South African Air Airlines Case Study

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1. EXECUTIVE SUMMARY

This essay reviews the challenges faced by South African Airways SAA (PTY) Ltd recently.
The company is in the airline business and carries about six million passengers annually
Over the past three years the company has been undergoing a range of restructuring initiatives to mitigate its operational challenges and loss-making position.
South African Airways (SAA) is owned solely by the South African Government and is governed through the Department of Public Enterprises. The Airline has been in operation for 80 years. The SAA brand is very strong in the domestic market and in the continent.
The airline recently expanded routes and now flies to 37 destinations in 26 countries worldwide and also has a fleet of 50 aircrafts.
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Existing competitive rivalry between suppliers
2. Threat of new market entrants
3. Bargaining power of buyers
4. Power of suppliers
5. Threat of substitute products (including technology change)
Threat of New Entrants: looks at the extent to which new players can enter the market.
The airline catering business is a capital intensive business and it is no surprise that the biggest barrier to entry in this industry is access to financing. A large some of funds are required to cover the high costs. Therefore the threat of entry by competitive entrants is low. Solid management experience and skills are very scarce in this competitive environment.
Power of Suppliers.
There are enough suppliers to the catering companies, to dilute the bargaining power. However the limited pull of experienced management and top notch chefs places the company, in terms of salaries in a weaker position.

Power of Buyers- it’s the degree to which buyers can switch from one supplier to another. While there are not many players in the Southern African regions’, buyer power is high as switching costs are relatively

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