Emirates Airline is a leading business in the global airline industry, managing its operations in more than 80 regions. The porter’s five forces model would help in gaining an understanding about the airline industry and Emirates’ position in the market.
Threat of New Entrants
Airline industry has high entry barriers, primarily associated with the huge start-up costs involved. In addition, entering in the airline industry requires taking government’s approval as well as fulfilling the standards of aviation associations. The companies also have to implement EPA standards, adhering to the quality of the airplanes and keeping the emission under specified limit (Belobaba, Odoni & Barnhart, 2015). Starting a new airline by penetrating into the competitive market would require capital resources, combined with an effective market entry strategy that helps in establishing a strong position. The airlines already present in the internal aviation industry make it difficult to get significant market share gain in the initial years (Bamber, Gittell, Kochan & Von Nordenflycht, 2013). Therefore, Emirates Airline is facing low threat of new entrants. Well established companies such as Emirates, which have been operating since many decades, have the capacity to handle the pressure from new entrants.
Bargaining Power of Buyers
The buyers in the airline industry can’t exert any significant control over the prices charged for airfare. They have some influence on the prices, by opting for other airlines, charging lower airfare, however the demand for quality is a central feature for customers of Emirates (Pride & Ferrell, 2016). An effect of this lack of bargaining power is that the airline companies such as Emirates can increase their prices due to the seasonal influences, and the customers continue to avail the service despite the price hike. Since Emirates has established its image as a quality service provider, the customers are willing to pay a higher price than other no frills airlines. Based on this analysis, it can be concluded that the buyers of Emirates have low bargaining power.
Bargaining Power of Suppliers
The bargaining power of suppliers in the airline industry is determined by the number of suppliers of planes and the demand of the airlines for these carriers. There are only 2 leading companies that are manufacturing the airplanes for civil transport usage, namely Boeing and Airbus. The low number of suppliers present in the aviation industry leaves ample opportunity for the suppliers to show limited flexibility in the price structure, while maintaining high bargaining power. As a result, they are able to have a higher bargaining power when dealing with the airlines such as Emirates. The suppliers get the benefit of gaining agreement with this leading global airline. The management has developed close ties with the suppliers, collaborating for the purpose of developing airplane designs that are equipped with the needed technical mechanisms to enhance customer experience (The Emirates Group, 2018).
Threat of Substitute Products
Emirates Airline faces moderate level of threat of substitute products in the airline industry. There are other carriers apart from Emirates that are providing transportation services to the people, which can be regarded as a substitute for the consumers. Another substitute that is available for people traveling to nearby regions is other modes of transportation such as automobiles. However, when it comes to international travel, air travel is the main choice of consumers. The other airlines offer tickets at a competitive price, creating moderate level of threat for the company, however, Emirates remains focused on service quality, thus charging premium price (Betz, 2010).
Competitive Rivalry
The global airline industry has a high degree of competitive rivalry, putting pressure on the company to develop a strategy to maintain financial supremacy despite the intense rivalry. According to the management, focus on enhancing the service quality and updating the aircrafts and infrastructure helps in maintain an edge in the industry (The Emirates Group, 2018). Even though Emirates has the benefit of being the national airline of Dubai, its competitors have global presence, necessitating the need to strive for maintaining customer loyalty through brand loyalty programs. Some of the competitors are Qatar Airways, British Airways and Air France which have a significant market share, making quality as a key component of differentiation for Emirates.
References
Bamber, G. J., Gittell, J. H., Kochan, T. A., & Von Nordenflycht, A. (2013). Up in the air: How airlines can improve performance by engaging their employees. USA: Cornell University Press.
Belobaba, P., Odoni, A., & Barnhart, C. (2015). The global airline industry. UK: John Wiley & Sons.
Betz, F. (2010). Creating and Managing a Technology Economy. USA: World Scientific.
Pride, W. M., & Ferrell, O. C. (2016). Foundations of marketing. USA: South-Western Cengage Learning.
The Emirates Group (2018). Annual Report. Retrieved from https://cdn.ek.aero/downloads/ek/pdfs/report/annual_report_2018.pdf