CIMA Exam CIMAPRA19-E02-1 Topic 5 Question 71 Discussion

Actual exam question for CIMA's CIMAPRA19-E02-1 exam

Question #: 71
Topic #: 5

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?

AHigh speed rail connection between the two cities

BNational airlines competing in low cost markets

CForeign airline now offering a service on this route

DCorporate customers driving down ticket prices

Show Suggested Answer

Suggested Answer: A

by Corinne at Jul 09, 2023, 05:56 PM

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Aretha

10 days ago

Definitely option A. The national airlines and foreign carrier are competitors, not substitutes. And corporate customers driving down prices is more of a bargaining power issue.

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Antonette

17 days ago

Haha, I bet the airline executives are wishing they had invested in the railway line instead! That would have been a clever move to control the substitute.

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Nobuko

1 days ago

A: Definitely! Investing in the high speed rail connection would have been a smart move.

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Jesusita

19 days ago

But what about option C, the foreign airline offering a service? That could also be a threat, right?

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Tequila

23 days ago

I agree with Aliza, the high speed rail connection could definitely lure passengers away from the airline.

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Alpha

23 days ago

I agree, the high-speed rail is definitely the biggest threat here. It offers a direct and potentially faster alternative for travelers between the two cities.

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Alpha

7 days ago

User 1

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Aliza

24 days ago

I think option A, high speed rail connection, would be a threat of a substitute product.

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Dorothy

27 days ago

But what about option B) National airlines competing in low cost markets? Wouldn't that also be a threat?

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Lasandra

27 days ago

The high-speed rail connection seems like a clear substitute service that could pose a threat to the low-cost airline. Passengers may choose the convenience and speed of the train over the airline.

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Kenneth

4 days ago

A) High speed rail connection between the two cities

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Velda

29 days ago

I agree with you, Gilbert. A high speed rail connection could definitely attract passengers away from the airline.

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Gilbert

1 months ago

I think option A) High speed rail connection between the two cities could be a threat.

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