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Written Assignment 1
Frantisek Dzuno
2012-10-MAR-301

Part A
Choose a specific industry (e.g., grocery retailing, the airline industry, etc.), and apply Porter's Five Forces Model to discuss that industry's competitive forces and their relative influence.
The domestic airline industry has generally been characterized by very high competition and low profit margins. To understand the position of the economic climate in this environment, an examination of Porter’s Five Forces could be used to obtain a better picture of these factors’ within the airline industry.
New entrants are usually blocked by the cost or difficulty if entering a market (Boone & Kurtz , 41). The airline industry is a typical case when the extremely high initial cost is the main barrier for new entities - entrants. The investment to build, purchase or rent airplane is enormous. Employees such as pilots and maintenance technicians are expensive to pay. The training efforts are extremely high. Security, safety requirements are heavy regulated. Another important factor which creates a challenge for new entrants to enter the airline market is the brand identity. Airlines with a long history in the industry have created a strong relationship with their loyal customers based on safety records as well as the discount programs they offer (frequent flyer programs, business members)
The Power of Suppliers within the airline industry is very low. The main factor relating to the bargaining power of suppliers is the supplier concentration (Ref 3). For example, Boeing and Airbus supply most commercial aircrafts. Limited competition makes it difficult to obtain lower prices and lower the costs. Airlines are also motivated to purchase the same type of aircraft or the same brand to reduce the long term maintenance and service costs. The strong power of suppliers is the main factor which