Strategy Model for Creating the Corporate Advantage of Indonesian Airlines

By Majid, Suharto Abdul | Academy of Strategic Management Journal, June 2018 | Go to article overview

Strategy Model for Creating the Corporate Advantage of Indonesian Airlines


Majid, Suharto Abdul, Academy of Strategic Management Journal


INTRODUCTION

Every airline company expects to have a high level of corporate advantage for their business competition. Corporate advantage can be created through market-driven strategy based on market attractiveness and resource capability. In general, the corporate advantage of Indonesian airlines has not been optimal if compared with the foreign airlines in the aspects of flight punctuality, profit gain, or flight safety and security. In fact, Indonesia's domestic market has very high potential and attractiveness.

This phenomenon is reflected by the domestic airlines' performance in their operation and flight service: unachieved target, highly frequent delay, frequent complaints and fairly frequent flight accidents. These, in turn, reflect that national airlines lack excellence in the aspects of product quality, innovation, business growth, and corporate image, contrast with the high market potential. This condition indicates that they do not implement market-driven corporate strategy based on market attractiveness and resource capability.

Based on the number of passengers and aircrafts, Indonesia's airline industry is one of the air transports with the highest growth in Asia Pacific and in the world (Airlines business, 2008 & 2009). With 17,500 islands divided into three different time zones, Indonesia has been acknowledged by International Air Transport Association (IATA) as one of the five airline markets with the fastest growth of passengers in the world (INACA, 2016).

Despite the global economic crisis, Indonesia still gives hope for the growth of aircraft passengers as projected by the growing demand for air transport. The problem is that Indonesia's national airlines have a high competitiveness but they are unable to exploit the high market attractiveness and resource capability as the basis for implementing market- driven strategy to achieve the corporate advantage.

In the variable of market-driven strategy, the problem is that not all Indonesia national airlines implement it appropriately and effectively, so they cannot achieve the optimal target.

BIBLIOGRAPHICAL REVIEW

Referring to Thomas et al. (2015); David (2011), strategic management contains two important things:

1. It consists of three types of management process, namely strategy formulation, strategy implementation, and strategy evaluation.

2. It focuses on unifying or combining the business aspects of marketing, research and development, finance/accounting and production/operation.

The theory related to air transport management refers to Gubbins (2009); Shaw (2011); Doganis (2006); Wells (1999); Heracleous et al. (2009); Thomas & Catlin (2014).

There are three airline business models in the corporate level (Heracleous et al., 2009):

1. Traditional integrated airlines model.

2. Virtual airlines model.

3. Aviation business model.

Furthermore, there is a change of future airline business model. According to Thomas & Catlin (2014), airline business competition is divided into three main models: Full Service Carriers (FSCs), Low Cost Carriers (LCCs) and hybrid LCC (combination of FSC and LCC).

The theory of market attractiveness refers to Nova (2014); Porter (1996); Best (2005); Cravens & Piercy (2006); Cromley et al. (1993); Walker et al. (1995).

The theory of resource capability refers to Protogerou et al. (2008), Barney & Clark (2007); Amit & Schoemaker (1993); Schreyogg & Eberl (2007); Hitt et al. (2007); Cigler (2007); Kusumasari et al. (2010).

The theory of market-driven corporate strategy refers to Collis & Cynthia (2005); Cravens & Piercy (2006 & 2009); Best (2007); Narver & Slater (1990). Marketing strategy process is the stage of strategic situation analysis to identify market opportunity, define the market segments, evaluate the competition, and assess the organization's strengths and weaknesses. …

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