...What affect has and what is the future of airline industry To begin with the purpose of the particular essay will intend to give an explanation about the Porter's five forces. However the discourse will focus on the sixth force and what affect has. The first part of the discussion will be analysed and supported by arguments about the meaning of Porter's five forces. Nevertheless examples for the five forces will mentioned in order to support and take thesis in the particular analysis. However examples about the sixth force will be mentioned in order to give the reader a satisfactory explanation and to make clear the effect that have in airline industry. Afterwards the essay will analyse the future of the airline industry. Finally a conclusion gives the reader a summarizing about the aspects discussed on the analysis. The Airline Industry has changed the people’s life. In addition it has drop the travel time and decrease the distances making possible to visit lands that cannot be imagined in the past. Michael Porter had created a model showing the influence on industry by five forces. This model help the managers to understand better the strategic forces that appear on industry and how they affect profitability. Five forces analyzing five key areas namely competitive rivalry, the threat of substitutes, the threat of entry, the power of buyers and the power of suppliers. Furthermore Porter referred to these forces as the micro-environment, to contrast it with the more general...
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...Southwest Airlines Prepared for: Mr. Balasubramanian Shankar Due date: Monday, 5th October 2015 Submitted by: Jiyeon | CT00000000 | TABLE OF CONTENTS 1. INTRODUCTION 2 2. COMPANY BACKGROUND 3 3. PESTEL ANALYSIS 4 3.1 Political 4 3.2 Economic 4 3.3 Social 5 3.4 Technological 5 3.5 Environment 5 3.6 Legal 6 4. PORTER’S FIVE FORCES ANALYSIS 7 4.1 Threat of New Entry 7 4.2 Threat of Substitution 7 4.3 Buyer Power 7 4.4 Supplier Power 8 4.5 Competitive Rivalry 9 5. STRATEGIC RECOMMENDATIONS 10 5.1 Managing Technology Advancements 10 5.2 Maintain Cost Advantage 10 5.3 Geographical Expansion 10 5.4 Product Diversification 11 6. CONCLUSION 12 7. REFERENCES 14 1. INTRODUCTION The focus company in this report is Southwest Airlines (SA), a major low cost carrier in the United States (US). The aim of this report is to examine the current market environment and competitive power of Southwest Airlines. In order to have a substantial overview of its environment, two analyses, the PESTEL analysis and Porter’s Five Forces analysis, will be used to evaluate SA. With the findings, strategic recommendations will be made for the problems that the airline is facing or may encounter in the near future. 2. COMPANY BACKGROUND Southwest Airlines is a budget airline established in 1967 by Rollin King and Herb Kelleher and had its first flight in 1971. Headquartered in Dallas, Texas, SA is an important airline in the...
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...Porter’s Five Forces After the analysis of Jetstar’s societal environment with the use of PEST, the Porter’s Five Forces can be used to analyse another aspect of the external environment; the task environment. Porter’s Five Forces is a framework that consists of five competitive forces, threat of entry, power of supplier and buyer, threat of substitution and competitive rivalry. These forces facilitate the analysis of the task environment of an industry or company (Wheelen and Hunger, 2009). The threat of new entry is high because there are no significant barriers of entry in the airline industry. For example, airplanes can be easily leased, defraying the large initial capital investment. Additionally, exit cost in the business is considered to be low as airplanes can be easily sold off or redeployed to other markets (Sundaresan, n.d.). Least to say, business in budget airlines is getting more lucrative with more flyers turning to low fare flights. Thus more airlines are providing low fare flights to meet the demands of flyers. Power of supplier of Jetstar is considered to be low. There are two main inputs to the airline industry; aviation fuel and airplanes. Since aviation fuel is a commodity, which prices are largely determined by the market forces and geo-political forces (Sundaresan, n.d.), it can be said that the suppliers do not have much of a control over the prices put out to Jetstar. With regard to the supply of airplanes, there are currently two manufacturers...
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...Five Forces model of Airline Industry Air travel has changed the way people live and experience the world today. The airline industry is a strategic sector that plays a fundamental role in the globalization of other industries since it promotes tourism, world trade, foreign investment and, therefore, leads to economic growth. However, all airlines within the industry operate in a highly dynamic environment where various legal, social, technological and economic forces interact with each other, thus influencing their decisions and actions In the industry where airlines can face severe financial distress due to oil crisis, recessions and terrorist attacks, In order to survive, as well as succeed, the business needs to assess its competitive environment and identify key factors that may influence its actions (Porter, 1998, p.45). The airline industry is very competitive and Michael Porter’s five-forces model can be used to analyse the intensity of the competition and the profitability of this industry. Porter’s five forces model is a business unit strategy tool which is used to make an analysis of the value of an industry structure (Hubbard, 2004, pg 35). The analysis is made by the identification of 5 fundamental competitive forces. These include: Threat of new entrants is high One of the forces identified by this model is the threat of new entrants which refers to the possibility of new competitors entering the industry and undermining the profits of the established...
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...Porter’s Five Force Model Industry competitors - Local competitors are Air Asia, Firefly, etc - International competitors- Singapore airlines, Garuda, Cathay Pacific, Thai International Airways - Other Low cost Airlines- Compass, Tiger Airways, Cebu Pacific, Jetstar Asia Airways, Impulse, Virgin blue Airlines. The number of competitors is very high and with the emergence of low cost carrier and deregulation the internal competition has increased and the only reason that reduces it is the low and highly volatile profitability. Suppliers Power - 高油費->高供應商議價能力Fuel prices are ever increasing affecting the cost so the supplier power is high. - 買大量飛機-> 高供應商議價能力The Asian airline industry is very optimistic about the growth potential of the Asian aviation industry so is placing huge aircraft orders thereby increasing the bargaining power of the suppliers again - The civil aircraft industry is monopolized by two major aircrafts manufacturers - Large capital required so the leasing companies come into picture. - Highly specialized and professional employees are required to maintain the status of five star carrier services. - The recent crisis in the overall airline industry has to some extend lead to a reduction in the prices of the aircrafts. Buyer’s power - Local population (Malaysian) - Southeast population- Indonesia, Thailand, Singapore, etc. - There is no switching cost as the buyer...
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...Micheal Porter projected five forces model in capacity to analyze competitive strategy of the management in any industry. These forces hold an exigent spectrum of importance in the airline industry because of enormous market saturation. The concentration of airline service providers in the market are more than the actual needed demand. Due to immense competition, the level of competition is enhanced within the complex market offering in terms of technology, prices, in-flight entertainment, customer services, and so on. Hence, this paper is presented to analyze the Porter’s five forces model in the horizon of airline industry. Porter has also given the more enhanced framework of forces by including the sixth force as well, which will subsequently be analyzed according to said industry. Porter’s Six Forces Model Analysis The extension of Porter’s five forces model is actually regarded as Porter’s six forces model. The enhanced stimuli of forces did not gain such popularity as that of its previous model integrating five forces only, because of its less positive acceptance. The model is similar to the five forces model with only difference of sixth force in the framework. Hence, all Porter’s (1980) forces are explained below with their certitude rating in the parameters of airline industry. Force 1: Threats of New Entrants The threat of new firm into the same industry is the force which describes the dependability of new entrants on the entering barriers. These barriers...
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...Asian Low Cost Airlines A Strategic Management Analysis Analysis is made from Strategic Alliances between Batch 20 and Batch 21 of SGU MBA Program Written by YopieRissa Pahlawan Arfianto RiaHutari RonyHariadi If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. Rollin King and Herb Kelleher, founder of Southwest Airlines in 1971 SECTION 1 – Budget and Low Cost Airlines 1.1. Budget Airlines The original concept of budget airlines is basically outsourced business. It puts together other businesses into and integrates those separate businesses into a form of operation and put effort to create a brand. Basically, it will try to minimize capital investments and cover it with operational expenses. And by nature of its business model, the cost structures are all variable costs, or very minimum fixed costs. With this business model, the company is not only rent the aircraft, but also outsourced its pilots, flight attendants, and other employees. It will sell tickets through agents and use service from company doing aircraft maintenance and services. And to ensure the profitability, it is critical that the operational costs, which is the main source of expenses, to be as low as possible. Therefore, it is typical that companies using this business model to use old airplanes which are close to end of the service-life...
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...Malaysian Airlines: A Business Turnover Name: Course: Instructor: Date: Malaysian Airlines: A Business Turnover Summary Malaysia Airlines ranks among the top government-run agencies in Malaysia. The organization is the national carrier for the country flying to over 100 destinations in six continents across the world. It is based at the Kuala Lampur International Airport where its core operations are run, and recent statistics indicate that it has the strongest influence in East and south Asia regions. However, it is also important to note that its influence is also growing in Europe and Australia, which technocrats believe to be the growing influence in the kangaroo routes leading to Australia and the pacific (Alamdari & Fagan, 2005). The organization has undergone tremendous changes to position itself strategically in the rapidly changing world of air transport. With the increased competition ranging from the swiftly growing carriers including the Emirates, Qatar airways and Etihad airways, and the low cost competitors such as Air Asia and Jetstar to the well-established carriers such as Cathy Pacific and Singapore airlines, the organizations have enacted strategic changes to position itself on the global air transport market. The wakeup call came in 2005 when the airline experienced its worst experience. The Malaysia Airline System achieved success in two years and braced the impact of the financial meltdown that rocked the world at around...
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...1 (25) "Porter's five forces model of industry competition is by far the most widely-used approach in industry and competitive analysis". Using Porter's five forces model, critically analyse Kulula's operation within the air travel industry. Competitive Analysis of Airline Industry Using Porter’s Five-Forces Model Rivalry within the Airline Industry: The nature of rivalry in the airline industry is extremely intense as there are several airlines operating in South Africa. Previous years the domestic airlines consisted of SAA, Comair, Nationwide and Sunair. They charged high prices and customers didn’t have much of a choice but to fly with one of these airlines which makes Kulula’s arrival a welcome new alternative. Larger rivals (SAA) were threatened by Kulula’s arrival and did not want to lose market share. They immediately countered the threat posed by Kulula by launching their “red-eye” campaign which was quickly countered by Kulula’s red-eye campaign and to date a there is a low-intensity price war between SAA and Kulula. Kulula aggressively compete with other airlines through offering the cheapest flights possible in South Africa via their online booking system. No unwanted extras, no free food or drinks in an effort to grab more customers than other competitors. They have to keep their flights more than 80% full in order to turn a profit a very tall order if one consider that other low cost carriers have folded under the cost pressure. Kulula...
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...Southwest Airlines Case Study Jared G. Sanders BUSN412 Business Policy April 1, 2012 SOUTHWEST AIRLINES WWW.SOUTHWEST.COM AIRLINE INDUSTRY BACKGROUND /HISTORY/ COMPANY TIMELINE: Southwest, founded by Rollin King and Herb Kelleher, began as a small Texan airline almost 35 years ago and has grown to become one of the largest airlines in America. It was created on the following premise: “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline!” (www.southwest.com). Today Southwest Airlines flies more than 70 million passengers a year to 60 great cities all across the country, and they do it more than 3,000 times a day. They have 436 of the newest jets in the nation, with each plane being an average age of 9 years. (www.southwest.com). Southwest’s combination of low fares, outstanding customer service, and strong leadership have helped the airline remain profitable even in the midst of tragedies like the terrorist attacks on September 11, 2001. SWOT ANALYSIS: Southwest was set up for success from the beginning because of its unique upside-down organizational structure. Upper management is at the bottom and supports the front line employees, who are the real experts. Kelleher’s unorthodox leadership style, in which everyone in the company makes management decisions, is largely unheard of these days. The company doesn’t...
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...ANALYSIS OF THE AIRLINES INDUSTRY Introduction The airlines industry in the U.S. provides air transportation services for passengers. To determine the current state of the airlines industry, various analyses were performed. An analysis of the macro-environmental factors affecting the industry was first analyzed. Then, a Porter’s five forces analysis was used to determine the attractiveness of the industry, and current changes in the industry as a whole. Key success factors were analyzed to determine a firm’s ability to thrive within the marketplace. And lastly, a strategic group map was created to assess the companies that are best positioned and worse positioned in the industry, along with a financial analysis of major competitors in the industry. Macro-Environmental Factors Affecting the Industry Macro-Environmental components include, “demographics, social values and lifestyles, political and legal factors, economic conditions, environmental conditions, technological factors, and global forces” (Gamble, Thompson, & Peteraf, 2012, p. 79). The most influential factors in the airlines industry are economic conditions and environmental factors. The economic recession in 2009 greatly affected the airlines industry. Poor economic conditions reduced the demand for consumer and business travel. According to the IBIS World database, “Rising unemployment rates and falling disposable income during the recession resulted in a stark 16.3% decrease in revenue” (Brennan, 2013)...
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...Budget airline industry has been profitable during last decade, and particularly Ryanair, as the largest European budget airline company has been vital in this area. Its success in past, issuses nowadays and importantly the sustainablility has drawn significant attention and offered a great oppourtunity for research. This case study will analysis the budget airline through its business model, evironment and industry and finally focus on Ryanair’s strategy position in order to explore its sustainability in future. The framework is briefly illustrated by following figure. Figure 1: Brief Framework of this Case Study The budget airline business model The first company in history to suggest the budget airline business model to the world was Southwest Airlines (SWA) in Texas, USA. At the beginning of 1970s, this company have launched first flights between three major cities in Texas i.e. Houston, Dallas and San Antonio at a price of 20 dollars, which was initiative at that time. It marked itself as budget airline and initiates a business model allowing it to offer scheduled flights service at a very low fare. It would focus on short-distance flights of typically 600 km or one hour with high traffic efficiency. Many strategic approaches of budget airline business model’s operations differ from the more traditional of full service airlines model. 6 main factors can be identified, which are illustrated in the table below: Budget airline | Full service airlines | ...
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...1.0 Introduction The competition in Airline industry is now rising which make it harder and harder for those Airline corporation to survive. Scandinavian Airlines System (SAS) is an airline business which was founded in early 1946. SAS has made a huge successful change to overcome its problems through recession period. This successful change has a big contribution of Jan Carlzon who is a CEO of SAS. Nowadays, after a vertical integration revaluation, SAS has expanded their business into International Hotel (SIH) and Service Partner (SSP) such as catering and restaurants. The main aim of this report is to analyze the problems that SAS faced as well as identify the solution approaches that had been used by the company, especially the vertical integration. In order to analyze those problems, the report will apply SWOT analysis, PESTEL analysis and Five Porter Factors analysis. 2.0 Analysis 2.1 Analysis SWOT is stand for Strength, Weakness, Opportunities and Threats. According to Robert (2004), SWOT analysis aims to identify as well as analyze internal strengths and weaknesses of a company. It also analyzes opportunities and threats that the environment has on a corporation. SWOT analysis can help companies to enhance their strengths and opportunities as well as minimize their weaknesses. Due to Nadine and Anne (2007), SWOT is a useful tool for decision making. In addition, by applying SWOT, company is able to avoid the unworkable constellations of threat and weakness...
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...The Airline Industry In this brief report I will be analyzing the airline industry up to date and I will also look at various aspects including Porters five Forces diagram, key customers and products of the airline industry. The reason for analyzing this brief report is to give the reader with a wider knowledge of the topic. The porter five forces model can be used to assess the competitiveness of the Airline industry. It can also review the competitive within the industry, it also checks for the threat from outside. Key points of Porters five forces model: • Supplier Power: The power of suppliers to drive up the prices of your inputs. Supplier power is reasonably high in airline industries because of the specialist nature of the goods required • Buyer Power: The power of your customers to drive down your prices. The bargaining power of buyers in the airline industry is quite low due to the high cost of switching planes. • Competitive Rivalry: The strength of competition in the industry. Highly competitive industries generally earn low returns because the cost of competition is high. • The Threat of Substitution: The extent to which different products and services can be used in place of your own. Substitutes to the airline industry only carry a small level of risk to existing companies within the sector. • The Threat of New Entry: The force of new entrants is relatively low in the industry. The ease with which new competitors can enter the market if they...
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...of the company's strategic direction and focus. Mission Statement Indigo airlines aims to become the number one leader in the low cost airline industry of India, offering the best service and ensuring highest standards of quality at low cost to the customer. Goals and Objectives Non- Financial Indigo airlines aim to attain the utmost rank of customer satisfaction in terms of the service and products offered by the firm. The management ensures that the highest standards of quality are in place at every level to ensure 100% customer satisfaction. Financial The financial goal for the firm is to ensure highest rate of return for the investors and the stakeholders and increasing the profit by following steps. Effective costing of products Cost cutting Increasing the market share by 25% Core Competencies / Competitive Advantage The strengths for indigo airline in the current market situation are the price tag of the tickets and the fact that it has been awarded many times in 2009 as one of the best low cost airlines. The recession was extreme and most of the people who were using services from jet airways and kingfisher came down to low cost airlines (financial express).The market almost doubled for the low cost airlines as in the times of recession companies wanted to cut costs so most of -the official travel (Domestic) was done through low cost airlines. Indigo airlines are a low cost airline and because of that when they earned in...
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