M 4
U
a
Select Page
We're here for you. Train online, facilitator led, using the world's most advanced simulation game.

It's time to replace stress with confidence.

“It was fun but before I knew it, I was negotiating better.”  

 
Updated: 28 Jan 2021

Competitive Business Conflict Escalation

Competitive Conflict Escalation

Summary

This case study shares a story of how irrational competition can cause damage through conflict escalation between competing airline businesses.

Compete without conflicts

Competition is clearly a healthy means to increase sales for any business. It is essential because it provides a stimulus for a company or organization to prosper and grow. However, does this mean that a company should compete at all costs? The answer is of course ‘No’! There comes a point when excessive competition may cause serious harm when the losses exceed the gains. Sounds like simple common sense, doesn’t it? Yet, there are many examples of escalated negotiation competition that are unsound. Even the big players can be drawn into an irrational escalation.

Increased competition

We all use frequent flier miles on our travels. Back in 1981, American Airlines introduced the first frequent-flier program. It was a unique marketing plan. Anyone who flew regularly could redeem their travel miles for rewards. Great stuff!

Taking American Airlines’ lead, all their competitors jumped on the bandwagon and provided a similar frequent-flyers program. To get a leg up on American’s initial advantage, several competitors enhanced what they offered by doubling the air miles. They also offered points for car rentals, hotel accommodations and other innovative tactics.

Out of control

The airlines continued this escalating negotiation competitive style through the early 1980’s as each airline tried to outdo their competitors. In 1987, Delta Airlines offered triple miles to any passenger who charged their tickets on their American Express card for all of the year of 1988. Analysts took a hard look what this would actually mean as a cost to the airline industry. They estimated that the airlines combined would end up owing their passengers somewhere between $1.5 and $3 BILLION dollars in free trips!

The airlines industry was in quite a quandary now. How could the industry get out of this marketing war that had spiraled out of control? It finally occurred to the airline industry that somebody had to step forward and draw a line. The total airline debt continued to increase with estimates placing it as high as $12 billion dollars towards the end of the 1980’s. The airline companies couldn’t stop competing and had to keep matching whomever raised the stakes. Eventually an announcement was made that the rebate programs would be canceled.

Take a chance and resolve the conflict

A similar thing had happened in the U.S. auto industry relating to rebate programs. The other players quickly escalated their rebate offers to potential customers accordingly. It reached a point where the major car manufacturers were selling every single car at a loss. Finally, the CEO of Chrysler, Lee Iacocca made a press announcement. He stated that Chrysler would not renew its rebate program when it expired at the end of the year if the other companies followed suit. He also stated that if they didn’t, he would match or exceed their competitors’ rebate programs. Iacocca drew a line in the sand and sent out a strong message to his competitors. The other manufacturers got the message loud and clear.

1 Star2 Stars3 Stars4 Stars5 StarsRate this Article
4.5 out of 5 from 2 responses
Loading...
1 comment
  • 7
    7
    Abdul on

    I enjoyed reading this good case.

  • Leave a Reply

    Your email address will not be published. Required fields are marked *

     
    The commercial landscape has become increasingly competitive, with customers increasingly trying to commodities offerings to force discounting. Take your sales career to the next level by learning how to consistently close bigger deals in less time at higher margins. Read More
    Investment per participant
    $2,410USD
    Early Bird Special:
    -$241USD
    Total investment
    $2,169USD
    Early Bird Special: -$241USD Ends 19 Sep 2021
    Delivery Method: Online
    19 Oct, 21 Oct, 26 Oct, 28 Oct, 2 Nov, 4 Nov 2021 (Tuesday, Thursday)
    6 instructor-led half day sessions
    11 am to 3:30 pm ET
    8 am to 12:30 pm PST
    Calum Coburn
    855-980-0126
    Procurement faces the double challenge of getting the best value deals from vendors, while at the same time managing internal stakeholder relationships. Cost savings initiative yields decreasing returns. Take your procurement career to the next level by learning how to consistently close the most complex of deals in less time while creating more value. Read More
    Investment per participant
    $2,410USD
    Early Bird Special:
    -$241USD
    Total investment
    $2,169USD
    Early Bird Special: -$241USD Ends 19 Sep 2021
    Delivery Method: Online
    19 Oct, 21 Oct, 26 Oct, 28 Oct, 2 Nov, 4 Nov 2021 (Tuesday, Thursday)
    11 am to 3:30 pm ET
    8 am to 12:30 pm PST
    Calum Coburn
    855-980-0261
    Whether you're aware of it or not, you've been negotiating your whole life. We negotiate with our colleagues, customers, suppliers, bosses, family and friends. We negotiate for business agreements, higher pay, a better job, our home or car. We only get to choose whether we negotiate better or worse than others. Read More
    Investment per participant
    $1,440USD
    Early Bird Special:
    -$144USD
    Total investment
    $1,296USD
    Early Bird Special: -$144USD Ends 19 Sep 2021
    Delivery Method: Online
    19 Oct, 21 Oct, 26 Oct, 28 Oct 2021 (Tuesday, Thursday)
    4 instructor-led half day sessions
    11 am to 3:30 pm ET
    8 am to 12:30 pm PST
    Calum Coburn
    855-980-0126
    Sending