Air France Case
1. What is your assessment of today’s airline industry? Answer 2. Given your results, what are the main factors enhancing globalization in that industry and why? Answer
Porter’s 5 Force Analysis – Airline Industry
Bargaining power of Suppliers Bargaining power of Buyers Potential Entrants Threat of substitute services Competitive rivalry among airlines
Easy access to finance has made it very easy for potential entrants to entre the airline market. In addition, airline industry still enjoys high class status in society, therefore entrance of big corporate houses in this domain is very much probable. Airline industry is mostly dominated by two suppliers Boeing and Airbus. Therefore, airline industry need to rely on these two suppliers for necessary supply. At the same time, on a positive note, there isn’t cutthroat competition among suppliers. The bargaining power of the customers in airline industry is not very high since willingness to purchase the airline ticket does not vary much with reasonably increased priced ticket. Therefore buyer does not put pressure on the airline or the prices of tickets. Airline industry is very competitive industry. This competitiveness in combination with rising fuel costs substantially affects profit margin for the airlines.
Threat of substitution by other transportation services (such as Train, Road services etc.) sector is very high in domestic region than international. In addition, consideration of time, cost, availability of medium also plays a very important role and creates threat to the domestic carriers.
PEST analysis – Airline Industry
• International strategic alliances • Bigger markets, reach to larger population • Demographics, population growth rate • Higher purchasing power of consumer • Higher living standard • Increased aviation based consumers and their flying frequencies
Economic
Political
• Improving internal political positions • Steps towards making aviation sector
Porter’s 5 Force Analysis – Airline Industry
Bargaining power of Suppliers Bargaining power of Buyers Potential Entrants Threat of substitute services Competitive rivalry among airlines
Easy access to finance has made it very easy for potential entrants to entre the airline market. In addition, airline industry still enjoys high class status in society, therefore entrance of big corporate houses in this domain is very much probable. Airline industry is mostly dominated by two suppliers Boeing and Airbus. Therefore, airline industry need to rely on these two suppliers for necessary supply. At the same time, on a positive note, there isn’t cutthroat competition among suppliers. The bargaining power of the customers in airline industry is not very high since willingness to purchase the airline ticket does not vary much with reasonably increased priced ticket. Therefore buyer does not put pressure on the airline or the prices of tickets. Airline industry is very competitive industry. This competitiveness in combination with rising fuel costs substantially affects profit margin for the airlines.
Threat of substitution by other transportation services (such as Train, Road services etc.) sector is very high in domestic region than international. In addition, consideration of time, cost, availability of medium also plays a very important role and creates threat to the domestic carriers.
PEST analysis – Airline Industry
• International strategic alliances • Bigger markets, reach to larger population • Demographics, population growth rate • Higher purchasing power of consumer • Higher living standard • Increased aviation based consumers and their flying frequencies
Economic
Political
• Improving internal political positions • Steps towards making aviation sector