Porter developed the Five Forces Model as a strategic tool to be used to analyze the competitiveness as well as lucrativeness of the market (Strydom, 156). The five forces in this case include the following: rivalry among existing players, threat of substitutes, buyer power,…
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The customers of KAL include passengers, corporate organizations as well as other actors in the aircraft industry among others. The table below highlights the industry analysis that constitutes Porter’s five forces that can impact on its operations.
KAL has a total of 149 aircraft and is the largest in terms of consumers and it specializes in offering services in the following sectors: Passenger services, components and parts, aerospace services as well as cargo (KAI). However, there are other competitors in the aviation industry which include the following: Asiana Airlines which is the second largest airline in Korea, currently operating a total of 83 aircraft, on top of that, there are also five Low Cost Carriers (LCC): Jeju Air, Jin Air, Air Busan, Eastar Jet, and T’Way Air. Though KAL is the largest airline, the existence of rivalry among the other existing players cannot be ignored. It poses a threat to the airline.
As noted above, there are six other competitors in the aircraft industry which entails that the threat of substitutes is high. For instance, “In 2013, 4.9 million international travelers, or 9.6% of all international travelers, used LCCs,” (KAI). The number of passengers using LCCs has dramatically increased which means that they can switch from KAL to these low cost planes. On the other hand, the consumers have the power to determine prices since they can easily switch to low cost careers and this in turn can force Korean Airlines to review its prices downwards.
According to KAI, the bargaining power of suppliers is low as a result of the fact that “all U.S. aerospace exports are duty-free as of March 15, 2012, and as a result of the implementation of the Korea-U.S. FTA (KORUS).” This means that this trade agreement between the two countries is specifically meant to protect the interests of both nations. Prices are regulated at acceptable levels
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