Delta Airlines: Porter's five forces industry analysis

DELTA

Information Systems Management Industry Analysis Case Study, research airline company (Delta Airlines) give an overview company, identify industry a part, complete a Five Forces Industry Analysis.

Delta Airlines

Brief company background

Delta Airlines became one of the world's largest air carriers when it merged with Northwest Airlines in 2008. Based at the Hartsfield-Jackson Atlanta International Airport, Delta offers extensive domestic and international service (Delta Airlines, 2013, CAPA). It is also one of the founding members of the Sky Team. The Sky Team is an airline alliance with Aeromexico, Air France, and Korean Air (Sky Team, 2013, CAPA).

Porter's five forces

Threat of new entrants (Low): Given Delta's size and scope as an organization, it is unlikely that a new entrant could easily rival its power. Flying frequent international flights takes a major capital investment of human and logistical resources. However, it is possible on a small-scale, domestic level for smaller carriers to enter the market. But these carriers cannot offer as many flights to as many passengers and also lack the ability to provide incentives like frequent flier miles

Power of suppliers (high): Boeing and Airbus supply most major commercial airplanes to the major carriers and there is very little competition between the two of them. The power of these companies to charge what they want to charge is very high. However, on the plus side, "the likelihood of a supplier integrating vertically isn't very likely. In other words, you probably won't see suppliers starting to offer flight service on top of building airlines" (The industry handbook: The airline industry, 2013, Investopedia).

Power of buyers (medium-high): The power of buyers in the airline industry has increased significantly with deregulation and with the rise of Internet shopping. Buyers can access the full range of prices and options open to them simply by surfing online. For leisure travel, because it is not a necessity, buyers can always 'opt out' of expensive flights and take other forms of travel to their destinations or stay at home. For businesses, the availability of video conferencing, email, online chatting and other electronic means of communication mean that face-to-face travel is not as necessary as it was in the past.

Availability of substitute goods (medium-low): The availability of substitutes depends largely upon the flight the consumer needs to take. For domestic travel, cars and trains may be viable alternatives. For international travel, however, there are few available substitutes for a flight.

Competitive rivalry (high): The increased focus on prices thanks to Internet ticket shopping and the decreasing lack of interest in loyalty programs has left airlines scrambling to distinguish themselves in the current competitive environment.