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Airbus Porter's Five Forces Analysis

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The threat of new entrants in the aerospace industry is high in other words the barriers to entry and to exit are high. For any new player who wants to enter the market need to have very large financial investment in terms of infrastructure and supply chain costs. In order to obtain licenses, permits and skilled human resource demands high financial needs. The regulatory barriers in this industry are very high which makes the job of new player very difficult not only for the entry barriers but also the exit of a new player will be very difficult. So based on the above-mentioned factors possibility for the entry of any new player will be very less until a big brand with enough capital investments and high financial aspects somehow decide to enter the market. The probability of such an occurrence is low because of the high risks including risks in capital, financial and legal departments.

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The threat of substitute products are low since the demand for quality aircrafts are growing there are only few competitive brands like Bombardier, Boeing etc. that can deliver matching quality products & services as Airbus. The performance of Airbus aircrafts in the industry is very good, which is the primary reason behind its demand. Quality, timely delivery and customer convenience are the factors which minimizes this threat from the substitutes. These factors are the main reason behind minimizing the threat from the substitutes from low to moderate range.

Considering customers as potential buyers if we see the analysis of the bargaining power of buyers one can easily understand that it is moderate overall. There are several business brands that are competing in the market share in this aerospace industry. Since the customers of Airbus are major and minor airlines brands all across the world they want to have the most fuel efficient and technology advanced aircraft because it allows customers to give their customers an enriching flying experience and also saves the costs. It is also true that the Aircrafts manufactured by Airbus are great and are high in demand, which ensures that the products and services provided by Airbus offers high quality and the brand image moderates this bargaining power.

The success of Airbus in its growing aircraft product line, Airbus relies on its large and global supply chain. This global supply chain has approximately around 7700 suppliers and many of those are major companies such as Siemens, Rolls Royce, and other industrial partners (Airbus Industrial Partners). These suppliers are from all over the world moreover the bargaining powers of all these suppliers are very low. Airbus needs different kinds of general raw materials like Titanium, Aluminum and composite materials to build an advanced best in class aircrafts. Airbus also demands from its suppliers to follow some rules and regulations for material quality and other important things like labor welfare and ethics. No supplier wants to loose such a major customer, which gives Airbus the upper hand. This is the main reason behind the bargaining power of suppliers being low. Some suppliers can also have moderate bargaining power but in that case, it will be because of the quality and size of the products that are bought by Airbus.

The competitive rivalry in the aerospace and avionics industry has grown intense. The numbers of players are limited and the major name apart from Airbus includes Boeing, Embraer, Bombardier, and few others. All of these brands are investing in building high quality helicopters, planes, and military aircrafts to employ best in the class technology and to deliver high performance and superior value. It is because of these reasons that now the customers have options so these brands are pushing the quality of their products whether in fuel efficiency or technology. This clearly indicates that the level of competition is high and in future, it can be more intense after analyzing the current situation of these brands. However, Airbus and Boeing are the major players in the market but players like Bombardier, Embraer and few others are making their mark in the market in several areas. Factors like Excess Capacity, concentration, Diversity of competitors and others are making the overall rivalry between existing players quite intense and high which is going to rise with the coming time. It will not be wrong to say that in this industry the brand gains an edge over other players with its product and services quality and brand image, which is reason behind Airbus success in this industry.

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