S. are seeing modest improvements in economic indicators.
The social environment is favorable for air travel. The mode still holds tremendous cachet with consumers and is favored when consumers can afford it. There is some consideration that the airline business is a major contributor to greenhouse gases and therefore global warming, but as of yet the industry has not come under serious public pressure as it is generally viewed by the public as a necessity rather than a luxury in this regard.
The technological environment is favorable, and the airline industry has typically responded well to technological change. While some developments are in the form of new airplane technology, for airlines the more important developments are those that reduce back-end costs. For example, the use of online reservation and check-in has been a core strategy for discount airlines to reduce costs (Starmer-Smith & Alleyne, 2009). Information technology has also facilitated other developments such as large airline code-sharing groups.
The legal environment concerning airlines is complex. The industry is highly regulated and in some cases -- such as security - that regulation is shifting. Because airlines often fly between different countries, they are subject to the laws governing multiple nations. Airlines in general have little difficulty navigating their legal environments but the complexity of these environments can occasionally be a threat to a route or its profitability.
The airline industry has a heavy impact on the environment. This places it at risk with regards to sanction or legal action in future. However, the industry's environmental impacts have yet to come under significant scrutiny and no talk of economic sanction has resulted from the environmental impacts of the airline business. As a result, this environment does not yet have a strong impact on the airline industry, even if it has the potential to do so.
The different environments paint a picture of an industry that is generally favorable. The economic environment presents the most significant challenge to the airline industry, with the political environment also having a strong impact. The other environments are generally favorable, at least for the time being. The airline industry has been able to dodge the major threats in most of its environments, with the notable exception of the economy, to which the fate of the industry is inextricably tied.
Resource-Based View
The resource-based view is a means of analyzing a firm in the context of the resources or tools it has at its disposal (Wernerfelt, 1984). The resources must be either valuable, rare, inimitable or non-substitutable in order for the firm to be able to use it to gain competitive advantage or preferably sustainable competitive advantage. Resources can be any of assets, capabilities, processes, firm attributes, knowledge that the firm controls.
The best way to analyze the airline industry from a resource-based perspective is to analyze the most successful companies in the industry to understand from where they draw their sources of competitive advantage. Critical resources that have been identified are systems, routes, corporate culture and strategic alliances.
Airlines can succeed by developing systems that have a lower cost structure than similar systems at competing airlines. For example, many discounters operate with a system that emphasizes online booking, and Ryanair has extended this to include online check-in (Starmer-Smith & Alleyne, 2009). This has allowed the company to have a lower cost structure than many of its competitors, who cannot do away with manual check-in gates.
Pricing systems can also allow an airline to gain competitive advantage. Unlike some other operating systems, pricing systems have more potential to be proprietary and therefore be considered "rare." Airline pricing strategy is based on complex algorithms. These algorithms both help the airline forecast demand and set prices. The result is that they should deliver to the airline the optimal combination of ticket sales and ticket prices to maximize revenue (Knapp, 2003). The airline with the best algorithm should in
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