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Airline Industry Value Chain Analysis Essay

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Introduction The objective for this paper is to describe how and why the use of a chosen strategic approach would impact the airline industry competitive advantage within the Caribbean. The aim is to analyze these two strategic approaches, namely: the value chain and three (3) cost drivers demonstrating their purpose and impact on the airline industry in the Caribbean. A background will be given, followed by definitions for value chain and cost drivers. A brief summary will be given highlighting and contrasting the industry and the uses of these approaches to conclude this assignment. Background In the Caribbean air transport network offers linkages with major cities and markets through commercial air transport services around the world. …show more content…

The region’s domiciled air transport sector is made up of a number of small commuter and jet airlines that are all very weak financially and continue to lose millions of dollars year after year, while most Caribbean countries experience mounting difficulty in securing the required funding for their many development needs and the attendant scourges of poverty, social turbulence and general inefficiency are ever present (Caribbean Tourism Organization …show more content…

These costs must be managed in relation to the maximum value that can be derived from each activity and what its customers are willing to pay for that value. Value chain management is an essential tool that helps managers break down each cost center or activity, whether primary or support activities and how these impacts the value chain. Global competition in the airline industry has forced Caribbean operators to closely evaluate their individual value chains and their respective cost drivers. Three cost drivers relevant to the airline industry in the region were examined for their impact. This includes economies of scale, percentage of capacity utilization and cost of input materials. Cooperation with suppliers is a key component to minimizing the impact of cost drivers. The size of an airlines’ fleet and its operating capacity determines its ability to achieve economies of

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