MARKET STRUCTURE IN AIRCRAFT MANUFACTURING INDUSTRY

Market Structure in Aircraft Manufacturing Industry



Market Structure in Aircraft Manufacturing Industry

Background

Aircraft manufacturing industry covers manufacture of aircraft and aircraft parts (please see separate article for aircraft engines and parts). Changes in passenger trips have historically been proportional to changes in GDP and demand for large civil aircraft is directly proportional to demand passenger (often with the delay of 3 to 4 years).

Critical Analysis of Competitive Factors Affecting Firm Growth, New Product

Development and Pricing in the Commercial Aircraft Market

Compared with general environment, industry environment has the direct effect on company's strategic competitiveness and yields above average, as exemplified by strategic approach. Intensity of competition in industry and potential for profit industry (as measured by long-term return on invested capital) are the function of five competitive forces: product to threats posed by new incoming power suppliers, power of buyers, substitutes, and intensity of rivalry among competitors.

Another way to think about market structure of sector is that these five groups of stakeholders competing for profits in given industry. For example, if the provider is the powerful industry that can charge higher prices. If industry member cannot pass higher costs to their buyers in form of higher prices, then member of industry makes less profit. For example, if you have the jewelry store, but rely on the monopoly such as De Beers, diamonds, De Beers, then, is actually extracting more value on their sector (i.e., jewelry business retail) .

Evidence suggests that companies often find it difficult to identify new competitors. Identification of new entrants is important because it may jeopardize market share of existing competitors. One reason new entrants represent the threat is to bring additional production capacity. Unless demand for the good or service is increasing, more capacity has cost consumers down, resulting in less income and less profitable for competitors. Often, new entrants have the strong interest in obtaining the large market share. As the result, new competitors may force existing businesses to be more effective and efficient, and to learn to compete in the new dimension (for example, using the channel Internet-based distribution).

Harder it is for other firms to enter the market, more likely that existing companies can gain relatively high. Probability that firms enter an industry is the function of two factors: barriers to entry and expected retaliation from current industry participants. Entry barriers make it difficult for new firms to enter an industry and often place them at the competitive disadvantage even when they are able to enter. As such barriers, high phone increase profitability of existing companies in industry.

Stronger power of buyers in an industry, greater likelihood of being able to force down prices and reduce profits of companies that supply product. Companies try to maximize return on your investment. Moreover, buyers (customers of an industry or company) buying products at lowest possible price- point at which industry gets lowest acceptable rate of return on your investment. To reduce costs, negotiation of buyers of higher quality, higher service levels, ...