Air Asia- Porter's Five Forces Essay

868 Words May 1st, 2010 4 Pages
Porter’s five forces
Michael E. Porter claimed that there are five competitive forces which can shape every industry by identify and analysis those five forces(appendix) and thus determine strengths and weaknesses of the industry. Those five forces are now used to determined Air Asia’s strengths and weaknesses which are shown as below:

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. Thus, to enter this industry not only required high capital but also have to take some time to
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Nevertheless, the archipelago geographical structure in Malaysia make air travel is the most viable, efficient and convenient mode of transportation. For example, travel from Kuala Lumpur to Bangkok, the customer may choose to take bus or air flight. However, air plane are much more convenient and also lesser time consuming compare with taking bus to Bangkok.

Rivalry among existing competitors
In every industry, there is positive or negative trend to industry growth rate. If there is positive trend, then the firms have not to steal the market share among them. However, in airline industry, the growth rate is really low due to limited customers. Thus, in order to expand, Air Asia has to steal the market share from its competitors.( Roy L. Simerly) Secondly, Air Asia leads the main battlefield in price among competitors due to its low operating costs. However, there are more competitors enter to airline industry who have major carriers as their backers or owners may lead to ‘unreasonable’ price war in the future. Moreover, Air Asia is not the only one who provides airline service. There are few low cost carriers such as Firefly, Tiger Airway and etc which makes their services provided weak differentiation. Thus, it becomes a threat to Air Asia.

Biblography

Roy L. Simerly, Strategic Management Case

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