Five –Forces Model of Competition
It is important to analyze the competitive forces in an industry’s environment in order to identify the opportunities and threats confronting a company. The competitive forces operating in a company’s industry are never the same for one industry to another. The most powerful and widely used tool for systematically diagnosing the principal competitive forces in a market and assessing the strength and importance of each is the ‘five forces model of competition’.
Rivalry among competing firms: Medium pressure
There are many competitors. Easy jet, Air Berlin and German wings those company are strongest competitor of Ryanair because they follow same strategy low ...view middle of the document...
Fuel price increasing and this sector is not control.
Entry of new competitors: Low
The threat of new entrants is low for Ryanair due to the significant entry barriers associated with entering airline sector that include economies of scale capital requirements, access to distribution channels etc. Some barriers are:
1. Commission for aviation regulation
2. Irish aviation authority
3. Department of transportation
Bargaining power of customer: high
Ryanair is follow low price strategic .they provide service in low cost. For this reason customer have no choice if they travel low price.
A substitute is a product or service of another industry, which creates an equivalent value for the customer .The threat of substitute products or services is a major factor upon the level of profitability of an industry .Substitute services for airline industry in general and Ryanair in particular include railway network, sea transport, and coach transport as well as car rental.
Understanding these competitive forces and their underlying causes reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition over time. Porter argues that the stronger each of these forces is, the more limited is the ability of established companies to raise prices and earn greater return. Within Porter’s framework, a strong competitive force can be regarded as a threat since it depresses profits. A weak competitive force can be viewed as an opportunity for it allows a company to earn greater profits. The strength of these five forces may change through time as industry conditions change profits.