Case Study Us Airline Industtry in 2007

| STRATEGYCASE STUDY |
| MBA 2011-2012 | |
|   [THE US AIRLINE INDUSTRY IN 2007] |
ANALYSIS THROUGH MICHAEL PORTER’S FIVE FORCES’’ FRAMEWORK |
| |



CONTENTS
INTRODUCTION 2
ANALYSIS OF THE US AIRLINE INDUSTRY THROUGH PORTER’S FIVE FORCES’’ FRAMEWORK 2
THREAT OF ENTRY 2
1. CAPITAL REQUIREMENTS 2
2. ECONOMIES OF SCALE 2
3. ABSOLUTE COST ADVANTAGES 2
4. PRODUCT DIFFERENTIATION 3
5. ACCESS TO DISTRIBUTION CHANNELS 3
6. GOVERNMENT AND LEGAL BARRIERS 3
7. RETALIATION BY ESTABLISHED COMPANIES 3
SUMMARY 4
ENTRY BARRIERS VERSUS EXIT BARRIERS 4
THREAT OF SUBSTITUTES 4
BUYER PROPENSITY TO SUBSTITUTE & RELATIVE PRICES AND PERFORMANCE OF SUBSTITUTES 4
SUPPLIER POWER 4
BUYER POWER 6
INDUSTRY RIVALRY 6
CONCENTRATION 6
COST CONDITIONS –EXIT BARRIERS 7
CONCLUSION 7
BIBLIOGRAPHY 8

INTRODUCTION
The essence of formulating competitive strategy is relating a company to its environment.
Porter’s five forces’’ framework provides a wide understanding of the profit potential in a particular industry.
By looking at the way the five forces influence profitability, tactics can be developed by the companies for countering the strength of the forces.
Here is made a brief analysis of the US Airline industry through this framework.

ANALYSIS OF THE US AIRLINE INDUSTRY THROUGH PORTER’S FIVE FORCES’’ FRAMEWORK

THREAT OF ENTRY
Threat of entry depends on both barriers to entry and reaction from existing competitors.
This industry force didn’t exist before 1978. Indeed, under regulation established by the Civil Aeronautics Board (CAB), barriers of entry were high and there was no place for new competitors.
Regulation “had been based on arguments about ‘traditional monopoly’”. (M.Grant, 2008)
Since 1978, deregulation will on the contrary cheer up new entrants and the establishment of an intense competition with about 20 new airlines entering by 1980.
This impact of deregulation will make the airline industry enter a... [continues]

Read full essay