Business Week #2 - anything lower. Rivalry American faces...

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Title of Article: Why American Airlines is stuck at the Gate Issue Date: October 11-17 Page Number(s): 19 Appropriate Model for Analysis: Porters Five Forces Focus: The reason that American Airlines has fallen behind its competitors. Salient Components of Model How Article Relates to Model Component Buyers The buyers have very low switching costs because of other options that are out there. American Airlines must stay at a competitive rate or the buyers will choose another company to fly with. By slowly replacing their MD-80 jets with their Boeing 737 that are 35% more fuel efficient they have lower cost which makes then able to charge a lower rate which in return leads to buyer power being low because the buyer is getting the flight at the lowest possible price and can’t bargain for
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Unformatted text preview: anything lower. Rivalry American faces operational challenges as well. This quote shows that American Airlines did not go into bankruptcy and merge with anyone they are the ones that now have financial problems and there pilots are still getting paid a 1993 wage which is much lower than any other airline. There is also low differentiation between AA and its competitors so its rivalry is very high. American is trying its hardest to make sure that they are different and the best option for its customers. Supplier The supplier threat is low because of the fact that the supplies purchased by AA have no chance of integrating into the focal industry. Another reason the threat is low is because of the amount of substitutes that American Airlines can purchase from....
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