Strategic Plan
Porter 5 Forces Example - Airline Industry
Strategic Business Unit
Airline Industry
Plan Details
A worked example showing a Porter's 5 Forces Analysis of the Airline Industry. Adapted from Michael Porter.
Analysis
Porter's Five Forces Analysis
Threat of substitutes
- Increasingly prevalence of remote working (instead of business travel)
- Fast trains are seen as a more environmentally friendly options
Bargaining power of suppliers
- Powerful labour unions control operations at network hubs
- Aircraft and engine manufacturers are concentrated oligopolies
- Airlines are local monopolies with significant power
- Airport services (handling, catering, cleaning) are also concentrated, but switching costs are low
Rivalry
- Rapid but volatile growth
- Perishable product: unsold seats per flight are a sunk cost leading to steep discounts to sell them
- Limited product differentiation
- Limited economies of scale
- Significant exit barriers (sunk costs)
Bargaining power of buyers
- Website increase price transparency and reduce switching costs
- Travel agents focused on driving costs down (especially corporate buyers)
- Many fragmented buyers
- Low switching costs for most customers (except airmiles)
- Price sensitive because air travel can be a significant portion of holiday budget (for the least enjoyable part)
- Airlines perceived as largely undifferentiated
- Growing market of customers who can afford to travel, especially in emerging markets
Threat of new entrants
- Capital outlay
- Access to landing slots
- Diseconomies of scale