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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.
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 is essential in assessing the competitive environment of a business. The five forces are:
- Rivalry among existing competitors
- Threat of substitutes
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of new entrants
In this context, the focus is on the bargaining power of buyers.
Step 2
Significance of bargaining power of buyers
Answer
The bargaining power of buyers is indeed a significant factor affecting easyJet plc. Consumers today have numerous options when it comes to budget airlines, such as Ryanair, giving them leverage to demand better prices and services. This competition places pressure on easyJet to maintain lower fares. Moreover, customers can easily share their experiences on social media, impacting easyJet’s reputation. Negative reviews can lead to reduced sales and market share.
Step 3
Possible counterbalance: Power of suppliers
Answer
While the buyers' power is significant, the power of suppliers also needs to be considered. Suppliers in the airline industry can account for a large portion of total costs. If suppliers have substantial bargaining power, they can influence pricing and conditions that may affect easyJet’s profitability. However, budget airlines often work on thin profit margins, which makes this balance crucial.
Step 4
Potential judgement
Answer
In evaluating which of the external influences is most significant, it becomes clear that while the bargaining power of buyers is critical, the dynamics of existing competition and the potential threat from new entrants also play considerable roles. Due to the changing nature of the airline market, with increased competition, adapting to buyer power may be more challenging. Therefore, the bargaining power of buyers could be seen as the most influential aspect affecting easyJet plc’s market standing.