Notoriously Airliners have been known as the worst type of  investment. In fact Michael Porter uses airliners as THE EXAMPLE when discussing his Five Forces. Five forces is a powerful framework to analyze the dynamics of different industries, let’s take a look!

Understanding Porter’s Five Forces

Porter’s Five Forces is all about understanding the competitive forces at play in any industry:

• Threat of New Entrants
• Bargaining Power of Suppliers
• Bargaining Power of Buyers
• Threat of Substitute Products or Services
• Rivalry Among Existing Competitors

Each force helps you gauge how tough the competition is, what the profit margins might look like, and where the opportunities and threats lie.

Airline Industry: Flying High or Turbulence Ahead?

Let’s start with the airline industry:

• New Entrants: Low Barriers to entry, because you can rent a plane, lease a gate, generic technology, and price is king. Customers are fickle and very price sensitive.
• Supplier Power: It’s pretty high here. A few large companies control the manufacturing of planes and the supply of jet fuel, which can squeeze airline margins. Union labor can shut down your business overnight.
• Buyer Power: Also high. With online platforms, customers can easily compare prices, which pressures airlines to keep fares low and service high.
• Substitutes: For international travel, there aren’t many substitutes for flying. But for shorter routes, trains, buses, or even cars can be competitive alternatives.
• Competition: Extremely intense. Airlines constantly compete on fares, routes, and services. This can lead to price wars, which might be great for consumers but tough for airline profitability.

Media Industry: The Digital Disruption

Now, onto the NEXT WORST INVESTMENT, the MEDIA industry:

• New Entrants: The digital era has dramatically lowered barriers to entry. Nowadays, anyone with a smartphone can create content and reach millions. This is important for investors to consider, especially when looking at traditional media companies.
• Supplier Power: In traditional media, supplier power is significant due to the control of content production and distribution channels. However, in digital media, the power has shifted towards platform providers like YouTube, TikTok, and Instagram.
• Buyer Power: Extremely high. Viewers have endless choices about what to watch, read, or listen to, and they can switch between platforms and providers effortlessly.
• Substitutes: There’s a massive threat from substitutes as new forms of entertainment and information continue to emerge, changing the way people consume media.
• Competition: Fierce. Media companies are not just competing with each other but also with every content creator on the internet. The fight for attention is relentless.

Both the airline and media industries offer unique challenges and opportunities. For investors or entrepreneurs, understanding where these industries are most vulnerable and where they’re strongest can help you spot potential and make informed decisions. Remember, the lower the competition and barriers, the higher the potential for profit, but also the greater the risk of disruption.

Porter’s Five Forces isn’t just academic; it’s a practical tool to evaluate the viability of industries and investments. Whether you’re looking at stocks, starting a business, or scaling an existing one, understanding these dynamics can give you a critical edge. Keep an eye on these forces, and use them to guide your decisions in the complex landscape of airlines and media.If you have an investment, you are interested in running through Michael Porter’s 5 forces set up a call CLICK HERE.