Airlines Competitive Forces

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1. Introduction To survive in the current competitive environment, most airlines are reviewing their strategies from time to time. Airlines are sharing risks and resources to remain in a competitive advantage which is known as alliance. This report analyses the internal and external analysis of the strategic alliances in the airline industry. 2. The Macro context (External) The alliance in airline industry consists of external influences that affects the performance of the business and it is beyond the control of an individual airline. The three influences mentioned below are from STEEP analysis which is the best tool used to scan the general environment of the airlines industry. 2.1 Technological Technological influence is one of the most…show more content…
Major airlines have the capability to cut prices to gain market share. However, it is difficult for new entrants as they have less resources, lack of substantial scale economies and less information. So, the airlines move towards alliance to win greater market share and eventually compete in the industry. 3.3 Bargaining powers of buyers Buyers are normally the customers in airline industry. They have a high bargaining power and it keeps increasing as the number of airlines increases. Nowadays, all the information is available on internet where customers can compare prices and make a purchase. So, they have the power to push down the price of tickets, ask for a top-notch service and choose their airlines as the switching cost is low. 3.4 Bargaining powers of suppliers Suppliers have power in terms of price and quality of product. Suppliers can increase the price or lower the quality of products and services. Through alliance, some airlines lower their tickets price while others increase their price. 3.5 Threat of substitute products or…show more content…
SWOT Analysis I N T E R N A L STRENGTHS • Strong route network in Northwest for KLM • Pool of frequent flyer programmes and shared airport lounge facilities for consumers • Great opportunity for economies of scale • Effective internal management system • Wide geographic network • Increase in number of passengers, strong market capitalisation for both Northwest and KLM airlines • Increase in financial strength • Economies of scope (profitability via joint marketing and purchasing) WEAKNESSES • No scale of economies as some carriers are costly • Low level of metrics which can’t decide the effectiveness of alliance • Lack of innovation as alliance is just a facilitator • High exit cost from alliance E X T E R N A L OPPORTUNITIES • Look for opportunities that can boost the economies of scale • Develop metric system to measure effectiveness of alliance and the intangible benefits i.e. how many customers are on board through alliance • Increase the joint purchasing initiative THREATS • Government regulations • Airline industry is very sensitive and give rise to uncertainties • Increase in low cost travel carriers • Raise in ticket prices • Conflicts may arise if there are too many alliance and can impact the competitive advantage of the

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