Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Question
Chapter 1, Problem 1QE
To determine
Explain the effect of Porter’s five forces on air courier industry.
Expert Solution & Answer
Explanation of Solution
Porter’s five forces determine the competitive position of an organization. The effect of five forces on air courier industry is listed as follows:
- Bargaining power of suppliers: Suppliers include supplier of equipments, aircrafts, labor, and pilots. Since there are a few companies, bargaining power of suppliers is low.
- Bargaining power of customers: Large business customers can negotiate heavily. Thus, bargaining power of customers is high.
- Rivalry amongst competitors: There is a high rivalry amongst air courier companies. A few air courier companies occupy a significant amount of market share. Thus, there is high competition amongst those companies.
- New entrants: The cost of equipments and infrastructure is high. Therefore, it is not easier for businesses to enter.
- Threat of substitute products: Threat of online transmission for intangible objects is high. Vessel routes are generally used for bulky commodities; also, sea route is not suitable for every destination point and may require other modes of transport which consume much time. Thus, substitute for the air courier companies is relatively low.
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Chapter 1 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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