Application of the porter model to the airline industry
Porter’s five forces model is a vital analysis tool for industries. The model may assist countries to see the extent of competition and drivers of profitability for the airline business. It can be achieved by analyzing the intensity of threat of recent entrants and substitute product, power of suppliers, entry and exit barriers, the power of buyers, and contention among existing competitors. The key element to consider around applying Porter’s five forces for the airline trade is that the airline business has been troubled by tough headwinds. These ranges from a bunch of external factors that embody declining traveler traffic, increasing operative expenses, high fuel costs, and bigger landing and maintenance prices, except for intense competition from low price carriers that has given rise to a cutthroat price competition that has caused the trade to be severely affected. Indeed, it is often said that the airline trade globally is in a very “death spiral” and additional therefore within the nations where many great carriers have been either forced out of business or had to merge with alternative airlines just to remain afloat (Hanlon, 11).
The power of suppliers within the aviation industry is vast thanks to the very fact that the three primary inputs that airlines have regarding fuel, aircraft, and labor are all plagued by the external setting. The airline business has to use fuel, and there is no substitute presently. For example, the worth of aviation fuel is subject to the fluctuations in the international marketplace for oil, which may whirl recklessly thanks to government and different factors. Also, corporations will have to opt for a trustworthy provider, which implies the scopes of suppliers are going to be narrowed right down to fewer decisions (Baker, 22). Similarly, labor is subject to the strength of the unions who typically bargain and obtain unreasonable and expensive concessions from the airlines (Hanlon, 58). Third, the airline business requires crafts either on the outright sale or wet lease basis that implies the airlines ought to rely upon the two biggies, Airbus, and Boeing for their craft demands (Baker, 24). It can be the rationale that the strength of the suppliers regarding the three inputs required for them is classified as high about the Porter’s five forces framework.
Work Cited
Hanlon, Pat. "The Airline Industry." Global Airlines (2010): 11-62. Print.
Baker, David Mc. A. "Service Quality and Customer Satisfaction in the Airline Industry: A Comparison between Legacy Airlines and Low-Cost Airlines." AJTR American Journal of Tourism Research 2.1 (2013). Print
