Porters 5 Forces

Threat of new entrants

Supporting Case Explanation
-

Scale and
Experience
Access to
supply &
distribution
channels

Thre
at
Leve
l

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

Access to distribution channels is required. New

entrants can easily find manufacturer via online
search

With the existence of other competitors such as

Ryanair, EasyJet & Aer Lingus, new entrant can
Expected
H
expect a strong price retaliation from its
retaliation
competitor
In summary, the threat of new entry by new players is low. New player
- Government
taxes
airport
have of
Legislation
& experienced
will
need to be
and able
toand
reach
to acharges
certainthat
amount
been implemented
require
new entrants
government
L
economies
of scale in order
to compete will
in the
industry.
Large to
to it and expertists. Strong retaliation by
action
investment
needed foroblige
airplanes
1

Porters 5 Forces
Threat of new substitutes
Supporting Case Explanation

With the existence of sea transports and car

rental firms which are more expensive, it takes
longer time to travel. Railway services such as
L
may be a cheaper option as compared to the rest
but it will take longer time to travel. Hence, the
barrier of substitute is high. (p619)
- Other means of transports other than by air are
Extra Industry
sea, train and car will post a threat for short trips.
Effects
Threat level for substitutes
is low.
Though
by train
However,
if distance
is traveling
further, flights
will beservices is
La
cheaper option, it will preferable
take a longer
time toin
travel
compared
as travelling
other as
transport
will to
budget airlines. The availability
other
mode of transports will also be
take longerof
time
to travel.
costly and time consuming, hence this concludes that Ryanair have a low
threat of substitutes.

Price
Performance
Ratio

Thre
at
Leve
l

Porters 5 Forces
Power of buyers
Buyers Cat: Leisure travelers
Supporting Case Explanation
Concentration
of buyers

Switching cost

Buyers power is low as buyer have limited

choices of budget airlines in the industry
No additional expenses are required to switch to
another airline. Buyers are free to choose.
Switch can be done immediately without any
complex steps,

Thre
at
Leve
l
L
H

Buyer
As
the number of budget airlines is low, buyer will have fewer choices to
- Buyer has no capability to own a plane/ provide
choose
from. Hence, threat level of buyer is low.
competition
L
themselves.
threat

Porters 5 Forces
Power of suppliers
Suppliers Cat: Airplane Manufacturer
Supporting Case Explanation

As there are only three manufacturers in the

industry (Boeing, COMAC and Airbus), bargaining
M
power of supplier is high.
- Switching cost is high as airline will need to train
the pilots on the new aircrafts and hence high
Switching cost
H
capital investment is made
Supplier
- Aircraft manufacturers are unlikely to go into the
With
the limited number
of manufacturers
airlines,
level
budget
airline industry. and
Customers
willthe
still threat
buy
competition
L
of supplies is moderate.
tickets directly from Ryanair websites
threat

Concentration
of Suppliers

Thre
at
Leve
l

Porters 5 Forces
Competitive Rivalry

Competitor
balance
Industry
growth rate

Supporting Case Explanation

Thre
at
Leve
l

There are direct competition with other airline

such as EasyJet.

No economic profit over 40 years (p612)

High fixed cost. Hence with the saturated

industry, Ryanair will need to have a unique
Fixed Cost
L
business model in order to mitigate the likelihood
of low returns
- rivalry
Difficult
exit
due intense
to the difficulties
in selling the
Overall,
competitive
isto
not
very
in this industry.
As it H
Exit barriers
assets
differentiates themselves with the big players, these no fills airlines only
- Not
much
of differentiation
as compared
to its in scale
has
a few competitors
to pit
against
with and they
are all similar
Differentiation
H
competitor EasyJet
and prices.
5