CUSTOMER POWER IN THE AEROSPACE INDUSTRY
When there is a downturn in the market for planes, supplying firms are affected by the power of their customers. Plane makers, producing for the world’s major airlines, are very dependent on the state of the world economy. When demand is low and margins are tight, they have to look for cost savings, irrespective of production costs. Many companies have large investments in plant and cannot exit from the market. They know, however, that when the economic climate improves, demand will recover, forcing prices back to more profitable levels. The bargaining power of the customer is greater when demand is low and reduces when demand rises.