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Tiger Airlines Essay

814 words - 3 pages

IntroductionTiger Airways is internationally recognised as one of the Asia-Pacific's leading low fare carriers. The company had recognised that in this highly competitive market, any advantage gained by one airline over others will be short-lived, and ideas that are new will become commonplace in a matter of months. As such, Tiger Airways noted the importance of having to always stay at the forefront both in service and technology.The intensity of competition in the airline industry and its profit potential are a function of Michael Porter's 'five forces' model of competition: the treats posed by new entrants, the power of suppliers, the power of buyers, product substitutes, and the intensity of rivalry among competitors.Threats posed by new entrantsNew entrants to an industry typically bring to it new capacity, a desire to gain market share, and substantial resources (Wheelen and Hunger, 7th Ed, pg 61). The threat of new entrants largely depends on the barriers to entry - obstructions that make it difficult for a company to enter an industry (Wheelen and Hunger, 7th Ed, pg 62). High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to entry include the need to gain economies of scale quickly, the need to gain technology, large capital and investment requirements and potential saturation of the market.Power of suppliersSuppliers are the businesses that supply materials & other products into the industry (Wheelen and Hunger, 7th Ed, pg 64). Suppliers can affect an industry through their ability to raise prices or reduce quantity of supply. The cost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a company's profitability. The bargaining power of suppliers affects the intensity of competition in an industry especially when there are a large numbers of suppliers, when there are only a few good substitute raw materials, or when the cost of switching raw materials is costly.Power of buyersBuyers are the people or organisations that create demand in an industry (Wheelen and Hunger, 7th Ed, pg 64). When the buyers are concentrated or large, or buy in big volume, their bargaining power represents a force affecting the intensity of competition in an industry. Buyers affect an industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other. The bargaining power of buyers is higher when the products being purchased are standard or undifferentiated. Whenever the...

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