Section A. 1. Analysis of the Business Environment
In order to analyze the airline industry, we need to conduct the PESTEL Analysis.
Political and Legal
- Regulations for the air travel industry are getting even more stringent. The European Union authorities demand that airlines operate in an open, transparent manner. Any state subsidies to airline companies are prohibited in order to make working conditions equal to anyone and to boost competition in the industry. There are also regulations in place for airlines not to exceed certain levels of noise and air pollution. All of the legislation and regulations make operating in the industry harder. - Trade unions are powerful in Europe and have a great…show more content… He also repeatedly challenged his rivals in very outspoken and extraordinary ways (e.g., challenged EasyJet sitting on top of a tank etc). His leadership style can be seen as transformational rather than transactional because under his management people tried to work harder and achieve challenging goals and felt commitment to what they were doing. FT called O’Leary one of the 25 greatest European business stars (‘A head for numbers, a shrewd marketing brain, and a ruthless competitive streak’).
4. The Competitive Environment
In order to understand the competitive environment, it is useful to carry out the Porter’s Five Forces Analysis:
Barriers to Entry • High because as the case suggests only early entrants such as Ryanair can succeed. There has been much industry shake-out and many airlines have gone bust. • High entry costs due to the necessity to buy expensive aircraft and equipment, pay to airports, and advertise massively. In the market where one competes on cost and not on differentiation, it is hard to attract customers from incumbent airlines.
Threat of substitutes • Medium to high. Although low-cost carriers have taken over some share of car ferries and buses, high-speed trains in Europe, especially on short-haul routes are posing an increasingly serious threat. The speeds of the train are ever increasing and new routes are constantly being added, which compounds the situation.
Bargaining power of buyers •