E-Commerce: Markets and Hierarchy the Term Paper

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Southwest Airlines today exemplifies this positioning of being very market structured in its approach. The company's attributes also reflect Malone (1987) in that the costs of the product, for Southwest due to their foresightful purchase of oil futures, is low, and their costs of coordination are high as they expand across hub cities. Further, Southwest has to this point shunned being listed on websites for comparative shopping including Expedia.com.

What is fascinating to watch in the broader airline industry is the progression from market-centric organizational structures to more network-based. American Airlines and the One World Alliance are a case in point, as is the United Airlines efforts to align with networks of carriers.

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This progression away from high levels of independence towards a more network-centric approach to the industry is a direct result of increased costs of operation, more of a willingness to share in the collective risk to the industry's viability due to terrorism globally, and the fundamental need the industry has to consolidate its available services. The progression from market-based structure to network is clear in the airline industry......

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