Assignment: Low Cost Structure

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Assignment: Low Cost Structure

Assignment: Low Cost Structure

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In contrast, stand‐alone kiosks in the lobby would destroy the feeling that the Ritz‐Carlton chain, acquired by Marriott in 1995, creates. To the Ritz‐Carlton chain, CRM means capturing and using information about guests, such as their preference for wines, a hometown newspaper, or a sunny room. Each Ritz‐Carlton employee is expected to promote personalized service by identifying and recording individual guest preferences. To demon- strate how this rule could be implemented, a waiter, after hearing a guest exclaim that she loves tulips, could log the guest’s comments into the Ritz‐Carlton CRM system called “Class.” On her next visit to a Ritz‐Carlton hotel, tulips could be placed in the guest’s room after querying Class to learn more about her as her visit approaches. The CRM is instrumental in implementing the differentiation‐focus strategy of the Ritz‐Carlton chain.8 Its strategy allows the Ritz‐Carlton chain to live up to its unique motto which emphasizes that its staff members are distinguished people with distinguished customers.

Airline JetBlue adopted a differentiation strategy based on low costs coupled with unique customer experience. It might be called a “value‐based strategy.” It is not the lowest cost carrier in the airline industry; at 12.3 cents per passenger seat mile, JetBlue has one of the lowest costs, but Virgin America, Spirit, and Allegiant had even lower per seat mile costs in 2013. But JetBlue manages its operational costs carefully, making decisions that keep its per passenger costs among the lowest in the business, such as a limited number of airplane models in its fleet, gates at less congested airports, paperless cockpit and many other operations, and snacks instead of meals on flights. Jet- Blue has one of the longest stage length averages (the length of the average flight) in the industry, and the longer the flight, the lower the unit costs. Competing network carriers, who are more well known and established, may have different pay scales because they’ve been in the business longer and have a different composition of staff. These carriers also have higher maintenance costs for their older, more diverse fleets. If it could realize its plans for growth while maintaining its low cost structure, JetBlue could move from its cost focus based on serving a limited, but growing, number of market segments to a cost leadership strategy.9

 

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