This analysis indicates the structure of the airline industry according to the easyJet organization business situation in the late 1990s refer to Porter’s (1980) five competitive forces. It also demonstrates the reasons why the airline industry was attractive. Moreover, this case study evaluates the competitive advantages of easyJet.
The structure of airline industry in the 1990s analysis
Threat of entry
According to the case (Kumar & Rogers, 2001), in the early 1990s, the European government policy unveiled fresh policy to the airline industry that any European carrier can operate their business to anywhere and use any landing slots. Therefore, the highly deregulation led to the rapidly growth of airlines; meantime, a large part of new firms run the operations from the UK due to the frequently traveled. Almost all the airlines set economics of density to serve their existing networks. To ensure the successful entrance to the airline industry, every firm had excess capacity of fixed inputs. Manuel and Hugo (2006) insisted that various kinds of cost requested a high standard of capital requirement. Airport charges, aircraft ownership, labor, fuel and ground cost were the typically largest components of operating costs.
Pressure from substitute products
The European airline industry appeared many low-cost carriers to contend for the markets. Many firms had the similar target customers and their flight routes had no distinguished differences; thus, it was hard to survive in the competition. In late of 1990s, 75% carriers suffered the bankrupt; however, the growing low-cost market caused more and more new airlines try to take over a position in the carriers industry. Jones (2007) claimed that the pressure from substitute products was huge while firms select different advertising campaigns and extensive public relations strategies. New airlines not only compete with other young carriers, but also contend against the experienced firms. Meanwhile, a number of young airlines competed in the low-cost segment of the European market were established by other big companies; while, some were formed an alliance with others.
Bargaining power of buyers
The new carriers were focus on the European low-cost market with target customer like travelers visiting relatives and making brief trips, as well as entrepreneurs and managers working for small firms. The main object of these kinds of customers was saving travel costs. Different airlines provided diverse ticket purchasing methods. The target group had many choices; therefore, they could have their flight with a very low price and accept no-frills journey. Nevertheless, flight seats were sold in a lottery system that the flight price was not fixed. It was hard to maintain a lowest price except the very early purchasing price. The service and the brand awareness were the most important part to attract the customers.
Bargaining power of suppliers
Generally, airlines were responsible for the plans, pilots, cabin crew, marketing and sales people; whereas, subcontractors handled other assignments. Therefore, the quantity and quality of subcontractors’ service had the large influences on the public praise of the firms. In not frequently served airports, airlines hired extra ground handlers whom were not the regular employees. They did not consider the airlines’ corporate image with an awful attitude in attending to customers. Therefore, the strict evaluation was important to the firm’s integration.
Government as a force in industry competition
The Swiss government favored the Swissair only, so that the Swissair was the monopoly for the Barcelona-Geneva route. Other carriers cannot fly between the two cities. Airlines rarely tried to break the rule and queried the Swiss government. This governmental block was well involved in almost all the firm’s strategy decision.
The attraction of airline industry in the...