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Michael Porter' 5 Forces Models Implementing on Emirates Airline Company
The management of Emirates Airline Company should view the environments of their organization in terms of five competitive forces which include the threat of new entrants, competitive rivalry, the threat of substitute products, the bargaining power of buyers, and the bargaining power of suppliers (Griffin, 2010). The strength of each force will determine the long-term profitability of Emirates Airline Company. Each force is a separate function of the industry structure. In this case, the five forces are the underlying economic and technical characteristics of the airline industry in which Emirates Airline operates.
The first force is the threat of new entrants. This is the extent to which new competitors can easily enter the airline industry or market segment (Griffin, 2010). For Emirates Airline Company, it is notable that it takes large amount of capital to establish a competitive airline company. This is because of the initial capital required to purchase the carriers, distribution systems, and the information technology systems to be put in place. As a result, the threat of new entrants is fairly low for Emirates Airline Company. The advent of information technology has reduced the costs and other barriers of entry in this market segment.
The second force is the competitive rivalry. For Emirates Airline this is the nature of the competitive relationship between dominant airlines such as British Airways, KLM, and Qatar Airlines. In the airline industry, Emirates Airline, British Airways, KLM, and Qatar Airlines engage in intense price wars, comparative advertising, and new product introductions. Griffin (2010) says that these airline companies continually try to outmaneuver one another with price improvements.
The third force faced by Emirates Airline is the threat of substitute products. Griffin (2010) says that the threat of substitute products is the extent to which other airlines such as British Airways, KLM, and Qatar Airlines are likely to introduce alternative products or services which may supplant or diminish the need for existing products or services offered by Emirates Airlines. The introduction of low cost carriers to compete with Emirates Airlines can significantly change the industry’s competitive landscape of the airline industry (Badi, 2007).
The fourth force is the bargaining power of customers or buyers. For Emirates Airline customers are the source of revenue. Information technology has enabled the customers to increase the level of information available to them and their price sensitivity (Badi, 2007). In the airline industry, customers always seek to optimize buying position and hence they make good use of all the available information to receive optimal price. The use of information technology and internet by the customers in the market has enabled them to compare prices offered by Emirates Airline and its competitors (Griffin, 2010). In this context, the bargaining power of the customers in the airline industry is the extent to which customers of the products or services offered by Emirates Airline have the ability to influence the providers. Griffin (2010) indicated that it is important to note that customers have a considerable influence over the price they are willing to pay depending on the type of product and service level delivery.
The fifth force is the bargaining power of suppliers. In relation to this force suppliers of key equipments that make up the final product and service delivery at Emirates Airline have influence on the level of competition of the airline industry. Griffin (2010) says that the bargaining power of suppliers is the extent to which suppliers have the ability to influence potential buyers. For example, even though Boeing has few potential customers like Emirates Airline, those customers have only two suppliers that can sell them a 300 passenger jet. Griffin (2010) says that to Emirates Airlines Boeing and Airbus have powers. At the same time, suppliers have more influence over the airline industry because they determine price increases and service quality (Badi, 2007). Since the suppliers in the airline industry are few, they exert more power because there are no substitute products. This force affects the way Emirates Airline, British Airways, KLM, and Qatar Airlines price their products and services.