The model of the Five Competitive Forces was developed by Michael E. Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors in 1980. Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes.
Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.
Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porter’s model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.
The Aviation Industry
Rivalry amongst firms
Porter (1980) argues that, in many industries, often little of the true competition and the drive for changes come from long established firms. These long established firms often resemble one another in terms of the strengths which they have, and in their problems and weakness. They therefore can only identify benefit from aggressive competition at the margins of their activities.
In the air transport industry, the policies of the long established airline of Europe illustrate this point, especially in their short haul markets. According to Jiangtian Xu (2006), Since April 1997, the airlines of the European Union have competed in a Single Aviation Market where they have been only the loosest controls over entry, capacity and fares. This represented a major change when it... [continues]
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