UK AIRLINE INDUSTRY ANALYSIS

U.K Airline Industry Analysis

COMPARISON OF MICRO ENVIRONMENT ANALYSIS OF BRITISH AIRWAYS AND RYAN AIR

Threat of Substitute Products

There is no perfect substitute for the British airlines as it is the fastest way to travel from one point/region to another. However, when considering the airlines at the domestic level, substitutes like rail, road and ferry services are available. Yet again, discouraging factors such as convenience and time consumption keeps the airliners at advantage. The major factor that might give rise to these substitutes' threats is the cost of air travel, which gives customers reasons to take up substitute measures. This threat hardly affects international carriers because of the long distance nature of their coverage (Pickling, 1991, 169).

Power of Buyers

Generally speaking, the bargaining power of buyers in the airline industry is quite low. This is as a result of the high costs involved with switching airplanes. Another factor that should be considered is the level of concentration. In the airlines industry, buyers are less concentrated than sellers, that is, there are more buyers than sellers which mean less bargaining power for buyers. However, when focusing on the ability to compete on service, in domestic airlines, customers stand a good chance for bargaining as the competition is on the high side but the reverse is the case on international routes; this is because there are fewer options (Hunter, 1995, 850).

Power of Suppliers

The level of competitiveness can be significantly affected by the power of its suppliers and customers. Where suppliers or customers have greater power than the member of the industry, competition within the industry for scarce suppliers/customers will be more intense (Hooley, et al, 2004). In the airline industry, the suppliers are more concentrated than buyers and there are only few organizations capable of supplying their resources to buyers. Boeing and Airbus are the main dominants of the airline supply business; therefore, there is not an intense competition within the industry providing the air freight services. Similarly, the British Airways is not into the cutthroat competition among suppliers. The likelihood of a supplier integrate vertically isn't very likely, so you probably won't see suppliers starting to offer flight service on top of building airlines. In the airline industry, the seller concentration of different products of services and scale of operation is to be taken into consideration (Hackle, 1991, 43).

Barriers to Entry

The barriers to entry that exist in the airline industry are the conditions that prevent new entrants from easily penetrating the industry. Existing airlines benefit from these barriers by protecting their existing revenues from new competitors. These barriers can either be natural or as a result of government interventions and they are as follows:

High vulnerability to economic conditions: The global economic recession has resulted in weaker demand for air travel and could create challenges for new entrants, which could have a material adverse effect on the business and the results of operations.

Marketing strategies of existing airline industries: Strategies such as frequent flier programmes and booking incentives have ...