A low cost airline is operating three flights a day between two industrial cities in neighbouring countries. The cities are 300 km apart and the terrain between the two countries is mostly flat grasslands. The two cities are also linked by motorways and a railway line.
At first the airline enjoyed first mover advantage and generated healthy profits for three years. But more recently, the airline is experiencing intense competitive pressures, reduced passenger numbers and lower returns. The airline directors are using Porter’s Five Forces framework to analyse the nature and severity of the various competitive forces being experienced.
In the context of this model which of the following forces would be considered as a threat of a substitute product or service?
A . High speed rail connection between the two cities
B . National airlines competing in low cost markets
C . Foreign airline now offering a service on this route
D . Corporate customers driving down ticket prices
Answer: A