Competing poorly outside your core is not the way to win

August 17, 2009 by Noel Gomez
Filed under: Marketing, Strategy

On Twitter today @paul_irish shared this infographic which illustrates why the legacy carriers can’t effectively compete with low-cost airlines.

Infographic illustrating how low-cost airlines beat their competitors

The information on this picture is nothing you can’t learn from taking any business school class, but what is interesting is how something so obvious is not put to good use. I have felt for a long time that by trying to compete with the low cost airlines, the legacy airlines are “stuck in the middle” as Porter suggested. Today these companies are neither differentiated nor low cost.

Bailout after bailout the legacy airlines pursue the same failed strategies. They continue to cut costs at the expense of service and I have noticed in my travels that the low cost airlines continue to outperform. The same was true of the US automakers and we see where that led.

Instead of trying to compete on price, legacy airlines should look for ways to leverage their size and put up a good fight against low cost airlines. A “fly anywhere” for a month pass from American Airlines is surely better than one from JetBlue. How about giving passengers who have to go through hubs the flexibility to book their connecting flight on a different day? I think everyone would see the value in being able to take a detour for a few days in Chicago on their way to Indiana. This perk would win favor with passengers while only increasing airline costs marginally (for additional baggage handling, automated check-in, etc.).

When a company sees itself losing sales to someone following a different generic strategy it can’t defend itself by trying to compete using the competitor’s strategy. It needs to get better at their strategy when on the surface it appears they need to abandon it.

Could Target ever beat Walmart on price? Probably not. Instead it chooses to have reasonable prices and compete on differentiation tied to style and trendiness. Dell has been trying for a few years to compete with Apple on style and has not done any better. When Apple was faced with extinction in the 90s instead of trying to compete on price they chose to go after innovation which was their core and is why today they are the model every company tries to copy. If you look at the early 90s, you can argue that it was the CEOs who lost that focus at Apple which put it in the predicament in the first place.

So when someone is competing with you don’t blindly abandon your core strategy. Look for ways to leverage what you have because your competitor won’t be able to effectively counter a strategy foreign to them.

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