FIVE FORCES

FIVE FORCES

THREAT OF NEW ENTRANTS
1. HIGH BARRIERS TO ENTRY
  1. Capital Requirements
    1. Starting an airline is tough (Boeing, 2014)
      1. http://www.boeing.com/boeing /commercial/startup/index.page
    2. Despite record industry losses, widespread bankruptcies, huge costs of entry, and rabid competition (INC, 2014)
      1. http://www.inc.com/ magazine/19940401/2867.html
    3. A business is considered capital intensive depending on the ratio of capital required to the amount of labor. The airline industry is considered among the top of the high capital intensive industries (mbaskool, 2014)
      1. http://www.mbaskool.com/business-articles/ marketing/207-ten-reasons-why-airline-industry-is-unique.html
  2. Economies of Scale
  3. Absolute Cost Advantage
  4. Product Differentiation
    1. Low Cost Flying
      1. Ryanair is Europe’s only ultra-low cost carrier (Ryanair - About Us, 2012)
      2. No-frills airlines, which date back to the late 1960s, are now major corporate players (the Telepgraph, 2013)
        http://www.telegraph.co.uk/finance/newsbysector/transport/10454522 /Low-cost-airlines-have-come-a-long-way.-But-who-will-win-the-battle.html
  5. Legal and Regulatory Barriers
    1. The Aviation Investment and Reform Act for the 21st Century (econ, 2011)
      1. Operating barriers include limited access to boarding gates, ticket counters, baggage handling and storage facilities, and take-o¤ and landing slots (econ, 2011)
      2. Marketing barriers include loyalty programs intended to tie consumers to an airline; frequent yer programs, corporate incentive agreements, and travel agent commission overrides (econ, 2011)
      3. http://www.econ.ucla.edu/ people/papers/Snider/Snider507.pdf
    2. Legislation and Airport Coverage (econ, 2011)
      1. Congress clear intentions to reduce concentration by encouraging additional entry at concentrated airports
    3. Implementation of Competition Plans (econ, 2011)
  6. Acess to Channels of Supplier and Distrubution
  7. Expected Retailiation
COMPETITVE RIVALRY
1. Price Competition
  1. Hyper Link to Website
    1. Cheap Flights - Book cheap flights to Europe with Ryanair
  2. Sale - £19.99
2. Advertising Battles
3. New Product Releases
4. Inceasing Customer Service Levels
BARGAINING POWER OF SUPPLIERS
1. Are the Suppliers Concentrated vs Competitors?
2. Are the Competitors a Significant Customer of the Suppliers?
3. Are the Supplier's Input Critical to the Company's Success?
4. Are the Switching Costs High or Low?
5. Is there a Threat of Forward Vertical Ingration?
BARGAINING POWER OF BUYERS
1. Are the Buyers Concentrated vs Competitors?
2. Are the Switching Costs High or Low?
3. Is the Product Differentiation High or Low?
4. Does the Buyer Purchase a Large Proportion of the Industry's output?
5. Is there a Threat of Backward Vertical Integration?
THREAT OF SUBSTITUTES
1. The Buyers Propsensity to Substitut
2. The Price-Performance of the Substitutes
  1. Train
    1. Obviously, for the quick hops through the tunnel, from London to Paris and Brussels, there is no competition from the air. The train is not only faster but cheaper (Telegraph, 2011)
      1. http://www.telegraph.co.uk/travel/columnists/nicktrend/83452 79/Trains-or-planes-The-great-European-travel-test.html

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