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Assess, with reference to Porter’s five forces, whether the ‘bargaining power of buyers’ represents the most significant external influence on easyJet plc - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Assess, with reference to Porter’s five forces, whether the ‘bargaining power of buyers’ represents the most significant external influence on easyJet plc. 0 1 2 ... show full transcript
Worked Solution & Example Answer:Assess, with reference to Porter’s five forces, whether the ‘bargaining power of buyers’ represents the most significant external influence on easyJet plc - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Knowledge of Porter's Five Forces
Answer
Porter's Five Forces framework analyzes competitive forces influencing an industry. In this case, 'bargaining power of buyers' is crucial as consumers can easily switch between budget airlines like easyJet and its competitors, such as Ryanair.
This high bargaining power arises because consumers have numerous available options and alternatives for travel, putting pressure on airlines to improve pricing and services.
Step 2
Significance of Bargaining Power of Buyers
Answer
The bargaining power of buyers significantly affects easyJet's market dynamics. Given the wide choice of airlines, customers can leverage their options to demand lower fares.
Moreover, customers can share their experiences on social media, leading to widespread publicity that can hurt an airline's reputation and sales.
This factor influences easyJet’s ability to retain customers and impacts their pricing strategies.
Step 3
Possible Counterbalance
Answer
Despite the high bargaining power of buyers, some counterbalancing forces exist. For instance, suppliers represent about one-third of total costs, which means budget airlines like easyJet remain sensitive to fluctuating costs.
Additionally, competition between low-cost carriers, such as Jet2, can also mitigate the power of buyers, as airlines may increasingly compete for the same customer base.
Step 4
Potential Judgement
Answer
In conclusion, while the 'bargaining power of buyers' is a significant external influence on easyJet, the changing nature of the airline industry makes this power more dynamic.
Factors such as new entrants fighting for market share and other existing competitors can also greatly influence easyJet’s operations. Therefore, while buyers hold considerable power, the overall industry context should also be considered.