I’m sure we can all remember a time when American Airlines was going bankrupt and their stock was worth close to nothing. It has been about ten years now since then and they have continued to grow as a company. During the past ten years American Airlines used bankruptcy protect to cut costs and allowed almost all of their flying from only five U.S. cities. This type of management strategy allowed them to survive after September 11th and throughout this decade. Now, at O’Hare, they have their own terminal for domestic and international departures and international arrivals. It’s almost hard to imagine they have come this far.
Since they will be exiting bankruptcy protection, they decided to come up with a new management strategy to deal with the upcoming costs and exit bankruptcy. Even though American has a market leading position on flights between U.S. and Latin America, they need to focus on their weakness with continental Europe and Asia. They have introduced new flights to Germany, South Korea, and Peru. Their flight to Germany will be from Chicago to Dusseldorf. They also plan on introducing some new domestic services (Nicas). American believes this strategy will increase their departures by 20% over the next five years while they try and exit bankruptcy.
American’s C.C.O. said, “An underlying foundation of the business plan has been to diversify our portfolio of flying and increase our mix of international flying” (Wall Street Journal). I personally couldn’t agree more with this statement and if I was looking to do this, I would start with the weakest parts of my management strategy. I would search for the gaps in my market and do whatever I could to bridge those gaps for my consumers. That seems like the smartest plan to me. I have begun to wonder if it will cost as much as a regular flight or if they will be trying a new competitive angle.
Do you think the American Airline’s expansion to continental Europe and Asia is a smart management strategy? How will the addition of these new services affect the price of tickets in the future?
When I think about running a business I know can achieve a competitive advantage by differentiation, cost, or response. We all know Starbucks Coffee Company doesn’t really compete with cost. Instead, they have decided to gain a competitive advantage through differentiation, not in their product, but in the way you can pay. An article from the Wall Street Journal stated, “Starbucks mobile payment app was different from other retailers because it combined paying on the go with the reward program already in place” (http://online.wsj.com/article/SB10000872396390444423704577575803898185594.html).
Starbucks Coffee Company has decided to invest $25 million in Square as an effort to stay ahead of everyone in respect to the mobile payment apps. With this investment, Starbucks will be able to give their customers what no other coffee shop does.
Customers will be able to walk into a store and up to the register, say their name to the employee, and receive their beverage without even taking their wallets out. Of course in order for this to happen the customer must have one of two apps: the Starbucks mobile app, which will allow a customer to pay with their Starbucks cards on their phones or the Pay with square app, which will allow customers to use their credit or debit cards on their phone. They must also be in a store that is using the square technology.
Eventually, Starbucks will use Square’s technology to process all of the credit and debit transactions in 7,000 of their U.S. stores. This partnership looks great and it could definitely help Starbucks stay ahead in the mobile payment area. I am sure most people have been in a Starbucks recently, and you can tell how hectic it gets. Right now, you can walk into any coffee shop, wait in line for your coffee, and pay for it like everyone else. Can you imagine, a year from now, you’re standing in line at Starbucks, you get to the register, and you can order your coffee without even taking out your phone or wallet.
Starbucks has decided to give their customer a new way to pay and are leading the front on mobile pay technology. What are some of the pros and cons of this decision and how do you think mobile pay technology will effect the way companies plan their operation strategies?