SAS case, on vertical integration Essay Example | Topics and Well Written Essays - 2000 words

SAS case, on vertical integration - Essay Example Previous study in the area of airline alliances was carried out in 1944 by Gellman Research Associate. This study was conducted under the request of the United States Department of Transport to measure the impact of code sharing agreements on the market share in the first quarter of 1994, between British Airways/USAir and KLM/North West. SAS Company is one of the leaders in the aviation industry, thanks to the restricting efforts that were brought by Jan Carlzon. Having been in the market for quite some time now, SAS is in the maturity level of the PLC curve and now focuses on provision of high quality services to the passengers. SAS also takes pride in having the largest market share of full-fare paying passengers in the airline industry. Company Operating Profits (US $million) 1. American 392 2. Federal Express 365 3. SAS 260 4. Delta 225 5. Cathy Pacific 206 6. Swiss air 200 7. Northwest 167 8. USAir 164 9. continental 143 10. KLM 131 Comparison of Major World Airlines, Statistics 1986: (Air Transport World, 1987). Currently, the firm has established itself as the third most profitable airline firm in terms of operating profits. By 1986, SAS made a total of Skr 1.5 billion in operating profits. ... le, SAS international hotel that provides full-paying passengers with facilities such as tickets, transport, and hotel packages has strategically positioned the company in the market. Other milestones have involved the introduction of the â€Å"euro class†. The external and internal and internal capabilities of the firm are the two factors that determine the strategies, which a firm takes to compete effectively in the external business environment. Despite operating in the same environment, different firms bear different internal and external capabilities that often determine the profits or losses that they make. It is for this reason that the profitability of a firm is determined by the industrial structure within which the firm competes, and how best it establishes it’s self in it (Porter 1980, p. 65). On the flip side, the proponents of the resource based school offer that the profitability of the firm is determined by the unique variety of resources and capabilities of the firm (Collis & Montgomery, 1995, p. 118). Kay (1993, p. 103) offers that to have a competitive advantage, a firm must differentiate its product and services from those of the competitors, through the introduction of distinctive features. This was the case of SAS in the replacement of the small 40-passenger airlines with the 110-passenger DC-9S aircrafts which had double capacity. To attract more passengers, SAS maintained the low costs and frequency which were synonymous with the 40-passenger airlines. Differentiation of the business travelers through the introduction of the â€Å"Scanoroma† lounges in SAS affiliated airports was also one of the ways of establishing distinctive resource capabilities. Organization architecture is also the other factor that determines the profits and losses that a