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Porter five forces of AirAsia Essay

Rivalry among existing competitor

Air Asia offers flights with lower price that other companies, but there are some companies that also offer service by the same price such as Malindo Air and Firefly and also these companies provide service with the same level of Air Asia so, in this case rivalry among existing competitor is high.

Threat of substitutes

We can define substitutes as a product or service that can be replaced with original product and give more satisfaction to customers. In airline industry these substitutes exist, For example if someone wants to go to Singapore from Kuala Lumpur can choose bus or train. As we know the bus is the cheapest transportation so customer prefers bus. But if we assume that customer wants to go to Australia airline is a good choice and by access internet customers will compare prices and choose the more reasonable for themselves in such a case threat of substitutes is moderate to Air Asia

Power of buyer

Success of industry can influenced by buyer. So, which companies offer better service to their customers , they are winner of the competition. Air Asia has lower price with better services than others, so it can be a good choice for customer. Power of buyer is a quite high to Air Asia.

Power of supplier

Every industry has some suppliers these suppliers have their own effect on the industry for airlines. There are only two options Boeing and Airbus. All airline company have the same situation. Both of them provide almost same standards aircraft and hence switching to Air Asia is low. Moreover Air Asia place order form Airbus to expend its routs to international routes so power of supplier may be reduced as Airbus’s profit may be influenced by Air Asia . Generally power of supplier is a quit moderate to Air Asia Threat of entrants

Setting up airline industry needs a high capital so it has high barriers, for example purchase aircraft, set up services, hire staff and…. It’s not enough most of time customer choose the product or industry which they are really trust. New entrants have to create brand loyalty by making huge investment to establish reputation. government legislation is one of the barriers for entering to this industry because it is too difficult getting a new flight route from government. Profit of Asia Air is related to extend their network for example MAS has been protected by Malaysia government on the route to Sydney and Seoul Incheon hence situation for AirAsia getting difficult to find a new route and it influence Air Asia’s profit. In another way AirAsia is closed to government in south Asia this helps Ari Asia to open up and capture a sizable market in south Asian countries. Government policy has limited new entrant so AirAsia is already settled on the market.

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