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
There are a few substitutes for personal travel over long distances, such as automobile, bus, and
, but there are even fewer express travel services
However, this is mostly dependant on geographic
location. For example, the Acela express train from D.C. to New York is the fastest method of travel
between the two cities.
In Europe, the extensive network of passenger-quality tracks make Eurorail a
suitable substitute for air travel in many cases. However, in developing nations with little infrastructure
islands such as Hawaii, there are no true substitutes for moving quickly between metropolitan areas.
In general, it can be stated that the threat of substitute products is relatively low.
Passengers always have
other options for air travel.
However, for some of their flights they have very few options.
can drastically reduce prices, especially with the advent of Internet ticket purchasing.
THREAT OF NEW ENTRY: Low
The most significant entry barrier in the airline industry is the cost of purchasing/leasing and
certification, securing space in airports, and obtaining
qualified pilots and other staff
that lowers the threat of new entry
airlines have the
of government regulations
that control their flight paths.
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
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
Buyer power is highly dependant on the market segment and geographical location. For example,
business travelers generally have
stricter needs than their leisurely companions, and thus have less buying
In the heavily congested northeast corridor of the U.S., lack of differentiation between flights and
low switching costs give the buyer significant powe
n the case of Latin America and the Caribbean,
buyers are significantly more fragmented and switching costs are higher (fewer substitutes and alternative