Porter's Strategic Analysis Of MAS Airlines

Better Essays
3.2 Industry conditions:
The industry environment has a more direct effect on the MAS airline’s strategic competiveness and ability to earn above-average returns as compared with the general environment,. The Porter’s Five Forces Analysis will assist MAS airline in analysing level of competition in airline industry and business strategy development. These 5 forces are: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competing firms.
Figure 3.0 at above represent the framework of Porter Five Forces Model. The five forces model of competition expands the arena for competitive analysis. By using Porter Five Force Model, MAS airlines will be able to classify the
…show more content…
The number of competitors and their capabilities has become the main driver of competitive rivalry in the market. The market attractiveness will decrease when there are many competitors offering similar products and services. The entry of low cost carriers have increased the competitive level in airline industry. Besides, the tight regulation of the airline industry whereby safety become paramount leading to high operating cost. The competitive rivalry seems to be in the mature stage of business cycle. It doesn’t seem to be over or under capacitated even if the number of competitors remain the same in long-term period. In fact, the fixed cost are very high in airline industry. So, airline may have to sign an agreement to borrow the long-term loan and make them stay in business. Long-term loan agreement is the thing that make them hard to leave the airline industry. The product involved or the planes are highly complex which also increase the intensity of competition. However, brand identities of different firms can help to decrease the level of competition in market. For example, MAS airline is well-known for providing the best hospitality to the passenger, while AirAsia is formerly known for its low fare …show more content…
There are few factors that determine how the price can be driven up, such as the amount of suppliers of each necessary input, switching cost from one supplier to another supplier, products or services uniqueness, and strength & size of the supplier. In Malaysia, the bargaining power of suppliers for fuel is not that high, it is due to the petrol organization in Malaysia is small and the fuel price is set by the government. Besides, It is a bailout for MAS airlines to sign the 25 years catering contact with Brahim’s Holdings Bhd. The 25 years contract can be considered as a long term threat to MAS airlines, since the Brahim’s Holdings Bhd had took over the accumulated losses by paying 170 million for it. Boeing and Airbus are the two companies that compete with each other in aircraft manufacturing industry for a very long period until now. Boeing has increased the prices of their aircraft since MAS airlines selected them as their main aircraft. Those maintenance staff of MAS airlines are highly experienced with Boeing’s aircraft, therefore MAS airline is likely to face a high risk if they want to switch over to another aircraft manufacturer. It’s because when MAS airline change their aircraft manufacturer, they also need to spend a lot of money in providing training to their maintenance staff and the overall switching cost is extremely high. So, the bargaining power of suppliers can’t be a negative

Related Documents

  • Decent Essays

    These costs that have been mention is a serious threat towards the airlines that intention to maintain their low costs strategy. Air Asia’s profit margin is about 30% and this has already attracted many competitors from same industry. Furthermore, there are lots of the small airlines competitors provide full service airlines have or in planning to create a low costs subsidiary to beat down Air Asia airlines. For example, Singapore Airlines has created a low costs carrier Tiger Airways. Air Asia users’ perception that budget airlines may compromise safety to keep costs…

    • 1263 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    To do so, they rely on different frameworks used by previous studies. For instance, they use the strategic negotiations framework initiated by Walton and McKersie (1994) to support their observation that Qantas is originally operating through “high road” strategies (441?). This was due to the fact that it provided high leading wages and high quality services to customers and employees (441). However, with a growing competition in the aviation market, new airlines were created, which resulted in Qantas loosing its superiority in the domestic market. Consequently, Qantas created Jetstar a “low road” strategy airline to take over the domestic routes.…

    • 1610 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    The passenger is more price sensitive in the worldwide. With this background, business development based on an elasticity of demand is more crucial to the business success for every airlines. But, an accurate elasticity of demand is very difficult because it depends…

    • 1638 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    However the rivalry between competitors is high and the current negotiating power of suppliers is variable, and, in general terms, medium / high. 3 Strategic Groups In the airline industry two main strategic groups stand up, flag airliners and Low-cost airliners. The Flag Airliners group is characterized by the Network or Hub-and-Spoke business model. The Hub and Spoke system allows the airlines to maximize passenger occupation on each flight by offering connections to both domestic and international destinations by using their own Hub (airports used as a distribution centre for air traffic). This more complicated route system provides customers with a much larger number of route option, which in turn maximizes revenue opportunities.…

    • 1720 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    Manufacturers: 3-3. Competitors: Steeper competition plays important role in airline industry. Today, many airlines compete each other to attract more customers to use their services over a limited demand for certain routes. SIA is no exception of this. Singapore Airlines has to compete with other airliners that operates in Changi Airport with similar service, like Thai Airways or Cathay Pacific.…

    • 1363 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    Boeing Case Study

    • 1159 Words
    • 5 Pages

    In the past, Boeing has always been a first-mover in its industry and has been rewarded with huge profit margins and a monopoly-like status. Recently, the market share for aircraft orders has been taken over by Airbus, the newcomer, so in order to compete against the competition, Boeing needed and innovation strategy and it has decided to come up with the…

    • 1159 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    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.…

    • 2072 Words
    • 9 Pages
    Decent Essays
  • Decent Essays

    Spirit Airlines Supply

    • 834 Words
    • 4 Pages

    Following the decline in airfare prices offered by Spirit Airlines, Inc., it resulted in an increase in the demand for more flights, along with more airplanes. Because they were capable of “accurately forecast business cycle fluctuations in economic growth,” they were successfully able to incorporate the purchases of new Airbuses to be implemented launched in the near future, (Baker College, 2015, p. 8). Because Spirit Airlines, Inc. has proven to be successful following their unbundling technique, other airline companies are…

    • 834 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    After a drop in fuel prices in 2009 the cost of fuel has drastically increased. While there is nothing they can do about the cost of fuel, they can look to exchange older plane and planes used on longer routes with new more fuel efficient plans. Another thing they can do is try to pick their routes based on revenue and fuel consumption. While this is not the only thing they need to worry about when picking their routes, it should definitely be a big part of their consideration. Porters Five Forces Threat of new entrants The threat of new entrants is currently low.…

    • 2600 Words
    • 11 Pages
    Decent Essays
  • Decent Essays

    The legislation caused many companies to enter the airline industry especially when the airline business was considered very profitable. With new entrants into the airline industry, there was a significant reduction in the airfares. The decrease in the airfares was mainly attributed to the new deregulation act of 1978. The legislation encouraged competition in the airline industry. As a result, there was new competition financial impact in the airline industry.…

    • 1083 Words
    • 5 Pages
    Decent Essays