Porters 5 [Ryanair]

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1 Porters 5 Forces Threat of new entrants Supporting Case Explanation Thre at Leve l Scale and Experience - In order for one to enter the budget airline industry, one will need to have a high capital in order to generate high economies of scale. When barrier of entry is high, threat is low L Access to supply & distribution channels - Access to distribution channels is required. New entrants can easily find manufacturer via online search H Expected retaliation - With the existence of other competitors such as Ryanair, EasyJet & Aer Lingus, new entrant can expect a strong price retaliation from its competitor H In summary, the threat of new entry by new players is low. New player will need to be experienced and able to reach to a certain amount of economies of scale in order to compete in the industry. Large investment needed for airplanes and expertists. Strong retaliation by existing players are high and this will prevent new players to join

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Ryanair

Transcript of Porters 5 [Ryanair]

1Porters 5 ForcesThreat of new entrantsSupporting Case ExplanationThreat LevelScale and Experience- In order for one to enter the budget airline industry, one will need to have a high capital in order to generate high economies of scale. When barrier of entry is high, threat is lowLAccess to supply & distribution channels- Access to distribution channels is required. New entrants can easily nd manufacturer via online searchHExpected retaliation- With the e!istence of other competitors such as "yanair, #asy$et % Aer &ingus, new entrant can e!pect a strong price retaliation from its competitorHLegislation & government action- 'overnment ta!es and airport charges that have been implemented will require new entrants to oblige to itLDiferentiation- &ow di(erentiation as low cost % no frills are the main focusLn summary! the threat o" ne# entry by ne# players is lo#$ %e# player #ill need to be experienced and able to reach to a certain amount o" economies o" scale in order to compete in the industry$Large investment needed "or airplanes and expertists$ Strong retaliation by existing players are high and this #ill prevent ne# players to &oin in the budget airline industry$)Porters 5 ForcesThreat of new substitutesSupporting Case ExplanationThreat Level'rice 'er"ormance (atio- With the e!istence of sea transports and car rental rms which are more e!pensive, it ta*es longer time to travel. "ailway services such as may be a cheaper option as compared to the rest but it will ta*e longer time to travel. +ence, the barrier of substitute is high. ,p-1./LExtra ndustry Efects- 0ther means of transports other than by air are sea, train and car will post a threat for short trips. +owever, if distance is further, 1ights will be preferable as travelling in other transport will ta*e longer time to travel. LThreat level "or substitutes is lo#$ Though traveling by train services is a cheaper option! it #ill ta)e a longer time to travel as compared to budget airlines$ The availability o" other mode o" transports #ill also be costly and time consuming! hence this concludes that (yanair have a lo# threat o" substitutes$2Porters 5 ForcesPower of buyersBuyers Cat: Leisure travelersSupporting Case ExplanationThreat LevelConcentration o" buyers- 3uyers power is low as buyer have limited choices of budget airlines in the industryLS#itching cost- No additional e!penses are required to switch to another airline. 3uyers are free to choose.- 4witch can be done immediately without any comple! steps,H*uyer competition threat- 3uyer has no capability to own a plane5 provide themselves.LAs the number o" budget airlines is lo#! buyer #ill have "e#er choices to choose "rom$ Hence! threat level o" buyer is lo#$6Porters 5 ForcesPower of suppliersSuppliers Cat: Airplane ManufacturerSupporting Case ExplanationThreat LevelConcentration o" Suppliers- As there are only three manufacturers in the industry ,3oeing, 708A7 and Airbus/, bargaining power of supplier is high. +S#itching cost- 4witching cost is high as airline will need to train the pilots on the new aircrafts and hence high capital investment is madeHSupplier competition threat- Aircraft manufacturers are unli*ely to go into the budget airline industry. 7ustomers will still buy tic*ets directly from "yanair websitesL,ith the limited number o" manu"acturers and airlines! the threat level o" supplies is moderate$9Porters 5 ForcesCompetitive ivalrySupporting Case ExplanationThreat LevelCompetitor balance- :here are direct competition with other airline such as #asy$et.Hndustry gro#th rate- No economic prot over 6; years ,p-1)/ L-ixed Cost- +igh !ed cost. +ence with the saturated industry, "yanair will need to have a unique business model in order to mitigate the li*elihood of low returnsLExit barriers-