Question

Consider the U.S. passenger airline industry through the lens of the Five Forces model. Suppose airline employees, who represent a significant portion of the cost of operating an airline, are strongly unionized Based on this information, supplier power is high__________.All else equal, this implies that the airline industry is attractive________ to enter.

Answer 1

Answer:

High;less.

Explanation:

In the book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors" published by Michael E. Porter in 1980. Porter proposed a five forces model of competition which is widely used in analyzing competitions, attractiveness and profitability in businesses.

Michael E. Porter's Five Forces of competition are;

1. Threat of substitute products or services.

2. Threat of new entrants into the industry.

3. Power of customers.

4. Power of suppliers.

5. Industry competition.

Considering, the U.S. passenger airline industry through the lens of the Five Forces model. Suppose airline employees, who represent a significant portion of the cost of operating an airline, are strongly unionized. Based on this information, supplier power is high. All else equal, this implies that the airline industry is less attractive to enter.

This ultimately implies that, when the bargaining power of suppliers are high, it simply means that the airline industry is at the mercy of the employees and as such would most likely depend on them by complying with their bids all the time.

Hence, this would make the airline industry to be less attractive to potential investors because there would be an increase in input or capital costs with a lesser profit margins.