The Porter’s five forces will help to analyze the state of the competition that is found in the industry in a very composite form. From this analysis the goal of the five forces model will be evaluated by putting the position in the industry in a considerable way so that they might face the future in a better way. The threats that are horizontal are a competitive threat that makes the customers switch from a substitute service or product to a new company that might be entering into the market place with share rates that are appropriate. The vertical threat is that which along the supply chain like the suppliers and the buyers can easily gain the bargaining power that can be put forward to the company as a competitive disadvantage. The Delta Airlines is one of the oldest airline that has made their operations in the US. The sheer size of Delta along with its status as a long time leader in the airline industry has helped them to make an endurance in its continual process. The share of Delta is quite high and its earnings are growing in a substantial rate. the five forces of Porter consist of:
The rate of competition is quite high in the airline industry. Some of the big airlines can fly to places that has the same airport and is about the same prices even. The lack of the amenities and the amenities are to some extent same, no matter what airline you chose. The traditional rivals of Delta include American and United, but these organizations also face a major competition that is from the growing popularity of the value carriers and notably the Southwest but Spirit and JetBlue also prevails. This may be because the people cannot differentiate which air travel he takes and mostly those are threatened by the prospect that might lead to losing the passengers in their level of competition. in a way, the organization manages the threats in the competition that has an extensive market campaign to focus on the awareness of the brand and their long standing reputation.
The buyers are immensely powerful over the airlines not because that they require effort and costs in order to switch from one carrier to another in a minimal way. The raging and emerging popularity of the bookings of the third party, smartphones applications are the issue of the airlines. Delta is such an airline that is not contacted by the travelers when booking their flights. They can easily access it through the apps and the sites that makes them compare the rates of all the carriers that needs to be entered in their trip itineraries and can make the least expensive deal while making them accommodate in their schedules. Delta can easily respond to the forces of the market by making a market research and by offering more flights but at a cheap rate so that the customers may reach to their destination frequently on a third party platform. As a matter of fact, the company is strengthening their relationships with the companies of the credit card holders so that they can strive their best in the offerings towards the best reward programs. The customers must take an oath that will make them switch their carriers so that it may be accumulated that might be set freed in making the miles in a particular airline.
The potential new entrants that can be found in the marketplace represent a comparatively minimal threat to the Delta airlines. The barriers that mostly restrict itself in the airline industry are remarkably high. The cost of the operation is massively high and the regulations of the government will navigate the ones that is numerous and is exceedingly complex. There was none such airline that was founded in the 21st century that has even recorded to make a market share of 2% (Milne & Kelly, 2014). The JetBlue was founded in 1998 that has made a representation in their new airline that will make a dent in their industry and has a market share that is even less than one third part of Delta.
The suppliers in the airline industry is quite high. The list of the airlines that the suppliers sell to is however very short. The asymmetrical places that has been used for the bargaining power is directly in the hands of the airlines. It cannot be denied that the bargaining power is directly on the hands of the airlines and in case of the Delta airlines it is quite strong. This can be assumed as it is the second largest airline in the global market as per the passengers. It can be stated that from January 2016, the Southwest is already high on its heels. In simple words it can be stated that the suppliers of the Delta organization have a strong incentive that will keep their relationship in good terms. It will not be difficult for the Delta Airline to find a replacement in the supplier only if the desired relationship goes bad. With the help of the contracts, the supplier is likely to find another capable buyer when replacement of the sale volume is concerned as represented by Delta (Scott & Trimarchi, 2017).
In case of the Five Forces Model, the substitute is not only a service or a product that is required to be competent enough that will make them directly with the offerings of the Company that needs to be acted as a substitute for it. Hence, the United flight from New York to Los Angeles is not only the substitute for the Delta flight that has the same starting and end points. For an example the substitutes are those that is required for making the trips either by bus or trains. Unless the trip is very short, no transport apart from the travel from the Los Angeles to Los Vegas, there will actually be no methods for the travel rates that can be worked as a viable substitute for the air travel. For example, from New York to Las Vegas the traveling time is 6.5 hours in flight. Almost the trip takes a time of about 41 hours by land transportation and the train can only get faster but not fastest. The most convenient way to travel for the long distances is the air transportation and Delta face a little threat from their substitutes.
In the airline industry, the human resources, air space resources, capital, equipment and facilities falls under the endowment factors. There is always a need for support for large finances, as it costs millions. There is also a need for the professionals like the human resources and other technical staffs and hence recruitment is necessary.
Firm Strategy, structure and rivalry: Local conditions affects the strategy of the Delta airlines. These structure and strategy helps to determine the different industries that will make their firm excel. The Delta airlines is based on the hierarchical society. Rivalry can be considered with the Southwest airway that is a major airline and is preferred next to the delta airways.
Good labor relations and their loyalty
Achieving their break even point
Extra benefits for their customers
Methodology of STARS is followedSKY Team member
Subsidiaries that are unsuccessful
Costing of labor that is high
The status of the airline is falling apart amongst the infrequent travelers
Pricing the tickets low
Fluctuations in the price of the fuel
Appreciations in the US dollar will impact the fliers of the other countries
The breakeven point of the airline was achieved. The airline is regarded as the most profitable one that has its history in 2013 and can be used for good momentum. Even in the financial year of 2016, the total revenue that is earned is that of $1.56 billion from the $926 million in 2015 (Mahmud et al. 2017).
Maintaining a good labor relation and loyalty that has contributed to make an increased investor interest and success in the operations. Delta has made around 12000 mainline pilots that has been represented by the association of the pilot, internationally and through the largest pilot group of the Union.
Extra benefits for customers is one of the long term advantage and offering in the Delta Airline. The offerings also include the Wi-Fi services to the on-board and the in-flight passengers along with that the demand in the digital entertainment system that can provide satellite TV, games, songs and movies. The passengers of the first class are made more privileged than the economy class with an addition of the pillows, blankets and free cocktails (Lim & Hong, 2014).
Delta airline is a members of the SKY team that has more privileged customers like the check in counters, extra baggage allowance and the preferred seating are some more that may be added. The expense of the company on the different services has to have a considerable reduction that may be shared by the cargo (Lück, 2017).
The methodology of the Stars is followed that is also operating under the BCG Matrix that includes for example worldwide route systems, their fares and is over a fleet of 800. This also has a partial ownership that is the Orbitz and has made a worldwide span in the websites in purchasing the tickets online and providing offers like a discount of 3-5% and 2% for the check ins through the self service kiosks.
The cost of the labor is high and though the Delta airlines is one of cheapest and the easiest services to all the customers, the cost of the employees is pretty high. Hence this could be the reason why the Delta airlines took so long to become the profitable. The total cost of the employees has incurred almost 36-40% of its experience (Guzman-Bouilloud et al. 2017).
The status of the Delta airline is slowly falling amongst its infrequent travelers. The frequent fliers are those who spends much time on the tickets and Delta has its revenue requirements and also the altered mileage system and finally ended up in hope of getting the airline status. In 2014, the Delta Airline has decided to base the miles of the airlines that will not only be earned by the distance but by the cost of the tickets instead. The requirements were made keeping the customers in mind sot hat they may love to travel in luxury.
The subsidies that are unsuccessful has been made to complete with the Southwest and JetBlue, eventually Delta has tried to get some of the low cost fare schemes. The Delta express was started specially for this and because of its unsuccessful way it was shut down in 2003. It has launched SONG airline that lasted for almost 3 years not only because of its low fare and high cost structure but that which lead to the increase in its debts. Thus its attempt to focus on the core business perished while trying to enter the low fare markets.
The strategic partnership needs an establishment with the airlines like the China Eastern and the Gol Linhas Aereas Inteligentes that is the key to broaden their global network in the Latin America and Asia (Kim, Liu & Yun, 2016).
The low price of the tickets as per the survey has been conducted by the CNN that will make sure of an 50% increase in the air traffics in the coming years (Boness, Younggren & Frumkin, 2017). Hence, it is a great opportunity for the Delta Airline to increase its revenue, customer base and its market share to low price and competition.
The fluctuations in the fuel price has been set to remain as the biggest expense in the airline industry which in short term, might expose Delta to the other external fluctuations in the price of the fuels.
The appreciation of the US dollar has made an impact unlike the fliers of the other countries. It is evident that a strong US dollar might impact the travel from the international destinations that is still suffering from the weakness in the economy. This might effect the people living in US but those living in the Asian and the European countries when flying to USA will be the victim to this dollar appreciation. This can be considered that the rate of impact is high when keeping the good number of the international flights.
The security of the company was affected severely especially from the incidents of the 9/11 that is due to the expenses that is to maintain their security rise inspite of all the measures and equipment for enhancing their security (Hunter, Batchelor & Dey, 2014).
Effect of Globalization on Corporate Strategy
Global growth has enabled the airline business with all sizes that needs to be expanded with their operations in the international market (Hunter, Dey & Batchelor, 2016). It is upto the Delta Company to decide if the suppliers can offer better value propositions than the competitiveness in the international market. The most striking change in the globalization is its outsource of the labor to the countries like Asia. The rate of the ability to hire those chines workers at the fraction of the cost in the US based workers were allowed to reduce those manufacturing costs greatly. This has made the US based companies like the Delta in investing the resources that is required in the technological department other than the goods that are manufactured. The global finance market has made a capital that allows them easily in the emerging markets. The investors were easily abled to move the capitals into the markets that are slightly unabled like the India (Morrison & de Wit, 2016).
From the above report on the Delta Airlines it can be concluded that the airline is the most renowned one in the global market. The VRIO framework has been analyzed along with the micro and the macro environmental analysis that will help in better understanding of the Delta airlines. It can be concluded that the Delta airline has become the second largest because of its customer loyalty and its great services. Hence, the various opportunity of this airline is highlighted that will help to overcome the weaknesses, all this by keeping the possible threats in mind.
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