Emirates Airlines Porters Five forces analysis

Porter’s Five Forces Analysis Porter’s five forces model is a tool that is utilized to analyze the competitive environment within which an organization or a product operates. There are five particular forces including the threat of entry, the bargaining power of suppliers, the bargaining power of buyers, threat of substitutes and rivalry amongst existing competitors. The threat of new entry delineates how simple it is for a new entity to enter into the airline industry.

The higher the threat of market entry, the worse it is for existing rivaling organizations in the industry. The threat of substitutes encompasses the magnitude of existing products or services that offer similar benefits to the products or services. With regard to the bargaining power of buyers, if the buyers have significant power they can demand cheaper prices or opt for other products, which can hamper the profits generated. Bargaining power of suppliers implies the ability of suppliers to shift to different consumers, being the sole producers and dominating.

Competitive rivalry takes into account the rival organizations within the similar industry that have the same products and services (Porter, 1980). The competitive forces shape every particular industry and market. They are also determining factors of the level of intensity of the competition and therefore the profitability and also the attractiveness of an industry. By contemplating on the manner in which each of these forces impacts the business, and by ascertaining its strong suits and direction, it is possible for Emirates Airlines to assess its market position.

Thereafter, it is possible for the firm to look at the different strategic changes that it needs to make in order to deliver longstanding profit. The fundamental objective of such strategy ought to be to undertake modifications in a manner that enhances the position of the firm (David and David, 2003).

Emirates Airlines should make use of the model in order to have a clear perception of these forces, either within the airline industry or external to the industry, which impacts their strategies and the organization as a whole, to determine how to have a competitive advantage. Every industry is distinctive and has its own unique structure. Therefore, Emirates Airlines can capitalize on the Porters Five Forces model to determine the different ways of satisfying consumers so as to attain an effective competitive edge over market rivals.

This is fundamental to ensure that the company generates profits (David and David, 2003). FORCE 1 – THREAT OF NEW ENTRY – LOW The threat of new entrants to the marketplace signifies a low threat for Emirates Airlines. First of all, the barrier of entry into the airline industry is significantly high. The operating costs incurred within the industry are massive and new firms are bound to face some challenges. However, it is imperative to note that the Middle East is a region has a number of good finance sources.

This implies that it is possible to provide the funding necessitated for business start-up and operation. Secondly, the rules and regulations in place are flexible for new market entrants. However, Emirates Airlines are provided with support from the government and therefore this makes it harder for new market entrants to compete (Rahman et al., 2015).

Third, bearing in mind that the airline industry necessitates incessantly keeping up with the advancement in technology and the level of specialty it has assimilated into the operating strategies, there is a significant challenge into market entry. The threat of market entry is also low owing to the reason that the industry is already saturated and operation within the industry is significantly high. It is imperative to note that at the moment, there are numerous different airlines with recognized brands.

This implies that new airlines would find it hard to compete effectively. For instance, in the present day, low-cost airlines have started entering the market. However, dominant airlines such as Emirates Airlines continue to enjoy a huge number of consumers owing to their renowned brand and also the exceptional services provided. Therefore, the new market entrants do not substantially hamper the profits generated (Rahman et al., 2015). There is no way that prevailing businesses can preclude new entrants from attempting to get a share of the market.

However, there are numerous strategies that can aid them to sustain their position in the marketplace or ensure that they are ahead of the rivals. There are various recommended strategies that Emirates Airlines can utilize to improve competitive advantage and its market position. First, Emirates should improve on existing products or services. For instance, the airlines can focus on offering consumers with affordable tickets, flights with full services and exceptional customer service. A second strategy is to lay emphasis on the needs of the consumers.

The company should make the customer experience fundamental to the different products and services assimilating various aspects to comprehend consumer perspectives and prospects (Porter, 2008). FORCE 2 – BARGAINING POWER OF SUPPLIERS - HIGH The supplier’s bargaining power delineates the relative power that powers are able to portray in the market environment to impact the level of success and performances of companies. The constituents of the suppliers’ bargaining power are in relation to the raw materials and the energy sources.

The major suppliers in the airline industry are Boeing and Airbus. There is intense competition between these two leading suppliers. These suppliers have significantly high bargaining power owing to the reason that they might opt not to work with the organization in the course of economic mayhem or also announce excessive prices for these resources (Rahman, Azad, and Mostari, 2015). Emirates Airlines has a strong incentive to maintain a good and healthy relationship with its suppliers because finding a new consistent and reliant supplier can be a significant challenge.

In contrast, the supplier can easily find other buyers that are capable of achieving the similar sales volumes signified by Delta. In this regard, the bargaining power of suppliers is high (DePersio, 2018). There are different strategies that Emirates Airlines can undertake to maintain a competitive advantage and strong position in the market. One of them is to realize that supplier strategies go in two different ways.

Majority of the corporations lay emphasis on what the suppliers can do for them instead of what they can accomplish with the supplier to diminish costs. Therefore, Emirates should strive to attain a partnership that leverages the total production cost to the advantage of both parties. In addition, it is imperative for Emirates Airlines to plan for exceptions and also major contingencies. At times, emergencies will take place, particularly in intricate manifold supply chains.

Therefore, it is imperative for Emirates to plan how emergencies will be dealt with and also partake in joint planning in order for disruptive events to be managed in a smooth manner (Blanchard, 2009). FORCE 3 – BARGAINING POWER OF BUYERS - HIGH Emirates Airlines are subject to high buyer bargaining power. This is driven by the fact that there are various airlines that the consumers are able to choose from. The different airlines that consumers can choose from include Turkish Airlines, Fly Dubai, and Etihad Airlines.

Specifically, consumers have bargaining leverage in the sense that they can choose different airlines in terms of the ticket prices, flights headed to the same destination. In addition, there are low switching costs in that consumers can easily switch from one airline to another owing to the various competitive mechanisms in the industry. In addition, owing to the advancement in technology, it has become possible for buyers to easily check the different prices offered by airlines for various destinations.

As a result, it is conceivable to easily pick the most affordable ones or the ones with attractive packages (Alshubaily, 2017). Some airlines offer cheaper tickers or even better services to consumers in regard to particular consumer needs. In addition, in the present day, there is progressively greater consumer price sensitivity. In the present day, consumers are able to choose from the various competitive prices provided by the various airlines.

In the event that Emirates Airlines opts to increase the prices of its tickets with no specific reason, consumers will easily choose a different airline to choose from. In addition, at the moment, there is a progressively increasing growth and development of low-cost carriers who offer consumers cheaper tickets to travel to and from various destinations. This implies that buyers have a high bargaining power (Alshubaily, 2017). There are different strategies that Emirates Airlines can employ to maintain its competitive position in the market.

First of all, Emirates Airlines should differentiate its products and services. Basically, this encompasses building a unique selling proposition for its airline product and services for them to become indispensable to the buyers. For instance, the firm can offer consumers even more exceptional customer services compared to the other rivals in the market. There is also the aspect of providing various attractive packages. These packages are meant to woo consumers.

For instance, the airline can incorporate a discount if the tickets are booked from the UAE to any of the destinations that are covered by the airlines. Another package is the inclusion of hotel stays. For instance, the airline can offer free stays for children if they are accompanied by paying adults (The Hindu Business Line, 2011). A second strategy for Emirates Airlines is embracing the low-cost leadership approach.

This takes into account diminishing the firm’s cost of production and the business in its entirety so as to offer the lowest possible price to the buyers. In this regard, it will be possible for the airline to maintain its competitive status in the market in spite of the increasing competition. FORCE 4 – THREAT OF SUBSTITUTES - LOW A substitute is not a product or service that is in direct competition with the firm’s product or service offerings but rather acts as a substitute for it.

Therefore, an Etihad Airlines flight from the UAE to Berlin is not deemed a substitute for an Emirates airlines flight with the similar stare and end points. With respect to the airline industry, examples of substitutes take into account making such similar trips by train, car or bus. For destinations that are situated far away from the UAE, the threat of substitutes is extremely low owing to the reason that there are not buses or trains that can guarantee the transportation of consumers.

Until a new technology comes along and supersedes or displaces air travel as the fastest and most convenient means of traveling long distances, Emirates Airlines face minimal threat from substitute means of travel (DePersio, 2018). In spite of the fact that airlines are yet to be supplanted as the fastest means of transportation, it is still important for Emirates Airlines to offer consumers with local travelling packages.

This implies that through cost affordable ticket prices and attracting air packages, the firm will also be able to increase its consumer base by including the local consumers. Notably, the United Arabe Emirates comprises of seven different emirs including Abu Dhabi, Ajman, Fujairah, Sharjah, Dubai, Ras al-Khaimah and Umm al-Qaiwain. By offering cheap ticket prices, the company will also be able to appeal to these consumers and also those travel to neighboring nations rather than using train or bus as means of transportation.

As a result, not only will Emirates Airlines be able to solidify its position in the market, but at the same time, the company will also be able to generate greater revenues FORCE 5 – RIVALRY AMONG EXISTING COMPETITORS – HIGH The airline industry is without a doubt one of the highly competitive industries. A major problem within the Middle East airline is mounting regional competition. This is one of the biggest longstanding threats facing the major airlines in the region (Dudley, 2017).

In spite of being the biggest airline in the Middle East region and having strong support from the Dubai government, Emirates airlines faces intense competition from other major airlines. One of the key competitors is Etihad Airways. This is the second biggest airline in the United Arab Emirates situated in Abu Dhabi and owned by the Abu Dhabi government. Etihad Airways has also created its own airline affiliation referred to as the Etihad Airways Partners, which comprises of Jet Airways, Air Serbia, and Air Seychelles (Bhasin, 2018).

A second key competitor of Emirates Airlines is Qatar Airways. Notably, this is a state-owned airline with its main center of operations situated in Qatar and has significant support from the Qatar government. Imperatively, Qatar airlines have a significant advantage of being positioned within a state that is rich in oil thereby obtaining major financing. In addition, the airline has strategic affiliations with Cathay Pacific and Royal Air Maroc (Bhasin, 2018). A third key rival for Emirates Airlines.