ECO 365 Week 5 Learning Team- B Competitive Strategies and Government Policies
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Competition and Policies Influencing the Airline Industry
Emerging Companies, Mergers, Globalization, Pricing, and Profits
The airline industry is characterized by increased levels of competition as a result of new companies that venture into the market. Such new entrants bring about an increased level of competition for the existing volumes of consumers that the different airlines have to share. Mergers occur when two companies come together to combine resources, market share, and experience to acquire a better position in the market. Mergers also create a greater pool of resources and stability, which is attractive to consumers. Globalization brings about a higher level of travelling where people will be moving from one point to another. As a result, airline services will be at a greater demand and hence increase business. However, this will also mean that airlines from foreign nations can access any region and as a result there is greater competition (Botten & McManus, 1999; University of Phoenix, 2011).
Pricing, Sustainability of Profits, and Horizontal Merger
The level of competition in the industry determines how the different airlines will price their services to attract a higher number of consumers. High levels of competition may cause the businesses in the industry to charge extremely low prices, and this means that there will be no sustainability of profits. However, because of increase demand for the services the airline companies can charge higher prices that should increase...