Instructions:First, read this article: https://www.nytimes.com/2012/
Next, write your memo (up to 1 pages, 12pt font, single, 1.15, or double-spaced) explaining your recommendation for what Delta should have done with respect to the Trainer Oil Refinery. You should apply the lecture material and at least some of the framework material from Competitive Advantage and/or RBV.
Please write your case as if it’s 2012 and the executives have not yet made their final decision.
Your Mission Details: Use your paper to apply the material from these slides from class 7 and then give a decision on whether or not Delta should buy the Trainer Refinery. These are the most important slides from that deck:
1) What Makes a Competitive Advantage? (Ghemawat/Rivkin)
2) Vertical Integration: Where Should We Compete? (Intuition Fodder)
3) Where Should We Compete?
I’m looking for a good, common-sense analyses that applies the framework material in an unbiased way. Then, use the end of your paper to conclude your argument by addressing the following:
4) What do the tests say about Trainer’s fit with Delta? Based on your analysis, do you think Delta should or should not buy Trainer? Why or why not?
Answer preview
Vertical integration is the business strategy where an organization controls its raw materials, manufactures goods, and supplies them to customers. Collis & Montgomery (2008) highlight that vertical integration enables the company to control the transport and raw materials. Vertical integration in the airline can present huge benefits as it will help an airline company like Delta to offset high operation costs, which negatively impacts its profit margin. A company should control fuel sourcing activities to lower the cost it incurs to purchase jet fuel. One of the challenges that the airline is the increasing costs of jet fuel. The international air transport estimates the price of the fuel to soar in the future, costing the company dearly. The cost of the fuels in the industry has been rising gradually, thinning the airline profit margin. The airline company can control fuel refining operations to reduce the cost of fuel in the company. Secondly, the company should compete in selling its services. The company should ensure that it controls the sales and marketing operations.
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