Industry Analysis of Aerospace industry Using Porter’s Five Forces

 

Threat of new entrants: Weak

It is challenging for new brands to get into the business due to the large money required to start a Aerospace brand. At the start, a large amount of cash will be necessary to build up the manufacturing facilities, distribution network, and employ qualified staff. The degree of competition from current brands is another key big obstacle. Unless a new brand brings an original and differentiated product to the market, the chances of earning a large market share are minimal. Although the law has not previously been a barrier to newcomers, legal requirements have expanded in recent years, creating even another barrier to entry. In terms of brand image and reputation, new players may face huge obstacles. In terms of brand image and equity, existing brands have a huge advantage. Any new brand would have to place a strong focus on product engineering and quality. Although raw materials may be easy to get by, small businesses may struggle to achieve economies of scale. It's also challenging to enter into new markets.

Bargaining power of supplies: Moderately Strong

Suppliers have the power to influence an industry by raising prices or lowering the quality of acquired goods or services. Suppliers in the aerospace industry do not have a lot of negotiating strength. There are a number of providers to pick from, and all of the big players are forced to fight for market share. When customers in the aerospace manufacturing business are seeking to make a purchase, they know it will be expensive, and pricing will play a big role in their selection. There are several exceptions, such as when a supplier possesses vital technology that another company does not. In general, prime contractors in the aerospace sector can pick from a range of suppliers.

Bargaining power of buyers: Moderately strong

The aircraft makers, Boeing and Airbus, are frequently forced into fierce rivalry by airline firms. Airlines acquiring a big number of planes, such as China, which aggregates orders

from state-run airlines, may negotiate incredible reductions with prime contractors. Since these orders account for a significant portion of the total sales of aerospace prime contractors, purchasers are in a strong position to negotiate price reductions. Switching costs for aircraft and engines are extremely low, giving purchasers more bargaining leverage. Other planes and engines may be readily learned by airline pilots and maintenance. Most airlines were eager to cut costs after suffering enormous losses in the early 1990s, which had a direct influence on the prices requested for airplanes and engines.

Threat of substitutes: Weak

Since as an airplane's distinct speed and ability to go across water, companies in the commercial aircraft business such as Boeing, an aircraft maker, and Pratt & Whitney, an engine manufacturer, face essentially no risks of alternative products. Main producers dominate the industry. There are few companies and difficult for consumer to change service.

Competitive Rivalry in the industry: Very strong

Despite the fact that there are just a few major contractors in the aerospace business, competition is severe for the reasons mentioned above. Aerospace companies are desperately attempting to obtain huge contracts from airlines in order to cover their high fixed costs and significant expenditures in developing new aircraft and engines. The main contractors in the business are equally matched and have less diversity in their product lines, which tightens the rivalry even more.