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Westjet Case Study

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There was the budget conscious consumers and the existing players weren’t facilitating this segment of the market. There was an opportunity there to facilitate them. There was low switching cost in the industry and they were very focused on price. Substitutes consisted of car buses and train at lower prices and if the price wasn’t low enough then they use won’t travel at all. This segment wasn’t being catered towards at all. Buyer power: very high as of low switching costs and price sensitivity. Suppliers: cost leadership west jet are coming over the power of the main airports by fling out of cheaper smaller less mainstream airports, which fits in with its cost leadership strategy. Barriers to entry: high set up costs as the hub and spoke system incurred very high costs but they entered in a different way so they were over to overcome the hurdles so it mad perfect sense. Geographic focus: did it make sense? Yes smaller area, less risk in keeping themselves in just the western part of the area.

Functional level strategy: does it make sense with business level strategy?

Efficiency: does it make sense, definitely always trying t reduce costs.

Competitive Level strategy: Looking at competitors and environment they are in market penetration: does it make sense?
Engaging in greater efficiency maximize everything they do where they are already doing it Spreading the costs over even more passengers, generating in further economies of scale which in turns generate barriers of entry to competitors. the west area of Canada is projected to grow from 30-40%. they have first mover advantage and the south west model can be imitated as they imitated them. Already a competitor could set up in the western part of Canada. Need to tap into the demand that is there by penetrating the market. Its all very logical price leadership: does it make sense?

There is no one else doing it, air cananda and canada air’s cost structure was too high. They tried to owed some of their prices for a period of time with promos etc but had to stop. Every single day west jet could compete on price whereas the others couldn’t. When the large players tried to reduces their prices west jet could also lower theirs as well ‘tit for tat’ These all fit in with business level strategy and functional level strategies

Recommendation: we were told to not expand to the east

Reasons to expand:
Pretty much the same size as the latent demand as the west side of the company. Growth potential is higher in the east
Restriction on air canada that they can’t set up one for a whole year after one is set up so gives the low fare airline a head starting in the east. Now west jet have 3 years experience with the model and the way they do business, could start up quicker than before.

Reasons to not expand to the east:
Still plenty of growth opportunity to grow in the west
Have to have more aircrafts increase their cost structure
looking to penetrate the market even further in the west so still some costs there 8 million $ to buy one plane their name west jet could be an issue , no not so much because it depends on what the brand actually portrays and means to people Long haul would have to be introduced as from going west to east, you would have to provide certain amenities and maybe different aircrafts ……… there are ways around this issue could do stop offs and get on another plane…..stop off incurs costs airport fees …..costs entailed Management are very conservative in their planning , their plans over the next few years is to not expand past thunder bar….have a very gradual approach only been in business for 3 years…. don’t want to be over stretched … too much too soon.

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