Bargaining Power Of Buyers - There Is Substantial Buying Power

723 Words Nov 4th, 2016 3 Pages
Bargaining Power of Buyers - There is substantial buying power. Passengers are very price sensitive, have no switching costs, and numerous options among other airlines to choose from. The digitization of the buying process has removed intermediaries. It has also given customers quicker and easier access to information, allowing them to instantly compare prices. Price competition has increased the demands customers have of rewards programs, which airlines depend on to build loyalty programs. (1) These programs are critical not just for repeat business but for transferring some semblance power back to the airlines.
Bargaining Power of Suppliers - There is a medium level of supplier bargaining power. The supply chain is vast, including (among others) travel agents, freight forwarders and navigation suppliers. These suppliers have limited power as they have standardized products.(2) The supplier with the lots of power, the actual manufacturers of planes, are few in number and derive direct power from long term pricing contracts that prevent firms from easily switching to another supplier. The long contract durations tend to be requisite in order to deliver the cost advantages airlines desperately seek.
The other form of supplier bargaining power comes in the form of unions which are common with many types of employees of United. These unions are a risk particularly during periods of renegotiation or changes in capacity that require layoffs. The final key input, fuel, is a…

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