Porter’s analytical framework consists of those forces that affect a companys ability to serve its customers and make a profit. A change in any of these five forces requires a re-assessment of the marketplace. The five forces include:
1) The threat of substitute products: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases.
2) The threat of the entry of new competitors: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), effectively decreasing profitability.
3) The intensity of competitive rivalry: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions.
4) The bargaining power of customers: The ability of customers to put the firm under pressure due to the availability of existing substitute products, buyer price sensitivity, the uniqueness of the products, etc.
5) The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company’s profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
Develop a detailed paper applying Porters Five Forces Model to the U.S airline industry, with a focus on the U.S. market.
Your paper should be about 5 double spaced pages, in APA format, and structured as follows:
1. Cover page with a running head
3. Introduction to the U.S airline industry
3.1. Industry Definition
3.2. Industry Profile
3.3. Industry Market Structure
3.4. Future Outlook
4. Porter’s Five Forces Strategy Analysis as it applies to the airline industry
4.1. Bargaining Power of Buyers
4.2. Bargaining Power of Suppliers
4.3. Competitive Rivalry in the Industry
4.4. The threat of New Entrants
4.5. Threat of Substitutes