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Porter’s Five Forces Argumentative Essay Sample

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Porter’s Five Forces Argumentative Essay Sample

Porter’s five forces tool will assist in analysing the competitive nature of the airline industry in order to assess the position of Flyafrica. This will enable FlyAfrica to make strategic decisions in order to increase geographical presence and profitability. Entry Barriers (Threat of new entrance)

Threat of New Entrants

This aspect has a low threat for the Zimbabwean airline industry because there are extremely low switching costs. Additionally, there are no proprietary products or services involved.

The industry requires a large amount of capital and without a strong customer base there will be little to no profit in the first few years. Existing firms can use their high capital to retaliate against newer firms with whatever means necessary such as lowering prices and taking a loss.

Due to low switching costs between brands, consumers tend to only chose well-known brands. The safety aspect involved make most consumers feel safer with firms that have been around for a long period of time. This industry requires plane and flying experience which also lowers the threat of entry. Airlines are constantly being regulated by several organisations such as the Civil Aviation Authority of Zimbabwe, Federal Aviation Administration and the Department of Transportation. Suppliers (Bargaining power of suppliers)

Determinants of Supplier Power
Supplier concentration
There are only two suppliers of aeroplanes mainly Boeing and Airbus (Odell, Mark); therefore it means that the suppliers have high bargaining powers such that our negotiating power is minimal. Airline cannot easily switch suppliers, therefore most firms have long term contracts with their Airlinesuppliers. This therefore means that whenever we want to purchase an additional plane, it would cost us and we have little room to negotiate the price down.

Additionally, it is difficult to enter into the plane manufacturing industry because of the capital needed to enter. The amount of money and expertise needed to make even one plane is around 200 million dollars.(https://sites.google.com/site/admn703ai/the-team)

Flyafrica are restricted with a sole supplier of fuel at the airport and this leave the organisation to buy fuel at whatever the rate it is sold even if it’s expensive.

Employees use collective bargaining through trade unions to increase their bargaining powers. This would force us to pay high salaries if approved by the union, and we have little room to negotiate for the low salaries.

Pricing of landing slots is given to historic rights of existing users such that our landing time is compromised and we can be slotted off peak periods.

Determinants Rivalry (Industry Competitors)
Product differences
The market is highly competitive
Most cost advantages can be copied immediately since we offer lowest prices on the current routes. We cater for short haul only flights while our competitors cater for both long and short haul flights which give our competitors and competitive advantage, whilst there is differentiation in price and service offering is almost similar. Buyers (Bargaining power of buyers)

Bargaining Leverage
Buyer concentration versus firm concentration
Currently, there is lower concentration of buyers to supplier meaning that the buyers have little bargaining powers. Generally, the Zimbabwean market does not prefer to travel faster with air. Buyer volume

Buyer switching costs relative to firm switching costs
There are low switching costs between firms because many travellers choose the flight based on where they are going and the cost at the time. This is loyalty to firms but not enough for high switching costs

Buyer information
The high uptake of internet usage has amplified awareness and interaction of customers and as such

Substitute (Threats of substitutes)
Determinants of Substitution Threat
There is no brand loyalty of customers
No ‘close customer relationship’
No switching costs for the customer
There are other modes of transport that can be used like private cars and public transport by road.

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