Boeing faces threats from risks of entry by potential competitors, fierce rivalry between the incumbent firms, and other macroenvironment factors. The company tries to use strategies such as brand loyalty, barrier to entry and customer switching cost to combat these market threats. While some strategies will help reduce external competitive forces, they may not be sufficient. To ensure its position in the market, Boeing should make sure that it: 1) Delivers all the 787 orders on time, and 2) Safeguard all of its competitive advantages, especially the company’s specialized knowledge on the building of commercial aircraft.
Boeing’s effort to reduce risk of entry by potential competitors
Boeing is likely going to successfully achieve customer’s brand loyalty through 787’s superior product features. First, 787 offers 57% more cargo capacity compared to similar products offered by Airbus, Boeing’s immediate competitor. This increased capacity will help customer generate more revenue from cargo business and will create more demand for the 787. Second, 787 help customers save on maintenance costs, for the plane is made of noncorroding composite which requires less frequent repairs. Boeing also implemented a special sensor within all the 787s that provides immediate data on the airplane’s condition. This makes maintence scheduling a lot easier, which in turn can increase customer satisfaction and hence loyalty. Third, 787 provides 20% in fuel saving. This offers a great incentive to buy since high fuel costs are considered the biggest threat to the profitability of the airline industry.
Boeing may successfully reduce risk of entry by potential competitor by its strategy to build barrier to entry. This is achieved through an absolute cost...