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
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