Question

Australia is a grographically large country with major cities that are far apart. From the perspective of the Australian domestic passenger airline industry, this results in which of porter's Five forces being especially weak?

A. threat of substitutes

B. Bargaining power of buyers

c. bargaining power of suppliers

d. rivalry between existing competitors

e. threat of new entry

Answer 1

A. threat of substitutes-Weak

Since cities are located very far and owing to geographical condition of Australia, the threat of substitutes is very low. The other means of transport would require huge outlay to compete with thriving airlines.

B. Bargaining power of buyers-Strong

The buyers have high bargaining powers as they can select between various airlines. Further they can select between various classes as premium class, low cost class and many more.

c. bargaining power of suppliers- Weak

The bargaining power of suppliers is weak as there are large number of suppliers providing similar services in the airline industry.

d. rivalry between existing competitors- Strong

The competition is so severe in the airline industry. For example, Qantas is competing with Virgin airlines in domestic market leading to competition and even suffering losses.

e. threat of new entry- Weak

The entry of new airlines would require huge expenditure into this capital intensive sector aside of obtaining of license which won’t be given due to already prevailing competition between airlines industry.