Delta Airlines B the Launch of Song Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Delta Airlines B the Launch of Song Case Solution

Introduction

In United States, airline industry was getting fragmented year over year. The increasing trend of low-cost airlines forced many airlines to launch their subsidiaries in order to meet the demand. Failure to comply with the low-cost airline can harm their sustainability in coming days. Delta Airline was facing similar circumstances alongside continuous and fierce competition from its rivals, through this low-cost airline. Top management of Delta was busy in building an action plan in order to compete against those competitors. Delta Express was being operated by Delta mainline. Management thought to convert this venture into a low-cost airline segment, but the majority rejected this plan because Delta Express had not gained significant acceptance among clients and its cost structure was also high.

After the thinking process, they decided to launch a separate and independent subsidiary with a small cost structure to compete with rivals in the low-cost segment. Name of this subsidiary was chosen as "Song" among various names. With a freight base of 36 planes and pilots agreement with the parent company, Song flew its first flight from Kennedy Airport to West Palm Beach Florida. Song implemented cost reduction model through increasing number of seats in the plane and reducing the number of a flight attendant from 6 to 4. Their primarily target market was women because Song was reflecting itself as leisure traveler with low cost. No one in the whole industry was targeting women as their customer base, which is why Song captured this untapped market. It targeted women with their preferred lifestyle; for instance, shopping, eating fresh food, and leisure traveling.

Problem statement:

Delta created its separate subsidiary in response to competitive threat of low-cost airlines. In addition, its subsidiary used pilots of its parent airline with independent decision-making authority. Do these strategies be sound enough to meet rivalry? Evaluate strategies by using three tests of effectiveness?

Case analysis

Low-cost airline:

Faster growth of low-cost aviation industry with homogenous service makes this industry fragmented across the United States. Delta airline was expanding its business into low-cost airline segment by launching new independent subsidiary by the name of Song. Song’s primary business model was to target women and the segment of business class people. In effect to reduce the cost, Song management decided to fly high load factor on the drag of 900 miles. Moreover, the company increased the number of seats in its planes and the number of flight attendants was decreased from 6 to 4. On a daily basis, a single plane was flying for 13 hours, which was more than what mainline Delta flew. Furthermore, personnel from Delta performed the maintenance of its flights.

Evaluation of strategies

Delta Company adopted different strategies in order to launch Song. Thus, to check their effectiveness, it has to pass three efficiency tests.

External consistency: Delta was responding to external opportunities and threats tremendously. Since opportunity to target women was catered by Song, it shows how well they are consistent with external consistency. The threat of competitors declined as well because of their sound strategic implementations. Moreover, we can judge their external consistency by applying porter five forces model.

Porter five forces model

Threat of new entrant: Threat of new entrant is quite low because of high capital requirement and lower margins in low-cost airline segment. In addition, market share in this segment is fragmented, which is why it not that easy to snatch market share from existing employees.

Threat of substitute goods: Threat of substitute good is high in this industry. If a private company or government introduces any fast road transportation services in the United States, then traveling through airline can reduce....................

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