Porter’s Five Forces: Strategy Analysis in Airline Industry

The success of any business in the global industry depends on its ability to develop a powerful competitive strategy. Leaders in the aviation sector need to consider the applicability of Porter’s five forces and consider evidence-based approaches to achieve their potential. The purpose of this paper is to give a detailed analysis of Porter’s model and its appropriateness in the selected industry.

Bargaining Power of Buyers

Companies in the airline industry should strategize and attract more customers in order to achieve their potential. Currently, many scholars are using Porter’s theory to describe how consumers of various services in this sector require quality and sustainability (Porter, 1985). Some are focusing on organizations that can offer superior loyalty programs and fair prices. Airline corporations are being forced to improve their products, consider changing demands to deliver personalized services, and provide timely support. The bargaining power of buyers remains quite high in this sector.

Bargaining Power of Suppliers

The leading suppliers in this industry include aircraft manufacturers and providers of engineering services. Companies in this field should cooperate with these players if they are to record positive gains. Suppliers might decide not to provide the relevant products to airlines that do not promote proper maintenance procedures (Baxter, 2019). From this analysis, it is agreeable that the bargaining power of such stakeholders is moderate.

Competitive Rivalry in the Industry

Competition remains a reality in the global airline industry. The emergence of both private and government-sponsored corporations in different regions is a major development that continues to trigger increased levels of rivalry. Some companies have focused on this challenge to market their services using evidence-based approaches while others have reduced their prices significantly (Renwarin, 2017). Corporations that want to maximize their sales have been keen to identify new destinations and acquire superior aircrafts that will meet the needs of the targeted passengers. The level of competitive rivalry, therefore, remains high in this sector.

Threat of New Entrants

The airline industry remains less favourable to potential starters or new entrants. The reason why this happens to be the case is that those who decide to invest in the sector will require numerous financial and human resources (Baxter, 2019). This is a clear indication that this force remains quite low for the selected industry. New firms will require more time before breaking even or attracting more customers from different parts of the world.

Threat of Substitutes

Corporations operating in the aviation industry should appreciate the fact that there are substitutes available to different customers. Individuals can decide to select other options when planning to move from point A to B, including luxury ships, cars, buses, and electric trains (Renwarin, 2017). However, the issue of cost remains critical whenever a person is making the best decision. The fact that airline transport is capable of meeting the needs of more people in a convenient manner makes it more favourable and appreciable. This means that the airline industry records a medium risk or threat from substitutes.

Conclusion

The above discussion has identified the major forces that inform the decisions many companies in the aviation industry make. Those who plan to invest in this sector should consider such factors and identify the most appropriate suppliers and regions to record positive results. The reduced risk of substitutes and new entrants explain why air transport can be a lucrative venture for those who have adequate resources.

References

Baxter, G. (2019). A strategic analysis of Cargolux Airlines international position in the global air cargo supply chain using Porter’s five forces model. Infrastructures, 4(1), 6-33.

Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York, NY: The Free Press.

Renwarin, J. M. J. (2017). The influence of aviation industrial environment and market orientation on competitive strategy and its effects on aviation business performance (study on aviation industry in Indonesia). Journal of Internet Banking and Commerce, 22(3), 1-23.