Firms operating in similar industries have always had very different rates of profit, which is why the environment and strategies chosen by particular companies are a vital part of success. In order to set up an appropriate strategy for Quantock Airlines, the five forces influencing the market, described in Michael Porter’s work, need to be taken into account and analysed.
Since Quantock Airlines is trying to enter an oligopolistic market, barriers of entry are going to be a major problem. The low budget flights industry in the UK is currently controlled by 4 companies, 2 of which are unquestionable leaders (Ryanair and easyJet). In order to successfully enter this market Quantock Airlines will first of all have to overcome the brand loyalty that the incumbents have worked for. It is always a major drawback for newcomers and a lot of money will have to be sunk into advertising if Quantock Airlines are to be successful. Furthermore, the new entrant will have to try and arrange convenient slots for its’ flights, most of which will have already been taken by the competition. The third, and perhaps the biggest barrier when discussing this particular industry, is the amount of money needed to cover the fixed costs.
To overcome the barriers and ensure a successful position on the market, Quantock Airlines will need to ensure their starting budget is vast and use it appropriately. A huge advertising campaign, negotiations with airports and good aircraft deals (Boeing or Airbus) should ensure a partial success in the short run. In order to cut down the fixed costs, the company should borrow aircraft in the short run, and invest in new aircraft of their own once the airline starts to earn profit.
The threat of substitutes is another force one has to always keep in mind. The falls in prices of existing substitutes or new entrants threaten the market profitability. In the budget airline industry, there is not much room for innovation. Therefore, I think Sir Max Lewis