The bargaining power of buyers is high due to many competitors existing in the market. Thus, success of industry can influenced by buyer. Nowadays, customers are high educated and price sensitive. They will do comparison and choose the specific airline that cost cheaper. Hence, AirAsia has lowest price and best services which can be a good choice for buyers. Besides, they can easily switch to other airline that also provides same level service like Tiger Airway, Firefly and others. However, AirAsia give an image that always delay the flight. As a business travellers, they will prefer more reliable airline than AirAsia.
Next, power of supplier is moderate because large number of suppliers available even that is limited to certain category and high switching cost in airline industry. There are only two options which are Boeing and Airbus. Besides, maintenance aircraft and air fuel are costly. To shift from one supplier to another is hard and moderate bargaining power of aircraft producers without cause any major alteration in the company.
The entry barriers is high to enter airline industry like capital requirement and government legislation because it needs to set up services and difficult to get a new flight route. Threat of new entrants is high which is provided opportunities for foreign airlines to enter into Asia. With deregulation by Asian country, competition increased due to growing demand of low-cost full service by budget airline. Besides, government barriers has eliminated to decreases the cost of entering in the market of Asia (Shaw, 2012). Although high cost of aircraft, AirAsia success started budget airline business with few aircrafts to create brand marketing and loyalty in order making investment.
Threat of substitutes is find a better product or services which can replace the old in order give more satisfaction and confidence. In airline industry, there are two kinds of substitutes which is indirect and direct substitutes. Indirect substitutes are train, bus and others which are most preferred transport in Asia due to the low cost. Whereas, direct substitutes are other airlines. For example, travellers want travel in Thailand from KL. They can choose either the cheapest transportation like rail or pay affordable flight ticket by comparing prices and reasonable. Overall, threat of substitute is moderate but in some region is high like India and China.
Nowadays, there have some negative and positive trends in every industry. In airline industry, it has limited customers but high rivalry among existing competitors so growth rate is not too high. Hence, AirAsia has pressured to offer low-fare flight tickets to be compete with others. However, customers can easily switch to another airline like Tiger Airways and Firefly that offer similar level service with lower price and promotion. From this case, rivalry among existing competitor is quite high due to high fixed cost (staffs and finance cost), high exit cost (flight cancellation refund) and low switching cost.