Strategic Management of NetJets


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Strategic Analysis of Netjets Management. The final presentation for the Planning Systems module in Embry Riddle Aeronautical University\'s Masters program.

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Strategic Management of NetJets

  1. 1. Strategic Management of NetJetsMSA 636 – Aviation / Aerospace Planning Systems Final Presentation<br />Andrew Bellini & Can Bayrak<br />
  2. 2. Background<br />Mission Statement<br />Corporate Social Responsibility<br />External Environment<br />Internal Analysis<br />Long-Term Objectives<br />Multi-Business Strategy<br />Conclusion<br />Recommendations<br />References<br />2<br />Overview<br />
  3. 3. History<br />Executive Jet was founded in 1965 by General O.F. Lassiter<br />Fractional Aircraft Owner Concept introduced in 1986<br />European and Middle Eastern divisions opened in 1997<br />Global Operations<br />Berkshire Hathaway Inc. acquires Executive Jet in 1998<br />Executive Jet is renamed to NetJets in 2002<br />3<br />Background<br />
  4. 4. Fractional Jet Ownership Concept<br />A share of the aircraft can be purchased rather than the whole aircraft<br />Shares are determined by projected flight hours per year<br />Minimum share is 1/16 or 50 flight hours.<br />High convenience, access, and time advantages of owning a private jet at a fraction of the cost<br />No responsibilities<br />4<br />Background<br />
  5. 5. No formalized Mission Statement<br />Follows 6 primary principles<br />Safety, Owner Value, Operational Excellence, Employee Value, Shareholder Value, Integrity<br />Company Philosophy <br />Establishes a positive self concept<br />Concern for public image<br />NetJets should consider publishing a Mission Statement<br />5<br />Mission Statement<br />
  6. 6. The Carbon Offset Program<br />Provides NetJets Owners the opportunity to mitigate the unavoidable impacts from flying today by voluntarily offsetting the emissions by investing in projects that remove the equivalent amount of greenhouse gases from the atmosphere (NetJets, 2010)<br />The Corinth Coal Mine Methane Project<br />The Enercon Wind Farm Project<br />The National Family Dairy Farm Project<br />The Newton-McDonald Landfill Gas Capture Project<br />6<br />Corporate Social Responsibility<br />
  7. 7. The Next Generation Jet Fuel Project<br />NetJets is investing in cutting-edge research to identify more environmentally-friendly aviation technologies by sponsoring this project at Princeton University and the University of California, Davis. This project developed an ultra-low emission jet fuel (Wilson, 2009)<br />The Solar Schools Project<br />The project will fund the placement of photovoltaic cells on school roofs. The public schools of the State of California are focused.<br />Environmental Affairs Chairs in the US & European Branches<br />Establishment of environmental councils which will be directed by the Director of Environmental Affairs. The Director will report directly to the Office of the Chairman, David Sokol (NetJets, 2007)<br />7<br />Corporate Social Responsibility<br />
  8. 8. Remote Environment<br />Economic Factors<br />Worldwide Recession<br />Low Interest/Inflation Rates<br />High Credit Levels<br />Social Factors<br />Very high ethical standards for employees<br />Participation in community events <br />Political Factors<br />Comply with Federal Regulations<br />Antitrust laws<br />Pollution and Environmental Regulations<br />8<br />External Environment<br />
  9. 9. Remote Environment (cont..)<br />Technological Factors<br />Consistently improving aircraft<br />Keep up with competitions<br />Ecological Factors<br />Use of Bio-Fuels<br />Carbon Offset Program<br />9<br />External Environment<br />
  10. 10. Industry Environment<br />Low Entry Threats<br />Highly competitive market<br />High cost of entry<br />Suppliers<br />Supplier selection (Over 15 aircraft types in use)<br />Fairly high selling power<br />Aircraft manufacturers<br />Fuel suppliers<br />Buyers<br />High control within the industry<br />Constantly trying to drive the price down<br />Substitutes are available<br />10<br />External Environment<br />
  11. 11. Industry Environment (cont..)<br />Substitute Products<br />Customers can sell shares after contract end<br />Low budget airline competition<br />Similar corporate luxury carriers available<br />Competitive Rivalry<br />Strives to gain a competitive advantage<br />Fixed cost increases<br />Product differentiation<br />High product loyalty<br />High value to safety<br />High exit barriers<br />11<br />External Environment<br />
  12. 12. Operating Environment<br />Customers<br />Customer Profiles<br />Buyer Behavior<br />Client History<br />Suppliers<br />NetJets has a big buyer power<br />12<br />External Environment<br />
  13. 13. Operating Environment (cont..)<br />Creditors<br />Important to maintain good credit<br />NetJets is a responsible buyer<br />Maintains valuable stock<br />Labor<br />Keep employees happy, and safe<br />Interaction with customers<br />First to influence company reputation<br />Raw Materials Costs<br />Financial Position<br />Price Competitiveness<br />13<br />External Environment<br />
  14. 14. SWOT<br />Strengths<br />Financial Background by Warren Buffett’s Berkshire Hathaway<br />Pioneer of the Fractional Jet Ownership Program – Employee Experience<br />Fleet Size (more than 800 aircraft)<br />Pilot experience (average of 7500 hrs.)<br />Alliances with various Fortune 500s<br />Safety Record<br />Brand Name<br />Global branches (the US, Europe, Middle East)<br />Weaknesses <br />Expensive<br />Fleet Diversity<br />High Operating Costs<br />Addressing only to frequent-flyers<br />14<br />Internal Analysis<br />
  15. 15. SWOT (cont.)<br />Opportunities<br />Airport Congestion<br />9/11<br />Comfort & Privacy <br />Time-Efficiency<br />Good relationships both with suppliers and customers<br />Private Flight Image given to customers<br />Destination and Date-Time Flexibility<br />Threats<br />FlexJet, CitationAir, Flight Options, XO Jet<br />Fuel Costs<br />Economic Downfall<br />Ground Transportation (Especially in continental Europe)<br />Customer’s Lease or Purchase options instead of fractional<br />15<br />Internal Analysis<br />
  16. 16. SWOT (cont.)<br />Internal Analysis<br /> Opportunities<br /> Weaknesses<br /> Strengths<br /> Threats<br />16<br />
  17. 17. Value-Chain Analysis<br />Primary Activities<br />In-bound Logistics<br /><ul><li>Receiving the latest technology aircraft from various suppliers (Gulfstream, Dassault, Cessna, Hawker, Boeing)
  18. 18. Receiving Fuel (depends on the airport)</li></ul>Operations<br /><ul><li>Air crew scheduling
  19. 19. On-site service (door-to-door)
  20. 20. Gate Assignments
  21. 21. State-of-the-art operational centers (quality & safety)</li></ul>Out-bound Logistics<br /><ul><li>Return of aircraft </li></ul>Marketing and Sales<br /><ul><li>Website & Telephone arrangements
  22. 22. Adverts (TV-series, movies, sports)
  23. 23. Special Events</li></ul>Service<br /><ul><li>Door-to-Door
  24. 24. Guaranteed Availability
  25. 25. Preparing the flight in 4-hours
  26. 26. Destination Flexibility
  27. 27. On-flight service (catering, entertainment)</li></ul>17<br />Internal Analysis<br />
  28. 28. Value-Chain Analysis (cont..)<br />Support Activities<br />General Administration<br />Fractional Ownership Program<br />Executive Jet Management<br />Marquis Jet Card Program<br />Dedication to Safety<br />Berkshire Hathaway’s Subsidiary (company image, capital usage)<br />Human Resource Management<br />The most experienced pilots<br />Maintenance Personnel<br />Flight Attendants<br />Corporate Personnel<br />Training <br />R&D<br />Exceeding the FAA and the industry standards in maintenance quality and flight safety<br />NextGen (Gulfstream Avionics)<br />Going Green by various CSR activities<br />Procurement<br />Purchasing the latest technology aircraft<br />Frankfurt-Egelsbach Airport acquisition (Financial capital, Operational Advantage)<br />18<br />Internal Analysis<br />
  29. 29. Resource Based View<br />Tangible Assets<br />Aircraft<br />Employees (Pilots, Maintenance, Corporate, Flight Attendants)<br />Maintenance & Operation Centers (Columbus, Frankfurt, Paco de Arcos, London, and Jeddah)<br />Frankfurt-Egelsbach Airport<br />Capital by Berkshire Hathaway<br />Intangible Assets<br />Company Name & Reputation<br />Pilot experience<br />Organizational Fractional Jet Ownership Experience<br />Jet Chartering experience (only by Executive Jet Management)<br />Strategic Alliances with various Fortune 500 (customer loyalty)<br />Alliances with aircraft manufacturers (Dassault, Gulfstream, Boeing, Cessna)<br />Organizational Capabilities<br />Safety<br />Elite Service<br />Fractional Jet Ownership Pioneer (the most experienced company)<br />Comfort & Privacy of Private Aviation<br />Flexibility in Time and Destination selection (multiple sister companies throughout the world)<br />Bargain Power over Suppliers (800+ aircraft)<br />19<br />Internal Analysis<br />
  30. 30. Balanced Scorecard<br />Customer Market<br />High value for customer service<br />The NetJets Experience<br />Financial Performance<br />Primary Goal= Generate a profit<br />Efficiency<br />Satisfy's demands of shareholders<br />Dividends<br />20<br />Long-Term Objectives<br />
  31. 31. Balanced Scorecard (cont..)<br />Internal Business Process<br />Valuable safety culture<br />Fulfill customer needs<br />On time flight<br />Reliability<br />Learning and Growth<br />Proactive about the future<br />Future expansion<br />Proper Training<br />Aircraft Maintenance<br />21<br />Long-Term Objectives<br />
  32. 32. Generic Strategies<br />Strives to gain a competitive advantage<br />Low-Cost Leadership<br />Reduces costs not essential for business<br />Reduces administration costs<br />Product Differentiation<br />Creative loyalty<br />Outstanding Customer Service<br />Telephone Services<br />Ferry Waiver Program<br />Marquis Jet Card<br />Creative flair<br />Defined Focus Market [Primary]<br />Defined Target Market<br />Efficient Advertising<br />22<br />Long-Term Objectives<br />
  33. 33. Grand Strategies<br />Concentrated Growth<br />Fractional Jet Ownership<br />Customer Loyalty<br />Market Development<br />Focused Advertising Campaigns directed towards target market<br />Concentric Diversification<br />Executive Jet Management<br />NetJets Europe, NetJets Middle East<br />NJI Inc.<br />23<br />Long-Term Objectives<br />
  34. 34. BCG Growth-Share Matrix<br />Growth Rate<br />Private Air Travel Growth<br />Fractional Jet Success<br />9/11<br />Airport Congestion<br />Time Efficiency<br />Image<br />Destination Flexibility<br />Comfort & Privacy<br />Safety<br />In-flight Meetings<br /><ul><li>Market Share
  35. 35. NetJets’ Domination
  36. 36. Fractional Jet Pioneer
  37. 37. Organizational Experience
  38. 38. Purchasing a fraction, not the whole
  39. 39. New Entrants follow NetJets’ footsteps
  40. 40. Pilot Experience
  41. 41. Fleet Size & Diversity
  42. 42. Global Service
  43. 43. Capital Advantage
  44. 44. Safety Record
  45. 45. Service Quality</li></ul>24<br />Multi-Business Strategy<br />
  46. 46. BCG Growth-Share Matrix (cont..)<br />Multi-Business Strategy<br />NetJets<br /> Market Share<br /> Growth Rate<br />25<br />
  47. 47. Industry Attractiveness – Business Strength Matrix<br />Allows managers to analyze in a broader way than BCG Growth-Share Matrix<br />Business Strength<br />Pioneer of Fractional Jet Ownership Program [Market Domination]<br />Multiple sister companies throughout the world [Worldwide Diversification]<br />Very large fleet size and various operational centers [High Investment]<br />Very experienced crew of pilots, maintenance, and corporate personnel [Skill Level]<br />Service quality and safety record [Company Image]<br />Industry Attractiveness<br />Popularity of Fractional Jet Ownership Program [Competitive Rivalry & Market Growth]<br />Various New Entrants [Market Diversification]<br />Bombardier, Cessna [Competitor’s Parental Company Strength]<br />Strategy Selection<br />Seek to Dominate<br />Seek attractive new segments to secure strengths<br />Fill Weaknesses<br />Accept moderate near-term profits<br />26<br />Multi-Business Strategy<br />
  48. 48. Industry Attractiveness – Business Strength Matrix<br />Multi-Business Strategy<br />NetJets<br /> Business Strength<br /> Industry Attractiveness<br />27<br />
  49. 49. Lack of a solid Mission Statement<br />Achievable CSR Goals<br />Based on Environmental Issues<br />More Community Relevance rather than Aviation<br />Competition is rising in the fractional jet ownership industry <br />Strong Alliances with both customers and suppliers<br />Very experienced crew <br />Very large diverse fleet<br />Valued Safety Culture<br />28<br />Conclusions<br />
  50. 50. Top-level management should be able to sustain the leading position in the market<br />Vast Capital<br />Organizational Strengths & Capabilities<br />Outstanding customer service<br />Exceeds the industry standards in terms of avionics, safety, and quality<br />Various fractional and chartering options<br />Marquis & Executive Jet<br />Competitors lack on this matter<br />29<br />Conclusions<br />
  51. 51. A solid Mission Statement<br />Reduction in Fleet Diversification might help in operating and maintenance costs<br />Additional jet services such as chartering, air-taxi, or sales of aircraft as a whole would secure NetJets’ position in the whole private aviation industry.<br />Creating subsidiary Headquarters in South East Asia, Australia and Latin America<br />30<br />Recommendations<br />
  52. 52. NetJets. (2007, September 13). NetJets Announces Comprehensive Climate Initiative. Business Wire. Woodbridge, NJ: Author.<br />Flottau, J. (2009, February). NetJets Buys GA Airport Near Frankfurt, Germany. Aviation Daily, 375(21), 1.  Retrieved April 8, 2010, from ABI/INFORM Trade & Industry. (Document ID: 1645326111).<br />NetJets Inc. (2010, March). Fractional Aircraft Ownership Decision – Support Matrix. Woodbridge, NJ: Author.<br />NetJets. (2010). Aircraft Carbon Credits Carbon Offset Investments & Carbon Offsetting for Aircraft. Retrieved July/22, 2010, from offsetting_unavoidable_impacts.asp<br />NetJets. (2010). NetJets Carbon Offset Program Offsetting Aircraft & Jet Emissions. Retrieved July/22, 2010, from climate_initiative.asp<br />Starry, C., & Bernstein, G. (2008). The economics of private business jet travel. Business Economics, 43(4), 36. Retrieved from<br />Swickard, J. E. (2009, January 1). NetJets, FAA Sign NextGenAgreeement. Business & Commercial Aviation, 11. <br />Wilson, B. (2009, November 9). Netjets unveils major environmental effort. Aviation Week Intelligence Network, p.12.<br />31<br />References<br />