The framework allows a business to identify and analyze the important forces that determine the profitability of an industry. It is these forces that determine how much competition will exist in a market and consequently the profitability and attractiveness of this market for a company. Through sound corporate strategies, a company will aim to shape these forces to its advantage to strengthen the organizations position in the industry.
The Airline industry provides a very unique service to its customers. It transports people with a high level of convenience and efficiency that cannot not be provided by any other industry or substitute.
Airline companies pride themselves on the way they treat their customer during the flight. They have things such as food, drinks, entertainment, and a welcoming staff. The service of transportation is provided in other industries but the airline surpasses all of them when it comes to timeliness.
The geographic scope of the airline industry is at a global level. Some firms are able to fly their planes all over the world while others focus on smaller geographic areas.
In order to analyze the airline industry we have look at each of these forces. Bargaining power of Buyers The airline industry is made up of two groups of buyers.
First, there are individual flyers.
They buy plane tickets for a number of reasons that can be personal or business related. This group is extremely diverse; most people in developed countries have purchased a plane ticket. They can do this through the specific airline or through the second group of buyers; travel agencies and online portals.
This buyer group works as a middle man between the airlines and the flyers. They work with multiple airline firms in order to give customers the best flight possible. Between these two groups there is definitely a large amount of buyers compared to the number of firms.
There are low switching costs between firms because many people choose the flight based on where they are going and the cost at the time.
This is some loyalty to firms but not enough for high switching costs. Each customer needs a lot of important information. They need to know the details of what is provided during the flight. Buyers need to understand the timing of the flight and the safety aspects of flying in general.
The service provided is unique. Each airline has a niche.
Some airlines focus on cost, while others focus on having the best amenities, etc. Overall the bargaining power of buyers has an extremely low threat in this industry. Bargaining Power of Suppliers Next we look at the bargaining power of the suppliers.
In this case the major suppliers are the airplane manufacturers. The top two manufacturers in the world currently are Boeing and Airbus Odell,Mark.
In this industry the inputs are extremely standardized. Airline companies only seem to differentiate with amenities. The planes are very similar.
Currently some manufacturers are trying to make their plans more ecofriendly. Airline companies cannot easily switch suppliers. Most firms have long term contracts with their suppliers. It is difficult to enter into the plane manufacturing industry because of the capital needed to enter. The amount of money and expertise needed to make even one plane is around million dollars.
For this reason there are very few suppliers in the airline industry. Airline firms are the only source of income for these manufacturers so their business is extremely important. Based on these things the bargaining power of suppliers has a low threat as well.
Threat of New Entrants Threat of new entrants is another major aspect of the five forces. This aspect has a low threat for the airline industry. There are two aspects that do however raise the threat level.The image below shows Porter’s Five Forces Model.
According to Korea Aerospace Industries Association (KAI), Korean Airlines (KAL) is the largest airline in Korea and it operates in passenger as well commercial/cargo. Bargaining power of Buyers The airline industry is composed of 2 categories of buyers. First, there are single flyers.
The reason why they purchase tickets is either personal or business related. Easyjet Porter Five Forces Analysis This Coursework Easyjet Porter Five Forces Analysis and other 64,+ term papers, college essay examples and free essays are available now on srmvision.com Autor: cors82 • November 30, • Coursework • Words (4 Pages) • 2, Views.
Southwest airlines’ PORTER Five Forces Competitive Rivalry-HIGH Southwest’s direct competitors are the seven major low-carriers operating domestically with similar services, such as.
This is a five forces analysis of the airlines industry that explains how these forces affect the competitive strength of any company in the industry.
Aviation Industry Five Forces Analysis. Porter’s five forces model is a unique tool that helps understand the level of competition in the industry and how attractive an industry and.
Senior managers need to utilize several conceptual models like BCG matrix, Porters Five Force model etc., in order to be efficient particularly in the decision making processes. Strategic management models can be said to be as the mode of the strategic management.