Mobile Business - Comprehensive Marketing Strategies or Merely It Expenses? a Case Study of the Us Airline Industry

By Pagiavlas, Notis; Stratmann, Marzel et al. | Journal of Electronic Commerce Research, August 2005 | Go to article overview

Mobile Business - Comprehensive Marketing Strategies or Merely It Expenses? a Case Study of the Us Airline Industry


Pagiavlas, Notis, Stratmann, Marzel, Marburger, Peter, Young, Seth, Journal of Electronic Commerce Research


ABSTRACT

This paper analyzes mobile business in the context of the US airline industry as a strategic tool to create a sustainable competitive advantage through the implementation of an effective mobile business model. The analysis is based on the assumption that such strategies must create a strategic fit with the business environment, as seen from an airline perspective. The analysis adopts classic strategic frameworks to suggest a most appropriate approach to airline practices and vision. Key success factors for creating value to airline customers through m-business are user experience, the value contribution of mobile technology, and customer requirements. Crucial elements found for matching these factors are expedite facilitating processes (i. e., process improvements), the ability to integrate systems into a mobile infrastructure, and the utilization of devices that consumers already use with quick and inexpensive results.

Keywords: Customer support; Focus group; Mobile business strategy; U. S. Airlines; SCA

1. Introduction

The US airline industry due primarily to the unique characteristics of services (i. e., intangibility, inseparability, lack of inventory, etc.) could be considered a model of mature service sectors that go through dynamic strategic transformations unparallel to traditional product or goods markets. Since the deregulation of the airline industry in 1978, uncertainty, risk, and open competition among airlines have risen dramatically. These trends have continued with increased volatility to the present day environment, illustrated by some major air carriers reporting record financial losses and bankruptcies, while others are following a successful strategy of growth and financial stability. To effectively compete in the industry, air carriers have expanded various differentiation strategies to cover services, revenue yield techniques, operational efficiencies, and labor relations. Yet, despite these intense efforts, most consumer studies relating to major US airlines have shown little difference in perception of service quality [Rhoades and Waguespack 2001]. This implies that "switching costs" for passengers between competing airlines are relatively low, making the industry vulnerable to price wars, especially in low demand periods. Das and Reisel [1997] explain the over-reliance on price competition and cost reductions as natural developments of a mature industry.

In terms of its structure, the airline industry is characterized by a trend towards consolidation. From an operating point of view, such strategies have not generated any significant cost savings. Facing a demand that is greatly influenced by general economic factors [Shearman 1992], it remains an important task for airlines to increase operating efficiency and to reduce process costs in order to retain profit margins [Suzuki 1998]. On the service side, the US airline industry faces numerous shortcomings, the most important of which are record levels of passenger complains due to poor service and overcrowded infrastructure, especially at large hub airports [Taylor 2001].

In order to develop an edge over competitors, companies in general need to create a sustainable competitive advantage, based on increased operational effectiveness and adequate strategic positioning [Porter 1996]. If integrated properly into the value chain, a "mobile" technology business model can increase an airline's operating efficiency and customer satisfaction by facilitating business processes, providing customers with value added services and by creating synergies between an airline's core competencies and mobile technology [Zobel 2001]. Furthermore, implementing a mobile business model can increase the level of personalization of a company's business relations, which in turn creates new possibilities of customer segmentation. It might even allow companies to pursue a focused one-to-one marketing approach [Barwise 2001]. …

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