Air Asia- Porter's Five Forces

Topics: Airline, Low-cost carrier, Kuala Lumpur Pages: 3 (876 words) Published: May 9, 2010
Porter’s five forces
Michael E. Porter claimed that there are five competitive forces which can shape every industry by identify and analysis those five forces(appendix) and thus determine strengths and weaknesses of the industry. Those five forces are now used to determined Air Asia’s strengths and weaknesses which are shown as below:

Threat of Entry
There is a high barrier entering airlines industry since it requires high capital to set up everything such as purchase or lease air craft, set up office, hire staffs, and etc. Thus, this has reduced the treat to Air Asia. Moreover, brand awareness is quite important in this industry. Thus, to enter this industry not only required high capital but also have to take some time to create brand awareness. Consumers always choose the product or service they really trust. Thus, instead of creating brand awareness, new entry has to create so called brand loyalty. Hence, this is reducing treat to Air Asia too.( Roy L. Simerly) However, the government legislation is one of the barriers for entering airlines industry. For example, MAS has been protected by Malaysia government on the route to Sydney and Seoul Incheon. Therefore Air Asia find itself very difficult getting a new route from government. This not only affects the timeline set by Air Asia but also influence their profit.

Power of suppliers
Every industry has someone to play the role as suppliers. Power of the suppliers is important as it will affect the industry. In airline industry, the power of suppliers is quite high since there are only two major suppliers which are Airbus and Boeing hence there are not many choices to airline industry. Nevertheless, the global economic crisis has limited the new entrant and also reducing the upgrade of planes in the immediate future. However, both suppliers provide almost same standard aircrafts and hence the switching to Air Asia is low. Moreover, Air Asia placed a large amount of order from Airbus in order to...
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