Capacity planning and pricing, Strategic Management

During early 1981 People Express (PX) became one of the ?rst new entries into the deregulated interstate airline industry. PX's entry strategy was to offer a uniform low-price, no frills, high-frequency regionwide service to 13 peripheral mid-Atlantic cities using a hub and spoke system out of Newark, New Jersey. By unbundling all services, adopting quick turnaround times, working longer crew shifts, and convert- ing all ?rst-class and galley space into additional coach-class seats, PX achieved a 31 percent reduction relative to the industry average in direct ?xed costs per ?ight (e.g., crew costs) and a 25 percent reduction in variable costs per seat (e.g., cabin service). Having secured the lowest operating cost structure in the industry, PX set out to attract customers who saw air travel as a commodity and would regularly ?y rather than drive. The prototypical target customer was a manufacturer's trade representative who often needs to travel on short notice, but is seldom on the company expense account.

In essence, People Express created a new segment of the market not previously served by much more expensive and infrequent Mohawk and Allegheny ?ights (the predecessors of US Airways). As a result, inverse intensity rationing of the cheap ca- pacity ensued; that is, the new low-willingness-to-pay customers attracted into the market by PX's discounting quickly secured all of PX's capacity, leaving almost  none available to other air travelers. As a result, PX failed to take regular customers away from the higher-priced incumbents. Figure WD.1 displays the strategy game this entry presented to the mid-Atlantic regional airlines. The incumbents had to decide whether to match PX's deeply discounted fares or accommodate PX by maintaining high fares. PX had to decide whether to enter with a large-capacity 120-seat Boeing 737 or a small-capacity 30-seat deHavilland 128.

Posted Date: 3/9/2013 1:06:39 AM | Location : United States







Related Discussions:- Capacity planning and pricing, Assignment Help, Ask Question on Capacity planning and pricing, Get Answer, Expert's Help, Capacity planning and pricing Discussions

Write discussion on Capacity planning and pricing
Your posts are moderated
Related Questions
what makes costco''s a distnghished and well reputed retail brand?

C.M. is a 28-year-old woman with a long history of dysmenorrhea managed for many years with oral contraceptives. She stopped taking the pill 8 months ago in anticipation of becomin

Choose a real life company.  This could be an organization from any industry.  No two students should select the similar company.  It could be the organization you are working in o

An industrial accident may be defined as "an occurrence. Which interrupts or interferes with the orderly progress or work in an industrial establishment." According to the Facto

Q. Show the Modern methods of budgeting? A flexible budgeting system produces many budgets projecting costs and revenues over different ranges of production or sales volumes.

need to make a memo to company executives explaining why adequate training is important to the company and how the financial costs can be justified

What outcomes are being assessed 1.  Demonstrate to a prescribed acceptable industry level service skills within a tourism/hospitality operation (b) 2.  Recognise and examine

a) Way a suitable structure for a strategy plan that make sures appropriate participation from all stakeholders of an organization. b) Make criteria for reviewing potential option


How much does it cost to get someone to write phase V Individual project Strategic Human Capital Management