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The Sabre by dffhrtcv3


									    The Success Story of
American Airlines
Market Control, Technological Innovation,
      and Competitive Advantage

   David Resnick, Aayush Munjal,
    Scott Whitney, Daniel Minot
History of Firm and Industry
 Commercial Aviation
   Creation of American Airlines
      American Airways develops into American Airlines
      Consolidation of four small air delivery carriers
      Cyrus Rowlett Smith became president
   The Big Four
      Transcontinental & Western Air (TWA)
      United Aircraft & Transport
      Eastern Air Lines
      American Airlines
 Market
    Regulation vs. Deregulation
    Asymmetric Information
    Moral Hazard
 Organization
    Centralization
    Employee relations
    “Hub and Spoke” system
 Strategy
    Competitive Advantages
    ‘First Mover’ Strategy
    Barriers to Entry
    Market - Deregulation
 Government Regulation
   Civil Aeronautics Board (CAB)
      Restriction of competition
      Limited market growth
 Deregulation Movement
   Market Competition
      Higher productivity
      Market efficiency
      Lower prices
      Intense rivalry
      Growth and expansion
 Market - B-Scale Workers
The Growth Plan
  Two-Tier Wage System
    Lower wages
    Reduced benefits
  Seniority System
    Moral Hazard
        Shirking and Incentives
        Veteran vs. B-scale employees
      Market -The Sabre
Computer Reservation System
  Technological innovation
  Strategic Manipulation
    Self-interest seeking with guile
    Bounded Rationality
  Market Failures
    Asymmetric Information (Market)
    Adverse Selection (Consumer)
Organization- Centralized Firm
  Centralization
    Top Management
       Decision rights
    Employees
       Limited decision rights
       Limited incentives
    Advantage: Better Coordination
    Disadvantage: Slower decision-making
  Information Restriction
    Need-to-know Basis
Organization- Internal Politics
Dominion over Flight Schedules
  Robert L. Crandall vs. Senior V.P.
   of Finance Robert Norris
    President Casey sided with Crandall
    Norris left American
  Crandall vs. Donald Lloyd-Jones
    The Pareto Optimal Solution
        Crandall named President
        President Casey became Chairman
        Lloyd-Jones remained, wasn’t harmed
  Organization - Efficiency
 Two-Tier wage system
   B-Scale employees
   Implementation problems
      Influence of unions on management
   Benefits to the Firm
      Increased revenue
      Expanded fleet
 Hub and Spoke system
   Served more customers
   Optimization of efficiency
    Strategy - The Sabre
Objective of Sabre
  organized reservations, flights, demand
Competitive Advantage
  ‘First Mover’ strategy
  Differentiation Advantage
    Customer Convenience
    Service, quantity, reliability
  Barrier to Entry
Strategy - Yield Management
‘Super Savers’
  Lower prices than charters
  Accommodated various customers
  Eliminated charter competition
Yield Management
  Pricing Advantage
    Ability to match/beat prices of competitors
  Barrier to Entry
    Prevented emergence of ‘upstart airlines’
 Strategy - Frequent Flyer
Frequent-Flyer Program
  Customer bonus miles for every flight
Technological Innovations
  Sabre coordinated frequent-flyer program
Competitive Advantage
  ‘First Mover’ Advantage
    Competitive advantage of time
    ‘Jump start’ on the industry
 Market
    Uniform pay structure
       Combat market issues of moral hazard and shirking
 Organization
    Decentralization
       Promote further innovation
       Speedier decision-making
       Better adaptation to ‘changing circumstances of time and place’
 Strategy
    American Airlines should implement several of Southwest’s
     innovative techniques to increase profits.

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