Pasific Blue and House of Fraser Essay Example | Topics and Well Written Essays - 2000 words

Pasific Blue and House of Fraser - Essay Example Internal forces are called Strengths if they add to the prowess and ability of a firm, and Weaknesses if they dilute its power and capacity. In this paper, we will be analyzing the cases of Pacific Blue in New Zealand’s airline industry and the House of Fraser in the context of the UK’s department store industry, looking at their problems and recommending solutions. Porter’s Five Forces Model Michael Porter in his book ‘Competitive Strategy: Techniques for Analyzing Competitors (1980) points out that there are five forces acting upon all firms in an industry that determine its chances of entry, exit and survival. Industrialists and producers set up barriers to entry or exit that can prevent or delay the entry of competition- so that they in the meantime reap the profits and revenues available from the interested consumers. These forces are the (1) likelihood of new entrants; (2) power of buyers; (3) power of suppliers; (4) degree of rivalry and (5) threat o f substitutes. Thus any one and all of these forces can impact a firm’s chances of success or failure in a particular industry at any given time. Porter maintains that an industry is a group of firms that market products which are close substitutes for each other. Thus we have the airline industry, the retail industry, the automobile industry etc. which deal in products and services that are close substitutes for each other. Porter also uses the concept of industrial groups according to whether the degree of segmentation of products or services is wide or narrow i.e. they are loosely or tightly segmented (Porter, 1980). The Pacific Blue Case Study Coming to the case of Pacific Blue, it seems that it is stuck between a rock and a hard place. At the one end it has Air New Zealand, the dominant competitor and national airline of New Zealand, for which locals have affinities mainly due to the reason that most industries are foreign operated and dominated. However since the entry of Qantas and Pacific Blue, the degree of competition has intensified. Both Qantas and Pacific Blue are foreign owned, one being Australia’s national carrier and the other a joint ownership between UK’s Virgin Group and Toll Holdings of Australia. With Air New Zealand having the major market share and most of the routes, the newer entrants are struggling to compete. Air New Zealand’s response to Qantas’s entry was to cut down on its costs and offer no frills basic flights that enabled passengers to travel very easily and inexpensively. Qantas has been constrained to operate with just four airplanes on New Zealand routes. It had also to build its own terminals since Air New Zealand got the best preferences here as well. Pacific Blue entered the arena in 2007 and chose to operate on a small scale only, choosing two or three main routes on which it can serve the most passengers i.e. Wellington, Christchurch and Auckland. It focuses on low cost but high servi ce. Meanwhile the entry of Pacific Blue has also forced Air New Zealand and Qantas to reconsider their strategies. While there has been an increase in the number of flights on the most travelled routes- a price war has also been triggered, with seats priced as low as $1 and $9 if booked well in advance. Air New Zealand has planned to attack at both ends, looking at the low price segment on no frills flights