Back to list
1. In this part I would like to analysis the forces which may provide firms with competitive advantages in pharmaceutical and airline industries.
Threat of entry: Since the participation of new competitors will bring new capacity and a desire to gain market share, a barrier of entry would help existing companies to keep their profitability, especially in industries like medical or airlines. Once new entrants occur, the sales of the products of pharmaceutical firms would be affected and the entry of new airline companies will puts pressure on prices of air ticket which will largely cut the profitability of existing airline firms.
For the reason of this, a barrier of entry help to maintain a 'stable ' competition and make it possible for existing companies to keep their profitability.
Another key word should be supplier power. Powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services and maximizing their profit. For example, in Australia, I found it is interesting that the air ticket price of the airline between small sized cities (eg: Amidale) are much higher than average level. I did some research and figured it out, the airline between small cities and largely controlled by few companies, as a result, they enjoy the possibility of gaining more profit by rising price. It is basically the same in pharmaceutical industry, especially when we talk about newly invented medicines.
Threat of entry: Since the participation of new competitors will bring new capacity and a desire to gain market share, a barrier of entry would help existing companies to keep their profitability, especially in industries like medical or airlines. Once new entrants occur, the sales of the products of pharmaceutical firms would be affected and the entry of new airline companies will puts pressure on prices of air ticket which will largely cut the profitability of existing airline firms.
For the reason of this, a barrier of entry help to maintain a 'stable ' competition and make it possible for existing companies to keep their profitability.
Another key word should be supplier power. Powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services and maximizing their profit. For example, in Australia, I found it is interesting that the air ticket price of the airline between small sized cities (eg: Amidale) are much higher than average level. I did some research and figured it out, the airline between small cities and largely controlled by few companies, as a result, they enjoy the possibility of gaining more profit by rising price. It is basically the same in pharmaceutical industry, especially when we talk about newly invented medicines.