How do discount carriers like Southwest stimulate competition and lower airfares?

  

Model 5.docx2-3 pages
Please read the two passages on Barry Diller/IAC
and Southwest merger.
A road to diversification: Barry Diller/Senior
Executive/IAC
In an interview with Leslie Stahl, Barry Diller, once
Paramount CEO, reflected upon seeing this primitive
interactivity of computers, televisions, and phones and how
it seized his curiosity. Diller saw a future where most
shopping would be done by interacting with a screen. Even
his wife indicated they were intrigued by this entire new
world. She said Barry Diller can see something way before
you can see anything. In the interview, Diller concurs that
most of the public considered him to be losing his mind with
the purchase of QVC and trading the glamour of Hollywood
away. In Westchester, PA, Barry Diller made his first fortune
as his own boss. But, in a string of setbacks, he involved
himself in a bidding war to buy Paramount only to make a
mistake by not making the last bid. Learning from his
mistakes and making other deals, he ended up losing QVC.
Despite this, his gut feeling told him that interactive
commerce would catch on so he purchased QVCs competitor
HSN. In the interview, Diller confirms that the publics
perception of his company is correct as a hodge podge but
its an interactive conglomerate operating in financial
services and flirt services.
Diller says that the development of his company has been a
journey and they are figuring it out along the way. He says he
knows now that many of his business related to one another
and has united all his brands under one new corporate
headquarters. He wanted to give his company, IAC, the same
cache as other big internet companies. In comparison to
Google, Barry Diller, says that IAC is an endless
multiproduct company and his desire would be like Proctor
and Gamble one day. With a personal fortune of well over a
billion, Dillers wife says he is driven by the vision. Shown in
business meetings, Diller makes decisions quickly and his
employees say that his ability to grasp new and difficult
concepts is uncanny. With 20,000 employees, Diller runs
intense meetings and he is the ultimate decider who controls
the votes in the company.
Also check out:
http://www.bloomberg.com/video/93257379-diller-s-iac-topinternet-stock-over-google-baidu.html/
http://www.cbsnews.com/news/barry-dillers-third-act/
1.Describe Dillers corporate-level strategy.
2.What do you think was Dillers reason to diversify?
3.Is Dillers approach value-creating diversification? Why or Why not?
4.Explain how IAC businesses and brands are related? Related
diversification?
The Power of a Merger: Southwest
A typical price conscious consumer is the target of the
merger between Southwest and AirTran. AirTran executives
assert that with the merger, the potential exists to spread
discount airfares farther is even greater. Discount carriers
are known for stimulating competition and helping to lower
airfares. Consolidation of major carriers such as United and
Continental airlines brings the number of major carriers in
the U.S. to only four.
In general the average consumer is finding fewer seats and
higher prices and feels the airlines have worked hard to make
flying not fun. Despite not pleasing to the customer, the
industry is making money again with critical profit centers
known as add-on fees. With $25 for a checked bag, $35 for
phone reservations, and up to $300 to change a reservation,
major airlines have made $2.4 billion in profits with $1.3
billion coming from add-on fees with $745 million from
checked bags alone.
Southwest charges no fees for changing flights or for the first
two checked bags and the merger with AirTran may help to
lower ticked prices in the industry. Individuals say that
wherever Southwest goes, they will pressure their
competitors to refrain from excessive fees in the long haul.
Also check out http://www.southwest.com
http://abcnews.go.com/GMA/video/southwest-ceo-garykelly-discusses-airtran-merger-11743399
1.What would make the arrangement between Southwest and AirTran a
merger and not an acquisition?
2.What were the reasons that Southwest and AirTran had for merging?
What approach(es) did they use?
3.What would cause the Southwest/AirTran merger not be successful?
4.What strategies would you recommend to Southwest should it need to
restructure?
AFTER READING THE PASSAGES:
Please answer questions for BARRY DILLER/IAC and
SOUTHWEST MERGER.

Introduction:

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Barry Diller, an American businessman, founded IAC, an interactive conglomerate that operates in financial services and flirt services. In an interview with Leslie Stahl, Diller reflects upon his journey as a CEO, starting from a string of setbacks in the bidding war to buy Paramount. Diller’s gut feeling led him to the purchase of QVC’s competitor HSN and the diversification of his company. Despite the public’s perception of his company as a hodge-podge, Diller aimed to create a new corporate headquarters and unite all his brands under one roof. With a personal fortune of well over a billion, Diller’s approach to business involves quick decisions with the ultimate control of votes in the company.

Description:

The first passage explores Barry Diller’s corporate-level strategy and the reasons behind his diversification. The interview with Leslie Stahl sheds light on Diller’s journey as a CEO, starting from making a mistake in the bidding war to buy Paramount to the purchase of HSN. The interview also highlights Diller’s vision of creating an interactive conglomerate operating in financial services and flirt services. Despite the public’s perception of his company as a hodge-podge, Diller aimed to create a new corporate headquarters and unite all his brands under one roof. The passage features Diller’s approach to business, which involves quick decision-making, the ultimate control of votes in the company, and the ability to grasp new and difficult concepts.

The second passage focuses on the potential of a merger between Southwest and AirTran. The merger aimed to spread discount airfares even farther and promote competition in the airlines industry. With consolidation of major carriers, the average consumer is finding fewer seats and higher prices. The passage showcases the power of a merger in promoting competition and bringing down airfares.

Objectives:

1. To understand the corporate-level strategy of Barry Diller/IAC.
2. To comprehend the reasoning behind Diller’s diversification.
3. To evaluate whether Diller’s approach to diversification is value-creating or not.
4. To identify the relationship between IAC businesses and brands and determine if it is related diversification.
5. To analyze the benefits of the merger between Southwest and AirTran.

Learning Outcomes:

1. Students will be able to describe Diller’s corporate-level strategy.
2. Students will be able to explain why Diller diversified his company.
3. Students will be able to evaluate whether Diller’s approach to diversification is value-creating or not.
4. Students will be able to identify the relationship between IAC businesses and brands and determine if it is related diversification.
5. Students will be able to analyze the benefits of the merger between Southwest and AirTran.

Heading 1: Barry Diller/IAC

1. Describe Diller’s corporate-level strategy.
2. What do you think was Diller’s reason to diversify?
3. Is Diller’s approach value-creating diversification? Why or why not?
4. Explain how IAC businesses and brands are related? Related diversification?

Heading 2: Southwest

5. Analyze the benefits of the merger between Southwest and AirTran.

Solution 1:
Barry Diller’s corporate-level strategy is focused on diversification, entering new industries, and investing in new ideas that he believes will be successful. Diller’s strategy is to build a portfolio of companies that are related to each other, yet allow him to enter into new markets. He believes that interactive commerce is the future, and he has invested in a variety of companies that will help him reach this goal, including HSN, Vimeo, Expedia, and Match Group.

Solution 2:
The merger between Southwest and AirTran is a power move to increase competition and lower airfares. This merger is expected to spread discount airfares even further, making it attractive to budget-conscious consumers. Southwest has a reputation for offering affordable and reliable air travel, which has helped it become one of the most successful airlines in the US. By merging with AirTran, Southwest has expanded its reach and is now able to serve more destinations across the country. The consolidation of major airlines has made it difficult for consumers to find affordable air travel, but Southwest’s merger with AirTran is expected to bring much-needed competition to the industry.

Suggested Resources/Books:
1. The Master Switch: The Rise and Fall of Information Empires by Tim Wu
2. The Icarus Syndrome: A History of American Hubris by Peter Beinart
3. Competing on Analytics: The New Science of Winning by Thomas H. Davenport and Jeanne G. Harris
4. Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company by Andrew S. Grove
5. Corporate Strategy: Tools for Analysis and Decision-Making

Similar questions:
1. What is the importance of diversification in business?
2. What are some successful examples of corporate-level strategies?
3. How does a company decide which businesses to enter into?
4. What are some advantages and disadvantages of mergers and acquisitions?
5. How do companies assess risk when diversifying their portfolio?Model 5.docx2-3 pages
Please read the two passages on Barry Diller/IAC
and Southwest merger.
A road to diversification: Barry Diller/Senior
Executive/IAC
In an interview with Leslie Stahl, Barry Diller, once
Paramount CEO, reflected upon seeing this primitive
interactivity of computers, televisions, and phones and how
it seized his curiosity. Diller saw a future where most
shopping would be done by interacting with a screen. Even
his wife indicated they were intrigued by this entire new
world. She said Barry Diller can see something way before
you can see anything. In the interview, Diller concurs that
most of the public considered him to be losing his mind with
the purchase of QVC and trading the glamour of Hollywood
away. In Westchester, PA, Barry Diller made his first fortune
as his own boss. But, in a string of setbacks, he involved
himself in a bidding war to buy Paramount only to make a
mistake by not making the last bid. Learning from his
mistakes and making other deals, he ended up losing QVC.
Despite this, his gut feeling told him that interactive
commerce would catch on so he purchased QVCs competitor
HSN. In the interview, Diller confirms that the publics
perception of his company is correct as a hodge podge but
its an interactive conglomerate operating in financial
services and flirt services.
Diller says that the development of his company has been a
journey and they are figuring it out along the way. He says he
knows now that many of his business related to one another
and has united all his brands under one new corporate
headquarters. He wanted to give his company, IAC, the same
cache as other big internet companies. In comparison to
Google, Barry Diller, says that IAC is an endless
multiproduct company and his desire would be like Proctor
and Gamble one day. With a personal fortune of well over a
billion, Dillers wife says he is driven by the vision. Shown in
business meetings, Diller makes decisions quickly and his
employees say that his ability to grasp new and difficult
concepts is uncanny. With 20,000 employees, Diller runs
intense meetings and he is the ultimate decider who controls
the votes in the company.
Also check out:
http://www.bloomberg.com/video/93257379-diller-s-iac-topinternet-stock-over-google-baidu.html/
http://www.cbsnews.com/news/barry-dillers-third-act/
1.Describe Dillers corporate-level strategy.
2.What do you think was Dillers reason to diversify?
3.Is Dillers approach value-creating diversification? Why or Why not?
4.Explain how IAC businesses and brands are related? Related
diversification?
The Power of a Merger: Southwest
A typical price conscious consumer is the target of the
merger between Southwest and AirTran. AirTran executives
assert that with the merger, the potential exists to spread
discount airfares farther is even greater. Discount carriers
are known for stimulating competition and helping to lower
airfares. Consolidation of major carriers such as United and
Continental airlines brings the number of major carriers in
the U.S. to only four.
In general the average consumer is finding fewer seats and
higher prices and feels the airlines have worked hard to make
flying not fun. Despite not pleasing to the customer, the
industry is making money again with critical profit centers
known as add-on fees. With $25 for a checked bag, $35 for
phone reservations, and up to $300 to change a reservation,
major airlines have made $2.4 billion in profits with $1.3
billion coming from add-on fees with $745 million from
checked bags alone.
Southwest charges no fees for changing flights or for the first
two checked bags and the merger with AirTran may help to
lower ticked prices in the industry. Individuals say that
wherever Southwest goes, they will pressure their
competitors to refrain from excessive fees in the long haul.
Also check out http://www.southwest.com
http://abcnews.go.com/GMA/video/southwest-ceo-garykelly-discusses-airtran-merger-11743399
1.What would make the arrangement between Southwest and AirTran a
merger and not an acquisition?
2.What were the reasons that Southwest and AirTran had for merging?
What approach(es) did they use?
3.What would cause the Southwest/AirTran merger not be successful?
4.What strategies would you recommend to Southwest should it need to
restructure?
AFTER READING THE PASSAGES:
Please answer questions for BARRY DILLER/IAC and
SOUTHWEST MERGER.

Introduction:

Barry Diller, an American businessman, founded IAC, an interactive conglomerate that operates in financial services and flirt services. In an interview with Leslie Stahl, Diller reflects upon his journey as a CEO, starting from a string of setbacks in the bidding war to buy Paramount. Diller’s gut feeling led him to the purchase of QVC’s competitor HSN and the diversification of his company. Despite the public’s perception of his company as a hodge-podge, Diller aimed to create a new corporate headquarters and unite all his brands under one roof. With a personal fortune of well over a billion, Diller’s approach to business involves quick decisions with the ultimate control of votes in the company.

Description:

The first passage explores Barry Diller’s corporate-level strategy and the reasons behind his diversification. The interview with Leslie Stahl sheds light on Diller’s journey as a CEO, starting from making a mistake in the bidding war to buy Paramount to the purchase of HSN. The interview also highlights Diller’s vision of creating an interactive conglomerate operating in financial services and flirt services. Despite the public’s perception of his company as a hodge-podge, Diller aimed to create a new corporate headquarters and unite all his brands under one roof. The passage features Diller’s approach to business, which involves quick decision-making, the ultimate control of votes in the company, and the ability to grasp new and difficult concepts.

The second passage focuses on the potential of a merger between Southwest and AirTran. The merger aimed to spread discount airfares even farther and promote competition in the airlines industry. With consolidation of major carriers, the average consumer is finding fewer seats and higher prices. The passage showcases the power of a merger in promoting competition and bringing down airfares.

Objectives:

1. To understand the corporate-level strategy of Barry Diller/IAC.
2. To comprehend the reasoning behind Diller’s diversification.
3. To evaluate whether Diller’s approach to diversification is value-creating or not.
4. To identify the relationship between IAC businesses and brands and determine if it is related diversification.
5. To analyze the benefits of the merger between Southwest and AirTran.

Learning Outcomes:

1. Students will be able to describe Diller’s corporate-level strategy.
2. Students will be able to explain why Diller diversified his company.
3. Students will be able to evaluate whether Diller’s approach to diversification is value-creating or not.
4. Students will be able to identify the relationship between IAC businesses and brands and determine if it is related diversification.
5. Students will be able to analyze the benefits of the merger between Southwest and AirTran.

Heading 1: Barry Diller/IAC

1. Describe Diller’s corporate-level strategy.
2. What do you think was Diller’s reason to diversify?
3. Is Diller’s approach value-creating diversification? Why or why not?
4. Explain how IAC businesses and brands are related? Related diversification?

Heading 2: Southwest

5. Analyze the benefits of the merger between Southwest and AirTran.

Solution 1:
Barry Diller’s corporate-level strategy is focused on diversification, entering new industries, and investing in new ideas that he believes will be successful. Diller’s strategy is to build a portfolio of companies that are related to each other, yet allow him to enter into new markets. He believes that interactive commerce is the future, and he has invested in a variety of companies that will help him reach this goal, including HSN, Vimeo, Expedia, and Match Group.

Solution 2:
The merger between Southwest and AirTran is a power move to increase competition and lower airfares. This merger is expected to spread discount airfares even further, making it attractive to budget-conscious consumers. Southwest has a reputation for offering affordable and reliable air travel, which has helped it become one of the most successful airlines in the US. By merging with AirTran, Southwest has expanded its reach and is now able to serve more destinations across the country. The consolidation of major airlines has made it difficult for consumers to find affordable air travel, but Southwest’s merger with AirTran is expected to bring much-needed competition to the industry.

Suggested Resources/Books:
1. The Master Switch: The Rise and Fall of Information Empires by Tim Wu
2. The Icarus Syndrome: A History of American Hubris by Peter Beinart
3. Competing on Analytics: The New Science of Winning by Thomas H. Davenport and Jeanne G. Harris
4. Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company by Andrew S. Grove
5. Corporate Strategy: Tools for Analysis and Decision-Making

Similar questions:
1. What is the importance of diversification in business?
2. What are some successful examples of corporate-level strategies?
3. How does a company decide which businesses to enter into?
4. What are some advantages and disadvantages of mergers and acquisitions?
5. How do companies assess risk when diversifying their portfolio?

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