Porter’s Five Forces of Industry Attractiveness Essay

612 WordsSep 2, 20123 Pages
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…show more content…
-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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