Apply Porter Model to identify forces driving industry competition In this case. Watch video – Southwest airline case: https://www.youtube.com/watch?v=RwKbMHbL8i8 2) Conduct a SWOT analysis on...

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1) Apply Porter Model to identify forces driving industry competition - Southwest airline
case.
Answer:
Porter, Five Force Model, focuses on external environmental factors that are driving the
industries. Southwest Airlines have unique business model that are difficult to imitate by the
other competitors in the industry (Manuraj, 2016). Besides strength and weakness of the
company, it is essential to understand the major five components that drive the airline's industry
in U.S.
Five Force Model
i. Bargaining Power Of Customers - The bargaining power of the customers is higher in the
Airlines Industry. The customer in this industry has more options to choose. There are more
low price carriers and high price carriers. Every airline has their unique services and target
customers. A customer has an opportunity to choose the best suitable, comfortable and
affordable airlines at the particular time. There is no to lower switching costs for the
customers resulting in more power to the customers. Customers cannot be persuaded and
forced to make use of any particular airline services. As there is availability of more carriers
customer quickly switch from one airline to another airline. They always focus on their
benefits and choose the best available options for them as their carrier. As the bargaining
power of the customers is higher many carriers are providing low-cost travel, better options
on cancellation, and endorsement and better amenities at the same price to retain more
customers. The business model of this industry is customer centric.
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ii. Bargaining Power of Suppliers - The bargaining power of the suppliers in this industry is
considerably higher in the industry as there are limited numbers of suppliers available in this
industry. In the case of Southwest Airlines, they are making use of Boeing 737s flights. All
their flights are of the same model so that it will be easy for the pilots and entire operations
team to handle them. In this case, the Southwest Airlines depends heavily on the Boeing who
is the only major supplier of aircraft to the company. Similarly, every company in this have
only limited suppliers. It increases the bargaining power of the suppliers in the Airlines
Industry. Airlines Company has to pay the charges that are demanded by these suppliers to
get a high quality of the product without any alternative options available to them. Airlines
industry does not have much control over the price, and they cannot bargain to their suppliers
as it will challenge their business and quality. Thus, the bargaining powers of suppliers are
high in the Airlines industry, and every company in this industry is incurring huge costs in
purchasing the aircraft as per their requirement.
iii. Competition Rivalry - Competition rivalry is high and intensified in the U.S. Airline industry.
There are some notable players are a participant in this industry. Merger and acquisition are
high in this industry to retain and grow the market share and competitiveness. The U.S.
Airlines industry can be categorized as the perfect competition market. All players provide
same primary service of providing air travel facilities from one destination to another
destination. Every player in this industry makes use of different strategies to remain
competitive in the market, and some of their services are niche and cannot be provided by the
other. There is cut-throat competition in this industry. There are more options available for
the customer as more airlines are providing services to all destinations. In most of the cases,
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the airfares are more or less similar due to the high operating costs and most of the costs are
similar and common to all the players like meeting safety parameters, etc. Similarly, the
airline industry is highly influenced by the supply side that is in most of the cases the supply
is comparatively higher in the industry when compared to the demand. Players are aggressive
in the industry and some competitors include Delta Air Lines, United Continental Holdings,
JetBlue Airway, US Airways Group etc.
iv. Threat of New Entrant - The barrier to entry is higher in this industry. The Airline industry is
highly regulated and violating them will result in cancellation of license. Similarly, the
Airline industry is a capital intensive industry that is a huge investment is required for the
company to start the business. Most of the airline companies post huge losses that are not
affordable by the new players. Entering this market will cost huge and might result in huge
loss to the new entrant thus, the barrier to entry is high, and threat of new entrant is lower.
v. Threat of Substitutes - Airlines fall under the transportation industry, and there are more
popular and cheaper alternatives available for the people. Rail and road transportation are
used by the people to commute from one to another place. In most of the cases, both this
transportation are considered to be cheaper alternatives when compared to the Airlines. But at
the same time, the advantage of Airlines that is speed and comfort cannot be obtained from
the other available substitutes. Thus, this mode of commutation cannot be considered as a
direct substitute for the airlines. In this case, the threats of substitutes are considerably lower.
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From the Porter Five Forces model analysis, it is clear that the bargaining power of
customers is high, bargaining power of suppliers are high, and the completion rivalry is high in
the industry. These are the main factors that have influence over the business of Southwest.
Southwest should focus on introducing various strategies that will meet the requirement of the
customers, and it cannot be easily imitated by the other players as the competition is intensified.
It is essential to study the industrial trend and the changes that are being introduced by
the other players in the industry. Southwest can obtain economies of scale as they have one
supplier and they buy only from them. It provides an opportunity for Southwest to reduce the
cost of supplies to some extent. Understanding the industrial movement and forming those
strategies that are mainly focusing on customer retention and satisfaction will provide a better
customer base for the company. Porter, Five Force model, enabled to identify the crucial external
factors that are causing more fluctuations and changes in the industry.
References
Manuraj, A. (2016, June 28). Southwest Airlines: A Case Study [Video file]. Retrieved from
https://www.youtube.com/watch?v=RwKbMHbL8i8
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2) Conduct a SWOT analysis on McDonald’s USA
Answer:
McDonald's is a chain of restaurant...