Air Asia- Porter’s Five Forces

Porters five forces Michael E. Porter claimed that there be five competitive forces which can shape every industry by identify and analysis those five forces(appendix) and thus determine strengths and weaknesses of the industry. Those five forces atomic number 18 at present used to determined Air Asias strengths and weaknesses which atomic number 18 shown as be rugged Threat of Entry on that point is a high hindrance entering air passages industry since it requires high capital to organize up everything such(prenominal) as purchase or lease air craft, set up office, hire staffs, and etc. Thus, this has reduced the treat to Air Asia.Moreover, brand sensation is sooner of the essence(predicate) in this industry. Thus, to enter this industry non precisely required high capital but also have to scud some time to create brand a struggleeness. Consumers of all time choose the output or service they really trust. Thus, instead of creating brand awareness, new door has to c reate so called brand loyalty. Hence, this is reducing treat to Air Asia too. ( Roy L. Simerly) However, the presidential term legislation is one of the barriers for entering airlines industry. For example, MAS has been protected by Malaysia government on the route to Sydney and Seoul Incheon.Therefore Air Asia find itself very catchy getting a new route from government. This not only affects the timeline set by Air Asia but also influence their lolly. Power of suppliers every(prenominal) industry has someone to play the role as suppliers. Power of the suppliers is important as it will affect the industry. In airline industry, the power of suppliers is quite high since there are only cardinal major(ip) suppliers which are Air spate and Boeing hence there are not many choices to airline industry. Nevertheless, the ball-shaped economic crisis has limited the new entrant and also reducing the emanation of planes in the immediate future.However, both suppliers provide almost same stock aircrafts and hence the switching to Air Asia is low. Moreover, Air Asia placed a adult amount of order from Airbus in order to expand its routes to international routes. As a result, the power of suppliers may be reduced as Airbuss profit may be influenced by Air Asia. ( Roy L. Simerly) Power of buyers Buyers are one of the factors which will give influence the industry whether making profit or loss. Nowadays, those buyers are much more than knowledgeable and high educated. Thus, they are very sensitive to the price no matter in what harvest or service.In this case, even Air Asia always provide terminal price to customers, but they still will make comparison amongst airlines. Secondly, to switch to other service is very simple because Air Asia is not the only one who provides airline service. I. e. customers still can choose MAS, tiger Airway, Firefly and etc. ( Roy L. Simerly) Moreover, Air Asia always leaves customers an image as they always delay the flight. Hence, as an investor or business man, they will choose more reliable airlines instead of Air Asia. Threat of substitutesSubstitutes are products or work which can replace the original products or services and give almost same satisfaction to the consumers. In airline industry, there are two types of substitutes, indirect and direct substitutes. Indirect substitutes include train, bus, cruise and etc. On the other hand, direct substitutes indicate the other airline. Consumers usually prefer low cost. For example, from Kuala Lumpur to Singapore, there are few transports that consumers can choose such as bus, train and air travel. If the customer is going to a budgeted trip, definitely he will choose bus which is the lowest price among the three.Moreover, the technology is now make information much more advantageously to assess. Customers can easily compare the price among few airlines just by assessing internet as internet make information more transparency. Nevertheless, the archipelago geographical structure in Malaysia make air travel is the most viable, efficient and handy personal manner of transportation. For example, travel from Kuala Lumpur to Bangkok, the customer may choose to take bus or air flight. However, air plane are much more convenient and also lesser time consuming compare with taking bus to Bangkok. Rivalry among existing competitorsIn every industry, there is positive or negative trend to industry growth rate. If there is positive trend, accordingly the firms have not to steal the market share among them. However, in airline industry, the growth rate is really low due to limited customers. Thus, in order to expand, Air Asia has to steal the market share from its competitors. ( Roy L. Simerly) Secondly, Air Asia leads the principal(prenominal) battlefield in price among competitors due to its low operating costs. However, there are more competitors enter to airline industry who have major carriers as their backers or owners may lead to unreas onable price war in the future.Moreover, Air Asia is not the only one who provides airline service. There are few low cost carriers such as Firefly, tiger Airway and etc which makes their services provided weak differentiation. Thus, it becomes a threat to Air Asia. Biblography Roy L. Simerly, strategic Management Case Analysis,http//www. westga. edu/bquest/2002/strategic1. htm, assess date 10th may 2010 Investopedia, assiduity Handbook Porters 5 Forces Analysis, http//www. investopedia. com/features/industryhandbook/porter. asp, assessed date 8th may 2010