Organizational Competitive Strategies-Porter's Five Forces Model (AIR ASIA)

774 Words Oct 6th, 2013 4 Pages
The Porter’s five forces model, in this assignment, can be used to access the competitiveness of the airlines industry. It can review the competition within the industry plus checks for threat from outside.

Bargaining power of supplier-High- In every industry, there has to be someone to play the role of a supplier. It is important to know the power of the supplier as it will affect the industry. There are only two main suppliers in the airline industry, Airbus and Boeing, thus there isn’t much of an open option. Not forgetting the global economic catastrophe which has limited the new entry of competitor plus reducing the necessity of upgrading of planes in near future. However, both suppliers grant almost similar standard aircrafts;
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The main key advantage is its low operating overhead, this factor enables it to be the prime in the main field in price. Nonetheless, there are many other upcoming competitors or rivals immerging into the airline industry, who have key carriers as their backbone, which may direct to an ugly price clash in the coming years. There are few other minimal cost airline services such as Firefly, Tiger Airways and etc, making them possible competitors of AirAsia.

Barriers to Entry/Potential entrants-Low- there is a high barrier to emerge in the airline industry since the capital required is very high, such as the need to purchase airplanes, office buildings and hiring staffs. Hence this reduced the threat for AirAsia. Plus brand awareness is also a main leading factor. A new line of aircraft can’t make a mark so fast in the industry and it requires a lot of capital and time to build its name. Consumers always prefer a brand that has been there for an adequate amount of time, a brand that they can trust. This also reduces the threat. Not forgetting the governmental legislation also is a barrier by itself.

For example, MAS has got the backing and protection by the Malaysian government on the route to Sydney and Seoul, so AirAsia finds it tough in getting a new route from the government. This reduces the profit margin able to be made by AirAsia, but also has reduced emergence of new entries.

Power of Substitutes-Medium- Substitute are products or services which can

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