Strategic Modelling and Business Dynamics: A Feedback Systems Approach

6.3. A Variation on the Diffusion Model: The Rise of Low-cost Air Travel in Europe

The Bass model is a particular instance of the more general conceptual diffusion model introduced in Figure 6.2.^[] In this section, we examine another diffusion model with similar feedback loops but entirely different equation formulations written to fit the early growth strategy of easyJet, one of the UK's most successful no-frills airlines, at the dawn of low-cost flights in Europe. The model shows an alternative way to represent word-of-mouth and advertising that nevertheless retains the essential combination of balancing and reinforcing loops associated with adoption and S-shaped growth. It is recognisably a firm-level model where diffusion of low-cost flights happens in competition with established airlines. It is a small model of some 27 equations in total.

^[] Another diffusion model, with explicit and quite detailed representation of firms' influence on adoption, is reported in Morecroft 1984. The modelling project investigated the migration strategy pursuedby one of the Bell Operating Companies in the early 1980s as it attempted to upgrade the private telephone switches used by business customers from traditional electromechanical technology to electronic. Thousands of customers generating several hundred million dollars per year of lease income needed to be persuaded to adopt electronic switches. The model included formulations for product pricing, sales targets, incentives, sales force ...