Alaska Air Group Industrial Analysis
The company got formed due to the combination of two groups that includes Alaska airlines as well as Horizon Air. With a combined market capitalization of 8.547 billion US dollars, approximately 14,000 employees, and have 11 percent in market share in the US; the company remains among the top five biggest airline companies in the United States (Statista, 2019). The company has its headquarters in Seattle, serves over 44 million customers annually, and operates in four countries such as the US, Canada, Costa Rica, and Mexico.
Porter’s Five Forces Analysis of Alaska Air Group
The threat of New Entrants
Generally, the threat of new entrants remains weak as far as Alaska Air Group is concerned. In the airline industry, there are strict government policies that entail the issuance of licenses and other legal frameworks before any company can start the airline operations. Such requirements render it relatively difficult for new entrants in the industry. Again, the Alaska air group operates on a high economy of scale, which makes its ability to produce high capacities of services (Statista, 2019). On the other hand, capital requirements are quite high, as well as the high expenditures that are incurred continuously. These aspects render the new entrants a weak force. However, Alaska Air Group can tackle the threats of new entrants by diversifying its services as opposed to the new entrants and building its strong brand through marketing. Finally, the company can bank on its high economies of scale and use the cost advantage characterizing that to fight off new entrants. Don't use plagiarised sources.Get your custom essay just from $11/page
Bargaining Power of Suppliers
The suppliers heavily rely on the industry where the company operates, and their profits closely tied together with the profits. Again, the suppliers provide relatively standardized products and possess low switching costs, allowing the buyers to switch suppliers. Finally, there is a high number of suppliers in the aviation industry, a number that supersedes the demand and the buyers, rendering the suppliers having less control over the prices (CSI Markets, 2019). The instances point out to a weak force in the industry. However, to effectively tackle the bargaining powers of the suppliers, Alaska Air Group can improve its close relationship with the suppliers, rely on several suppliers within its supply chain, or, focus on purchasing raw materials from its suppliers at a relatively low cost.
Bargaining Power of the Buyers
The buyers do not have much control over the prices since the number of suppliers in the aviation industry also deals with other players in the industry. Again, the profit margin of the buyers is relatively low, translating to the buyers purchasing low-cost products to maintain a profit margin. Finally, there is high differentiation within the industry, making it relatively hard for the company to settle on other alternative firms that produce similar products (Statista, 2019). These aspects point out to the fact that the bargaining power of the customers is a weak force. However, the company can address the bargaining power of the buyers in the following ways. First, through advertisements, the company should expand its customer base to the net as more customers as possible. Further, since the company has high economies of scale, it can set low costs to its target buyers in order to attract more customers and have a competitive advantage over other flights.
The Threat of Substitute Products or Services
There are fewer substitute products available in the industry in the aviation industry, which translates to a lack of maximum ceiling that caps the earnings in the industry. The few available substitute products are of high quality and expensive for the customers to purchase. The low cost but high quality that the company offers is core in preventing the customers from seeking other alternative products (CSI Markets, 2019). Thus, based on such assertions, the threat of substitute services is a weak force within the industry. However, Alaska Air Group can effectively tackle such issues through providing products of high quality as well as the differentiation of products to provide unique benefits to the customers.
Rivalry among Existing Firms
There are several competitors in the aviation industry that are relatively large; thus, secrets cannot be kept. Again, the company operates on fixed costs, giving the competitors such as Delta Airlines, United Airline Holdings, and Jetblue Airways Corporation a more significant competitive advantage, hence, a strong force in the industry. Again, the exit barriers in the industry remain relatively high, fostering rivalry between companies and leading to a weak force (CSI Markets, 2019). However, Alaska Air Group can tackle rivalry among existing firms by focusing on differentiating the products, focusing on new customers, and conducting market research to counter the growing competition from well-established airlines.
References
CSI Markets. (2019). ALK’s comparison of Quarterly Growth Rates to its Peers. Retrieved from https://csimarket.com/stocks/competitionNO3.php?code=ALK
Statista (2019). Total assets of Alaska Air Group 2018. Retrieved from https://www.statista.com/statistics/530824/total-assets-alaska-air/