Business: Threat of New Entrants

1000 WordsJul 7, 20184 Pages
Threat of New Entrants This has a low threat because firms already in the industry have a cost advantage and these companies already have a strong customer base. Economies of Scale • Bigger producers buy more inputs and therefore may get quantity discounts • Boeing is the world's largest aerospace and defense company • Boeing sells more products in multiple industries so they have the ability to produce each unit at a lower cost than a smaller company would • Delta is the 2nd largest passenger airline in the world by available seat miles Product differentiation • Boeing offers many different types of planes for different needs • By scheduling and operating its aircraft efficiently, JetBlue is able to spread its fixed costs over a greater…show more content…
(Turner, Howard) Diversity of rivals • Technology, prices, and customer service are a few components that airlines try to incorporate to diversify themselves Threat of substitute products or services The threat of substitutes is low-medium, because there are other forms of transportation. This is for domestic traveling, for international travel the threat is lower because other than boats there is no other means to travel across seas. • Advances in the automotive industry for lower fuel consumption • Fast trains for shorter distances • Advances in telecommunications, such as video-conferencing, eliminate the need to travel for meetings • Time, money, and convenience need to be considered Bargaining power of buyers The bargaining power of buyers is medium because it depends on what type of consumer is buying the airline tickets. • Individual flyers for personal or business related traveling • Low switching costs • High price competition • Customers can compare the alternatives Bargaining power of suppliers Bargaining power of suppliers is medium-high because there are only a couple of airline suppliers. • Major suppliers are the airplane manufacturers • Boeing and Airbus are at the top • The likelihood of a supplier integrating vertically isn't very likely • Most companies have long-term contracts with their suppliers • “The amount of money and expertise needed to make even one plane is around 200 million dollars” (Porter's

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