Read the “Jet Blue Airways” case below and then answer thefollowing 3 questions.

The case is below:

WHEN JETBLUE AIRWAYS took to the skies, founder David Neelemanset out to pursue a blue ocean strategy. This type of competitivestrategy combines differentiation and cost-leadership activitiesusing value innovation to reconcile the inherent trade-offs inthose two distinct strategic positions. How is this done, and wheredid Neeleman’s ideas come from? At the age of 25, the youngentrepreneur co-founded Morris Air, a charter air service that in1993 was purchased by Southwest Airlines (SWA). Morris Air was alow-fare airline that pioneered many cost-saving practices thatlater became standard in the industry, such as e-ticketing. Afterworking as an airline executive for SWA, Neeleman went on to launchJetBlue in 2000. When Neeleman established JetBlue, his strategywas to provide air travel at even lower costs than SWA. At the sametime, he wanted to offer better service and more amenities than thelegacy carriers such as American, Delta, or United. To sum it up,JetBlue’s Customer Bill of Rights declares its dedication tobringing humanity back to air travel. To implement a blue oceanstrategy, JetBlue focused on lowering operating costs while drivingup perceived customer value in its service offerings. Inparticular, JetBlue copied and improved upon many of SWA’scost-reducing activities. It initially used just one type ofairplane (the Airbus A-320) to lower the costs of aircraftmaintenance and pilot and crew training. It also chose to fly pointto point, directly connecting highly trafficked city pairs. JetBluespecialized in transcontinental flights connecting the East Coast(e.g., from its home base in New York) to the West Coast (e.g., LosAngeles). In contrast, legacy airlines such as American, Delta, orUnited use a hub-and-spoke system. This type of operating modelconnects many different locations via layovers at airport hubs. Thepoint-to-point model focuses on directly connecting fewer but morehighly trafficked city pairs. This model lowers costs by notoffering baggage transfers and schedule coordination with otherairlines. In addition, JetBlue flies longer distances andtransports more passengers per flight than SWA, further drivingdown its costs. Initially, JetBlue enjoyed the lowest cost peravailable seat-mile (an important performance metric in the airlineindustry) in the United States. At the same time, JetBlue alsoenhanced its differential appeal by driving up its perceived value.Its mantra was to combine high-touch— to enhance the customerexperience—and high-tech— to drive down costs. Because roughlyone-third of customers prefer speaking to a live reservation agent,despite a highly functional website for reservations and othertravel-related services, JetBlue decided to use work-from-homeemployees in the United States instead of following industry bestpractice by outsourcing its reservation system. Some of JetBlue’sother value-enhancing features include high-end 100-seat Embraerregional jets with leather seats, free movie and televisionprogramming via DirecTV, XM Satellite Radio, along with friendlyand attentive on-board service. Other amenities include itsrecently added Mint class, which is a luxury version of first-classtravel. The Mint service features small private suites with alie-flat bed up to 6 feet 8 inches long, a high-resolution personalscreen, and free in-flight high-speed Wi-Fi (“Fly-Fi”). It alsofeatures other amenities such as personal check-in and earlyboarding, free bag checking page 184and priority bag retrievalafter flight, and complimentary gourmet food and alcoholicbeverages in flight. For JetBlue, pursuing a blue ocean strategy bycombining a cost-leadership position with a differentiationstrategy resulted in a competitive advantage in its early years.Although the idea of combining different business strategies seemsappealing, it is quite difficult to execute a cost-leadership anddifferentiation position at the same time. This is because costleadership and differentiation are distinct strategic positions.Pursuing them simultaneously results in trade-offs that workagainst each other. For instance, higher perceived customer value(e.g., providing leather seats throughout the entire aircraft andfree Wi-Fi) comes with higher costs. These trade-offs caught upwith JetBlue. Between 2007 and 2015, the airline upstart facedsevere turbulence after several high-profile mishaps (e.g.,passengers stranded on the tarmac for hours after a snowstorm,emergency landings, erratic pilot and crew behaviors). These publicrelations disasters compounded the fundamental difficulty ofresolving the need to limit costs while providing superior customerservice and in-flight amenities. This fundamental conflict was notapparent at first. In its early days, JetBlue could use valueinnovation to drive up perceived customer value even while loweringoperating costs. The approach can work when an airline is small andconnecting a few highly profitable city routes. But as the airlinegrew, its blue ocean strategy started to fray. As a consequence ofsuch factors, JetBlue experienced a sustained competitivedisadvantage for a number of years. The airline removed founderNeeleman as CEO in 2007. He left to found Azul, a Brazilianairline, in 2008. (In 2017 Azul was a publicly listed company onboth the NYSE and the Sao Paulo exchanges with positive results;Azul is currently the third-largest airline in Brazil.) Meanwhile,unable to overcome challenges in its profit and market share, theJetBlue board of directors in 2015 accepted the resignation of thenCEO David Barger and appointed Robin Hayes to replace him. Formerlywith British Airways for almost 20 years, Hayes wasted no time insharpening JetBlue’s strategic profile, doubling down on its blueocean strategy as he attempted to lower operating costs whileincreasing perceived value creation. To drive down costs, hedecided to add more seats to each plane, reducing legroom in coach(now on par with the legacy carriers). Other areas of cost savingsincluded mainly aircraft maintenance and crew scheduling. At thesame time, Hayes also expanded the Mint class offerings to manymore flights, providing a product that customers love and that someother airlines lack. JetBlue is also considering adding a newairplane (Airbus A-321) to its fleet, which scores significantlyhigher in customer satisfaction surveys than the older A-320.Although JetBlue already flies internationally by servingdestinations in Central and South America as well as the Caribbean,Hayes is considering adding selected flights to Europe in thefuture. Flying non-stop to cities in Europe is now possible withnew Airbus A-321. Flying longer, non-stop routes drives down costs.International routes, moreover, tend to be much more profitablethan domestic routes because of less competition, for the timebeing. JetBlue is now the sixth-largest airline in the UnitedStates, right after the “big four” (Delta, SWA, American, andUnited) and Alaska Airlines, which beat out JetBlue in acquiringVirgin America in 2016. Noteworthy is also that the “big four”airlines control more than 80 percent of the U.S. domestic market,so the industry is fairly concentrated.

Answer the following three questions dealing with the case studyabove:

1. Despite its initial success, why was JetBlue unable tosustain a blue ocean strategy?

2. JetBlue’s chief marketing officer, Marty St. George, wasasked by The Wall Street Journal, “What is the biggest marketingchallenge JetBlue faces?” His response: “We are flying in a spacewhere our competitors are moving toward commoditization. We havetaken a position that air travel is not a commodity but a servicesbusiness. We want to stand out, but it’s hard to break through tocustomers with that message.” Given St. George’s statement, whichstrategic position is JetBlue trying to accomplish: differentiator,cost leader, or blue ocean strategy? Explain why.

3. JetBlue CEO Robin Hayes is contemplating adding internationalroutes, connecting the U.S. East Coast to Europe. Would thisadditional international expansion put more pressure on JetBlue’scurrent business strategy? Or would this international expansionrequire a shift in JetBlue’s strategic profile? Why or why not? Andif a strategic repositioning is needed, in which direction shouldJetBlue pivot? Explain.