Business analysis of European Airline Industry

Factors affecting the barriers to entry are: Economies of scale

First mover advantage

Relationships with suppliers and customers

Legal barriers

Competitive Force 3: Threat of Substitute Products

The degree to which substitute products or services exist affects the industry bargaining power with suppliers and customers, and ultimately profitability. The degree to which substitutes exist depends upon the relative price and performance of competing products or services, and the willingness of customers to accept substitutes.

Competitive Force 4: Bargaining Power of Buyers

Buyer bargaining power can exert downward pressure on prices. Factors that can affect this bargaining power are:

– Buyer price sensitivity to product or service

– Relative bargaining power of buyers competitive Force Bargaining

Power of Suppliers

A mirror image of the bargaining power of buyers.

– Suppliers have bargaining power when there are few substitutes and/or few suppliers relative to the number of customers demanding a product or service.

Applying Industry Analysis to the European Airline Industry

During the early asses, profitability in the industry was low.

Competitive forces:

Moderate industry growth

Fragmented industry

Few opportunities to differentiate; low switching costs

High excess capacity

– Threat of new entrants:

Budget airlines

– Bargaining power of suppliers and buyers

Suppliers: aircraft, oil, ground handling Buyers: high price transparency

Competitive Strategy Analysis I

ndividual firms must choose appropriate strategies to succeed within their industry segment. Two basic competitive strategies are:

– Cost leadership

– Product/service differentiation

Figure 2-2 conveniently summarizes aspects of cost leadership and differentiation.

Purling (c) 2010 south-western

Coinage Learning Strategies for Creating Competitive Advantage

Achieving and Sustaining Competitive Advantage

Choice of strategy is an important first step for a firm.

The likelihood of achieving and sustaining competitive advantage must be evaluated. Factors to evaluate include:

– Resources and capabilities to implement strategies.

– Whether the firm’s activities, infrastructure, and other operating elements consistent with its competitive strategy.

Applying Competitive Strategy Analysis to the KEA group What was Kike’s superior performance based on? Low-cost competitive strategy

Global strategy Sourcing of production Economic designs Logistics Sales Corporate Strategy Analysis Companies with multiple business segments require an analysis how the separate segments are managed within the corporate governance structure. Factors to analyze include:

– Transaction costs

– Specific benefits to operating under one corporate umbrella

The case of gregarious.

Concluding Comments

The industry analysis approach has notable strengths and some limitations.

Porter’s “five forces” framework is valuable in evaluating the strategy and actions of firms within an industry.