The Airline Industry and Porter Five Model Forces
The Airline is one of the major industries in the world today and is majorly affected by Michael Porter's "Five Forces" model. The following write up conducts an analysis on how the model affects the airline industry today.
The central force of Porter's model is Internal Rivalry within the Industry. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated. There are more service providers than needed in both local as well as international markets. The various airlines are competing for the same customer, which also results in strengthening the buyer power, another of Porter's forces. Moreover, a lot of airlines such as Qatar Airways and Emirates have a brand name which they have to defend so they compete in doing so. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services and many more areas. The net result of this competition between companies is an overall slow market growth rate.
One of the forces that Porter describes is Entry into the industry. In the world today, the airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The biggest for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is the brand name of existing airlines and it is really difficult to lure customers out of their existing brands. On the other hand, a newcomer could enter this saturated market easier with a completely new concept and/or technology. This was the case when Southwest entered the airline industry, with the new concept of budget or low cost travelling. The new concept was appealing to whole new universe of customers who previously would have thought multiple times before deciding to fly instead of driving or
The central force of Porter's model is Internal Rivalry within the Industry. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated. There are more service providers than needed in both local as well as international markets. The various airlines are competing for the same customer, which also results in strengthening the buyer power, another of Porter's forces. Moreover, a lot of airlines such as Qatar Airways and Emirates have a brand name which they have to defend so they compete in doing so. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services and many more areas. The net result of this competition between companies is an overall slow market growth rate.
One of the forces that Porter describes is Entry into the industry. In the world today, the airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The biggest for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is the brand name of existing airlines and it is really difficult to lure customers out of their existing brands. On the other hand, a newcomer could enter this saturated market easier with a completely new concept and/or technology. This was the case when Southwest entered the airline industry, with the new concept of budget or low cost travelling. The new concept was appealing to whole new universe of customers who previously would have thought multiple times before deciding to fly instead of driving or