The first threat to consider is the entrance of new companies in the market. In this point, is possible to say that it’s easier to enter the market than thirty years ago. The deregulation allowed the barriers disappearance and with this, the competition was increased. But, the FSCs (Full Service Carriers) allowed high fixed costs and economics of scale. So, it’s possible to mention that the threat of new competitors is low.
The second threat is the substitute’s power. It’s necessary to have in mind the necessity of being aware of yours competitor’s services, because they are your point of differentiation. In this industry the substitutes are the main vehicle transport like car, boat, train and so on. These are the options that the consumers have for your air travel, but it’s important to refer that your service has more competitive advantage in a long period travel. The qualities like comfort, reduction of travel time, convenience and the reduction of the costs are very important to the leisure and business costumer. The conclusion of this point is that the airplane industry doesn’t have a very direct substitute, which means that this threat is low.
The third and four facts that are necessary to consider are the bargaining power of the suppliers and customers. The suppliers don’t have a huge bargaining power because of the fragmentation of the market. Currently, your company depends of three companies of airplane productions like Airbus, Boeing and Series MD. The credibility of these companies can give to them a little advantage but don’t justify a power of negotiation due the diversification of airplanes manufacturers. Considering the customers, it’s possible to see that they don’t have a bargain power. This fact is... [continues]
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