In this paper, we will be analyzing the cases of Pacific Blue in New Zealand’s airline industry and the House of Fraser in the context of the UK’s department store industry, looking at their problems and recommending solutions.
Michael Porter in his book ‘Competitive Strategy: Techniques for Analyzing Competitors (1980) points out that there are five forces acting upon all firms in an industry that determine its chances of entry, exit and survival. Industrialists and producers set up barriers to entry or exit that can prevent or delay the entry of competition- so that they in the meantime reap the profits and revenues available from the interested consumers. These forces are the (1) likelihood of new entrants; (2) power of buyers; (3) power of suppliers; (4) degree of rivalry and (5) threat of substitutes. Thus any one and all of these forces can impact a firm’s chances of success or failure in a particular industry at any given time. Porter maintains that an industry is a group of firms that market products which are close substitutes for each other. Thus we have the airline industry, the retail industry, the automobile industry etc. which deal in products and services that are close substitutes for each other. Porter also uses the concept of industrial groups according to whether the degree of segmentation of products or services is wide or narrow i.e. they are loosely or tightly segmented (Porter, 1980).
Coming to the case of Pacific Blue, it seems that it is stuck between a rock and a hard place. At the one end it has Air New Zealand, the dominant competitor and national airline of New Zealand, for which locals have affinities mainly due to the reason that most industries are foreign operated and dominated. However since the entry of Qantas and Pacific Blue, the degree of competition has intensified. Both Qantas and Pacific