Cryptography and network security assignment questions

ivalry among Existing Firms: High A major challenge facing the companies in the airline industry is the rivalry

among existing firms. Even though the number of competitors is low, airline companies

face intense competition. This intense competition is a direct result of the Airline

Deregulation Act in 1978. Prior to this act, “flying was absurdly expensive. There was

one simple reason why flying was absurdly expensive. That was the law” (Morris, 2013).

The deregulation of the airline industry allowed companies to adjust prices and thus make

the market more competitive and price sensitive.

Another challenge is the high amount of fixed costs airline companies face.

Companies must fly their planes on schedule, whether at full capacity or not. This is a

key factor that illustrates the competiveness of the industry. Regardless of the situation,

airline companies must find a way to entice customers to fly with them, and that often

means lowering ticket prices. “To cover its costs, an airline must have on average 65% of

its seats occupied, a share that increased since deregulation” (Rodrigue, 2014).

Companies must then sell there remaining tickets at a price that gives them no profit

simply because it’s better to redeem some money, than to lose the entire amount on an

empty seat. As a result of this, companies must formulate a strategy to increase sales, or

they will operate at a loss.

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Diversity of rivals is another factor that plays a role in the rivalry among firms.

For the most part, all airlines provide the same services and therefore it is very difficult

for companies to differentiate themselves. This lack of diversity increases competition

and ultimately drives prices down. “Over the last 10 years or so, Allegiant Travel and

Spirit Airlines have pioneered a new “ultra-low-cost-carrier” business model in the

airline industry” (Weinberg, 2014). This example clearly illustrates the intense rivalry

airline companies face and their willingness to provide low-cost fares to gain market

share.

Threat of Substitute Products or Services: Medium The airline industry faces potential competition from other forms of substitute

products. These substitutes consist of other forms of travel such as cars, buses, railroads,

and cruises. “For trips between 100 and 500 miles, express buses, trains, and airlines are

all vying for customers and contemplating the future of these shorter trips” (Webber,

2012). Substitute transportation methods pose serious competition threats to short

domestic flights. Driving offers the customer the most flexibility and therefore must be

taken into consideration by airline companies. Although these are legitimate alternatives

to flying, threat of substitutes is still ranked as medium because with the increased

industry competition, airlines are forced to offer consumers comparable low-cost fares. In

addition to the comparable prices, airlines offer a faster and more convenient method of

travel than any other form of transportation. More so, when it comes to long distance

trips, airlines face very few substitutes and that is why airlines will continue to be the

dominant method of transportation for longer trips.

Bargaining Power of Buyers: Medium Passengers are considered the buyers in the airline industry. In the airline

industry, alternative suppliers are plentiful. As a result, passengers have the ability to

search all the different airline rates and choose the best option. The fact that the airline

industry is pretty standardized really gives the buyer strong bargaining power. “The shift

in the airline industry over the past four decades has been towards more price sensitivity”

(The Economist, 2012). In addition, changing costs are very little. If a customer is not

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satisfied with an airline, they can easily switch to another company with no cost. There is

essentially no commitment by a passenger. Since passengers can easily find an alternative

flight, airlines don’t have much pricing power and therefore buyers bargaining power

plays a major role in the airline industry. This directly correlates with the increase in

customer demand for cheaper tickets.

Bargaining Power of Suppliers: High In the airline industry, the main suppliers are the airplane and part manufacturers. The

two main suppliers are Airbus and Boeing and between them, they have significant pow