Copa02 - Strategic Management Project for Module Questions...

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Strategic Management Project for Module Questions from Chapter 2 for Copa Airlines Team 7: Stephanie McLeod, Robert Peters, Luke Setzer, Jim Toepel, David Tumblin 1. Apply the five forces model to the airline industry. THREAT OF SUBSTITUTES: High Passengers always have other options for air travel. However, for some of their flights they have very few options. Competition can drastically reduce prices, especially with the advent of Internet ticket purchasing. THREAT OF NEW ENTRY: Low The likelihood of new competitors remains low due to the fairly high cost of entering the market. The cost of new airplanes represents the single biggest entry barrier. However, because some of Copa's flights have few other options, it would take a moderate investment for a new competitor to compete on a small number of the flight paths. Cost, certification, securing space in airports as well as qualified staff make entry extremely difficult. BUYER POWER: Moderate People who need to fly somewhere for business will most likely pay the demanded price to get there. By contrast, people who want to fly for vacation will much more likely choose not to buy rather than break the bank. In either case, flyers may also choose another airline. Some of Copa's destinations have few competitors which gives Copa more power. This makes the buyer's power moderate. Moreover, travel by auto in Copa territory differs substantially from that in the United States. Central and South America have fewer major cities spaced farther apart than does the United States. This geographical condition makes air travel the only realistic mode of transport. These conditions show that airline buyer power relies heavily upon geographic location and that buyers have significantly more power in the northeast corridor of the United States. SUPPLIER POWER: High Airplanes and fuel represent Copa's main costs, with airplanes a fixed cost and fuel a variable
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cost. Copa has a few good choices for airplanes as they fly one model per airplane type (by passenger capacity), 737s and smaller Embraer jets. They do not have any Airbus equivalents in the single aisle 150-200 passenger area (737 vs A320s). Boeing has Copa locked as a sole- source supplier unless Copa can sustain significant costs to change platforms and maintain several different brands of planes. This gives power to the supplier, even considering the broad airplane manufacturer duopoly. Copa also requires fuel of which they have no power to control. Copa also requires many other items to run the business over which suppliers have moderate
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Copa02 - Strategic Management Project for Module Questions...

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