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Market Segmentation & Product Brand strategy - Essay Example

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In accordance with the Porter’s Five Forces Model, firms that operate in the modern market have to face five different powers: a) the power of supplier, b) the power of customers, c) industry’s competition, d) substitute products and e) new entrants. Using the particular…
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Market Segmentation & Product Brand strategy
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Download file to see previous pages he delivery of orders (planes) and financing problems have reduced the profits for both the above suppliers (Tuggle 2009); however, the intervention of IATA in the reduction of supply chain costs in the US airline industry helped the industry to save about $17 billion in supply chain costs – helping the industry to face the effects of the global crisis (Clark 2011); b) power of customers; customers in the airline industry can choose among the industry’s firms, even if the availability of choices has been reduced due to the increase of M&A (see Graph 1 below); c) industry’s competition; competition in the US airline industry has been limited because of the expansion of mergers and acquisitions; the specific problem is clear in Graph 1 below; in 2010, the number of firms in the US airline industry has been reduced, allowing the existing firms to set easier their rules regarding the industry’s prices and priorities.
On the other hand, from 2007 onwards, the industry’s profits have been negatively influenced because of the global crisis; in 2009, the specific industry reported a loss of $4 billion (Bozzo 2010); in 2010, the industry’s profits helped the airlines to cover the relevant loss – even partially; d) substitute products; substitute products are a common phenomenon in the airline industry. Customers who cannot afford to pay the high prices of well known airlines, can choose among low-fare airlines – even with lower quality of services (Zacks Equity Research 2011), e) new entrants; the operational costs of firms in the airline industry can be high; new entrants are difficult to threaten the industry’s existing firms. However, the increase of the power of existing competitors – through mergers – could be considered as a major threat for the industry’s firms.
The view that supplier power is somewhat weak reflects the current status of competition in the airline industry. Indeed, Airbus and Boeing are the key suppliers in the particular ...Download file to see next pagesRead More
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