Airline industry: analysis of five forces model of Porter
- Porter's 5 forces
- Threat of entry
- Buyers bargaining power
- Supplier Power
- Competitive rivalry
- Criticism of Michael Porter's 5 FORCES
Airlines are companies and their aim is to operate routes and carry passengers. We will not analyse the cargo part of the airlines here but only the passenger carrying. An Airline can be a national company (airline owned by the government of a country). It normally conducts scheduled flights but can sometimes conduct chartered ones. A regional company (airline which only conducts domestic flights between regions of a country).
A public company (airline the main shareholders of which are the public such as national or regional institutions). They can conduct all types of flights.
A private company (established on private investments)
Tags: Porter's five forces for airline industry, Porter's model for airline industry, 5 force analysis for Hong Kong airline industry, Case study on airline industry, Porter's analysis for the airline industry
[...] Criticism of Michael Porter's 5 FORCES Porter's Five Forces model is still widely used because it allows a simple reading of an organisation's environment. This model is characterised by the usage of a defined area of the external competitive environment of a company and in a certain way some rules are associated with this area. The strategy then only has to be set according to the different forces analysed. This model is effective if the competitors stay in the established area we are analysing. [...]
[...] In this case, we see that these two aircraft manufacturers, if they want to obtain more market shares, sometimes have a position of weakness facing airline companies. (http://archives.lesechos.fr/archives/2006/LesEchos/19714-101-ECH.htm, translated from French, accessed the 1st December 2008). Thus, we can conclude this point by saying that the suppliers' bargaining power is strong in the airline industry even if sometimes big airline companies have a powerful position against the aircraft manufacturers. The fact is that they must rely on three powerful suppliers that can make them lose money in case of conflicts. [...]
[...] So Porter's model is quite relevant in explaining the micro-analysis environment of a company (with some other clues that we have just talked about), but it must be linked with the other tools of marketing strategy which are the PEST analysis and the SWOT analysis. PEST will be relevant for analysing a wider area of the company as it is useful to analyse the macro-environment as well. And as an external analysis cannot only be focused on the micro or the macro environment, linking these two tools is more effective. [...]