Porter’s 5 Forces for British Airways
There are various ways used by the company to determine the likelihood of its profitability in the industry, however, Porter’s 5 Forces for British Airways is one of the most effective. British Airways is a full service global airline company, mainly focusing on passenger services, cargo and ground services handling. Considering British Airways is targeting the global market, determining the situations of the markets can be quite daunting. However, there are 5 key factors that can easily describe the situation of the market for proper strategy development.
Analysis of Porter’s 5 Forces for British Airways
The following comprehensive analysis of Porter’s 5 forces for British Airways will unearth the current competitive strengths of the company and its ability to remain profitable in the market.
Supplier Power
British Airways obtains its planes, aviation fuel from other aviation companies in order to run its business. These suppliers command a certain level of collective power in the industry, which may impact the profitability of the airline company’s operations. For instance, a high level of competition among the suppliers, could ensure better prices of aircrafts and fuel. British Airways mainly relies on two manufacturers for its planes; Airbus and Boeing. Since these two are the main suppliers to BA, they command a higher bargaining power.
British Airways needs fuel to run their planes, thus, reliant on the global prices of fuel. Currently, the prices of fuel are on the decline.
Power of Buyers
British Airways mainly focuses on passengers for its revenues. Although the company offers short haul flight services, there is a wide range of options for passengers across Europe. This gives the customers some power since they can easily buy tickets from other companies that offer cheaper prices. However, their powers are limited when it comes to international flights because BA has a more effective global network.
Through the internet, passengers can now easily obtain information about airlines, giving them more power to choose the company to fly with.
Barriers to Market Entry
There are several barriers to new companies planning to enter into the airline industry. One is the stiff measures imposed by industry regulators. Besides, investment in the industry also requires quite a huge amount of money. In several markets too, British Airways might find it a bit challenging to enter due to the increasing number of affordable long haul carriers. However, the withdrawal of Air Asia from the European market will work towards deterring many new low cost airline companies from entering the market. Generally, there is no significant threat of new entrants into the market.
Competitive Rivalry
BA offers both long and short haul flight services. In the long haul category, there is almost no difference between BA and other aviation companies, with regards to their services and pricing. The short haul sector is however, quite fragmented because of the existence of several companies offering the services. Many rival companies are shifting mergers in order to remain profitable, thereby, pushing the level of competition even further.
Threat of Substitutes
Some of the key substitutes to the products and services offered by British Airways include; trains, cars or buses. However, these would only be used in the cases whereby people wish to travel over short distances. This means they can only threaten the company’s short haul flight services. However, there is almost no substitute to long haul services. Even for buses, cars and trains to pose significant threat to BA, they must be able to cover the network of air transport and travel times.
Conclusion
Different conclusions can be derived from the above analysis of Porter’s 5 forces for British Airways. The buyer power ranges from little to medium, presenting a good business environment for BA. Since Boeing and Airbus are the key suppliers of aircrafts, they have significant bargaining power. Besides, there is also a very high competitive rivalry in the global airline industry that poses great risk to the company. In fact, competitive rivalry exists both in short and long haul segments. Threats of substitutes and new entrants are however, quite low, presenting a favorable market for British Airways.
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References
http://www.slideshare.net/MohamedHussienFarah/british-airways-strategic-analysis-group-report
http://www.academia.edu/5285221/British_Airways_Strategic_Management
https://prezi.com/wq2rnsd8pbkv/porters-five-forces-for-british-airways/
http://www.britishairways.com/en-gb/information/about-ba