Apply Porter’s Five Forces Model to evaluate the attractiveness of the Chinese fireworks industry. Remember to evaluate all the relevant criteria for each of the five forces and provide a low, medium,

Porter’s Five Forces Template

Industry being analysed: Canadian Airline Industry

Describe the level of rivalry among competitors. (High, Medium Low) Explain.

Number of competitors - 5-10 leads to a medium level of rivalry

Growth rate - High growth in cargo, current pandemic has caused a low growth rate for business flights and medium growth rate for pleasure travel. This leads would lead to a high rivalry for passenger and low for cargo.

Fixed costs - high for cost of aircraft, maintenance and airport fees leads to high rivalry

Differentiation among existing competitors - customer service and level comfortable between airlines is different among airlines. Cost and available destinations are different leads to medium rivalry

Exit barriers – high barriers to leave due to presold tickets, leases at airports, and the high cost of aircraft. This leads to high rivalry

Perishable - Airline seats are perishable. Once a plane leaves you can’t sell the seat. Leads to high rivalry

Overall the rivalry among competitors is high rivalry.

What is the threat of potential entrants? (High, Medium Low) Explain.

Capital requirements - High cost to purchase aircraft, insurance leads to high barrier which is low threat for new entrants

Access to distribution channels – Permission to fly are a high barrier which is a low threat for new entrants. Access to sell on internet is low barrier which is a high threat for new entrants.

Switching costs - No switching costs from one airline to another when booking a new flight. Loyalty cards may be a minor threat but overall low barrier so a high threat for new entrants.

Overall the threat of new entrants is low-medium

Describe the level of bargaining power held by each of supplier groups. Consider each supplier group separately. (High, Medium Low) Explain.

Who are the suppliers? – List Suppliers and consider the following for each supplier.

Number of suppliers
Uniqueness of good/service
Switching cost to change vendors
Importance of good/service to industry
Low threat of backwards or vertical integration by buyers

Aircraft manufacturers – Suppliers have the power since there are only two manufacturers for airlines to choose from and it may be costly for an airline to switch vendors. However, larger airlines that purchase many planes may have higher bargaining power.

Jet Fuel – Jet fuel is highly important but prices are primarily set by the world markets resulting in the suppliers have slightly more power.

Food and Beverages – Many food and beverage vendors exist and the cost to an airline to switch is low unless there are contracts in place. The airlines have the power.

Airports – Airports are necessary the operation for an airline and provide a unique service. This means that airports have the power and are they are a higher threat to the industry.

Describe the level of bargaining power held by the buyers. Consider each buyer group separately. (High, Medium Low) Explain.

Relatively few buyers – many buyers leads to low threat

Goods/Services homogeneous (hard to distinguish between) – There are some differences in comfort and customer service leads to medium buyer power

No or low cost switching costs – low switching leads to high buyer power

Credible threat of backwards integration – Not applicable

Overall – airlines have the power overall threat from the buyers is low-medium

What are the potential substitute products and services? Is the threat from these each of substitutes high, medium, or low?

Trains – low threat in most parts of Canada

Car – high for short distance but low for long distance

Boat – low threat

Buses – low threat

video conferencing – high for business travel – low for pleasure

Overall Threat – low threat for long distance but high threat for short distance

Strategic Planning