Deregulation In Airline Industry

The Impact of Deregulation on the Industry Structure
Deregulation can be described as “the removal of controls raised by the government on the operation of industries” (Dalken 2014). In the last decade, there has been a significant shrinkage of government influence on certain industries. In the U.S. during the early 1970s, there were restrictions on interstate banking, which meant competition was low in the industry. There were distinct banks in each state (Stiroh Strahan 2003). By the early 1980s, the banking industry began to steadily deregulate allowing for interstate banking. This led to the rise of competition in the market from privatised institutions who could threaten the state-owned institutions with i.e. lower interest costs (ibid).

In the early 1990s, the “open sky” agreement was introduced in Europe, which erased the entry barriers for the airline industry (Dalken 2014). Previous to this agreement, airlines were owned by the state, the bargaining power of buyers was low because there was few alternative ways to travel. There was no competition in the airline industry until the agreement, which allowed for privatised airlines. “Low-budget” (ibid, p.5) airlines began entering the market attracting consumers. While deregulation has brought more opportunities to some industries, it has meant others have had to reconstruct their strategy “in order to face the new competitive environment” (ibid, p.5).
The Impact of Digitalisation on the Industry Structure
“Digitisation at its simplest means the conversion of analogue information into digital information” (Ernst & Young LLP 2011, p.2). Beginning in the 1990s, the global economy has been undergoing a “fundamental structural change” (Dalken 2014, p.5) due to the rapid development of “the internet and technological innovation” (ibid, p.5). While the pace of IT continues to

In the global economy of today, multinational companies need to analyse the market and consumer of more than one country to be successful. Porter’s model is not flexible enough to analyse an industry’s profitability on a global scale. Hence, the model doesn’t have the influence it once had however, this does not challenge the whole validity of the model. Porter’s theories are still valid, the framework is built on factors in which a company operates; Suppliers, Buyers, Substitutes, Competitors and threat of New Entrants, these factors are still the same. Therefore, Michael Porter’s Five Competitive Forces Model is applicable as it can still analyse these factors to find out the attractiveness of an industry, once applied with the knowledge of their limitations (Recklies 2015b). While, it is also advised to not solely rely on the model and use it along with other management tools when developing a strategy for