Competitive Rivalry in Airline Industry
Competitive strategy is one of the substantial forces of the Porter’s five forces analysis. This strategy is all about the combination of goals from which a company strives from and the policies by which it intends to meet. The competitive nature of a company is conceptualized when it realizes its position in the marketplace. Airline industry has been quite competitive since its establishment and it has gone through a lot of transformation to become the best.
Airline is one of the few inventions that have changed lives of many people in the world, but its competitive nature has led to many mishaps on the global market. Airlines are grouped in many ways and more so by their size and what they transport. Passengers’ airlines are the most common followed by low-cost carriers, air freight and regional or commuter carriers. The airline industry is characterized by low profit margins and high fixed costs.
Dominant economic traits have helped define the operations of the airline industry, and they include market size, ease of entry, technology, customers, scope of competitive rivalry, scale of economies and industry profitability among other characteristics. Competitive rivalry analysis is one of the great strategies that have helped many airline companies stand out on the global stage. There are a number of competitive forces that define the airline industry and they are;
- The threat of entry of new competitors- Many investors in underdeveloped countries may think that it is a challenge to break into the airline market. Getting enough capital to invest in the industry is a challenge, but if borrowing from banks and other money lenders is easy, and then the possibility of more airlines joining the industry is higher. Nevertheless, the more airlines enter the market, the more flooded the industry becomes. Airlines that hold good reputation and brand names have been able to lure more customers that new ones.
- Power of customers- Today, the airline industry has a large number of customers. Thousands are travelling on daily basis and this guarantees profitability. The bargaining power of airline customers is quite low. There are high costs that come with switching from one airline to another and to also compete for services.
- Competitive threat of substitutes- Other means of transport like passenger rail lines, personal transportation and bus services are all probable substitutes that exit in relation to air transport. They are low cost and more convenient for short distances, however air transport rules when it comes to long distance regardless of the charges.
- Power of suppliers- There is no cutthroat competition among the air transport suppliers. Boeing and Airbus are the core suppliers of airline services, hence the work hard to meet clients’ needs.
- Competitive rivalry among airline service providers- Airlines locally, regionally or internationally compete for services and prices. On top of this, they also rival on frequency of flights, reliability of flights and other related amenities. Pressure from low cost airlines or carriers and private companies which are also expanding rapidly has impacted the industry greatly.
The airline industry has gone through massive expansion and for any entrepreneur to excel in the field; it is wise to substantially look at the competitive nature of the industry. Airline services vary from low-cost rivals to legacy or large carriers. Times have changed and without a strategic plan, it is not easy to excel in any income or revenue generating venture.
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