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Airline Industry - Identify an Ecommerce Company of Interest to You

Essay by   •  August 26, 2011  •  Case Study  •  806 Words (4 Pages)  •  1,871 Views

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Identify an ecommerce company of interest to you. Visit their site and analyze it using Porter's framework competitive forces. As you complete your review of the ecommerce website, what illuminations occur to you in light of Porter's notion of five competitive forces that influence strategy? What strategy recommendations might you make to those companies you reviewed as a result of your findings?

The e-commerce business I have selected is Delta Airlines, the world's largest airline. One of the most fiercely competitive business segments in e-commerce is the airline industry. Delta Airlines focuses their efforts towards the business class customer and passengers who either expect or desire full in-flight services such as meals and related amenities. American Airlines, Delta Air Lines, United Air Lines, U.S. Airways, Continental Airlines and Northwest Airlines fit these designations . With the gaining market share of the "discount air carriers" they have changed the airline industry competitive force by offering their no frills, low-cost airfares. This has put extreme pressure upon the major carriers and taking away their already slim market shares and profit margins.

* Barriers to Entry / Threat of Entry

The airline industry originally controlled competition by requiring a large initial investment in forming an airline company. Low air-fare carriers conducted business by taking advantage of the larger international carriers by exploitation of low-end air travel by offering lower prices and thus creating Southwest, Jet Blue, America West and others .

* The Power of Buyers

By supplying what the customer wanted in no frill flights in return for discounted fares the larger carriers were at the mercy of their suppliers and vendors in offering many upgraded services. Many times the larger carriers were held hostage to the supply and demand of the upgrades they promised passengers not knowing this would affect their bottom line. The no-frills carriers approached this by effectively pulling the casual traveler which eventually spread to frequent fliers of corporations who wanted to cut costs. The demand for this new customer has re-shaped the airline industry as a result of these options.

* The Power of Suppliers

The one common denominator for both categories is contained in the largest airline expenditure and that is fuel for the aircraft. In order for the low-fare carriers to remain profitable they have lowered their per flight operating costs switching more passengers to their side.

* The Threat of Substitutes

When demand exceeds supply and vice versa, airlines in both segments alter their services with substitutions. In particular low-fare carriers are gaining market share by attacking the excess passenger supply of the airline industry. This occurred from major carriers downsizing their aircraft fleets leaving smaller available aircraft oversold and overcrowded.

* Competitive Rivalry

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