Question

Discuss the six dimensions (Political, Economic , Sociocultural (and demographic) , Technological, Ecological (physical env’t), Legal ) of general, or macro, environment. Take notes on the relevant: i.   Describe impact. ii.   Business opportunities? iii.   Airlines and other companies in the airline industry that stand to benefit?

Conduct a Five Forces Analysis of the domestic airline industry

Five Forces Analysis Template

Intensity of industry rivalry

Factors (affecting the intensity of industry rivalry)	Analysis (current and future)	Rating of Industry Rivalry
Overall Rating: (LOW or MEDIUM or HIGH)

Threat of new entrants

Factors (affecting the threat of new entrants)	Analysis (current and future)	Threat Rating of New Entrants
Overall Rating: (LOW or MEDIUM or HIGH)

Bargaining power of suppliers

Factors (affecting the bargaining power of suppliers)	Analysis (current and future)	Rating of Supplier Power
Overall Rating: (LOW or MEDIUM or HIGH)

Bargaining power of buyers

Factors (affecting the bargaining power of buyers)	Analysis (current and future)	Rating of Buyer Power
Overall Rating: (LOW or MEDIUM or HIGH)

Threat of substitutes

Factors (affecting substitutes)	Analysis (current and future)	Threat Rating of Substitutes
Overall Rating: (LOW or MEDIUM or HIGH)

Answer 1

Airlines Industry Porters Five forces.

Bargaining power of Buyers – Low Threat
	Analysis (current & future)	Yes (Low Threat)	No (High Threat)
Question
Is demand greater than supply? Number of buyers substantially more than airline operators?	The demand for air travel is likely to experience major growth with it becoming the preferred mode of travel and greater tendency to travel due to advancement in technology	YES
Do customers have controlling or bargaining power with each customer transaction being high value?	Only very few large corporations may have some leverage due to loyalty with an airline for all their travel needs else each customer transaction value is irrelevant	YES
Are there any significant costs in switching suppliers, for the customer?	They may benefit from the switch with competitors offering better pricing		NO
Does the buyer need a lot of important information with regard to using the product?	Travelers need extensive information and support with it forming an important CSR initiative in the airlines industry	YES
Can customers imitate the product/service in-house?	Air travel is not easily replaceable by other options and not likely to be in the future with no other options providing similar speed	YES
Are customers highly price sensitive?	Most travelers are in the economy range and always looking for best bargains	YES
Are products unique to some degree? Do they have accepted branding?	very unique as an overall service with branding having great influence over customers	YES
Do firms provide incentives to decision-makers on the buyer side?	Yes, constantly with discounts and offers implementing intertemporal pricing	YES
Bargaining Power of Suppliers- Low Threat
Question		Yes (Low Threat)	No (High Threat)
Industry requires atandardized Inputs rather than unique or highly differentiated(material, labor, services)	Inputs are standard with limited airlines operators so limited options for suppliers limits power this is not likely to change in the future	YES
Firms can switch between suppliers quickly and easily.	The quality and standardized uniformity of products and services are important along with timely deliveries		NO
Suppliers would find it difficult to enter this business.	It has significant entry barriers	YES
There are many current and potential suppliers in this industry.	Limited suppliers specifically catering to needs of airline operators		NO
This business is important to the suppliers.	The business provides substantial profits as quality is a major factor and pricing of products is substantially marked up for most consumables within the industry	YES
Threat of New Entrants- Low Threat
Question		Yes(Low Threat)	No (High Threat)
Do existing firms have cost and/or performance advantage in this industry?	Substantial advantage obtained by implementing strategy of cost leadership or service and product differentiation through add-ons	YES
Are there proprietary products/services on offer in this industry?	The nature of the service does not provide scope		NO
Are there established brand identities in this industry?	Brands play a major role in influencing consumers	YES
Do customers incur significant costs in switching suppliers?	They may benefit from the switch with competitors offering better pricing		NO
Is a lot of capital needed to enter this industry?	Very capital intensive industry with other statutory entry barriers requiring meeting extensive regulations	YES
Does experience contribute to continuous improvement in performance?Does the industry exhibit a learning curve?	This is an industry where experience really counts as innovative strategic management of flights and routes with unique marketing methods provide great benefits and returns	YES
Are there any licenses, insurance and other qualifications required in this industry that are difficult to obtain?	Strict regulations and licensing policies with security parameters for qualification creating serious entry barriers	YES
Can a new comer entering this industry expect strong retaliation from the existing players?	Competition among the few players is strong with new entrants discouraged or thwarted by efforts to substantially cut their profitability through price wars	YES
Threat of Substitutes- Medium Threat
Question		Yes	No
		(Low threat)	(High threat)
Available substitutes have performance limitations and/or high prices that do not justify their use as mainline products.	Substitutes are minimal and not affordable for most of the customers	YES
Customers will incur costs in switching to substitutes.	Costs for substitution can be extremely high and a major deterrent for most	YES
There truly are no real substitutes for the products available in this industry.	Substitutes available but not viable for most unless technology provides us with flying cars which may still be unaffordable for most		NO
Customers are not likely to go for substitutes.	Customers will always switch to most beneficial option and high speed self driven cars may prove a threat		NO
Rivalry among Existing Players- High Threat
Question		Yes	No
		(Lowers rivalry)	(Intensifies rivalry)
The industry is growing rapidly.	The suppliers cannot grow easily demand is growing		NO
The industry does not have overcapacity at the moment.	Supply of the service is limited to keep it viable as high cost of operation with large supply would render the industry as unviable.	YES
The fixed costs of the business are a relatively low proportion of the total costs.	Fixed costs are high fuel, maintenance of aircrafts, hangars, salaries of pilots and technical staff		NO
There are significant product differences and brand identities among the competitors.	Based on strategy adopted, existence of company	YES
It would not be hard to get out of this business because there are no long-term commitments that bind players to the industry.	It is hard to get out of the business as it can lead to extensive loss due to inability to find a buyer with huge capital and interested in managing the barriers. the assets are not easily disposable.		NO
Customers would incur high costs if the switched from one player to another.	They may benefit from the switch with competitors offering better pricing		NO
Products on offer are highly complex and require significant customer-producer interaction.	It is finally a mode of travel with assistance required for completing the formalities associated with air travel with minimum hassle for customer		NO
Market shares in the industry are more-or-less equally distributed among competitors.	Due to limited suppliers it is an accepted policy to practice collusion on minimal pricing and route selection by existing players	YES