Assessments instead of online discussions and seminar - Essay Example

The purpose of an industry analysis is to assist an industry’s management to create and maintain a competitive advantage that helps a company to prosper in the market. Industry analysis needs to understand the structure of an industry and its attractiveness because it determines the profitability of a business (Hill and Jones, 2010:41). The level of industry profitability is not random but it rather has a systematic influence of the Industry’s structure, which eventually determines the entry and exit barrier.

This paper will analyze the industry analysis applied to different industries in European markets (1) - Industry Analysis Analysis of five forces using UK Airline industry as our case study Porter arguers that there are five forces that determines an industry’s competitiveness that may change over time as the industry conditions change. These forces are entry threats, rivalry from existing competitors, threat of substitution, bargaining power of suppliers and the bargaining power of buyers (Porter, 2008:6).

This paper will outline the five forces that the European airline industry put into practice. Competitive rivalry (European airline industry) Competitive rivalry will be the first force to analyze. The purpose of competitive rivalry is to assess the rate of competition within an industry (Porter, 2008:29). Airline industry’s is among the prominent industries globally that exist in an intensive competitive market. In Europe, the top three airlines are Air France, Lufthansa, KLM and British Airways.

These airline companies compete against each other for the same customers through prices, technology, in-flight entertainment customer service and other services (Rothkopf, 2009:213). Entrants’ threat New entrants invade the existing market and bring competition and changes in the market environment. The cause of new entrants is the profitability in certain industries, which in turn attracts other businesses who intend to join the industry (Porter, 2008:7). European air industry has improved tremendously which has led to attraction to new entrants; however, the cost of entry is becoming higher.

The required capital for an airline entering the industry is quite expensive. Competitive substitute The products and services provided in a particular industry usually have the same substitutes elsewhere. This substitute products and services pose a threat because they limit the ability of a firm and their prices (Porter, 2008:25). In our case, the main substitutes that offer other forms of transport are road, rail and marine. The distances between European destinations are relatively small, and people prefer other transport services.

More so, the substitute means of transport tend to be cheaper than air transport. Additionally, environmental factors affect air travel because customers tend to see the environmental impacts of air travel as crucial disadvantage. These factors pose threats to the British airways in the business market. Supplier bargaining power Bargaining power is the ability to influence setting of prices because it assesses the ease of suppliers to hike prices (Porter, 2008:26). Suppliers can influence the profitability of a firm by exerting pressure for both higher and lower prices.

The airline industry have little control over the rising fuel prices because there is no alternative source of fuel so far hence leading to the strength of supplier power (Porter,