Porter's Five Forces Analysis: Malaysian Airlines

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Every business has their own strategies to increase the sustainability of their business over the long run with the purpose of maximizing the shareholders’ wealth. There are many ideologies and strategies being implemented with the purpose of generating long term profitability of the organization. Michael E. Porter has designed and developed the Five Forces framework to help the companies to assess the nature of an industry’s effectiveness and also the organization strategies. With the framework which is developed by him, it allows an organization to identify and analyse the opportunities that is crucial in determining the effectiveness of an industry. Porter has categorized the five main competitive forces which can affect the industries …show more content…
Profitable markets will attract new entrants because of the high yield return. The threat of new entrants into the markets has made some significant changes due to their increased experience in the industry. This significant changes include the increase in the seating capacity of the passengers and the reduction of prices for all available routes. Malaysian Airlines has made losses in their market share mainly to Air Asia because of Air Asia’s concept of low cost airline (Shah and Mr. Bhavin, J., 2008). As a result, this has increased the demand for Air Asia’s flights due to their increase in flight frequencies. To counter attack this, Malaysian Airlines has launched their Fly as their low-cost carrier. By doing this, Malaysian Airlines has strived with new competitors and has also gained market share which is being controlled by their competitors. However, the threat of new entrant is still considered to be reasonably weak due to the high capital requirements and high investments needed which happens to be the major barriers for new entrants to enter the airline industry (Evans and Nigel, …show more content…
It may also be described as the market inputs in which airlines will have partnership with suppliers that supply the raw materials which are used to carry out the operational activities of the airline company. Fuel suppliers, aircraft engines and maintenance, and manufacturers of aircrafts are the suppliers of the airline industry. Other than aircrafts and aircrafts maintenance, other services are including ticket sales and reservation, air traffic control, ground control services and other aviation services. Airline industry will face the fuel price fluctuation in which the fuel prices will increase and decrease dramatically due to the unstable condition of the nation’s economy. In Malaysia, the government will make a budget and subsidy the fuel in order to reduce the burden of the consumers. Besides that, recently the government of Malaysia has removed these subsidies for fuel which has increased the costs for the airline companies to bear. Malaysian airlines had to make agreements with several international fuel suppliers to have some discounts on the average base price of oil. Due to high switching cost, Malaysian Airlines also acquired the aircraft where the engines suppliers also supported the provision on spare part related to flight operations to optimize the market share of the

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