Strategic Cost Management and Differentiation Strategy in Enhancing Competitive Advantage in the Indonesian Airline Industry

Daniel Dewantoro Rumani; Miko Andi Wardana; Andung Luwihono; Hendra Sudarso

doi:10.55606/makreju.v4i3.4491

Authors

Daniel Dewantoro Rumani Akademi Penerbang Indonesia Banyuwangi
Miko Andi Wardana Akademi Penerbang Indonesia Banyuwangi
Andung Luwihono Akademi Penerbang Indonesia Banyuwangi
Hendra Sudarso Akademi Penerbang Indonesia Banyuwangi

DOI:

https://doi.org/10.55606/makreju.v4i3.4491

Keywords:

Airline Industry, Competitive Advantage, Digital Service, Differentiation Strategy, Strategic Cost Management

Abstract

The Indonesian airline industry faces increasing pressure to manage complex operating costs while maintaining service attributes that differentiate airlines in an increasingly competitive market. This study examines how Strategic Cost Management (SCM) and Differentiation Strategy can be integrated to strengthen Competitive Advantage. An integrative literature review was conducted by analyzing peer-reviewed studies published primarily between 2020 and 2024, focusing on strategic management accounting, airline digital transformation, service quality, customer satisfaction, and data analytics. The findings indicate that SCM contributes to competitiveness when cost information is strategically connected with value-chain activities, resource optimization, operational efficiency, and long-term business positioning rather than merely focusing on short-term cost reduction. Meanwhile, Differentiation Strategy enhances customer value through service reliability, digital innovation, customer trust, convenience, and data-driven personalization. The study highlights that competitive advantage is achieved when cost efficiency and differentiation are developed as complementary capabilities. Cost savings generated from non-value-added activities can be redirected toward improving high-value services, while digital technologies support process optimization and enhanced customer experiences. This study proposes an integrated framework combining efficiency, customer value creation, and sustainable competitive positioning for Indonesian airlines in a dynamic aviation environment.

References

Abdullah, N. H. N., Krishnan, S., Mohd Zakaria, A. A., & Morris, G. (2022). Strategic management accounting practices in business: A systematic review of the literature and future research directions. Cogent Business & Management, 9(1), Article 2093488. https://doi.org/10.1080/23311975.2022.2093488

Bamber, G. J., Gittell, J. H., Kochan, T. A., & von Nordenflycht, A. (2013). Up in the air: How airlines can improve performance by engaging their employees. Cornell University Press. https://doi.org/10.7591/9780801458330

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108

Blocher, E. J., Stout, D. E., Juras, P. E., & Smith, S. M. (2019). Cost management: A strategic emphasis (8th ed.). McGraw-Hill Education.

Büyüközkan, G., Havle, C. A., & Feyzioğlu, O. (2020). A new digital service quality model and its strategic analysis in aviation industry using interval-valued intuitionistic fuzzy AHP. Journal of Air Transport Management, 86, Article 101817. https://doi.org/10.1016/j.jairtraman.2020.101817

Büyüközkan, G., Havle, C. A., & Feyzioğlu, O. (2021). An integrated SWOT-based fuzzy AHP and fuzzy MARCOS methodology for digital transformation strategy analysis in airline industry. Journal of Air Transport Management, 97, Article 102142. https://doi.org/10.1016/j.jairtraman.2021.102142

Doganis, R. (2019). Flying off course: Airline economics and marketing (5th ed.). Routledge. https://doi.org/10.4324/9781315143323

Hansen, D. R., Mowen, M. M., & Heitger, D. L. (2021). Cornerstones of cost management (5th ed.). Cengage Learning.

Kıyıklık, A., Kuşakcı, A. O., & Mbowe, B. (2022). A digital transformation maturity model for the airline industry with a self-assessment tool. Decision Analytics Journal, 3, Article 100055. https://doi.org/10.1016/j.dajour.2022.100055

Law, C. C. H., Zhang, Y., & Gow, J. (2022). Airline service quality, customer satisfaction, and repurchase intention: Laotian air passengers’ perspective. Case Studies on Transport Policy, 10(2), 741–750. https://doi.org/10.1016/j.cstp.2022.02.002

Li, Q., Jing, R., & Zhu, X. (2024). Determinants of travel satisfaction for commercial airlines: A data mining approach. Engineering Applications of Artificial Intelligence, 133, Article 108597. https://doi.org/10.1016/j.engappai.2024.108597

Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press.

Prasetyo, A. H., & Wardhani, R. (2020). The impact of strategic cost management and differentiation strategy on financial performance: Evidence from Indonesian aviation sector. Journal of Applied Accounting Research, 21(4), 615–630.

Rashid, M. M., Ali, M. M., & Hossain, D. M. (2021). Strategic management accounting practices: A literature review and opportunity for future research. Asian Journal of Accounting Research, 6(1), 109–132. https://doi.org/10.1108/AJAR-06-2019-0051

Shank, J. K., & Govindarajan, V. (1993). Strategic cost management: The new tool for competitive advantage. Free Press.

Suraida, I., & Suhartanto, D. (2022). Service quality, brand image, and customer satisfaction in full-service vs. low-cost carriers: A study of the Indonesian airline industry. International Journal of Quality & Reliability Management, 39(8), 1845–1862. https://doi.org/10.1108/IJQRM-05-2021-0142

Wensveen, J. G. (2018). Air transportation: A management perspective (8th ed.). Routledge. https://doi.org/10.4324/9781315263434