Porter’s Five Forces Analysis for External Appraisal

Topics: Airline, Low-cost carrier, Qantas Pages: 3 (812 words) Published: August 26, 2011
Porter’s Five Forces analysis
Except for the PEST model, Porter’s five forces model is also an important tool to do an external appraisal. The difference between those two models is that they apply to different levels of the environment. For example, PESTEL model is used to analyse the macro-level factors, which impacts almost all industries within this broad environment; however, Porter’s five forces model is more focused on the specific industry that the company is operating in. Porter’s five forces model to some extent indicates the attractiveness of a specific industry through deep analysis in five different aspects. Those five areas are the competition between existing competitors, threat of Substitutes, threat of new entries, bargaining Power of Suppliers and bargaining Power of Buyers respectively. After doing this industrial analysis, the management can have a better understanding of how the external environment looks like and what kind of opportunity or threat they are facing, which ultimately helps them to develop suitable strategies.

Competition between existing competitors
Qantas now has the biggest market share in Australian domestic airline market, which is also the leader in this industry. Qantas try to differentiate itself with other airline companies by providing high-quality full-services to its customers. After the big success of Virgin Blue established in 2000, whose aims to attract price-sensitive customers by selling cheap no-frill tickets, Qantas established Jetstar in 2004 to compete with Virgin Blue in low-cost market. Virgin Blue also changes their strategy recently by rebranding the company name to Virgin Australia, which tries to develop a new image to the public to compete with Qantas instead of only focusing on low-cost markets. Except for those, the emergence of Tiger Airways, who also targets at the low-cost airline market, undoubtedly make the competition more intense. The competition level therefore is very high in...
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