The objective of this airline is to operate a 20-strong airbus 380 fleet by 201 5. The group is also a part of the world global marketing and code-sharing alliance, which consists of 11 leading airlines. Santa’ stakeholders are its shareholders, employees, customer, equines partners and the community. Indirect stakeholders include the media, governments and non-government organizations. They all have a major influence on the business, its strategy and therefore its performance.
It is to mention that Santa group is in the unique position of having two outstanding and well established brands in both the premium and low fares categories with Santa and Strata, which Airline Industry By sectarianism’s located in New South Wales, Australia. It is split up into three main branches which include the Flying business, flying services Businesses and the Associated Services. All departments of this group have focused on one goal and that’s nothing except ensuring high quality service in most efficient way.
But they long term purpose is to operate the world’s best premium airline, Santa, and the world’s best low fares carrier, Strata. Body Comprehensive Porter’s 5 forces analysis Nowadays, Porter’s Five Forces model is the most important force which affects the Airline industry, especially because the market is completely saturated. There are more service providers than needed in both local as well as international markets (Greener, 2008). The airlines continuously compete against each other in terms of customer services, technology, prices, in-flight entertainment, and many more areas (Greener, 2008).
Actually, Porter’s Model is a business strategy tool which is used to analyze the competitiveness and attractiveness of the airline industry of which Santa operates. It is considered as an important part of planning tool set (Strata, 2013). Alts analysis consists of 5 fundamental competitive forces: Santa is faced with competition within the domestic airline industry in Australia from Virgin Blue and Tiger Airways and international competition from all major airline operators including British Airways and Deutsche Lufthansa (all three airline operators are national flagship carriers).
The fierce rivalry has resulted in high cost of competition, lower profits and slow market growth. Bargaining power of Suppliers: Medium The main factors which determine the bargaining power of suppliers include switching costs, substitute suppliers, threat of backward and forward integration and supplier concentration. The airline supplier market for aircrafts is very concentrated as there are two main suppliers, Boeing and Airbus. Their bargaining power is high n this industry (Greener, 2008). This restricts Santa, along with its competitors, from exercising control over their suppliers to generate higher profit.
Threat of Substitutes: Low The threat of alternative solution to international airline travel is somehow limited. However, the threat for domestic airline travel includes train, bus or car travel which is determinants of money, preference, time and convenience of the traveler. The ease of switching to a substitute increases competition (chemical, 2012). Hence, when switching cost is relatively low, the competition becomes higher and price comes even more important. The airline industry is very competitive and as a result, profit margins are usually low.
Also, the bargaining of the supplier is very high which undermines companies in the airline industry to exercise control over their supplier. With high entry cost, new competition into the international airline market is very low. Santa can continue to dominate this market while still competing with domestic market using the Frequent Flyer programmer increase loyal customer. In the world today, the airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The biggest for this is the cost of entry.
The high cost of buying and leasing aircraft; operational activities including safety and security measures, customer service and manpower; makes the airline industry one of the most expensive industries (Q. G). Other barriers to entry which will prohibit new comers into the airline industry include Government restrictions and the brand name of existing airlines. Brand name recognition and frequent fliers point also play a role in the airline industry. An airline with a strong brand name and incentives can often attract a customer even if its prices are higher.
On the other hand, a newcomer could Just enter this saturated market easier with a completely new concept or technology (Greener, 2008). Bargaining power of Buyer: Medium to Decline The bargaining power of buyers is another force that can affect the competitive position of a company. The airline industry is very competitive as they are competing for the same passengers and switching cost between airline operators is low. As a result, the buyer power is high in this industry. There are various choices presented to customers; which usually means brand loyalty or price is the main factors when selecting an airline (Q.
G). Buyers for Santa include business travelers, leisure travelers, and travel agents. In fact, they demand value for every dollar spent, therefore they expect more and more from the airline. Santa has the frequent flyer program which rewards loyal customers and increases switching costs for a passenger selecting a rival airline operator. Add to this, the technology developments help the Santa to reduce the buyer power (chemical, 2012). Conclusion The airline industry is very competitive and as a result, profit margins are usually low.
