Question

In one paragraph, choose an industry to apply Porter's Five Forces strategy. What implications do you find for the future of this industry? What are opportunities for growth? How far should a company bend under competition in the industry?

Answer 1

I would like to choose airline industry to apply porter’s 5 force model.

Porter’s 5 force model:

1. Treat of new entrant: treat of new entrant is fairly limited because of huge capital required and thin margin in the business. Still airline industry faces many new entrants who are well financed.
2. Treat of substitutes: Treat of substitutes is fairly limited as there is no other means of transportation which can transport people from one place to another quickly. Although there are other means of transportation like rail and ships, it is not effective as air travel.
3. Bargaining power of customer: Bargaining power of customer is high as there are multiple flights connecting single destination with multiple airlines. People can choose any airline.
4. Bargaining power of supplier: Bargaining power of supplier is high because number of suppliers are limited. If we choose aircraft manufacturers there are only two wide body manufacturers i.e. Boeing and Airbus. When it comes to fuel supplier, it is also limited as number of suppliers are only few in number.
5. Competitive rivalry: Competitive rivalry in airline industry is high. Many airline reduce fare to capture market share and stay competitive in market. This results in thin margin to company.

Future of airline industry is very bright as number of air travelers are increasing exponentially. As world progresses and poverty is eliminated number of people who can afford air travel increases which results in higher growth to company.

Company should bend a lot to acquire customers and increase market share. This will help them to stay competitive in market. Companies price there tickets as low as $1 to increase market share which has eroded profitability of industry.