Many companies choose to employ a global strategy where different pieces of the process are completed in different regions of the world. These global processes can be accomplished in numerous combinations and it is up to the company to find the most effective one.
In this article, Norwegian Air Shuttle, an airline that specializes in low-cost flights around Europe, is bringing it business model to the United States and Asia, to the dismay of U.S. airline companies.
Their strategy is a complex one that has different cost-effective parts. Norwegian is “moving its long-haul operations from Norway to Ireland, basing some of its pilots and crew in Bangkok, hiring flight attendants in the United States, and flying the most advanced jetliner in service — the Boeing 787 Dreamliner.” Other airlines have tried but failed to do a low-fare approach on long-haul flights.
Bjorn Kjos, Norwegian’s CEO, is confident that they can offer fares that are 50 percent cheaper than the competition’s, which will ultimately drive out competition. American Labor groups, “see it as a backhanded attempt to outsource cheaper labor and undercut competition” as well as taking advantage of the open-skies agreement made with the EU (even though Norway isn’t part of the EU).
“United Airlines and American Airlines said the low-cost airline wanted to skirt labor laws by resettling its long-haul operations in Dublin, while using a Singapore-based company to hire pilots on its behalf in Thailand. The result would give it ‘a competitive advantage on trans-Atlantic routes in direct competition with U.S. carriers.’”
In class, we talked about competitive advantages in relation to globalization. According to the lecture there are many reasons to globalize:
- Improve the supply chain
- Reduce costs
- Improve operations
- Understand markets
- Improve products
- Attract and retain global talent
I think that the way that Norwegian Air Shuttle is globalizing falls in line with these points and it is effectively improving supply chain, reducing costs, and improving operations better than their American counterparts. They improve the supply chain by finding the most beneficial process to establish their airline. They lower direct and indirect costs by eliminating unnecessary expenses and finding the cheapest way to provide labor, and reducing taxes and tariffs. They also improve operations by understanding differences in how business is handled in different countries, and using it to their advantage.
There are also strategies for competitive advantage: differentiation, cost-leadership, and response. I believe that the Norwegian Air Shuttle company is competing on cost; they are they are providing the maximum value as perceived by the customer at the lowest cost and it is creating the most demand.
Do you think that the way Norwegian Air Shuttle handles their business model is considered a strategic competitive advantage or is it an unfair advantage? Why?