Jetstar - Porter's Five Forces

689 Words Mar 26th, 2012 3 Pages
Porter’s Five Forces

After the analysis of Jetstar’s societal environment with the use of PEST, the Porter’s Five Forces can be used to analyse another aspect of the external environment; the task environment.

Porter’s Five Forces is a framework that consists of five competitive forces, threat of entry, power of supplier and buyer, threat of substitution and competitive rivalry. These forces facilitate the analysis of the task environment of an industry or company (Wheelen and Hunger, 2009).

The threat of new entry is high because there are no significant barriers of entry in the airline industry. For example, airplanes can be easily leased, defraying the large initial capital investment. Additionally, exit cost in the business is
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Or even if the flight service is of a lower standard, flyers are sometimes willing to compromise on that aspect for a much lower fare. Of course there are factors like customer loyalty and flight duration to be considered when choosing an airline to fly with. However, low cost still rules over flight services, especially for short distance flight.

The threat from substitution is moderate for Jetstar because though advances in technology like internet and video conferencing lessens the need for business travelling, there are still some matters that are difficult to be discussed or overseen over the internet (Rahman, Joha, 2010). Moreover, Jetstar has international carriers, thus the threat from substitution is relatively lower as compared to domestic or regional carriers. This is because the likelihood of train and cars being able to reach the destinations of non-neighbouring countries is low and sometimes, travelling by sea is not always convenient.

Lastly, competitive rivalry for Jetstar is high. There are many competitors and they are not just from other budget airlines but full service airlines as well. This is because many full service airlines recognised the threat of the presence of budget airlines. Therefore, they started to provide low switching cost to lure customers that wants to enjoy the comfort and quality of a full service airline at just a small increase in ticket

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