In order to fully understand competitive advantage and its application with in the aviation industry, it is first important to consider its definition. According to Chaston (2012), a sustainable competitive advantage is long-term strategic thinking adopted by a firm through which they exceed the other firm’s performance dealing with the same customer(s) and same market area(s). An alternative definition is, the power of an organisation to do something that its competitors cannot achieve. This means the organisation should: ensure customer retention; expand its business by attracting additional customers and on a basis that is more profitable than the business’ counterparts over a long period of time (The Fallible Investor, 2010).
Porter (1998) identifies three generic strategies for a sustainable competitive advantage. These include: cost leadership, differentiation and focus.
Through the cost leadership strategy, the business aims to become the low cost provider with in that market (Porter, 1998). Cost leadership gives firms a competitive advantage as decreased costs allow for higher profitability (Sørensen, 2005). In order to implement this strategy, the firm has to devise methods to create cost-effective amenities, apply cost minimising techniques in terms of service, sales and marketing and so forth (Sørensen, 2005). However, it is important to note that this strategy works best in a market where passengers are more price sensitive, thus prefer cheaper airfares (Flouris & Oswald, 2006). In the context of the aviation industry, this strategy has had an influence on Low Cost Carrier’s business model. LCC have to reduce costs significantly in respective to their FSC counterparts in order to build a sustainable competitive advantage over them (Flouris & Oswald, 2006). LCC such as Southwest airlines, have implemented the cost leadership strategy by primarily just offering the aircraft seat; reducing the turnaround times to ensure aircraft spend more time in the air thus increasing profits; and distinct positioning in the aviation market to provide cheaper airfares than Full Service Carriers (FSC) (Scilly, 2014). Generally, LCCs provide the aircraft seat and additional services such as baggage and foods have to be purchased. Also, in order to apply this strategy effectively and sustain competitive advantage it is important that a LCC devises a strategy that is difficult for other Low Cost Airlines to replicate (Flouris & Oswald, 2006). Therefore, the successful application of the cost leadership strategy has proven to be beneficial to LCCs in the aviation industry.
The second generic strategy that has had an impact on the aviation industry is differentiation. By using this strategy, the airline aims to be distinct from its competitors in order to gain a competitive advantage (Porter, 1998). The airline provides value to its customers in a way in which the competing airlines cannot or are unable to due to factors such as high costs (Porter,...