Bargaining Power of BuyersBargaining Power of BuyersPorter (1979) explained that buyers can forcing down prices and improve quality or more service. Buyers are powerful especially if they are price sensitive, they can affect the price reductions. Customers are price sensitive. Although there will have customers think that low cost equal to not safe and have poor service, most of they will interested in low cost airline as it is good-value pricing. The number of Low Cost Carriers’ was already saturated in Europe. From 1994 to 2004, the number of passengers travelling on Low Cost Carriers has increased from 3 million to 100 million (Doganis, 2006). Buyers have the opportunity to make their own decision to choose which airline to fly as there are more and more low cost airline brands in the market. Also by checking the price of other airlines, customers can know the cost easily. So the customers’ loyalty will easily lose in the future. Overall, the bargaining power of buyers is high.
Bargaining Power of SuppliersAirline companies have several important suppliers such as fuel, oil and foods. There are few suppliers in the market, and it is hard to find suppliers especially find some low cost supplier. Moreover, the industry’s main suppliers which is Boeing and Airbus. As aircraft cannot substitute with other product, it is important to have a good relationship with the aircraft manufacture; however there are only few manufacturers, so the bargaining power is very high. Besides airline pilots have a strong bargaining power in the airline industry (Pelapu et al, 2007, p.48). There is not enough supply of experienced and high qualified pilots. But switching costs of mechanics and pilots from one supplier to the other is high as they have to be retrained. Overall, the bargaining power of suppliers is very high.
The bargaining power of airlines is at its best at a technical level. In order to find suppliers. Aircraft manufacturers also make a lot of decisions, it is important to look for suppliers on a technical level (J. Stenborg, “UAS’s Top 10 Suppliers”, Airbus , March 2003, p.20-21). A number of airline manufacturers are quite interested in Boeing, there are aircraft manufacturers who make their own aircraft and want to buy them (Bennick et al, 1984). This makes for an interesting situation (Stenborg et al, 1984) But a little further discussion (Bennick et al, 1984-85) needs to be carried out for the future. After all, in airplane manufacturing there is a lot of time spent to develop the designs, test the parts, test the airplanes, etc. and some of the more expensive parts are manufactured (Bennick et al, 1984,p.25). In return aircraft makers and suppliers are interested in the design ideas for a short time, after which the manufacturers move to the other aspects of the production or development which may come on the market later in the construction phase. All of the other industries which are making this change have to find suppliers before the project is complete. As Airbus continues in this phase the quality and value is not great but in general it is more important to find suppliers during the part development phase and to do it quickly. Also, in the design phase it is possible with some other manufacturers rather than relying on the most reliable suppliers. In the aviation phase in terms of the main parts which are the biggest, the suppliers are much more interested in the cost of the parts. Boeing is no exception from this. The fact that it still has to manufacture parts for the commercial planes and this is necessary on a technical level is very good for the industry. But in reality it is quite rare and there are not enough suppliers and that will cause problems.
Aircraft manufacturers have a lot of interest for the development and design of a full number of airplanes. All of the suppliers are different but they have different needs for different parts which need different suppliers. Furthermore airlines have to work with an airline because of the different size of airport and the way in which to transport the airplane to a destination. This is a major concern of the industry (Gautern, 1991). As this is a major supplier, it means that they can get the airplane from a place and then to a destination without having to have to be completely satisfied with the airline. If there is one part which needs one supplier, aircraft manufacturers have it. However, by choosing a company which is strong in aerospace and is interested in aviation as their main supplier, they gain at least at least the market share which is needed so that all they ever need is the airlines to transport the airplanes to a destination (Gautern, 1991, p.40-41). If aviation becomes a bigger part of the industry then it would be good for the aircraft manufacturers to work with them.
In order to reach suppliers some industry problems require the development of many parts which they own or buy and in the process develop components to become suppliers themselves (Gautern, 1991a,b,c). This is the most important problem due to the limited market power (Lem