ECON600 Managerial Economics

Question:

Boeing Aircraft Company has held the commercial aircraft market in dominance for decades. However, its influence has diminished over recent years.

Airbus, the main competitor to Boeing, has seen significant market gains and could soon be the number-one producer of commercial aircraft.

The material in Chapters 1 through 6 will help you understand how Airbus and Boeing approach aircraft markets, how they differ (including their production processes), where their rivalry is likely, and what the most likely outcome of their ongoing battle.

Answer:

Boeing and Airbus are the two most well-known manufacturers of aerospace products in terms market share.

Boeing is based the United States of America but Airbus is a multinational European company. It focuses on developing and selling civil as well as military aeronautical equipment worldwide.

Boeing, which was founded in 1917, has been in business for close to 100 years.

Airbus’s arrival in operation in 1970 has presented the greatest challenge to Boeing’s dominance and market share.

The large operation and marketing strategies of the subsidiaries have allowed airbus to secure 50% of the aircraft market orders that affect the Boeing business (Vasigh & Fleming (2016)).

This paper is intended to create a report on the topic and identify how the different approaches of these big manufacturers have led them to success or caused them to face challenges.

This report has been a great representation of the impact and outcomes of competition on their market share, business operation and profitability over the years.

Comparative analysis of these two firms has been done on their operations, outlook, strategies and approaches.

We conclude the discussion by presenting some feasible recommendations for the challenges Being faced and stating the outcome.

Boeing has enjoyed a greater market share for a longer time. This is almost 40 years prior to Airbus’s arrival.

Boeing 747 has been a remarkable product.

It is evident that the industry is resilient and has enormous potential to grow, despite the recent economic crisis.

As the world’s population grows in income, so has the demand for aviation services. This has led to a greater potential for market emergence.

Caliskan (2010) has led the firm to adopt a current market outlook that emphasizes long-term market benefits and calibrating emerging markets.

The firm has maintained a market approach that takes into account the economic structure and its performance.

The firm’s focus when developing policies and strategies is on the gross domestic products of the country being considered, as well as the percentage of people who use airlines services.

Global commerce, including international trade and transaction, the emergence of technology, and the composition of manufacturing play an important part in the firm’s strategy planning.

Overall, the firm provides non-cyclical forecasts that aim for long term growth in its contribution towards the aviation industry. This is beyond the short term deadlocks.

Airbus’s importance lies in its position as Europe’s largest aerospace manufacturer and leader in innovation in commercial aircrafts.

After a series of commercial failures, the firm developed a strategy to make it stand out in crowded market.

Airbus’ approach to the market has been based on its production and quality.

Airbus adopted the product differentiation strategy and went for product innovation.

It was a simple idea that if there are more products to meet the needs of customers, it will lead to greater satisfaction which would allow Airbus to expand its business beyond the current market.

These strategies have aided in the expansion of the company’s operations in 170 locations around the world (Pitt & Norsworthy (2012)).

Another important approach to the company has been its orientation towards family-oriented aircraft.

Airbus has been able to reduce their operating costs, which has helped them achieve success.

This concept has allowed the firm to keep inventory and management costs low.

Its partnership with larger countries, as well as the presence of MRO Hubs in five continents worldwide, are all signs of its success.

Both Boeing and Airbus are subject to fierce competition due to their important contributions in the aircraft industry.

It was able to grow because it was two of the largest firms in the aerospace industry, despite the fact that they were merged together.

Airbus received 9,985 orders in the last 10 years, compared to Boeing’s 8, 978 orders (Naayagi (2013)).

This suggests that Airbus, while leading the market, is still behind Boeing (Naayagi, 2013). The Boeing is not far behind in terms production and sales.

There are many areas where the rivalries between these companies are obvious. These include pricing, engine selection, currency exchange rates, safety, quality, and the cost of technology.

Airbus, which had to develop new technologies to compete against the well-known ranges of Boeing products, was challenged in these competitions.

Airbus A300 applied composite materials and automated the functions for the flight engineers. This allowed the jets’ two-man flying crew (Caliskan 2010).

It’s also the first company in the world to introduce digital fly-bywires controls into the aircrafts.

The governments of the countries that control the airlines industry are directly or partially responsible for their decisions.

This shows that decisions are made according to political criteria (Pitt & Norsworthy (2012)).

These firms are now looking to subcontract production and assembly in strategic manufacturing countries.

The goal is to gain competitive advantage.

How the engines are chosen by the firms determines the level of competition and the strength of the aircrafts made by these two companies.

Airbus has a deal with Rolls-Royce in order to use engines made by them, while Boeing uses engines from General electric.

Airbus has a lower price than Boeing and offers more discounts to customers.

Airbus has a much larger market share than Boeing due to price competition.

Airbus charges a lower price because of its use of efficient technology, and the consequently lower cost.

Currency & Exchange Rate

Airbus costs in Euro, Boeing in Dollar.

Airbus production is more attractive because of the relative cost efficiency and attractiveness of the Boeing production (Caliskan 2010).

Safety & Quality

Both firms are responsible for maintaining the brand’s reputation in terms of safety, quality and service provided by the aircraft.

These companies do not compare or compete with each other on this issue, rather they follow well-engineered structures to provide the best quality.

It is the execution of strategies and tactics that make the competition fascinating. This includes factors like product design, pricing and cost, market structures faced by them, strategies or approaches they adopt, management decisions, marketing policies, and management decisions.

Although both companies are in the same industry as the main component of the aircraft industry, their differences in market share can be attributed to managerial factors such as production decisions on the basis of emerging market demand and market trends (Naayagi 2013).

The following are some of the most important factors that can motivate competition:

Price and cost

Production and demand decisions:

Structure of the market:

Advertising and other marketing strategies

Management and profit

Comparing the sales figures of both leaders, it is clear that Boeing 737 has outsold Airbus A320 right from its introduction.

The firm received 7033 orders compared to its own record of 7940, with an indication of a slight drop in the orders.

Airbus received 4471 orders for the A320, which was launched in 2010.

Airbus is growing in popularity and sales of its A320 launching in 2010.

Airbus has 7610 deliveries, which is more than the Boeing family’s 9522 or 4430.

Airbus A380 was launched in response to growing demand for larger aircraft, which is a significant change from the Boeing 747.

A380 became the full-length and double-decker aircraft that took the Boeing’s market share.

Boeing decided to develop the third generation of 747-8. This created greater competition between the companies for long routes.

Competitive Outcomes:

Although many market players are intimidated by the existing competition between companies, competition can have positive effects on the quality of products and services in the entire industry.

Both firms involved in complex manufacturing processes are more likely to need to invest more capital (Baye & Prince (2014)).

This leads to higher production costs.

Furthermore, complex manufacturing and designing require greater research and development costs.

Because of the fierce competition for quality services, firms have opted to use the most effective strategies in line with market conditions and changing circumstances.

Due to competition, both firms have been able build long supply chains all around the world and in their home markets of Europe and USA.

Airbus seems to prefer system interaction for their method of production in the USA.

This allows the firm spread the risk of costs and allows for sales to be spearheaded by both domestic and foreign partners.

Even if the final products were assembled in Europe or the USA, the majority of the main airframe components are manufactured and transferred by subcontracting to foreign suppliers.

Boeing had to be concerned by the fierce competition that faced the company. It needed to devise new techniques that could outweigh Airbus, and regain its market share.

The firm uses a different manufacturing process that combines economies of scale and economies-of-span.

This allows the firm more production in the face of greater demand. It also allows for lower production costs and a higher initial investment.

Boeing is more inclined to produce military and commercial aircrafts that reach different markets.

Airbus’s cost-partition is the most important. The company tries to minimize costs by producing levels of outputs that optimize the selection of production levels, fixed and variable.

The firm adjusts its average long-term cost curve, adjusting the fixed variables over time as a result of market growth and increasing competition.

This firm is more technologically inclined than Boeing. This has allowed it to stay ahead of the market in terms price, due to lower cost incurred (Naayagi (2013)).

This is a significant quality challenge for the entire industry of aircraft, as well as capturing business share due to lower costs.

The discussion reveals one important insight about the competition between the US and Europe’s largest aircraft industry leaders. It is clear that technology and the adoption of appropriate strategies to calibrate markets can help a failing company rise to the top of the market as the leading seller and manufacturer, while also improving quality.

After many years of Boeing’s existence, it is not surprising that Airbus could be the next big thing after its inception.

Airbus recognized the market needs and channeled resources to meet them. The result was an increase in orders and delivery.

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