Date post: | 20-Jan-2015 |
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Business |
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Introduction
How LAN’s Three Models Interrelate
The Challenge of Managing Multiple Models
Distinguishing Complements From Substitutes
Trying to operate more than one business model at a time• To expand new market• To make more efficient use of fixed asset and resources• To Develop new income
VS
Direct-Sell
2 Business model- DVD by mail- Streaming video services
Flourishes by running 3 distinctly different operation at the same time
Latin American Network Airlines
Latin American Network Airlines
How LAN’s Three Models Interrelate
Full service international passenger-airline business model
Cargo-Business Model
No-frills passenger model
How LAN’s Three Models Interrelate
Boeing 787 Dreamliner
• Full service international passenger-airline
Two classes• Coach Class
Hot meals & beveragesMultilingual personal-entertainment
• Business ClassFully flat beds
How LAN’s Three Models Interrelate
• Cargo business model
Premium Service• Transports high-value products
Salmon from Chile Asparagus from Peru Computer, Mobile phones from U.S.
• Revenue 2011 Q2: 31% of total revenue
How LAN’s Three Models Interrelate
Set out in 2007Lower-cost Lower-overheadNo KitchenNo meal & beverageE-Ticket
• No-frills passenger model
Mutually Reinforcing Advantages
• Maximal use of physical assets Increased utilization of as costly as asset as aircraft Change from parking to delivery time
• Reduction of the break-even load factor(BELF) Combining cargo and passenger operation
• Diversification of revenues and profits Minimize risks
• Reduce threat of entry by other airlines Increased the number of routes
• One-stop shop for cargo in Latin America
How Two Business Models Complement Each Others
The Challenge of Managing Multiple Models
History of LAN :
• 1994 Chilean privatized LAN -> Cueto Family
• Begun Cargo business with Fast air since 1970’s
• Combine Cargo and Passenger service
Profit potential of LAN international’s route• Wide body air craft• Reputation and reliability
“Why doesn’t every airline do what LAN does ?”
The Challenge of Managing Multiple Models
• Additional complexity• Complex logistic system that coordinate with cargo and
passengers.• Additional criterion to passenger fares.• Gives priority to carrying passengers.
• Broader organizational skills• Require different sale, marketing, technical skills.
• Extensively training its flight and maintenance crew
The Challenge of Managing Multiple Models
• Greater flexibility employee• Pilot fly even on two hours notice, more fly.
• Instituting a performance-related pay and bonus.
• Additional investments• Invest in warehouse for each country.• Regulatory constraint prevent non-national company.
• Create series of separate company : LAN Peru, Ecuador, Colombia, Argentina.
• Alliance in Mexico and several country.
Distinguishing Complements From Substitutes
Distinguishing Complements From Substitutes
Advantages using more than one business model
• Decreasing the break-even load factor• Combining cargo and passengers• Flying to more places
• Better services to passengers and increase customers• Using grow revenue provided by cargo operation
• Increase barriers to entry• Flying to more places make other airline harder to enter and grow
Advantages using more than one business model
• Increases barriers to imitation• Optimizing the use of aircraft and network of route
• Increases switching costs• Leading passenger airline connecting from Latin America • One-stop shop for cargo in the region
Distinguishing Complements From Substitutes
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