Porter’s Five Forces of Industry Attractiveness Essay

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2.1.4 Porter’s Five Forces of Industry Attractiveness
Michael Porter’s Five Forces model explains the importance of how market dynamics can affect competitive rivalry. This model includes three forces from the ‘horizontal’ competition: threat of new entrants, threat of substitution products, and the degree of rivalry among existing competitors; and two forces from the ‘vertical’ competition: bargaining power of customers and the bargaining power of suppliers. These five factors make up the Porter Five forces.

These five factors represent what power a company has as a buyer verses the power it has as a supplier. This model also looks into how easily a product or service can be imitated by alternate companies; and additionally, how other
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-Existing brand names have advantage over new names, hard to lure customers out of preference brand. | Threat of Substitute Product | -Low threat for international airlines as there is a limited amount of companies who can take you there. -Ability for passengers to utilise ground travel i.e. train/ bus/ car. -Time, money and personal preference can be considered in what substitution method would be selected. | Bargaining Power of Suppliers | -Airline suppliers are predominantly aircraft manufactures, fuel companies and airports. There isn’t a lot of competition between suppliers. -The likelihood of suppliers integrating vertically is uncommon. | Bargaining Power of Customers | -Cost to switch air service carriers is decreasing as customers can utilise internet. -Possibilities to compare competing air tickets prices online. -Emerging lower budget airline i.e. Jetstar/ AirAsia/ Tiger. Travellers prefer using these over full service high price airlines. | Rivalry Among Existing Competitors | -Airline industry is entirely saturated with more services providers than needed in both local and international market. -Various airlines are competing against one another for the same customer. -Airlines continuously competing against each other with prices, customer service, technology and in-flight entertainment etc. -Highly
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