CORPORATE STRATEGY

Question 1 (25)
"Porter's five forces model of industry competition is by far the most widely-used approach in industry and competitive analysis".
Using Porter's five forces model, critically analyse Kulula's operation within the air travel industry.

Competitive Analysis of Airline Industry Using Porter’s Five-Forces Model

Rivalry within the Airline Industry:
The nature of rivalry in the airline industry is extremely intense as there are several airlines operating in South Africa.

Previous years the domestic airlines consisted of SAA, Comair, Nationwide and Sunair. They charged high prices and customers didn’t have much of a choice but to fly with one of these airlines which makes Kulula’s arrival a welcome new alternative. Larger rivals (SAA) were threatened by Kulula’s arrival and did not want to lose market share. They immediately countered the threat posed by Kulula by launching their “red-eye” campaign which was quickly countered by Kulula’s red-eye campaign and to date a there is a low-intensity price war between SAA and Kulula.

Kulula aggressively compete with other airlines through offering the cheapest flights possible in South Africa via their online booking system. No unwanted extras, no free food or drinks in an effort to grab more customers than other competitors. They have to keep their flights more than 80% full in order to turn a profit a very tall order if one consider that other low cost carriers have folded under the cost pressure.

Kulula was also one of the first airlines to offer flights to Cape Town and Durban from Lanseria airport and this has secured them a huge percentage of these routes business.

Threat of New Entrants:
Airline Industry is a business which requires huge setup costs, thus large investment. Previously this industry might have very little threat of new entrants but today