United States Airline Industry
United States Airline Industry 4
Desire for profits goesbeyond established industry rivals myriad of factors can affectairline profitability in the short run including the weather and thebusiness cycle. These intense forces include threat of new entry inthe market and the airline is faced with challenges of the newcompany getting the market to create new capacity and desiredservices. Demand reduces due to a variety of option for the customerand low-cost budget carriers entering the industry have made itfavorable since they use lucrative route. Competitive of rivalrywithin the industry is another factor affecting the market. It takesthe familiar form of advertisement, lowering the prices and othervarious forms. Large carriers have experience competition amongthemselves as they advertise about their offers on the Internetnoting that this kind of advertisement is convincing with theincrease in internet travel sites. This force is evident as companieshave even merged to be more competitive and overdo other businesses(Kotler & Armsrong, 2012). Additionally, bargaining powerof the buyers led to competition from the regular customers who arefrequent travelers and if lost their effect will be felt. Customersare powerful if they have negotiating power relative to industryparticipants, especially if they are worried about pricing, usingtheir effort to pressure price reductions. Similarly, higher oilprices affect the airline power where dominant suppliers acquire moreof the value for themselves by interfering with prices thus limitingquality or services. Companies depend mostly on other enterprises forservice or product to attain either desired goal and if these firmscharge more so will be for the enterprise. As new companies enteredthe market companies like Southwest Airlines, Jet Blue, AirTranAirways, and Virgin America offered same services as United, Delta,and American. They become a threat as substitute companies providesimilar products that offer the same services. Other forces likepricing have led to the downfall of the airline firms (Luther, 2011).
High cost of living causes low profitability, and this isexperienced when laborers demand higher pay than the company canprovide. Also, the business faces challenges as the supplier alsoincrease the cost of fuel and other factors regarding pricing can beaffected by the coast of living. Minimum profit shares are alsoaffected in a competitive market if more industries join the marketthe demand will be low as the supply increases leading few trips ofthe airline than experienced earlier. Additionally, increase indemand creates decrease in profit as the price of the airline isexpected to reduce as competition increases. Similarly, mergingcompanies have led to little profit as the firms that have merged areadvantageous in resources. These companies outshine the others andcan attract more customers (Sekhar,2012). Poor or no advertisement has led to lowprofitability in the airline industries. The rise of internet travelsite has resulted in demand of quality advert that can convince thecustomer to take up their services. Industries that do not use thismethod of attracting customer are bound to get small sale than thosethat used the modern method of attracting customers. When a companyexploits structural change, it is recognizing, and reacting to, theinevitable. However, the airline did not add value to theirstructure instead other companies had better offers of focusing onthe lucrative routes unlike, incumbents. Strategy can be viewed asbuilding defenses against the competitive forces or finding aposition in the industry where the forces are weakest. Consider, forinstance, larger carriers had the advantage of positioning the marketbut failed to (Fleisher &Bensoussan, 2014).
Kotler, P., & Armstrong, G.(2012). Principlesof marketing. Boston:Pearson Prentice Hall.Luther,W. M. (2011). Themarketing plan: How to prepare and implement it.New York: AMACOM.
Fleisher, C. S., & Bensoussan,B. E. (2014). Businessand competitive analysis: Effective application of new and classicmethods. Philadelphia,Pa: Wharton School.
Sekhar, G. V. S. (2012). Businesspolicy and strategic management.S.l.: I K International Publi.