Business: Threat of New Entrants

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Threat of New Entrants
This has a low threat because firms already in the industry have a cost advantage and these companies already have a strong customer base.
Economies of Scale
• Bigger producers buy more inputs and therefore may get quantity discounts
• Boeing is the world's largest aerospace and defense company
• Boeing sells more products in multiple industries so they have the ability to produce each unit at a lower cost than a smaller company would
• Delta is the 2nd largest passenger airline in the world by available seat miles
Product differentiation
• Boeing offers many different types of planes for different needs
• By scheduling and operating its aircraft efficiently, JetBlue is able to spread its fixed costs over a greater number of flights and available seat miles.
• Brand identity is important, Delta offers frequent flyer programs
Capital requirement
• High capital causing Boeing to invent huge financial resources in manufacturing facilities to produce large commercial planes creates entry barriers
Switching costs
• Most airlines have orders for planes to be manufactured to meet demand, so they cannot cancel orders due to the high costs to produce
• To switch a whole fleet to another is nearly impossible because of the high costs already involved
• Consumers tend to choose well-known names

Access to distribution channels
• “Southwest Airlines’ multi-channel distribution strategy is strategically designed to provide corporations and their business travelers with access to Southwest Airlines content through their preferred booking tool”. (Corporate Travel Services)
• JetBlue’s distribution channel is through their website
Cost disadvantages independent of size
• In developing new planes, Boeing’s costs goes down ...

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...est.com/html/air/business-groups/corporate-travel.html>.
Levin, Alan. "FAA Predicts Steady Growth for Airline Industry." USATODAY.COM. N.p., 15 Feb. 2011. Web. 15 Feb. 2014. .
Lipton, Eric. "STATE'S SECRETS: Hidden Hand of Diplomats in Jet Deals." STATE'S SECRETS. N.p., 03 Jan. 2011. Web. 15 Feb. 2014. .
"Porter's Five Forces - Airline Industry Analysis." Porter's Five Forces - Airline Industry Analysis. N.p., n.d. Web. 13 Feb. 2014. .
Turner, Howard. "Smith, Gambrell & Russell, LLP." TURBULENCE in the Airline Industry. N.p., 2005. Web. 15 Feb. 2014. .

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