OGL 355 Leading Organizational

Innovation and Change:

Environmental Analysis
Objectives:
1. Perform an industry analysis on your Case Study Organization using Porter’s Five Forces
Industry Analysis.
2. Identify target market for Case Study Organization and strategies to maintain the audience.

Complete the following and turn in as a team assignment. There is no need to create any other
document, just complete this one, save as, and post for your team. Everyone earns the same
grade unless consequences of non-participation are enacted (see Worksheet 1b, #2). Make sure to
support your ideas and cite from the textbook and other course materials per APA guidelines.

1a) What is a Porter's Five Forces Industry Analysis?

Porter’s Five Forces Industry Analysis is an I/O (Industrial Organization) model that

“focuses on the structural forces within an industry, the competitive environment of firms, and

how these influence competitive advantage” (Coulter, 2013, p. 29). The primary focus of this

analysis is to concentrate on the external factors that affect the industry in which the business is

in, how profitable that industry is, as well as how the company is positioned in the industry. Both

the current opportunities in the industry, as well as how the company compares to its competitors,

is the primary indicator for a company’s competitive advantage, or lack of advantage.

The five industry forces that Porter takes into consideration with his analysis are

competitive advantage, determinants of profitability, focus of analysis, major concern, and

strategic choices (Coulter, 2013, p. 29). These areas cover the company’s overall position in the

industry, what the characteristics of the industry are, an external analysis on the market within the

industry, the current competitors, finding a profitable industry, and putting the company in a

competitive position within that industry.

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 Porter’s Five Forces Analysis indicates that an industry’s high profitability will make that

industry a better strategic choice for an organization, which can be assessed by using the five

competitive forces. Additionally, the analysis looks at how current competitors interact, the value

of the product in the marketplace (demand) and determines the level of rivalry within the industry.

A higher level of rivalry indicates lower profitability within an industry. The level of rivalry is

determined by using eight conditions to assess current competitors in the industry. These

conditions are, numerous or equally balanced competitors, slow industry growth, high fixed or

storage costs, lack of differentiation or switching costs, addition of capacity in large increments,

diverse competitors, high strategic stakes, and high exit barriers (Coulter, 2013, p. 60).

1b) How would the team implement a Porter's Five Forces Industry Analysis?

a. If we consider the current industry that our assigned organization is in (Delta), and

apply Porter’s Five Forces Industry Analysis, we would be looking at the airline

industry and the profitability of this industry as our focus. We would begin by

assessing the industry and competitive forces by identifying (Coulter, 2013, p. 60):

• Existing competitors

• Possible competitors

• Consumers

• Resource providers

• Alternative industry providers

To determine the competitive advantage of overall positioning of Delta within the airlines

industry, we would determine the level of rivalry between the competition through analyzing

competitors against Porter’s eight conditions (Coulter, 2013, p. 60):

• Equally balanced competitors

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 • Slow industry growth

• High fixed or storage costs

• Lack of differentiation or switching costs

• Addition of capacity in large increments

• Diverse competitors

• High strategic stakes

• High exit barriers

1) Indicate the threat level of new entrants within your organization’s industry.

a. Threat Level of New Entrants

● The threat level of new entrants in the airline industry is High

b. List 3 reasons why, using sourced material for at least 1 of them to earn excellent.

i. Reason 1: Capital requirements. The cost to break into the airline

industry is high, and maintaining operations has high fixed costs (Kunc,

2018b, p. 90).

i. Reason 2: Access to distribution channels. There is a great amount of

established competition that is vying for distribution availability such as

airport slots, which are restricted in availability for both existing airlines

and new airlines (Slots and Exemptions, n.d.).

ii. Reason 3: Government policy. The airline industry is highly regulated,

from consumer protection laws, taxation, to environmental policy

(IATA, n.d.), there are many regulatory requirements to operate in this

industry.

2) Indicate the bargaining power level of buyers within your organization's industry.

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a. Bargaining Power Level of Buyers

● The bargaining power level of buyers within the airline industry is very

high. With there being so many different airlines, they can pick and choose

which service to buy. The buyers will influence our product choice, they

can choose other forms of travel, and our price point will be different from

other airlines.

b. List 3 reasons why, using sourced material for at least 1 of them to earn excellent.

i. Reason 1: Technology is a big factor that could drive our organization to

buy the best products on the market. For example, some airlines have

phone chargers, tv’s, and comfortable seats. With another airline

improving these features our airline would not want to lose customers on

these changes. Also, planes are very safe to travel in, but if we have an

older style plane it has the potential to fail and crash. Our airline needs the

top-of-the-line airplanes, or no one would trust flying with us.

ii. Reason 2: According to Joe David who is a writer for a website named

“howandwhat.net” he says that buyers in the airline industry have high

bargaining power because if the industry does not fit their needs, then they

can choose another mode of transportation (David, 2022). Which makes

sense because most of the time driving to a destination is cheaper than

flying. If everyone chose not to fly, there would be no airline industry.

iii. Reason 3: Determining a price point is hard for airlines because they will

always try to make their flights cheaper so they can get more customers.

Although they cannot go too low, or they will not make money. With

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 buyers being able to shop for prices and different airlines their buying

power is very high.

3) Indicate the bargaining power level of suppliers within your organization's industry.

a. Bargaining Power Level of Suppliers

● The bargaining power of suppliers in the airline industry is low. In the

airline industry there are not that many suppliers, the airlines have long

contracts and loan agreements, and their manufacturing costs are very

high.

b. List 3 reasons why, using sourced material for at least 1 of them to earn excellent.

i. Reason 1: There are 2 major suppliers to the airline organizations and

those suppliers are Boeing and Airbus. With there being only 2 options

that means that the airlines do not have other options to shop around and

find something better. They need their equipment to run their company

and these 2 suppliers give them that opportunity.

ii. Reason 2: With a high price point of the airlines manufacturing costs, it

forces airlines to sign long term agreements and sign off on big loans to

help pay for their planes. Both the supplier and buyer know the

importance of these loans and agreements, and they do not change that

often.

iii. Reason 3: Airplanes are very expensive as you can imagine. According

to Twesha Khanijow who is a Business Associate at KPMG Global

services states that it takes around 200 million dollars to produce 1 plane

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 (Khanijow, 2021). It requires high capital to pay for these planes. This

cost creates those long never-ending loans that airlines take.

4) Indicate the threat level of substitute products within your organization's industry

based on the identified buyers in #3. Provide reasoning to your selection.

a. Threat Level of Substitute Products

● The threat level of substitute products within our organization’s industry is

high. As referenced in the identified buyers in #3, there are a multitude of

other options for buyers to use as opposed to our organization such as cars,

trains, or even alternate or private airlines.

b. List 3 reasons why, using sourced material for at least 1 of them to earn excellent.

i. Reason 1: Cheaper Alternative Airlines/Private Planes. Alternative

airlines such as Spirit, Jet Blue, and Frontier all which offer lower cost

flights are more desirable for buyers. While Delta may be the oldest

operating airline in the U.S. most airlines offer similar experiences and

the availability of destinations (DePersio, 2022). Because of this, buyers

have the availability of lesser-known airlines for lower price points than

one of the top four in the industry. According to Greg DePersio in

“Discover which forces pose the biggest threat to Delta”, facets such as

the amenities or leg room available is not different between airlines and

because of this and the rising attractiveness of cheaper options is

considered a threat. Additionally, with the advancement in technology,

many buyers can also find flights available through private airlines or

charters with a simple search. Because of this feasibility, and similar costs

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 without having to wait through security and long layover times, many

people are opting to search outside the norm of the big airlines.

ii. Reason 2: Cars. While airlines and Delta in particular offer expedited

ways to travel, cars in particular offer a much more affordable means of

traveling especially if you are not traveling alone. Even with the spike in

gas prices, traveling by car would be an inexpensive option and a

reasonably priced choice if the destination isn’t cross country. With added

costs to flights such as checked bag fees and airport parking, many buyers

may find that driving is a better decision (Jet, 2021). Another added

benefit of driving is the ability to see more and enjoy the experience.

Rather than getting to the airport hours in advance, waiting through

security, and filing into a plane, people have more freedom when driving

and the ability to set their own schedules and course.

iii. Reason 3: Trains. Trains may not seem like an immediate substitute but

just like cars, the fact that they are much cheaper and have less

constraints than airplanes make them a viable alternative especially

when needing to travel shorter distances. An article from NY Times

showed that options such as Los Angeles to San Diego, New York to

Washington, and Seattle to Vancouver, British Columbia saved on both

time and money in choosing train over airline (Glusac, 2019). Just as

with cars, factoring in the time it takes to not only get to the airport, but

through security, and checking bags adds up. By traveling via train there

are other added benefits such as less intense security screenings, more

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 flexibility with travel plans, and added space to move around while on

the train. Trains also have the convenience of delivering passengers in

the heart of the city, and savings with baggage fees and Wi-Fi options

that many airlines have.

5) Indicate the threat level of industry rivalry within your organization's industry.

Provide reasoning to your selection.

a. Threat Level of Industry Rivalry

● The threat level of industry rivalry is high for Delta, this is due to the rivalry

among existing airlines. According to an Investopedia article the three

largest competitors for Delta are United Airlines Holdings, Southwest

Airlines Co., and American Airlines Group (Neugarten, 2021, para. 1).

b. List 3 reasons why, using sourced material for at least 1 of them to earn excellent.

i. Reason 1: Flight departures and destinations. Each airline operates out of

various major U.S. cities and hubs. This allows competitors to add new

destinations based on customer demand.

ii. Reason 2: Competitive pricing. When competitors can offer a better deal

or lower prices the customer is able to shop around. This is great for the

customer but an issue for Delta largely because they compete for the same

customers as the other airlines.

iii. Reason 3: Number of aircraft. As of December 2020, Delta had 750

aircraft; this number is less than both United and American but more than

Southwest (Neugarten, 2021, para. 4). Having less aircraft operating can

affect customer service and revenues.

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 6) Who is your target market for your selected Case Study Organization? Describe the

target in 3-5 sentences providing at least one sourced material to earn excellent.

For our organization, we have selected Delta Airlines, which operates flights out of the

United States, but also provides travel internationally, targeting all airline customers. While Delta

provides a similar cost option as the other big four airlines, their aim is to move towards a more

premium and business class customer. As stated by Singh in 2021, “about 24% of Delta's revenue

came from premium cabins. By 2024, Delta wants to grow that to 36%” (Singh, 2021). Delta has

also laid claim to being “The world's most trusted airline” (Delta, 2015), attempting to trademark

the phrase in 2015. Although the trademark was rejected by the government, the tagline would

suggest Delta’s pursuit and vision of being the top airline and providing the best service and this

pursuit of excellent service is shown through their success mentioned previously through the profit

share of the premium cabin.

7) Identify at least 2 strategies to maintain the organization’s target market. Discuss in

at least 5 sentences and provide source material for both strategies to earn excellent.

a. Strategy 1: Offering new and competitive products such as first-class flights,

lounges, updated planes and technology that promote a premium flight experience.

Singh states “In 2021, Delta is sitting at roughly 27% of its seats as premium seats

across its fleet. As it reaches a gauge of over 150 seats per aircraft, over 30% of its

seat mix will be a premium cabin” (Singh, 2021). Airlines such as Spirit or Frontier

are competitors in the sense that they offer airline services on many of the same

routes as Delta, but their focus is on cheap flights without the premium offerings.

The absence of these offerings places those companies on a lower income target

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 market to provide a point of reference to compare Delta’s experience with. Delta

also provides a selection of in-flight entertainment and amenities that the

aforementioned airlines do not offer for most flights. These premium seats create a

vastly different experience for the customer than compared to other airlines, as well

as their regular cabin through such amenities.

b. Strategy 2: Delta is looking to improve their user experience through the

advancement of their technologies. They are working to be more inclusive with

their STEM related teams, where diverse teams have shown to produce more

innovation in their work. The company is attempting to lead the industry through

their initiative called Gaining Altitude (Gaining Altitude, Delta News Hub, n.d.).

The main focuses of this project is diversity, inclusiveness, and sustainability.

Many customers value these ideals, and if performed well, they will help to capture

their target market through tackling social pressures, as well as gaining attention on

a broader scale.

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 References

Coulter, M. (2013). Strategic management in action (6th ed.). New York, NY: Pearson

Kunc, M. (2018). Strategic Analytics: Integrating Management Science and Strategy (1st ed.).

Wiley.

Slots and Exemptions. (n.d.). US Department of Transportation. Retrieved October 27, 2022,

from https://www.transportation.gov/policy/aviation-policy/competition-data-

analysis/slots-exemption

Delta Airlines Inc. (2015) THE WORLD'S MOST TRUSTED AIRLINE (United States Patent No.

86/298519). United States Patent and Trademark Office.

https://tsdr.uspto.gov/documentviewer?caseId=sn86298519&docId=APP2014060607104

2#docIndex=0&page=1

Glusac, E. (2019, September 20). Train vs. plane: And the winner is ... well, it depends. The New

York Times. Retrieved October 29, 2022, from

https://www.nytimes.com/2019/09/20/travel/trains-airplanes.html

Jet, J. (2021, June 28). Is it cheaper to fly or drive for your next vacation? Forbes. Retrieved

October 27, 2022, from https://www.forbes.com/sites/johnnyjet/2018/09/06/is-it-cheaper-

to-fly-or-drive-for-your-next-vacation/?sh=4f42d597659b

Neugarten, J. (2021, September 17). Who Are Delta Air Lines’ Main Competitors. Investopedia.

Retrieved October 27, 2022.

https://www.investopedia.com/articles/markets/093015/who-are-delta-airlines-main-

competitors.asp

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Khanijow, T. (2021, December 1). Porter's five forces for Aviation Industry. LinkedIn. Retrieved

October 27, 2022, from https://www.linkedin.com/pulse/strategy-porters-five-forces-

aviation-industry-twesha-

khanijow#:~:text=The%20Bargaining%20Power%20of%20Suppliers%20is%20Low&te

xt=The%20manufacturing%20of%20the%20planes,they%20have%20long%20term%20c

ontracts.

Singh, J. (2021, December 18). Delta Air Lines doubles down on drive for premium revenue.

Simple Flying. Retrieved November 1, 2022, from https://simpleflying.com/delta-

premium-revenue-push/

David, J. (2022, May 27). Porter's five forces analysis of the U.S. Airline Industry. howandwhat.

Retrieved October 27, 2022, from https://howandwhat.net/porters-five-forces-analysis-us-

airline-

industry/#:~:text=Bargaining%20power%20of%20buyers%20in%20the%20U.S.%20airli

ne%20industry&text=Currently%2C%20their%20bargaining%20power%20is,purchase%

20from%20their%20preferred%20airlines.

DePersio, G. (2022, September 14). Analyzing Porter's five forces model on Delta Airlines.

Investopedia. Retrieved October 27, 2022, from

https://www.investopedia.com/articles/markets/012816/analyzing-porters-five-forces-

delta-airlines-dal.asp

IATA. (n.d.). Home. Retrieved October 27, 2022, from https://www.iata.org/

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Gaining Altitude. Delta. (n.d.). Retrieved October 29, 2022, from

https://gainingaltitude.delta.com/about.php

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