Mature industry life cycle. The Bargaining Power of Buyers: Medium to High - Internet gives the power to the customers to search for the low fares. - Leisure travelers who are not sensitive with the price and most of them are loyalty to the particular industry that offer the best service and offer the best flying experience. - There are many airlines in the market that offers the same flying experience in the low-price. Bargaining Power of Suppliers: High - Boeing and Airbus are the only two suppliers of
They also included a share of the costs associated with running the hubs at two airports, such as ticket agents, building charges, baggage handlers, gate charges, etc. Suppose that the revenue collected on the typical United flight from San Francisco to Washington does not cover these costs. Does this fact imply that United should discontinue these flights? Explain. Based on the book when there are competitive markets such as airlines, a company certainly needs to look at costs and revenue very closely.
[pic] Colorado Technical University Southwest Airlines: Porter’s Five Forces Term Project - Final Professor Hanji Wu Submitted in Partial Fulfillment of the Requirements for ECON 616 Applied Managerial Economics By Larry Rodgers, Brent Packard, Leanne Marks, James Ladwig Colorado Springs, Colorado September 2012 Southwest Airlines: Porter’s Five Forces Analysis Southwest Airlines continues to show their strength in this tough industry. With the company’s main focus in keeping costs down, they are in a much better position than the rest of the airline industry in continuing to make profits during this current recession with customers being careful with their money. In fact, while most airlines strongly compete for their fair share of the market which has an impact on their ability to make a profit, Southwest’s focus has been on discovering new ways of increasing their profit. (Bundgaard, et al, 2006) Rivalry Among Existing Firms The threat of rivalry is high. Price competition has been the primary focus of the rivalry among airline companies.
Southwest Airlines tries to save money by simplifying its operating process. Utilizing strategies such as having “One type of aircraft”, “cash-register receipts as tickets”, “no computer reservation system” and “no meal service” are some examples of its low cost strategies. C. Speed and Efficiency Southwest knows that airplanes generate revenue only when they are in the air. Accompanied with the “point-to-point” strategy, Southwest chooses to operate by the most efficient way of adopting the concept of “high average velocity” instead of conventional “hub-and- spoke” system. D. High Service Quality Furthermore, Southwest understands that its “low fares” strategy cannot be achieved at the sacrifice of good service.
AO2- Swot and PEST analysis for Easyjet In this piece of coursework I will be analysing the SWOT and PEST analysis for the easyjet airline. |Strengths |Weaknesses | | | | |EasyJet operate a fast and efficient service with an average |They do not offer free food service and passengers have to pay for | |turnaround time of 30 minutes or below. This enables them to maintain|food and drink onboard the aircraft. | |a reliable and hassle free service to their passengers. | | | |Domestic air travel is an extremely competitive industry with | |EasyJet offers an online promotion alert which is e-mailed to |EasyJet’s main competitors being Jet2, BMI Baby, Ryan Air plus a host| |existing customers and contact on the company’s database.
As delays will often frustrate travellers, this can make WestJet that traveller’s top choice. An order winner is the low price fares that WestJet is able to provide to customers in order to entice them to fly with them. Bargain-basement airfares may appeal to many travellers and the affordability of fares may be what drives that traveller’s decision on whether to drive, or purchase from another airline. 2. WestJet’s competitive priority relates to cost, quality and delivery.
Based on the summary table provided in the text book – the first thing that jumps out is how disproportionate the labor volume/number of employees is to the number of aircraft that the company has. The company has to make some tough decisions in streamlining the labor force to reduce the cost of labor and make itself more competitive with its peers in an industry where competition is stiff at the least. In addition to this the idea that they will be using more regional jets e.g. Mesa Air in medium markets may help alleviate operating costs that are also currently very high. US Airways may also want to look into the option of merging/working with one of the more successful low cost carriers as a strategic partnership 2.
Southwest’s traditional pricing strategy has been the choice of buying cheap airplane tickets for just basic transportation services, without any extra service, such as meals. This pricing strategy was so successful throughout the airline’s first three decades because their strategy was the complete opposite of competitors. The airline did not serve major airports, but second-tier destinations where the costs were lower. They only served snacks on the flights, and employees were offered a profit sharing plan in place of a retirement plan. All of these elements helped cut costs and make Southwest profitable every year since its founding.
Mission Statement: When the airline was first started, the goals were to get passengers to their destinations when they wanted to get there, on time, at the lowest rate and make sure they have a good time doing it. Today their mission statement strongly resembles that of the original ideas that the airline was started with. The statement reads, “The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Sprit." The company’s main goal is to become the largest airline carrier in the United States. Indeed, Southwest proudly proclaims, "We are a company of People, not planes.
By using a framework by (Porter 1980) we can illustrate the compatibility of such a strategy in the existing aviation industry Potential Entrants Despite the high volume of new entrants during the period of easyjet’s inception, only a minority were actually able to survive. This was mainly due to the low usage of low cost air travel by customers as they were still unwilling to transition into the form of air travel. In short, air travellers still preferred the old system which involved having inflight service as well as benefits that would be derived if a person was travelling long distances. Buyers As easyJet offered flights at prices, customers had little to worry about as they were paying amounts far lower than what was required on normal carriers. Additionally, due to the limited competition as well as its ability to keep prices low, easyJet was able to successfully offer stable prices to its customers while ensuring sustainable levels of profitability.