...Porter Airlines Case Brief Embry-Riddle Aeronautical University Background Porter Airlines is another unlikely success story in the fierce and cutthroat regional airline industry. Founded in 2002 by Robert Deluce, a regional airline veteran, Porter Airlines wanted to take advantage of a small but crucial market in the Toronto area and grow from that beginning. The Toronto area is considered Canada’s financial hub and thus created a large number of business travelers. Deluce’s strategic vision for Porter was to start with exceptional customer service and combine that with numerous flight options by instituting a quick turnaround system for departures and arrivals. He also wanted a competitive but low cost fare structure with the intent to gain a healthy market share in a short period of time. Porter wanted to use a single turbo prop airplane fleet that would have low maintenance costs and would be efficient to run over short distances. This would allow Porter to offer more flights at lower capacities yet still be able to make a profit. Deluce also wanted his working environment to be friendly but efficient and he leads by example. Deluce has also been known to come down to the terminal to greet notable passengers—governors, cabinet ministers—when they arrive. As one observer put it to me, “He runs his airline like a family restaurant.” (Preville, 2013) Air Canada, its subsidiaries and affiliates dominated the Canada airline industry and they often used...
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...Cost Leadership Strategy This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive customers. This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio (price compared to what customers receive). To succeed at offering the lowest price while still achieving profitability and a high return on investment, the firm must be able to operate at a lower cost than its rivals. There are three main ways to achieve this. The first approach is achieving a high asset turnover. In service industries, this may mean for example a restaurant that turns tables around very quickly, or an airline that turns around flights very fast. In manufacturing, it will involve production of high volumes of output. These approaches mean fixed costs are spread over a larger number of units of the product or service, resulting in a lower unit cost, i.e. the firm hopes to take advantage of economies of scale and experience curve effects. For industrial firms, mass production becomes both a strategy and an end in itself. Higher levels of output both require and result in high market share, and create an entry barrier to potential competitors, who may be unable to achieve the scale necessary to match the firms low costs and prices. The second dimension is achieving low direct and indirect operating costs. This is achieved by offering high volumes of standardized products, offering basic no-frills products...
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...competition. One way to answer those questions is by using Porter's Five Forces model. Originally developed by Harvard Business School's Michael E. Porter in 1979, the five forces model looks at five specific factors that help determine whether or not a business can be profitable, based on other businesses in the industry. "Understanding the competitive forces, and their underlying causes, reveals the roots of an industry's current profitability while providing a framework for anticipating and influencing competition (and profitability) over time," Porter wrote in a Harvard Business Review article. "A healthy industry structure should be as much a competitive concern to strategists as their company’s own position." According to Porter, the origin of profitability is identical regardless of industry. In that light, industry structure is what ultimately drives competition and profitability —not whether an industry produces a product or service, is emerging or mature, high-tech or low-tech, regulated or unregulated. "If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment," Porter wrote. "If the forces are benign, as they are in industries such as software, soft drinks, and toiletries, many companies are profitable." Understanding the Five Forces Porter regarded understanding both the competitive forces and the overall industry structure as crucial for effective strategic decision-making. In...
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...than others… …but how do you tell them apart? @strategywrap strategywrap.com Leave it to gut feel? @strategywrap strategywrap.com Leave it to gut feel? @strategywrap strategywrap.com 1 27 990 91 7.50 13,450 89 Get stuck in to some analysis? @strategywrap strategywrap.com 1 27 990 91 7.50 13,450 89 Get stuck in to some analysis? @strategywrap strategywrap.com Whether you are… Working on a plan for a new business Contemplating the launch of a new product Reviewing the strength of your own marketplace @strategywrap strategywrap.com …Porter’s Five Forces model can help you understand your situation. This model was developed more than 30 years ago by Michael Porter, a Harvard academic. However, it remains as relevant today as it was when it was developed. @strategywrap strategywrap.com Porter’s Five Forces model Threat of new entrant Supplier power Competitive rivalry Buyer power Threat of substitutes @strategywrap strategywrap.com Let’s take each of the five elements… buyer power @strategywrap How much power is held by the customer? How many customers are there and how many customers does a typical player have? How much market share do the largest customers account for? What alternatives do customers have? strategywrap.com Let’s take each of the five elements… supplier power @strategywrap How much power do suppliers hold? ...
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...Introduction----- The diamond model is an economics model developed by Michael Porter in his book The Competitive Advantage of Nations. In the mid-1980s, Professor Michael Porter of Harvard Business School developed the model to assess the competitiveness of regions, states and nations. It’s a model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to them. Porter used a diamond shaped diagram to illustrate the determinants of national advantage. That’s why it is called the Porter’s diamond model. The body -------- Now we will use some examples to illustrate the determinants of national advantages. For example:- • Germany is associated with good car making • Japan is strong with respect to micro-electronics and cameras. • France is strong with respect to wine. • The UK (at least until recently!) was associated with a strong financial services industry The chart --- Factor conditions: Some countries enjoy natural advantages. For example, France starts with an advantage in the wine industry because of its climate and soil. Finland, however, is never likely to be good at producing wine. Germany has an abundance of iron ore, ready to be used in the car and other industries. Climate and natural resources are known as basic factors. In addition, countries can develop advanced factors such as their transport infrastructure, telecommunications, and educational system. Demand conditions: The first step...
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...Porter Airlines Critique Assignment 1. A comfortable and safe passenger jet is the basement of excellent customer service. If Porter raises the bar of customer service, Bombardier will have to react (i.e. modify or upgrade aircrafts) to meet Porter’s demand. But airline industry is highly competitive and has relatively low margin, while the cost to improve customer service can be rather high. Even if Bombardier can react fast enough to meet the ever-changing demand from airlines, how does it negotiate the high cost associated with R&D with airlines? Bombardier must consider the cost and benefit before accepting airlines’ offer. Another issue become more salient as Bombardier is losing its supplier power. Its performance on stock market is unsatisfying, and it desperately needs more support and orders from airlines (Van Praet, 2015). Therefore Bombardier’s reliance on Porter grows bigger, undermining its bargaining power when making offers with airlines. On the other hand, to compete with Air Canada and Westjet, Porter is considering to expand its destinations, that is, to include in more long-haul routes to attract customers (Owram, 2015). Although Bombardier C-series has the capacity to meet Porter’s expansion plan for now, it’s hard to say whether Bombardier has the capability to meet Porter’s expansion in the long run. By then Porter can turn to Boeing or Airbus for more advanced long-haul airplanes. Consequently, Bombardier’s poor performance and Porter’s growing...
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...Michael Porter presented three generic strategies (above) that a firm can use to overcome the five forces and achieve competitive advantage. Firms that identify with one or more of the forms of competitive advantage that Porter identified outperform those that do not and firms that combing multiple forms outperform those that only use one. Overall Cost Leadership The first generic strategy is overall cost leadership. Cost leadership requires a tight set of interrelated efforts that include: - Aggressive construction of efficient-scale facilities - Vigorous pursuit of cost reductions from experience - Tight cost and overhead control - Avoidance of marginal customer accounts - Cost minimization in all activities in the firm’s value chain, such as R&D, service, sales force, and advertising The value-chain concept can be used as an analytical tool to identify specific activities and the costs and assets associated with them. Two important concepts related to the overall cost leadership strategy are economies of scale (the decline in unit costs that usually come with larger production runs, larger facilities, and allocating fixed costs across more units produced) and the experience curve (how the business “learns” to lower costs as it gains experience with production processes; with experience, unit costs of production decline in most industries as output increases). Overall Cost Leadership: Improving Competitive Position vis-à-vis the Five Forces - Enables a firm...
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...IN AN article entitled “Strategy and the Internet” published in the March 2001 edition of the Harvard Business Review, Michael Porter outlined six principles that he believes companies need to follow if they want to establish and maintain a distinctive strategic position in the market place. Since the internet is a business platform with low barriers to entry, these six strategic principles are particularly relevant to any company that wants to be profitable online: 1. Stand for something In order for a company to develop unique skills, build the right assets, and establish a strong reputation it is important to define what the company stands for so that the company will have continuity of direction. 2. Focus on profitability This point seems obvious, however many internet based companies have instead focused on “unique visitors” and “page views” as measures of performance. At the end of the day, sustainable profits will only be possible where goods or services can be provided at a price which exceeds the cost of production. 3. Offer consumers a unique set of benefits Good strategy involves being able to provide a distinct set of benefits to a particular group of consumers. Trying to please every consumer will not give a company a sustainable competitive advantage. 4. Perform core activities differently If a company is able to establish a distinctive value chain by performing key activities differently from its competitors, then this will help...
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...discussions', 'critical discussions'] - “The contribution by Porter (1990) on the competitive advantage of nations has led to an extensive discussion among academics and practitioners on the sources of international competitiveness (Grant, 1991; Gray, 1991). However, in order to understand why so much emphasis is placed on the diamond framework in the management literature, this essay will discuss Porter’s concept of the Diamond and the factors that contribute to the development of national competitive advantage. This paper will begin with a theoretical approach followed by the reception of different authors and schools of thoughts who disagreed with his management thinking, and then goes on to consider empirical issues which have arisen subsequently, followed by a conclusion.” Theoretical Discussions (explain the 'main theory' [such as 'Late/Early industrialization', 'Managerial enterprise', 'Weber's theory about impacts of culture'] in this question) - “Porter’s theory of national competitive advantage is based upon a study of the characteristics of the national environment which identifies four sets of variables, and an additional two, which influences a company’s ability to establish and maintain competitive advantage within international markets. These interacting determinants are: factor conditions; demand conditions; related and supporting industries; and firm strategy, structure and rivalry and form what Porter refers to as the “national diamond.” The four main determinants...
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...QUESTION: Choose an industry in which you would like to compete. Use the five forces method of analysis to explain why you find that industry attractive. Porter’s Five Forces Method Industry: Car service industry Introduction Michael Porter is a professor at Harvard Business School and is a leading authority on competitive strategy and international competitiveness. Five forces uses concepts developing, Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the industry profitability. Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: 1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. In the car service industry, for company owned players the bargaining power of suppliers is less as it can get constant supply of spare parts including OEM parts (Vehicle manufacturer’s brand) and OES parts (reputed brands of component manufacturer’s either domestic or international, supplying to vehicle manufactures or aftermarket)....
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...to successfully analyse the Starbucks case, thorough research was carried out in these areas. A number of sources were offered for us to explore in relation to the case. We chose the following, as we believed they possessed the most relevant information. The Financial Times, Harvard Business Review, Mc Kinsey Quarterly and we also referred to our core textbook: Exploring Corporate Strategy. With regards to the international context surrounding Starbucks we looked at different areas, which we believed, were of the most importance e.g. what issues Starbucks faces on an international scale and also what Starbucks can do strategically to change for the benefit of the company. We looked at the work of one theorist in particular Michael Porter and ways in which his concepts and theories could be applied to this particular case study. We chose to adopt the infamous Porter’s Diamond as a theoretical framework for our analysis. If this model is applied to a company in the correct manner it allows for them to obtain and sustain competitive advantage over rivals as it provides them with more knowledge as to how they conduct their operations and power the business to future success. The diamond model looks at how a business can reign over rivals within every country which it operates. There are four points to this model, in brief: Firm Strategy, Structure...
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...Competitive Advantage Creating and Sustaining Superior Performance Author: Michael E. Porter Michael E. Porter's Competitive Advantage explores the underpinnings of competitive advantage in the individual firm. Porter's groundbreaking concept of the value chain disaggregates a company into "activities," or the discrete functions or processes that represent the elemental building blocks of competitive advantage. Giving readers a comprehensive understanding of business strategy and how to create a sustainable competitive advantage for their organization, Porter explores how a firm can put the generic strategies of cost leadership, differentiation and focus into practice. This essay will explore Competitive Advantage and the underlining theory that to compete in any industry, companies must perform a wide array of discrete activities that are narrower than traditional functions. It will analyze the real core of the book which is to determine whether companies profit from creating value for customers, or whether that value is competed away. INTRODUCTION “Competitive Advantage is at the heart of a firm’s performance in competitive markets. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification. Today the importance of competitive advantage could hardly be greater. Firms throughout the world face slower growth as well as domestic and...
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...Johan Basson 2457167 CCMM 516 Assignment 1 QUESTION 1 1.1 Introduction Porter's competitive forces model utilises five legs or better known as competitive forces to determine the market position of a company or a certain line of business. These five legs will be briefly mentioned and discussed below and will then be applied on the NBA to determine its current position. 1.2 Entry barriers The first competitive force is the threat of new entrants, or also known as entry barriers, this analyses the market and then determines how easy it is for new businesses or companies to enter and thrive in the industry. The reason for this is that the more companies enter a market, the less market share each company will have in a business. This means that the market will become less profitable and less attractive. Things that influence the entry barriers include economic considerations like capital required and the economy and also in general legislation and rules and regulations limiting the entry into a certain market. 1.3 Threat of substitutes The second competitive force is the threat of substitute products or services. This means that if it is a product that is easily made or obtained and it has no registered patents over it, that it would easily be substituted by a similar or same product. It also refers to the uniqueness of a product and how easily a similar product or a different product with the same goal may be manufactured. If it is easily substituted it weakens the...
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...1. The threat of entry: This examines the threat of potential competitors as well as existing competitors. The threat of new entrants is based on the market entry barriers. These barriers can take a variety of forms and exist to prevent a surge of new firms into an industry whenever profits rise above zero. The most common forms of entry barriers (excluding legal and physical obstacles) are as follows: • Economies of scale: for example, the benefits of bulk purchasing • Cost of entry: for example, how much one would have to invest in new technology in order to compete • Distribution channels: for example, competitors' ease of access • Cost advantages that aren't related to the size of the company: for example, connections/contacts and expertise • Government legislation: for example, new laws that might weaken a company’s competitive position • Differentiation: for example, a certain brand that cannot be copied 2. The Power of Buyers: Buyer power is one of the two horizontal forces. The most important factors that determine buyer power are the size and the concentration of customers. Buyer power is high when there are only a few large players in the market, such as large grocery store chains. It is also high if there are a large number of small suppliers supplying the large grocery store chains. 3. The Power of Suppliers: This tends to be the opposite of the power of buyers. The switching costs are high (for example, switching from one software to another)....
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...Sujay J Shetty Div – A Report The competitive structure of an industry can be analysed using Porter's five forces. According to this model the likelihood of firms making profits in a given industry depends on five factors: rivals, customers, suppliers, new entrants and substitute products. The Five Forces 1. THREAT OF NEW ENTRY: A new entry increases competition. It competes for the same share and hence there is a threat for existing players that their market would be eaten up. However barriers to entry plays a very important role in determining the threat of new entrants. An industry can have more than one barriers. The likelihood of entering a market would be lower if: * The entry costs are high – huge investments * Already existing firms have more advantages - loyalty * The existing firms have control 2. THE POWER OF SUPPLIERS The stronger the power of suppliers the more difficult it is for firms in that sector to make a profit because suppliers can determine the terms and conditions on which business is conducted. Suppliers will be more powerful if: * There are relatively few of them (less alternatives for buyer) * Moving to other player is difficult or costly 3. THE POWER OF BUYERS The more the power of buyers in an industry the more likely it is that they will be able to force down prices and reduce the profits of companies that provide the product. Buyer power will be higher if: * There are very few good buyers...
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