Industry Analysis on Airline Industry

Industry Analysis on Airline Industry

  • Submitted By: GreenBb
  • Date Submitted: 10/23/2008 8:23 AM
  • Category: Book Reports
  • Words: 1101
  • Page: 5
  • Views: 6

Industry Analysis

The Airline is one of the major industries in the world today and is majorly affected by Michael Porter's Five Forces model. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated. There are more service providers than needed in both local as well as international markets. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services and many more areas.

One of the forces that Porter describes is Threat of New Entrants which refers to the possibility of new competitors entering the industry and undermining the profits of the established businesses. In the world today, the airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The biggest for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Other barriers to entry which will recess new comers into the airline industry include Government restrictions and the brand name of existing airlines. Brand name recognition and frequent fliers point also play a role in the airline industry. An airline with a strong brand name and incentives can often lure a customer even if its prices are higher. On the other hand, a newcomer could enter this saturated market easier with a completely new concept and/or technology.
The bargaining power of buyers is another force that can affect the competitive position of a company. This refers to the amount of pressure customers can place on a business, thus, affecting its prices, volume and profit potential. The various airlines flying from the KLIA are competing for the same customer, which also results in strengthening the buyer power. Individuals wishing to travel to and from the KLIA are presented with various choices when...

Similar Essays