Question

Use Porter's five-forces method of analysis to explain whether or not the US Domestic Passenger Airline Industry is attractive. Do so by listing each of the five threats and determining whether each of them present a High", Moderate", or Low" threat, make sure you provide justification. Then, given the results of each of the five forces tell me whether you feel it is an attractive industry.

Answer 1

The US Domestic Passenger Airline Industry is considered less attractive due to high barriers to entry moderate threats from substitutes and buyers, high supplier power, and intense competitive rivalry.

Step-by-step explanation:

Porter's five-forces method of analysis can be used to assess the attractiveness of the US Domestic Passenger Airline Industry. The five forces in this analysis are:

1. Threat of new entrants: This threat can be considered low for the airline industry as high capital requirements, regulatory barriers, and existing airline dominance make it difficult for new entrants to compete effectively.
2. Threat of substitute products or services: The threat of substitutes is moderate in the airline industry. While there are alternative modes of transportation like trains and buses, they are not always practical or efficient substitutes for air travel.
3. Bargaining power of buyers: The bargaining power of buyers can be considered moderate in the airline industry. Although individual passengers have limited bargaining power, travel agencies, corporate clients, and frequent fliers can negotiate deals and discounts.
4. Bargaining power of suppliers: The bargaining power of suppliers is high in the airline industry. Aircraft manufacturers, fuel suppliers, and labor unions can exert significant influence on airlines, affecting their costs and operations.
5. Intensity of competitive rivalry: The intensity of competitive rivalry in the airline industry is high. Airlines compete fiercely for market share through price wars, route expansion, and service enhancements.

Based on these analyses, the US Domestic Passenger Airline Industry can be considered less attractive for new entrants due to high barriers to entry, moderate threats from substitutes and buyers, high supplier power, and intense competitive rivalry.