Porters five Forces and Ryanair

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Table of Contents 1.Introduction 2.Substitute products 3.Bargaining power of customers 4.Bargaining power of suppliers 5.Entrance barriers 6.Usefulness of the Five forces 7.Limitations of the five forces Model 8.Porter in the airline industry/Ryanair Introduction The model of the Five Competitive Forces was developed by Michael Porter in his book Competitive Strategy: "Techniques for Analyzing Industries and Competitors" in 1980. Since that time it has become an important instrument for analyzing an organisations industry structure in the strategic processes. Porter's model is based on the idea that a business strategy should meet the opportunities and threats in the organisations external environment. Porter came up with a set…show more content…
For example when there is a limited amount of raw materials such as gold the bargaining power of suppliers can be quite high. Entrance barriers The competition in an industry will be higher, when it is for relatively easy for other companies to enter the industry. In such circumstances, new entrants could change major factors of the market environment including market shares, prices and customer loyalty. The threat of new entries will depend on the extent to which there are barriers to entry. Whether it is easy or not for a firm to enter a market depends on aspects such as how brand loyal customers in the industry are, how expensive it is for a firm to enter the market, how beneficial economies of scale are to the firms in that industry such as bulk buying, whether there are copyright and patents in the industry, whether or not there are legal issues and whether changing firms is time consuming and expensive for the consumer. New entrants can reduce sales and profits of existing firms in an industry. By providing strong supply channels that are difficult for new entrants to match, a business can be strategically strong. In Ryanair's case entrance barriers are very valuable for the company. The cost of setting up an airline company is phenomenal. One plane alone costs billions to purchase making it extremely difficult for competitors to enter the market. Industry Competitors This force describes the intensity of competition between businesses in an industry.
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