Question

Explain how airlines will have to strategically watch other competitors to make decisions. How do you think this will impact both consumers and firms? Why do you think firms in this market structure will advertise to be able to create more opportunities to gain business?

Answer 1

Airlines will have to strategically watch their competitors to make decesions because they enhance internal capabilities to capture the opportunities of new distribution trends and so become cemntered on customers in their organizations. Airlines can benefit from loyalty programs because they reduce the cost to capture coustomer insight.Companies have only three olptions : attack coexist uneasily, or become low cost player themselves. None of them is easy, but the right framework can help you to which strategy is most likely to work .

As Price -discrimination plays a major role which plays a major role for both consumers and firms.As price- discrimintaion involoves charging dfferent prices to different sets of consumers for the same good. Firms can charge different prices depending upon certain criteria:

1. Quantity brought

2.Time of use( higher price at peak times).

3. Age profile

4. when it is prchased.

The main principle behind this price dicrimination is that a firm is trying to make use of different price elasticity of demand. If some people have a very inelastic demand it means they are willing to pay more.If the firm can set higher prices for thesze consumers it can increase its revenue and profits. Other customers will be more sensitive to prices so they will respond to special offers and discounts.

The firms in this market structure wil advertise to be able to create more opportunities to gain business because now a days less travell time increases the interst of consumers. Airlines is the fastest mode of communication, where a person can reach to their destination very soon in comparative to other source. That is why it plays a great role to gain business by offering time to time discounts and sales accordingly to gain business.