Porter s Five Forces
Porter’s Five forces
Porter’s five forces tool will assist in analysing the competitive nature of the airline industry in order to assess the position of Flyafrica. This will enable FlyAfrica to make strategic decisions in order to increase geographical presence and profitability.
Entry Barriers (Threat of new entrance)
Threat of New Entrants This aspect has a low threat for the Zimbabwean airline industry because there are extremely low switching costs. Additionally, there are no proprietary products or services involved.
The industry requires a large amount of capital and without a strong customer base there will be little to no profit in the first few years. Existing firms can use their high capital to retaliate against newer firms with whatever means necessary such as lowering prices and taking a loss.
Due to low switching costs between brands, consumers tend to only chose well-known brands. The safety aspect involved make most consumers feel safer with firms that have been around for a long period of time. This industry requires plane and flying experience which also lowers the threat of entry. Airlines are constantly being regulated by several organisations such as the Civil Aviation Authority of Zimbabwe, Federal Aviation Administration and the Department of Transportation. Suppliers (Bargaining power of suppliers)
Determinants of Supplier Power
Supplier concentration
There are only two suppliers of aeroplanes mainly Boeing and Airbus (Odell, Mark); therefore it means that the suppliers have high bargaining powers such that our negotiating power is minimal. Airline cannot easily switch suppliers, therefore most firms have long term contracts with their suppliers. This therefore means that whenever we want to purchase an additional plane, it would cost us and we have little room to negotiate the price down.
Additionally, it is difficult to enter into the plane manufacturing industry because of the capital needed to enter. The amount of money and
Porter’s five forces tool will assist in analysing the competitive nature of the airline industry in order to assess the position of Flyafrica. This will enable FlyAfrica to make strategic decisions in order to increase geographical presence and profitability.
Entry Barriers (Threat of new entrance)
Threat of New Entrants This aspect has a low threat for the Zimbabwean airline industry because there are extremely low switching costs. Additionally, there are no proprietary products or services involved.
The industry requires a large amount of capital and without a strong customer base there will be little to no profit in the first few years. Existing firms can use their high capital to retaliate against newer firms with whatever means necessary such as lowering prices and taking a loss.
Due to low switching costs between brands, consumers tend to only chose well-known brands. The safety aspect involved make most consumers feel safer with firms that have been around for a long period of time. This industry requires plane and flying experience which also lowers the threat of entry. Airlines are constantly being regulated by several organisations such as the Civil Aviation Authority of Zimbabwe, Federal Aviation Administration and the Department of Transportation. Suppliers (Bargaining power of suppliers)
Determinants of Supplier Power
Supplier concentration
There are only two suppliers of aeroplanes mainly Boeing and Airbus (Odell, Mark); therefore it means that the suppliers have high bargaining powers such that our negotiating power is minimal. Airline cannot easily switch suppliers, therefore most firms have long term contracts with their suppliers. This therefore means that whenever we want to purchase an additional plane, it would cost us and we have little room to negotiate the price down.
Additionally, it is difficult to enter into the plane manufacturing industry because of the capital needed to enter. The amount of money and