An analysis of the forces that determine the competitive intensity in the airline industry and the implications for strategy

Abstract

The research analyzes the dynamic forces of competition and demonstrates that competition embodies the fact that it can appropriate value, and that management of the competitive tensions is central to strategy. The paper also demonstrates that the level of intensity in the industry is determined by basic competitive forces and through the organization‟s choice of strategy it can alter the impact of these forces to its advantage. Central to the paper is a series of realist appraisal of what is right and wrong with current industry thinking and practices. The research investigates, through a questionnaire, the why and how of decision making in the airline industry given the competitive environment of this industry. Data was coded into themes, ideas, topics and key words leading to an analysis which attempts to show that the two sides of competition create an interesting tension, the intensity and balance of which has major, often surprising implications for strategy. Despite the intensity of the airline industry rivalry, this research proves that an airline has latitude to influence rivalry through its choice of strategy. The results show that the airline business is dynamic and complex. Therefore effective strategy is separable from execution and is based on a match between capabilities and activities. The ability to anticipate and be innovative is a critical core competence. The net result of this rivalry and intense competition in the airline industry reflects in an overall slow market growth, margins driven down to unattractive levels and competitors chasing the same flighty customers.