Rail Australia is undoubtedly the leading organization in the provision of rail transport and passenger services in Australia. Major rail operators in Australia have formed an alliance to deliver joint tourist-oriented and passenger services. Rail operations and infrastructure are not only owned and managed by government agencies but also by private operators. Rail operators include Countrylink, Great Southern Rail, Transwa and Traveltrain Holidays (Rail Australia, 2010).
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Countrylink offers long distance services to travelers in New South Wales and other 360 destinations. Traveler services include XPT, XPLORER and the Country Coach Network. Great Southern Rail is tourism oriented and service operations offered by this operator include the Overland, Indian Pacific and the Ghan.
Transwa is a regional transporter in Western Australia and it services more than 275 destinations. The last operator in the organization is Traveltrain Holidays which delivers diversified services to both long distance passengers and tourists. It also offers a number of distinct travel packages tailored to suit all customers.
Porter’s 5 Forces in the industry
Traditional competition is very high because of the existence of stiff competition as evidenced by the number of distinguished rail service providers. Each service provider aims to be the leading in the industry in the satisfaction of traveler needs and thusly the continuous diversification of traveler packages. Profitability within the industry is influenced by the delivery of customized packages to suit every clientele. For instance, almost every operator offers more than three types of service operations based on the targeted market.
Porter’s 5 forces existing in the Australian rail organization are confirmed by rivalry in market control within the industry. There is high entry of substitute products and services into the market. This is well explained by the highly diversified traveler packages provided by the different rail operators.
Horizontal forces include the ever changing alternative passenger and tourist packages. The diversification of service operations forces operators to develop new products. Established rail operators are also using their economies of scale to increase their profitability levels as well as funding their operation levels.
The last among the horizontal forces is the threats associated with the entry of new operators (Porter, 2000). The entry of new rail service providers is low because other rail operators are very established and are jointly owned by the organization. Therefore the major obstacle faced by new entrants is establishing their services to compete with those standards prevailing in the industry and partly due to the lack of economies of scale (Laudon and Laudon, 2006).
The customer’s bargain power is high because there is availability of a variety of travel packages from where they can choose from. They determine vertical competition due to their service tastes and preferences. This is the reason for the existence of differentiated service packages among the service operators designed to suit their needs.
On the other hand, supplier’s bargaining power is low as evidenced by the diversified range of services on offer. The customers are well informed of the services forcing the suppliers to instill some element of bargaining power to woo customers to purchase the travel packages.
Strategies and recommendations
The availability of competition within an organization in the same industry is not a good idea because the management of operations is run by one single body (Rainer &Turban, 2009). Therefore, the organization should develop strategies aimed at addressing the impacts brought about by the porter’s 5 forces.
This includes controlling the line of operations that each service provider should concentrate in the provision of services. It will help to prevent rail operators from operating in areas that are not related to their area of specialization. The number of operating destinations must also be minimized to certain specified regions.
Furthermore, the organization must be the determiner of services packages delivered by operators. This will help in the reduction of supplier bargaining power and the influence from customers and thusly limiting the threats associated with alternative operational services. It will also reduce mushrooming of diversified service packages tailored to suit customer needs
Laudon, K. C. & Laudon, J. P., 2006. Management Information Systems: Managing the Digital Firm, 10th edn. Prentice Hall, New Jersey.
Porter, E. M., 2000. What is strategy? Harvard business review.
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Rail Australia, 2010. The Rail Australia alliance. Web.
Rainer & Turban, 2009. Information systems and the modern organisation. In Introduction to information systems, 2nd Edition. Wiley, New York.