Porter’s Five Forces
After the analysis of Jetstar’s societal environment with the use of PEST, the Porter’s Five Forces can be used to analyse another aspect of the external environment; the task environment.
Porter’s Five Forces is a framework that consists of five competitive forces, threat of entry, power of supplier and buyer, threat of substitution and competitive rivalry. These forces facilitate the analysis of the task environment of an industry or company (Wheelen and Hunger, 2009).
The threat of new entry is high because there are no significant barriers of entry in the airline industry. For example, airplanes can be easily leased, defraying the large initial capital investment. Additionally, exit cost in the business is considered to be low as airplanes can be easily sold off or redeployed to other markets (Sundaresan, n.d.). Least to say, business in budget airlines is getting more lucrative with more flyers turning to low fare flights. Thus more airlines are providing low fare flights to meet the demands of flyers.
Power of supplier of Jetstar is considered to be low. There are two main inputs to the airline industry; aviation fuel and airplanes. Since aviation fuel is a commodity, which prices are largely determined by the market forces and geo-political forces (Sundaresan, n.d.), it can be said that the suppliers do not have much of a control over the prices put out to Jetstar. With regard to the supply of airplanes, there are currently two manufacturers that dominate the scene in the airline industry; Boeing and Airbus. Since Jetstar has dealings with both Boeing and Airbus, the power of the suppliers over the airline is relatively low as compared to others that have dealings with only one manufacturer (Rahman, Joha, 2010).
The power of buyer is significant as seen through the intense price competition amongst airlines. Not to mention, there are many other airlines available for choice. If there is another airline with similar...
References: Wheelen, Thomas L., and Hunger, J. David., 2009. Strategic Management and Business Policy. 12th ed. New Jersey: Prentice Hall
Sundaresan, Sanka Ram, n.d. Analysis of the Airline Industry. [online] Available at: http://bcs.solano.edu/workarea/mgarnier/MGMT%2050/Southwest%20Porters%20-%20Brief%202.pdf [Accessed 5 August 2011]
Rahman, Joha, 2010. Five Forces in Airline Industry. [online] Available at: http://www.slideshare.net/joharahman/five-forces-in-airline-industry [Accessed 6 August 2011]
Please join StudyMode to read the full document