Porter Five Analysis of the European Airline Industry Essay Example for Free

Porter Five Analysis of the European Airline intentness EssayWhile the business model existed for some time (first such in 1973 US), the appearance of these in the European market needed the liberalization brought forward by the EU, implementing the Freedoms of the air in three stages. In 1997 the first LCC (Low Cost Carrier), the Ryanair began its operation, and in a few years a few more followed, which gave the interior(a) and network airlines a new problem to the existing economic problem, shrinking market and others such as 9/11. By today the changes in the historic two decades have shifted and diversified the industry, which was once a mature and to some level declining in structure. The new regulations, companies, investors and consumers have brought new life, the industry once once again mature with fragmented characteristics. The ideal tool for the assessment of the airlines industry is Michael Porters five force model. It aims to line up and demonstrate the forces in the microenvironment which influence the industry, indwelling and external as well. Threat of new entrants (barriers to entry) High capital investment ? Capital intensive ? Airport slot availability ? Predatory pricing ? brandmark loyalty/frequent flyer ? Economies of scale ? Limited number of routes The threat of new entrants, due to the barriers mostly set by the nature of the industry and by the existing companies, are very low. Yet sometimes when the possibility arises, new companies start in the past few years many national companies went pause leaving a market to take by the existing companies or new upstarts. Bargaining power of suppliers Aircraft manufacturers Relatively low number of suppliers Suppliers are concentrate Airlines are valued customers ? Airports Slot availability Alternatives to the primary airports ?The bargaining power of suppliers is mostly two-legged, and both have a medium threat. For both parties it is best to find a mutually working solution on a long term, because it is a industry with relatively small number of players loosing even one fuck have an impact on both sides. Threat of substitutes Alternative transport (bus, car, train) Videoconferencing Global environmental awareness The threat of substitutes includes a broad variety for the various needs. All-in-all it dormant only gives a medium threat, since the quick transport to a distance has no alternative.Bargaining power of customers Price ? Internet/social media client orientation ? Choice With the first LCCs the customers had no bargaining power if you choose to go with this low price, accept the services as it is. However, nowadays with more alternatives and the ever-reaching lucre and social media a bad customer satisfaction can be a disaster. This can however be mitigated with customer orientation, but still customer had the choice, it is a medium utmost level. Rivalry within the industry Between LCC and national/network airlines Between LCCs The r ivalry within the industry is high due to the high number of big and medium sized companies. The airlines industry is highly competitive, with very high barriers and medium to high threats within. While on that point is a relatively low threat from a new market entree, the existing international competition is fighting over all the resources more and better airports maybe with mutually excluding contracts, picking up the customers fed up with their previous carrier or starting a price war on a selected destination, book binding the newly aquired flyers with brand loyalty programmes.Unless there is an opportunity, it is not an attractive industry to enter due to the high number of barriers. However, once established a foot, it is a very interesting and very intensive industry with good possibilities. The major LCCs depending on how low cost they are making good profit and there is still room for growth. The key factors for success should include Efficiently utilizing the resources (financial, time, human resources) Utilizing a network of business partners (complementary) Timely expansion (trying new destinations, increasing frequency) node orientation (with following trends eg. ocial media) These above should be observed by both LCCs and traditional airlines. The industry standards are given, those companies will become successful which can efficaciously utilize them.