Airline Industry Essay 10

2126 Words9 Pages
Introduction It is easy for people nowadays to travel around the world because the Airline industry can provide fast and convenient service for the passengers. However, in the world with a lot of competition, it is not easy for the business to survive. In this essay, we will first describe the features of the market which determine its market structure and consider what the best market structure for the International Airline industry is. Then we will move on to the term of non-price competition and the three different ways in which airlines compete for a share of the market. Lastly, we will explain why a perfect competitive firm is unlikely to make supernormal profit in the long-run by using the graph and also discuss why the…show more content…
“It is logical to assume that a firm wishing to sell more goods or service will drop its price. At a lower price, the quantity demanded by consumers will increase” (James & Keith, 2008, p. 139). On the other hand, non-price competition is the strategy in which company uses to increase its market share by offering such quality of goods or service, customer focus, or other sustainable competitive benefit other than price. This strategy is such brand management, advertising, or sales promotion (Brue & McConnell, 2002). With the price competition, when one firm lower its price to sell more goods or service, other firms will match the fall in price in order to remain their market share. If the firms decide to lower prices further, a price war will be happened and it results in firms’ bankruptcy (James & Keith, 2008). “Firms will engage in non-price competition, in spite of the additional costs involved, because it is usually more profitable than selling for a lower price, and avoids the risk of a price war” (Brue & McConnell, 2002). This is the reason why some firms prefer to use non-price competition rather than price competition. Three different ways in which Airlines compete for their market share: ❖ Price leadership: This is a type of collusion which Airline industry uses to avoid the uncertainties of competition. This is when one firm has the greatest market share and the firms with lower market shares follow the
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