Porter Five Forces of Airasia

Porter Five Forces of Airasia

Threat of Entry

There is a high barrier entering airlines industry since it requires high capital to set up everything such as purchase or lease air craft, set up office, hire staffs, and etc. Thus, this has reduced the treat to Air Asia. Moreover, brand awareness is quite important in this industry. Hence, to enter this industry not only required high capital but also have to take some time to create brand awareness. Consumers always choose the product or service they really trust. Thus, instead of creating brand awareness, new entry has to create so called brand loyalty. Hence, this is reducing treat to Air Asia too.( Roy L. Simerly) However, the government legislation is one of the barriers for entering airlines industry. For example, MAS has been protected by Malaysia government on the route to Sydney and Seoul Incheon.(Appendix) Therefore Air Asia find itself very difficult getting a new route from government. This not only affects the timeline set by Air Asia but also influence their profit. Nevertheless, this has limited the new entrance due to the government policy. In overall, the treat of entry is low to Air Asia.

Power of suppliers

Every industry has someone to play the role as suppliers. Power of the suppliers is important as it will affect the industry. In airline industry, the power of suppliers is quite high since there are only two major suppliers which are Airbus and Boeing hence there are not many choices to airline industry. Nevertheless, the global economic crisis has limited the new entrant and also reducing the upgrade of planes in the immediate future. However, both suppliers provide almost same standard aircrafts and hence the switching to Air Asia is low. Moreover, Air Asia placed a large amount of order from Airbus in order to expand its routes to international routes. As a result, the power of suppliers may be reduced as Airbus's profit may be influenced by Air Asia.( Roy L. Simerly) Generally, the power of supply is moderate low to Air Asia.

Power of buyers

Buyers are one of the factors which will give influence the industry whether making profit or loss. Nowadays, those buyers are much more knowledgeable and high educated. Thus, they are very sensitive to the price no matter in what product or service. In this case, even Air Asia always provide lowest price to customers, but they still will make comparison between airlines. Secondly, to switch to other service is very simple because Air Asia is not the only one who provides airline service. I.e. customers still can choose MAS, Tiger Airway, Firefly and etc.( Roy L. Simerly) Moreover, Air Asia always leaves customers an image as they always delay the flight. Hence, as an investor or business man, they will choose more reliable airlines instead of Air Asia. In this case, the power of buyers is quite high to Air Asia.

Threat of substitutes

Substitutes are products or services which can replace the original products or services and give almost same satisfaction to the consumers. In airline industry, there