Porter’s Five Forces.
Risk of Entry by Potential Competitors – The aviation industry is a very difficult industry to enter, and the risky of entry by potential competitors is extremely low.
Rivalry among established companies – The intensity of rivalry among established companies within the aviation industry is very high. Currently the only competitor or Airbus is Boeing. Both of these companies gain market share from each other using prices, product design, advertising, and direct selling efforts. Due to the intensity of the rivalry among Boeing and Airbus, the profits are squeezed.
The Bargaining power of buyers – The aviation industry depends on airlines and governments for almost the all of its total orders. Also, due to the intense rivalry among Airbus and Boeing, the bargaining power of buyers must be moderately high.
The bargaining power of suppliers – Airbus and Boeing are such big companies, they probably have more bargaining power than their numerous suppliers. Airbus also does risk sharing with many of its suppliers. The bargaining power of suppliers would probably be fairly low.
The Closeness of Substitutes to an Industry’s Products – Boeings airplanes are very close substitutes to Airbuses airplanes.
Complementors – The power of complementors is moderate. Complements such as TV screens, wi-fi interenet abroad a flight, decoration or comfort of the seats has an influence. However, with the recent trend towards low cost provider airlines, many complementors have not been as important as once expected.
The macro-environment has a strong influence on the forces in the Porter model.
Macroeconomic forces have had a major influence in Airbuses decisions. Since the airline industry is highly affected by the business cycle, the health of the economy can cause the airline industry to lose profitability. Interest rates could affect financing, and deflation could put a bigger burden on... [continues]
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