Supplier power aircraft manufacturer not so much

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Supplier power Aircraft Manufacturer: not so much power because of fierce competition in spite of duopoly. Labor Unions: 40% of cost, potentially significant power Fuel: 15% of cost, commodity, may influence profitability but no market power. Airports: getting gates, landing rights, costly and/or timely, especially international expansion. Buyer power Buyer power moderately high – low switching costs Substitutes Alternate travel (car or train): more threat for regional airlines. Information technology alternative: more threat for long distance, slows down industry growth Entrants Relatively easy to enter Rivalry High fixed costs, nondifferentiated, perishable product = intense rivalry! Salvatore’s chapter 11: a. Discussion Questions: 12. Before the 1971 law that banned cigarette advertising on television, each producer spent too much on advertising and this cut into its profits. Yet, no producer would unilaterally reduce its advertising because others would then have an incentive to continue advertising heavily to increase their market share and profits. While the 1971 law that banned TV cigarette advertising was intended to avoid encouraging the public to increase smoking (and to some extent the law achieved its purpose), it also had the unintended effect of solving the prisoners' dilemma for cigarette producers. By being forced to reduce TV advertising, cigarette producers were able to reduce costs and increase profits —something that they had been unable to do on their own.
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13. ( a ) Tit-for-tat is the best strategy in repeated or multiple-move prisoners' dilemma games.
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