Competitive
Difficulty in differentiating product/service
Bargaining Power of Suppliers
Strong
Aircraft maker duopoly--
Boeing and Airbus
Fuel suppliers
Threats of Substitute
Moderate
Other types of transportation
Driving by oneself
Train or bus
Telecommunication
But...
Plane is still the fastest and most convenient public transportation
Bargaining Power
of Buyers
Moderate
Low switching cost
Price sensitivity
But...
Concentration of buyers
Threats of New Entrants
Relatively weak
High capital requirements and government regulations
But...
Deregulation
Lower borrowing cost
http://www.transtats.bts.gov/
Core Competencies
Specialization in international routes.
Own refinery
Ways to
Differentiate
SkyMiles
Reward customers based on dollar spent, rather than miles flew.
Customer Service
http://travelingmamas.com/pink-skies-with-delta-air-lines-for-breast-cancer-awareness/
Song Airlines
http://www.brandingserved.com/gallery/song-airlines/382085
Delta Air Lines
Delta Private Jets
DAL Global Services
Global staffing
Security management for all business
Delta Vacations
SkyMiles-
American Express
Credit Card
Diversification
Vertical Integration
Aircraft makers & Fuel Suppliers
Flight operation
& MRO
Travel Agency
& Meta Search Site
Customers
Trainer Refinery
http://www.cnbc.com/id/101253932
http://thebakken.com/articles/75/why-delta-went-all-in-for-bakken
http://www.forbes.com/sites/airchive/2014/03/05/delta-skymiles/
Business class & last-minute high-fare or short-hual high-fare
http://english.chosun.com/site/data/html_dir/2011/04/28/2011042800840.html
Customer-facing staff training
Customer support via fb & Twitter
Real-time bag tracking
In-flight features
Failed
-high-cost low-fare business model
-Chapter 11 bankruptcy
http://usatoday30.usatoday.com/travel/news/2004-07-09-airline-exercise_x.htm?POE=click-refer
http://www.airlinemeals.net/browse.php?id=2257&start=1&x=1
Seat-back TV
Kate Spade uniforms
Charter flights
Aircraft management
Tech service center
-Reconstruct business model (optimize cost
structure w/o sacrificing too much diff.)
Seattle hub-skip Japan Narita hub, nonstop to China
Next 5-10 yrs, Open-Skies w/ China.
Hubs in Beijing & Shanghai.

Questions?
Source of C.A.?
-Yes, but replicable
Full transcript