People Express Airlines Case Study
Abstract:
In the well documented case of the early low-fare and economy carrier
People Express Airlines (PE) the common explanation for the rapid rise and decline is excessive corporate growth. Based on a dynamic resource based, this case finds that it is not only the rate of growth embodied in the resource buildup processes—which determines the outcome of a corporate growth strategy.
“Despite the rapidly increasing financial problem by the spring of
1986, PE continued to win praise for its impact on the airlines industry and the value it offered to customers. But PE was fighting for market share all over the country. In Denver, United and
Continental were destroying Frontier. Other airlines continued
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People Express could not be saved if they stick with its old strategy.
Their approach of growing too fast and acquiring other airlines certainly didn't work. Founder and CEO of PE’s precepts behind the growth were to be the best provider of air transportation and commitment to development to their people.
To implement all the changes, PE raised price as it did before but this time it did not work like it did before. So they have to cut back the price immediately. Most of the airlines that tried to do so have given up either by choice or by intense financial pressure brought on directly by that subsidiary. But for the long run, increasing price would not be an only solution. While Burr may be theoretically correct as to how pricing should be done on cost based, in most cases the actual pricing takes place on the basis of competition and market strength that is based on Market.
“The competitive business strategy was to provide outstanding service by highly motivated people and to take advantage of deregulation by offering unrestricted, greatly reduced prices, and convenient flight schedule”, (Pg2, Holland)
2. How did its corporate goals and strategic direction both help and hinder the growth and management of the company?
People Express was distinct from other airlines for several reasons.
It was created and led by the visionary and dynamic personality Don
Burr, who promoted a fundamental management philosophy. “The
overarching
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