8/14/2019 Macro Factor.doc

1/3

Emerging macro theme

Industry selected: The outbound Airline Industry in Sri Lanka

Macro theme: Economy The impact of the various economic

challengers.

Meso theme: The nature/structure of competition in the outbound airlineindustry in Sri Lanka

Impact of lobal recession.

The global recession impacted the outbound travel industry in SL since many investorstrimmed do!n any ne! investments due to the poor market conditions. "orporates !ouldalso cut back on travel since no foreign party !as ready to invest in these trying times.

The impact of Inflation/#eflation on public spending.

Sri Lanka has an annual inflation rate $.%&' !hich is currently palatable to the public.The inflation rate has seen a slight reduction since ()*) and has encouraged more peopleto spend and invest. This contributes to higher airline sales since people !ould use theirearnings for leisure or business travel.

#isposable income + credit access.

,ne of the highest contributors to foreign income in Sri Lanka !ould be from foreign

labor -primarily housemaids !orking in the middle east the labor traffic to the iddleEast is the bread + butter for many airlines that operate in out of SL.

0ost !ar Sri Lanka has seen vast improvements in the disposable income levels of the public sector since of late this is mainly due to the accessibility and opening up offormerly unapproachable parts of the Island such as the 1orth + the East.

These markets boast a strong ethnic community and fre2uently visit countries in Europe+ 1orth America. This is fundamentally a cash rich market that automaticallycategori3es them as a preferred market segment.

The government has also taken measures to reduce interest rates for fi4ed deposits inorder to encourage the public to reinvest in the economy. So entrepreneurs are seen totravel to countries such as India + "hina in order to build business relationships.

5argaining0o!er of5uyers

6I 6

"ompetitive7ivalry

6I 6

Threat ofSubstitutes

L,8

Threat of 1e!Entry

L,8

5argaining po!er ofsuppliers

6I 6

8/14/2019 Macro Factor.doc

2/3

5argaining po!er of 5uyers

It is relatively high since there are many airlines that operate out of "olombo the buyershave a !ide variety to choose from and at times can create price !ars bet!een airlines.

Threat of 1e! Entrants

This !ould have to be deemed lo! since there are many competitors in the market a ne!entrant !ould face stiff competition from the established airlines that already e4ist.

5argaining po!er of suppliers

In this conte4t I !ish to highlight the fact that the suppliers to the airline industry !ould primarily refer to the travel agents. These agents could be manipulated through incentiveschemes and special fares hence their bargaining po!er is high.

Threat of Substitutes

8/14/2019 Macro Factor.doc

3/3

Is lo! !hen taking into the consideration the local market. The IT infrastructure is yet toimprove to an e4tent in !hich it could be deemed a considerable threat.

"ompetitive 7ivalry

In the recent months the industry has seen a steady gro!th and profits have also increasedhence !e come to the conclusion that the industry rivalry !ould be high.