Airbus A380 (Porters Five Forces)

Index

List of abbreviations

WTO World Trade Organization

List of figures

1. Introduction
1.1. Problem assignment
1.2. Scope and structure of this paper

2. Branches and branch attractiveness
2.1. Definition
2.2. Differentiation

3. The 5 Forces-Model by Porter
3.1. Introduction
3.2. Threat of substitution
3.3. Power of customers
3.4. Power of suppliers
3.5. Industry Competition
3.6. Threat of new competitors

4. Analysis of the 5-Forces model according to the Airbus A380
4.1. Threat of substitution
4.2. Power of customers
4.3. Power of suppliers
4.4. Industry competition
4.5. Threat of new competitors

5. Conclusion

ITM Checklist

List of literature

List of abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

1.1. Problem assignment

As Airbus in general and the Airbus A380 model is facing a huge competition especially by its most important competitor Boeing it is necessary to analyze the branch (commercial aircrafts) to gain information concerning the sector attractiveness.¹ This will help to understand the connection between the market environment the power of market participants and possible impacts on the success of Airbus in general and its model A380 especially.

1.2. Scope and structure of this paper

This paper aims on the 5-Forces model by Michael Porter which is determined according to the Airbus A380 which was analyzed in Assignment 1. At the beginning of this assignment the terms branch and branch attractiveness will be explained. Afterwards the 5-Forces model by Porter is introduced and the theoretical attributes will be explained. In the third step the theoretical concepts will be applied to Airbus S.A.S. in general and especially to the Airbus A380. Furthermore the characteristics of the aviation industry will be pointed out.

2. Branches and branch attractiveness

2.1. Definition

The term branch is described as a group of companies, whose products or services may partly or even fully substitute each other.² Kotler, Keller and Bliemel associate the whole amount of suppliers for a certain product or service.³ Coming back to the A380 it has to be clarified whether a product means aircrafts, very large aircrafts or even double-decker aircrafts. Due to the fact that the most important competitors of the Airbus A380 are very large aircraft (Boeing 747, Boeing 767/777) this assignment will concentrate in this definition. In practice these discussions can be endless because companies are often afraid to overlook a possible competitor.⁴ It is important that a certain branch attractiveness is only a static view which does not cover the constant change in markets.⁵

The branch attractiveness is determined by the 5-Forces model of Porter.⁶ The model will be explained in detail later on in the assignment. The average profit ratio of a branch is an important determining factor. Furthermore the competitive position plays a major role because according to Porter sometimes companies have high profits apart from their average profit ratio.⁷ The most important factor for the intensity of competition is the highest one of the five forces.⁸

2.2. Differentiation

In literature terms can be found which are used synonymously like Kotler, Keller and Bliemel do in their book Marketing Management. They describe the whole supply side as a branch.⁹ Often the branch term in linked to the market term which is also not correct and needs to be differentiated in practice. Nevertheless as Porter uses both terms synonymously in relation to his 5-Forces Model this assignment will follow him.¹⁰

3. The 5 Forces-Model by Porter

3.1. Introduction

Michael Porter started analyzing competitors in 1975 and only five years later he developed his 5-Foces Model which is also called Porters Five Forces.¹¹ It determined the intensity of competition and furthermore it monitors four forces (effects) which may influence them.¹² The Five Forces model is an important extension of the environmental analysis of a company.¹³ The following five Forces will be explained in this chapter in reviewed in relation to the Airbus A380 in the next chapter:

- Industry Competition
- Power of suppliers
- Power of customers
- Threat of new competitors
- Threat of substitutes

In practice the next step would be the determination of competitive strategies in dependence of the results of the five forces. This has to be excluded in the assignment. Porter’s 5-Forces Model which is illustrated in figure 1 aims on helping companies to create measures to reach a long term oriented competitive position in the market.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: The five forces model by Porter. Source: Hill, C., Jones, G.R. (2007), p. 40.

3.2. Threat of substitution

Substitution products provide the same value as the primarily product and set up a price ceiling.¹⁴ The danger of a substitution product depends on the complexity of a product on the one hand and on their greater cost-effectiveness and the customers’ willingness to change on the other hand.¹⁵ Furthermore customers may have to invest money to switch to a substitute. They may also be a barrier. Especially markets with monopolistic structures would be affected by competition by substitution. Great changes could be expected then. If there is a substitute in the market companies have to react and upgrade their product or service respectively quality.¹⁶

3.3. Power of customers

According to Porter the power of customers has a huge influence on branch activity.¹⁷ This is the result of a competition between supplier and customer. If a supplier has only a few customers or even one customer the power of them is higher than if the supplier has a huge amount of customers. On the other hand if there are only a few customers and many suppliers in a market, customers may have the power to dictate conditions. The more power customers have the lower is the branch attractiveness.¹⁸ If a product has a USP this would strengthen the position of a supplier in relation to its customers. If a supplier has high fix costs which means he is dependent upon a high capacity utilization customer may benefit from this according to their power.¹⁹ Switching costs may also keep customers’ power on a lower level. Switching costs may not only be monetary but also psychological or in terms in time.²⁰ In addition pre-switching costs need to be conserved for searching and evaluating a new supplier.²¹

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¹ Cf. Kerth, K., Pütmann, R. (2005). p. 168.

² Cf. Vahs, D., Schäfer-Kunz, J. (2007). p. 268.

³ Cf. Kotler, P., Keller, K., Bliemel, F. (2007). p. 16.

⁴ Cf. Porter, M. (2008). p. 68.

⁵ Cf. Asum, H., Kerth, K. (2008), p. 169.

⁶ Cf. Runia, P., Wahl, F., Geyer, O. Thewißen, C. (2007). p. 50.

⁷ Cf. Pfeffer, J., Sutton, R. (2007). p. 193.

⁸ Cf. Welge, M.K., Al-Laham, A. (1992), p. 94

⁹ Cf. Kotler, P., Keller, K., Bliemel, F. (2007). p. 16.

¹⁰ Cf. Hungenberg, H. (2004). p. 98.

¹¹ Cf. Eschenbach, R., Eschenbach, S. Kunesch, H. (2008). p. 190.

¹² Cf. Herrmann A., Huber, F. (2009). p. 55.

¹³ Cf. Becker, F. G., Fallgatter, M. J. (2007), p. 81.

¹⁴ Cf. Porter, M. (2008). p. 22.

¹⁵ Cf. Macharzina, K., Wolf, J. (2008). p. 313.

¹⁶ Cf. Camphausen, B. (2007). p. 43.

¹⁷ Cf. Porter, M. (2008). p. 59.

¹⁸ Cf. Anwander, A. (2002). p. 131.

¹⁹ Cf. Porter, M. (2008). p. 60.

²⁰ Cf. Peter, S.I. (1997), p 94.

²¹ Cf. Tomczak, T., Dittrich, S., Reinecke, S. (2001), p. 122.