Portor Five Forces Model

Can Customer-Centric E-Business System Achieve Competitive Advantage for Airline Industry?

Mr Hongwei Jiang [HREF1], School of Aerospace, Mechanical, and Manufacture Engineering [HREF2] , GPO Box 2476V, RMIT University [HREF3], Victoria, 3001, Australia.george.jiang@rmit.edu.au

Abstract

The main objective of this study is to provide significant new insights into the development and implementation of e-business strategies that will lead airlines to a competitive advantage.

The success of application of e-business strategy to airline industry depends on the value added of e-business to airlines. Currently, many airlines are looking at e-business to protect their assets and to secure customer's loyalty, and to be successful in today's competitive environment. In view of the new features of Internet, the core question of this paper is:

Can an e-business system utilising Internet technology to achieve competitive advantages for airlines?

To provide an answer to this question, the researchers conducted an online survey and develop a Customer Centric E-Business (CCEB) System Model, using China ShenZhen Airlines as a case study.

The work in this paper is organised as follows: Introduction; Section 1: Research Goals, Literature Review, Research Methods, Original Contribution, and Research Outcomes; Section 2: Research Flow Chart; Section 3: Findings and Results; and Section 4: Other Considerations. Furthermore, the work presents some pertinent strategies for airlines based on Michael Porter's Five Competitive Force Model.

With respect to the typology suggested by Porter, the results indicate that Porter's model was essential in evaluating the airline industry under both descriptive and elucidative aspects.

Introduction

Many e-commerce principles were pioneered by the airline industry. These include the first business-to-business electronic information exchange and industry-wide electronic marketplace. This environment provided unprecedented opportunity for operations research (OR) modelling. Airlines continue to derive billions of dollars annually from these and derivative models. The availability of reliable, low-cost communications via the Internet is not only providing new modelling challenges within the airline industry, but it is also providing similar opportunities in other industries [1].

Electronic Commerce is defined as "buying and selling of goods and services through electronic technology utilising on line services such as Internet, interactive television, commercial online services and screen telephones so that an organization's objective can be achieved."[2]

In the 21st century digital technologies will push beyond the existing boundaries in all these spheres of our lives [3]. The transition from brick-and-mortar business to "clicks" business is happening in all sectors of the economy [4]. Any size business can have an e-commerce strategy; from a sports club selling T-shirts with their name on, to a medium-sized business selling widgets, through to a traditional retail behemoth like Wal-Mart [5]. Some e-commerce companies sell only over the Internet; others sell both over the Internet and in standard brick-and-mortar distribution channels [6]. Most airline managers realize that a major business transition is taking place. Some believe the various processes by which business strategies are developed will need to change. New value propositions are being promoted by e-commerce, and it is being used to give airlines competitive advantage.

Regardless of which business model airlines adopt, to be successful, airlines need to understand how the Web and e-commerce affects their business [7]. Airlines need to develop an overall strategy covering: strategic management, IT infrastructure, design, content, e-commerce systems, marketing and customer service. Airlines also need to be creative and entrepreneurial. As every entrepreneur knows however, you will only be truly successful if you provide genuine value to your customers and solve a problem for them.

Section 1. Research goals, literature review, methodology, original contribution, and research outcomes

Scope

The scope of this research was to create an e-business solution, which will concentrate on developing a Customer-Centric E-Business (CCEB) System Model for the Chinese Airlines.

Objectives of research

To define the value added process of customer requirements.

To provide information for Civil Aviation Administration of China (CAAC), Airline managers, and Airline employees for decision making about application of an e-business model to Chinese airline industry.

To apply this e-business model for Chinese Airlines and assess its comprehension to business efforts.

To develop an e-business framework that is aimed to create better customer relationships, and thus assist Chinese Airlines to achieve competitive advantages.

Research Question Answered

Can an airline increase market share and customer loyalty by achieve competitive advantage utilising e-business models?

Literature Review

Undoubtedly, one of the faster-growing business sectors is Internet-based commerce, commonly called e-commerce (electronic commerce) or I-commerce (Internet commerce). E-commerce includes both B2C (Business-to-Consumer) and B2B (Business-to-Business). The demand for e-commerce systems will translate into career opportunities and new challengers for systems developers, another name for systems analysts. Advances in technology have greatly expanded the role of e-commerce in business. Some business analysts believe that the Internet is changing consumer buying habits and reshaping the economy. E-commerce is changing traditional business models and creating new ones [8].

To figure out just how fast the Internet economy is growing, the Centre for Research in Electronic Commerce at the University of Texas at Austin conducted a study of over 2000 Internet companies. If found explosive growth from $322 billion in 1998 to $524 billion in 1999, a 68% increase. The fastest growing sector was e-commerce, which skyrocketed by 72% from $99.8 billion to $171.5 billion. According