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. [...]
[...] (http://www.themanager.org/Strategy/BeyondPorter.htm viewed the 1st of December 2008) The Five Forces model is quite useful to easily explain the micro-economic environment of the company. This environment is defined by the factors or elements in an organization's immediate area of operations that affect its performance and decision making freedom. These factors include competitors, customers, distribution channels, suppliers, and the general public (definition from http://www.businessdictionary.com/definition/microenvironment.html viewed the 1st of December 2008). But this model is inadequate to analyse other factors that can affect a company as environmental factors (for example, we now know that there will not be oil anymore within 30 or 40 years and this is a challenge for companies as airlines need this product to exist because they do not have any other substitute). [...]
[...] Take the example of an international airline: the road won't be a substitute if the distance of travel is 10,000 miles. A ship will no more be a substitute if the journey is across land. Thus we can say that for regional companies, the road and the railways can be real substitutes because it will be cheaper and maybe an easier means of travel. However, for international companies the ships and the railways (example of the Eurostar) can become substitutes. [...]
[...] Porter's 5 forces Threat of new entrants For the airline companies, this point seems at the beginning quite easy to answer by saying that it is very difficult to establish a new airline company because of different reasons such as the high amount of capital needed to acquire planes, the entire administration process to get into the market and to be able to make your planes use routes or airports. But the deregulation of the market enabled easier establishment: as long as the capital is sufficient, it becomes possible to enter the market. [...]
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