Which drivers of cost advantage (Figure 7.7) do lowcost carriers such as Southwest Airlines and Ryanair exploit in order to undercut legacy carriers such as United Airlines and British Airways?

. Technical input-output relationships ECONOMIES OF SCALE . Indivisibilityes . Specialization ECONOMIES OF LEARNING * Increased individual skills . Improved organizational routines PRODUCTION TECHNIQUES . Process innovation . Re-engineering of business processes PRODUCT DESIGN . Standardization of designs and components . Design for manufacture . Location advantages INPUT COSTS . Ownership of low-cost inputs . Non-union labor . Bargaining power CAPACITY UTILIZATION . Ratio of fixed to variable costs . Fast and flexible capacity adjustment . Organizational slack/X-inefficiency RESIDUAL EFFICIENCY * Motivation and organizational culture . Managerial effectiveness