Porter Five Forces Analysis Aerospace And Defense Industry

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10. CybAero AB Porter Five Forces analysis (Aerospace and Defense Industry)

Threat of substitute products and services: MEDIUM
There are currently many alternatives to aircraft travel, including cars, rail, and ship. Depending on distance, air travel has a significant advantage as far as speed and convenience. High speed rail may be a significant competitor. Also, as more people use the internet to teleconference, air travel may become less necessary in the business community. Other aerospace products such as space equipment have no foreseen competitors. Defense also has little to no substitute, as researchers are constantly developing better, more accurate and less destructive methods. Unless world conflict disappears, there will always be a need for defense spending.

Threat of entry of new competitors: LOW
The aerospace and Defense industry has significant barriers to entry. The industry is very intensive on research and development, which requires specialized workers and is capital intensive. Projects also have large capital requirements as significant investment is needed before money is received from sales. Contracts are made with a significant amount of weight to reputation and successful projects completed in the past. There are also many government and safety regulations that must be met in order to enter the market. The companies within the industry will shift from defense to focus more on aerospace as worldwide defense spending decreases and aerospace spending increases. New competitors can attempt to enter the aerospace market, primarily in China. China is known to have little industrial regulation and their companies may have reduced barriers to entry.

Intensity of competitive rivalry: MEDIUM
Competition is particularly fierce at the basic stage of negotiating contracts. Competitors at each level of product line are relatively similar. Contracts are made with promises of future research and development that has not yet been accomplished....