Porter’s Five Forces Analysis
The five forces framework might be used for the industries’ competitive analysis. The aviation industry is characterized by barriers to entry (high initial and operating costs) contributing to the low level of threat, while the advertising sector relying on customer loyalty shows medium threat (Liu, 2018). The bargaining power of aviation suppliers and customers is high because two manufacturers (Airbus and Boeing) dominate the market, and the competition is significant. On the contrary, the advertising industry is associated with the low bargaining power of suppliers and high power of customers (Johnson, 2017). The case of China Southern Airlines demonstrates that the threat of substitutes is medium due to affordable alternatives (trains, cars), while rivalry among competitors is intense, especially from low-cost carriers. Similarly, the threat of substitutes and the rivalry among competitors are high in the advertising industry because the market is represented by diverse brands, from small agencies to multinational conglomerates driving innovation and substitute products/services.
Critical Drivers of Success
Based on the competitive analysis, the critical drivers of success for the aviation industry are effective pricing strategies (affordable products) and sustainable differentiation to tackle environmental concerns. The five forces approach assisted in evaluating profit potential through the level of competitive rivalry (De Kluyver and Pearce, 2015). Additionally, the model suggested strategic implications for companies in the advertising industry (Dobbs, 2014). Thus, the industry players may succeed by developing innovative online campaigns in collaboration with industry leaders (Google, Facebook, YouTube) to address rivalry from major competitors.
Relevance of International Strategy
An effective international strategy helps businesses gain a competitive advantage by employing different international entry modes and expanding their geographic scope. Hagen et al. (2012) report a superior international performance in customer, entrepreneurial, and product-inward types of businesses pursuing wide geographic scale and opportunities in foreign markets. Moreover, global expansion through exporting, licensing, joint ventures, acquisitions, or Foreign Direct Investment requires companies to adapt to local preferences and needs (De Kluyver and Pearce, 2015). The timing of entry should also be considered because it is crucial for determining the limited opportunity window. Therefore, adequate international strategies should address global and competitor diversity to improve performance and profitability.
Reference List
De Kluyver, C. A. and Pearce, J. A. (2015) Strategic management: an executive perspective. New York: Business Expert Press.
Dobbs, M. E. (2014) ‘Guidelines for applying Porter’s five forces framework: a set of industry analysis templates’, Competitiveness Review, 24(1), pp. 32–45.
Hagen, B. et al. (2012) ‘International strategy and performance – clustering strategic types of SMEs’, International Business Review, 21(3), pp. 369–382.
Johnson, G. et al. (2017) Fundamentals of strategy. 4th edn. London: Pearson Education.
Liu, H. (2018) A strategic analysis of Chinese airline industry under online environment: In the case of China Southern Airlines. Wuhan: Scientific Research Publishing.