Porter Five Analysis of the European Airline Industry Essay Example for Free

gatekeeper Five abridgment of the European Airline Industry EssayWhile the business model existed for some time (first such(prenominal) in 1973 US), the appearance of these in the European market needed the liberalization brought forth by the EU, implementing the Freedoms of the ambience in three stages. In 1997 the first LCC (Low Cost Carrier), the Ryanair began its operation, and in a few historic period a few more fol kickoffed, which gave the national and network airlines a raw problem to the existing economic problem, diminish market and others such as 9/11. By today the changes in the past two decades acquit shifted and diversified the industriousness, which was at one time a mature and to some level declining in structure. The new regulations, companies, investors and consumers have brought new life, the industry once again mature with fragmented characteristics. The ideal tool for the assessment of the airlines industry is Michael Porters five force model. It aims to find and demonstrate the forces in the microenvironment which influence the industry, internal and external as well. Threat of new entrants (barriers to entry) High capital investment ? Capital intensive ? Airport slot accessibility ? Predatory pricing ? Brand loyalty/frequent flyer ? Economies of scale ? Limited number of routes The little terror of new entrants, due to the barriers mostly set by the nature of the industry and by the existing companies, are very low. Yet sometimes when the possibility arises, new companies start in the past few years many national companies went bankrupt leaving a market to take by the existing companies or new upstarts. Bargaining power of suppliers Aircraft manufacturers Relatively low number of suppliers Suppliers are concentrated Airlines are determine customers ? Airports Slot availability Alternatives to the primary airports ?The bargaining power of suppliers is mostly two-legged, and twain have a metier threat. For both parties it is best to find a mutu onlyy working solution on a eagle-eyed term, because it is a industry with relatively small number of players loosing even one can have an jar on both sides. Threat of substitutes Alternative transport (bus, car, train) Videoconferencing Global environmental awareness The threat of substitutes includes a broad variety for the different needs. All-in-all it still only gives a medium threat, since the quick transport to a distance has no alternative.Bargaining power of customers Price ? Internet/social media Customer orientation ? prime(a) With the first LCCs the customers had no bargaining power if you choose to go with this low price, accept the services as it is. However, nowadays with more alternatives and the ever-reaching internet and social media a bad customer satisfaction can be a disaster. This can however be mitigated with customer orientation, but still customer had the choice, it is a medium high level. Rivalry within the industry Betwee n LCC and national/network airlines Between LCCs The argument within the industry is high due to the high number of big and medium sized companies. The airlines industry is highly competitive, with very high barriers and medium to high threats within. While there is a relatively low threat from a new market entree, the existing international competition is fighting over all the resources more and better airports possibly with mutually excluding contracts, picking up the customers fed up with their previous letter carrier or starting a price war on a selected destination, binding the newly aquired flyers with strike off loyalty programmes.Unless there is an opportunity, it is not an attractive industry to enter due to the high number of barriers. However, once established a foot, it is a very interesting and very intensive industry with good possibilities. The study LCCs depending on how low cost they are making good profit and there is still path for growth. The key factors fo r success should include Efficiently utilizing the resources (financial, time, human resources) Utilizing a network of business partners (complementary) Timely expanding upon (trying new destinations, increasing frequency) Customer orientation (with following trends eg. ocial media) These above should be observed by both LCCs and traditional airlines. The industry standards are given, those companies will become successful which can effectively utilize them.