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 …show more content…
Written in bold on the first page of United’s 2016 annual report “The airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adv erse effect on the Company.”(1). Additionally, it is stated that significant price increases often and will likely result in a drastic decline in sales due to price pressures from domestic and international competitors. Internal rivalry has been increasing and is likely to increase, particularly in the international front with the mergers, acquisitions and joint ventures being carried out. Both domestic and international competition for United are further increased by high exit barriers and fixed costs.
Based on an analysis using Porter 's 5 forces, we suggest the airline industry is in a mature phase marked by high levels of price competition and consumption. We do not think it is actively being pursued as a prospect by outsiders but there are threats of M&A activity in international markets which could create price risk. Periodic changes in capacity that lead to downsizing can create conflcit with labor unions. Ultimately, it comes down to a highly visible price war isn’t that prospective entrants are none the eager to partake
Bargaining Power of Suppliers - There is a medium level of supplier bargaining power. The supply chain is vast, including (among …show more content…
Written in bold on the first page of United’s 2016 annual report “The airline industry is highly competitive and susceptible to price discounting and changes in capacity, which could have a material adv erse effect on the Company.”(1). Additionally, it is stated that significant price increases often and will likely result in a drastic decline in sales due to price pressures from domestic and international competitors. Internal rivalry has been increasing and is likely to increase, particularly in the international front with the mergers, acquisitions and joint ventures being carried out. Both domestic and international competition for United are further increased by high exit barriers and fixed costs.
Based on an analysis using Porter 's 5 forces, we suggest the airline industry is in a mature phase marked by high levels of price competition and consumption. We do not think it is actively being pursued as a prospect by outsiders but there are threats of M&A activity in international markets which could create price risk. Periodic changes in capacity that lead to downsizing can create conflcit with labor unions. Ultimately, it comes down to a highly visible price war isn’t that prospective entrants are none the eager to partake