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"Northwest Case Analysis"
Northwest Case Analysis
Gabrielle Gooch
PorterÕs Five Forces Model

When relating the airline industry, or more specifically Northwest Airlines, to PorterÕs Five Forces Model there are five forces to be examined, hence the name. First off it is good to look at the risk of entry by potential competitors. With respect to this force there is a high barrier to entry due to the high cost of capital. To be a competitor in the airline industry you must first have and airplane. Airplanes are large investments that require high mechanical maintenance, and a high degree of employee competence. If you arenÕt operating efficiently you wonÕt be profiting enough to adequately maintain your aircraft and keep competent employees.

The second force of the five is rivalry among established companies already in the industry. In the airline industry this is always something that is relevant. Seeing that all airlines generally provide the same service of bringing people from one place to another it is important to differentiate. To be a competitive airline you need to offer something that the others donÕt, for instance you may focus on service and neglect low fares or focus on low fares and minimize service. Depending upon the target market for either one of these niches it is important to offer customers something that is appealing, and something they wonÕt be able to get from another airline.

The third force of five is the bargaining power of buyers. The events of 9/11 promoted negative financial trends that were already evident in the airline industry before this disaster. Buyer bargaining power as of right now is somewhat high. People arenÕt traveling as much as they used to due to widespread fear over terrorism. In general people arenÕt traveling by plane unless they have to. This leads to the dilemma of making it a bargain to fly...

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