Strategy Maping - Competition in the European Airline Industry
Essay by smallie • January 9, 2017 • Research Paper • 1,459 Words (6 Pages) • 1,198 Views
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Strategic Analysis and Planning ST4S15-V1
Group 10 - Ipha Miguel & Raquel Miller - Henry
Week 3 - Task 1 Mapping Competitive Advantage
Competition in the European Airline Industry
Wikipedia (2017) records the European Airline industry having a total of fifty (50) major players of which ten has been selected for this analysis and listed below in figure 1.
| Extract of 10 from 50 of Europe’s Airline Industry Players |
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| 1 | Virgin Atlantic |
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| 2 | Lufthansa |
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| 3 | Air France |
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| 4 | Norwegian |
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| 5 | Austrian |
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| 6 | Bristish Airways |
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| 7 | Ryanair |
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| 8 | Iceland Air Group |
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| 9 | Air Berlin Group |
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| 10 | Meridiana Fly |
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Figure 1
Porter’s Five Forces of Competitive Advantage – The Airline Industry
(Jurevicius, 2013) defines Porters five forces model as an "analysis tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level". Acquiring knowledge of an industry’s drive that enable profitability is the main feature of the framework and the five forces are; competitive rivalry, power of suppliers, power of buyers, new entrants and substitutes. Below in figure 2 is an analysis of the factors affecting the airline industry using the five (5) forces.
Factors | Strength |
Competitive Rivalry | High |
British Airways (BA) signature flights are long hauls and short haul flights which are characterised by prices and services offering between their competitors. The short haul has the most players therefore it is the reason for being fragmented. Intense Price Competition High Fixed Cost Tight Regulations Competition has increased because of the consolidation of competitors. | |
Power of Suppliers | High |
There are two aircraft manufactures with high bargaining powers. British Airways faces challenges such as restriction by being the sole supplier of fuel at the airport. Switching cost is high To increase and protect their bargaining powers, BA employees utilises the services of trade union collectively.
| |
Power of Buyers | Medium |
The airline industry created positive competition decreasing concentration of buyers to supply which decreased their bargaining power. The application of technology via the usage of the internet has created positive interaction amongst customers. Customers are loyal to specific airlines Opportunity to choose low cost carriers | |
Threat of New Entrants | Low |
Numerous factors determine significant barriers to entry, amongst them are; competitive environment, high requirement and high capital cost requirement. New entrants are repelled by existing barriers. Historical records demonstrated why many airlines had failed also detour new entrants. | |
Threat of substitutes | Medium |
Substitutes such as car, train and boat exist, however none compare, especially over long distance with time and costs. Airline is the fastest mode of transportation. Switching cost can be very high, especially when baggage is considered, it is more costly than other means and inconvenient especially when timing is a major factor to the consumer. |
Figure 2
Porter’s Generic Strategies – European Airline Industry Top Ten Airlines for 2014
Generic strategy is a concept developed by Michael Porter which seeks to help businesses to identify what they are good at and provide a guide to achieving a sustainable competitive advantage over its competitor. Below is a figure 3 depicting the four types of strategies that a business can employ as sources of competitive advantage.
[pic 1]
The competitive strategies European Airlines from extract in figure 1 along with data from SkyTrax World Airline Awards (n.d.) for 2014 was used to identify the competitive advantage in the industry and is depicted in the figure 4 below;
| Competitive Strategy |
| ||||
Top 100 2015 Industry Quality Rank | EUROPEAN AIRLINES | SkyTrax 2015 Quality Rating | Cost Leadership (Broad) | Differentiation (Broad) | Cost Focus (Narrow) | Differentiation Focus (Narrow) |
| Top European Airlines extract (2014) |
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|
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37 | Virgin Atlantic | 4 |
| Yes |
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12 | Lufthansa | 4 |
| Yes |
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15 | Air France | 4 |
|
| Yes | |
33 | Norwegian | 4 | Yes |
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|
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13 | Austrian | 4 |
| Yes |
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20 | British Airways | 4 |
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| Yes |
| Top Cheapest European Airlines extract (2014) |
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| Ryanair | 3 | Yes |
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81 | Iceland Air Group | 3 |
|
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| Yes |
71 | Air Berlin Group | 3 |
|
| Yes |
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| Meridiana Fly | 3 | Yes |
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|
|
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