The document discusses strategic groups within industries and how airlines can be categorized into different strategic groups. It identifies three main strategic groups for airlines: network carriers, low-cost carriers, and regional carriers. Network carriers closely follow their group's strategy, while regional carriers loosely follow. The document examines how airlines innovate and imitate the strategies of other groups to change their positioning within and across groups over time.

1. Strategic group: a set of companies within an industry pursing strategies that are similar to each other Core firms: follows the group strategy closely and is tightly aligned Secondary firms: loosely follows the group strategy Solitary firms: cannot easily be placed in a particular strategic group

2. Firms can change their position in the group by strategic innovation

3. Firms can change their position in the group by strategic innovation

4. … or firms can change their position in the group by strategic imitation

5. … or firms can change their position in the group by strategic imitation

6. Firms can also imitate other groups

9. Secondary firms may then resemble firms from other strategic groups

11. Core airlines in the strategic group innovate more activities than secondary airlines, but to a smaller extent than secondary airlines.

12. The more pure the strategy the less imitation within the group

13. Unable to prove that airlines with less pure strategies tend to imitate more pure models within their own group

14. A pure strategy, and high rivalry within and among strategic groups, leads to greater imitation of other strategic groups

15. The purest group The least pure group

16. Innovation Depth 1. FSC 2. Regional 3. LCC Innovation Spread 1. FSC, Regional 2. LCC Average Innovation 1. FSC, Regional 2. LCC

17. Imitation Depth 1. LCC 2. Regional 3. FSC Imitation Spread 1. Regional 2. FSC 3. LCC Average imitation 1. Regional 2. FSC 3. LCC

18. Sent a questionnaire to the CEO of every scheduled passenger airline earning more than $5 million in revenue Response rate Responded 21% 10% 19% 38% 42 10 5 27 Total Regional LCC FSC

19. Competition 4% 12% Charter 4% 16% Regional 31% 35% LCC 25% 0% Other 96% 4% FSC 5 of 5 4 of 5 FSC 11% 11% Charter 70% 0% Regional 44% 22% LCC 0% 100% Other 44% 22% FSC 5 of 5 4 of 5 Regional 40% 0% Charter 0% 0% Regional 80% 20% LCC 25% 0% Other 60% 20% FSC 5 of 5 4 of 5 LCC

20. Competition 4% 12% Charter 4% 16% Regional 31% 35% LCC 25% 0% Other 96% 4% FSC 5 of 5 4 of 5 FSC 11% 11% Charter 70% 0% Regional 44% 22% LCC 0% 100% Other 44% 22% FSC 5 of 5 4 of 5 Regional 40% 0% Charter 0% 0% Regional 80% 20% LCC 25% 0% Other 60% 20% FSC 5 of 5 4 of 5 LCC

21. Competition 4% 12% Charter 4% 16% Regional 31% 35% LCC 25% 0% Other 96% 4% FSC 5 of 5 4 of 5 FSC 11% 11% Charter 70% 0% Regional 44% 22% LCC 0% 100% Other 44% 22% FSC 5 of 5 4 of 5 Regional 40% 0% Charter 0% 0% Regional 80% 20% LCC 25% 0% Other 60% 20% FSC 5 of 5 4 of 5 LCC

22. Customer segments 12% 42% 27% 15% 2 21% 0% Charter 15% 38% Leisure 8% 58% SMEs 0% 81% Corp. 3 1 FSC 44% 60% 20% 0% 2 56% 0% Charter 0% 40% Leisure 0% 80% SMEs 0% 100% Corp. 3 1 Regional 20% 40% 20% 40% 2 40% 0% Charter 0% 60% Leisure 20% 60% SMEs 40% 0% Corp. 3 1 LCC

23. Customer segments 12% 42% 27% 15% 2 21% 0% Charter 15% 38% Leisure 8% 58% SMEs 0% 81% Corp. 3 1 FSC 44% 60% 20% 0% 2 56% 0% Charter 0% 40% Leisure 0% 80% SMEs 0% 100% Corp. 3 1 Regional 20% 40% 20% 40% 2 40% 0% Charter 0% 60% Leisure 20% 60% SMEs 40% 0% Corp. 3 1 LCC

24. Customer segments 12% 42% 27% 15% 2 21% 0% Charter 15% 38% Leisure 8% 58% SMEs 0% 81% Corp. 3 1 FSC 44% 60% 20% 0% 2 56% 0% Charter 0% 40% Leisure 0% 80% SMEs 0% 100% Corp. 3 1 Regional 20% 40% 20% 40% 2 40% 0% Charter 0% 60% Leisure 20% 60% SMEs 40% 0% Corp. 3 1 LCC

25. Value creation A value proposition can be described as the tangible benefits customers obtain from using your product; it should answer the question, “Why should I buy this product?” How would you describe your airline’s value proposition? 13% 20% 30% 33% 60% Frequency Safety Punctual/ reliable Network Fares Service/ product Keywords

26. Value creation A value proposition can be described as the tangible benefits customers obtain from using your product; it should answer the question, “Why should I buy this product?” How would you describe your airline’s value proposition? What are airlines saying themselves ? 13% 20% 30% 33% 60% Frequency Safety Punctual/ reliable Network Fares Service/ product Keywords

27. Value creation A value proposition can be described as the tangible benefits customers obtain from using your product; it should answer the question, “Why should I buy this product?” How would you describe your airline’s value proposition? Safety, quality, reliability Focused on providing quality product. Meals at mealtime, good customer service, reliable product Premium full service product and service offerings at a competitive price Adequate schedule, high quality of service, good value for money ratio, established brand The shortest link between regions and a link between regions and the world Biggest network and frequencies… participation in world’s biggest airline alliance, comprehensive FFP Punctuality, reliability, e-services, FFP, connectivity … resonable, economical fares and high level of service (free wine and microbrews, Starbucks and Wallstreet Journals in waiting area) 13% 20% 30% 33% 60% Frequency Safety Punctual/ reliable Network Fares Service/ product Keywords

28. Value creation A value proposition can be described as the tangible benefits customers obtain from using your product; it should answer the question, “Why should I buy this product?” How would you describe your airline’s value proposition? Safety, quality, reliability Focused on providing quality product. Meals at mealtime, good customer service, reliable product Premium full service product and service offerings at a competitive price Adequate schedule, high quality of service, good value for money ratio, established brand The shortest link between regions and a link between regions and the world Biggest network and frequencies… participation in world’s biggest airline alliance, comprehensive FFP Punctuality, reliability, e-services, FFP, connectivity … resonable, economical fares and high level of service (free wine and microbrews, Starbucks and Wallstreet Journals in waiting area) INDUSTRY ECHO!!!! 13% 20% 30% 33% 60% Frequency Safety Punctual/ reliable Network Fares Service/ product Keywords

29. Value creation A value proposition can be described as the tangible benefits customers obtain from using your product; it should answer the question, “Why should I buy this product?” How would you describe your airline’s value proposition? Safety, quality, reliability Focused on providing quality product. Meals at mealtime, good customer service, reliable product Premium full service product and service offerings at a competitive price Adequate schedule, high quality of service, good value for money ratio, established brand The shortest link between regions and a link between regions and the world Biggest network and frequencies… participation in world’s biggest airline alliance, comprehensive FFP Punctuality, reliability, e-services, FFP, connectivity … resonable, economical fares and high level of service (free wine and microbrews, Starbucks and Wallstreet Journals in waiting area) Because of market conditions normal competitive mechanisms are not entirely relevant INDUSTRY ECHO!!!! At least somebody sees the problem 13% 20% 30% 33% 60% Frequency Safety Punctual/ reliable Network Fares Service/ product Keywords

30. Value creation A value proposition can be described as the tangible benefits customers obtain from using your product; it should answer the question, “Why should I buy this product?” How would you describe your airline’s value proposition? “… dedication to the highest quality customer service, delivered with a sense of warmth, friendliness, individual pride, and company spirit.” Safety, quality, reliability Focused on providing quality product. Meals at mealtime, good customer service, reliable product Premium full service product and service offerings at a competitive price Adequate schedule, high quality of service, good value for money ratio, established brand The shortest link between regions and a link between regions and the world Biggest network and frequencies… participation in world’s biggest airline alliance, comprehensive FFP Punctuality, reliability, e-services, FFP, connectivity … resonable, economical fares and high level of service (free wine and microbrews, Starbucks and Wallstreet Journals in waiting area) Because of market conditions normal competitive mechanisms are not entirely relevant INDUSTRY ECHO!!!! At least somebody sees the problem Only one airline attempts to create value via an inimitable channel 13% 20% 30% 33% 60% Frequency Safety Punctual/ reliable Network Fares Service/ product Keywords

32. Why are airlines changing strategically 26% 30% 26% Process imp. 32% 28% 4% Tech. 8% 24% 20% Econ. 8% 44% 12% Politics 24% 16% 28% 36% 4/5 20% 32% Growth 12% 60% Comp. 32% 28% New market 28% 24% Market 3/5 5/5 FSC 20% 20% 20% Process imp. 30% 20% 0% Tech. 30% 30% 30% Econ. 20% 20% 0% Politics 50% 30% 40% 20% 4/5 0% 40% Growth 10% 40% Comp. 30% 30% New market 30% 30% Market 3/5 5/5 Regional 75% 0% 0% Process imp. 25% 0% 0% Tech. 0% 0% 0% Econ. 50% 0% 25% Politics 25% 25% 25% 50% 4/5 25% 25% Growth 0% 50% Comp. 25% 0% New market 25% 0% Market 3/5 5/5 LCC

33. Why are airlines changing strategically 26% 30% 26% Process imp. 32% 28% 4% Tech. 8% 24% 20% Econ. 8% 44% 12% Politics 24% 16% 28% 36% 4/5 20% 32% Growth 12% 60% Comp. 32% 28% New market 28% 24% Market 3/5 5/5 FSC 20% 20% 20% Process imp. 30% 20% 0% Tech. 30% 30% 30% Econ. 20% 20% 0% Politics 50% 30% 40% 20% 4/5 0% 40% Growth 10% 40% Comp. 30% 30% New market 30% 30% Market 3/5 5/5 Regional 75% 0% 0% Process imp. 25% 0% 0% Tech. 0% 0% 0% Econ. 50% 0% 25% Politics 25% 25% 25% 50% 4/5 25% 25% Growth 0% 50% Comp. 25% 0% New market 25% 0% Market 3/5 5/5 LCC

34. Why are airlines changing strategically 26% 30% 26% Process imp. 32% 28% 4% Tech. 8% 24% 20% Econ. 8% 44% 12% Politics 24% 16% 28% 36% 4/5 20% 32% Growth 12% 60% Comp. 32% 28% New market 28% 24% Market 3/5 5/5 FSC 20% 20% 20% Process imp. 30% 20% 0% Tech. 30% 30% 30% Econ. 20% 20% 0% Politics 50% 30% 40% 20% 4/5 0% 40% Growth 10% 40% Comp. 30% 30% New market 30% 30% Market 3/5 5/5 Regional 75% 0% 0% Process imp. 25% 0% 0% Tech. 0% 0% 0% Econ. 50% 0% 25% Politics 25% 25% 25% 50% 4/5 25% 25% Growth 0% 50% Comp. 25% 0% New market 25% 0% Market 3/5 5/5 LCC

35. Who is changing airlines strategically 38% 0% 0% Other 17% 0% 0% Academia 50% 19% 15% Comp. 31% 19% 8% Consult. 15% 31% 46% Cust. 16% 38% 15% 38% 4/5 32% 4% Partner 27% 15% Emp. 12% 69% CEO 23% 27% BoD 3/5 5/5 FSC 0% 0% 0% Other 11% 22% 0% Academia 30% 40% 10% Comp. 20% 10% 0% Consult. 11% 44% 33% Cust. 10% 40% 50% 50% 4/5 40% 0% Partner 40% 0% Emp. 10% 40% CEO 30% 20% BoD 3/5 5/5 Regional 0% 0% 0% Other 25% 0% 0% Academia 25% 0% 25% Comp. 0% 0% 25% Consult. 0% 50% 25% Cust. 0% 25% 75% 33% 4/5 75% 0% Partner 50% 0% Emp. 25% 0% CEO 33% 33% BoD 3/5 5/5 LCC

36. Who is changing airlines strategically 38% 0% 0% Other 17% 0% 0% Academia 50% 19% 15% Comp. 31% 19% 8% Consult. 15% 31% 46% Cust. 16% 38% 15% 38% 4/5 32% 4% Partner 27% 15% Emp. 12% 69% CEO 23% 27% BoD 3/5 5/5 FSC 0% 0% 0% Other 11% 22% 0% Academia 30% 40% 10% Comp. 20% 10% 0% Consult. 11% 44% 33% Cust. 10% 40% 50% 50% 4/5 40% 0% Partner 40% 0% Emp. 10% 40% CEO 30% 20% BoD 3/5 5/5 Regional 0% 0% 0% Other 25% 0% 0% Academia 25% 0% 25% Comp. 0% 0% 25% Consult. 0% 50% 25% Cust. 0% 25% 75% 33% 4/5 75% 0% Partner 50% 0% Emp. 25% 0% CEO 33% 33% BoD 3/5 5/5 LCC

37. Who is changing airlines strategically 38% 0% 0% Other 17% 0% 0% Academia 50% 19% 15% Comp. 31% 19% 8% Consult. 15% 31% 46% Cust. 16% 38% 15% 38% 4/5 32% 4% Partner 27% 15% Emp. 12% 69% CEO 23% 27% BoD 3/5 5/5 FSC 0% 0% 0% Other 11% 22% 0% Academia 30% 40% 10% Comp. 20% 10% 0% Consult. 11% 44% 33% Cust. 10% 40% 50% 50% 4/5 40% 0% Partner 40% 0% Emp. 10% 40% CEO 30% 20% BoD 3/5 5/5 Regional 0% 0% 0% Other 25% 0% 0% Academia 25% 0% 25% Comp. 0% 0% 25% Consult. 0% 50% 25% Cust. 0% 25% 75% 33% 4/5 75% 0% Partner 50% 0% Emp. 25% 0% CEO 33% 33% BoD 3/5 5/5 LCC

38. Impact of strategic imitation Network Low-cost Regional Charter EU US 1970s 1980s 1990s 2000s 2010s