ACCA Strategic Professional · Strategic Business Leader · Competitive forces
A regional airline relies on one airport operator for landing slots and one fuel provider in a remote island hub. Passengers can choose among several airlines and rarely face switching costs. Which assessment of the forces is most appropriate?
Both supplier and buyer power are high. Single suppliers of essential slots and fuel can dictate terms, while passengers with many alternatives and no switching costs are price sensitive, so the airline's margins are squeezed from both sides.
- ABoth buyer and supplier power are low
- BBuyer power is high and supplier power is low
- CSupplier power is high and buyer power is also high, squeezing profitability from both sidesCorrect
- DBuyer power is low because passengers are fragmented, and supplier power is low because the airline is large
Explanation
Sole providers of essential slots and fuel have strong supplier power. Passengers with many alternatives and no switching costs retain price sensitivity, giving buyers meaningful power even though they are individually small. The airline is squeezed from both sides.
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