Review of the Boeing vs Airbus Case Study
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Show MoreReview of the Boeing VS Airbus Case Study
In the market for large aircraft demand the emerging niche for very large aircraft (VLCT aircraft seating more than 400 passengers) saw only two competitors: Boeing and Airbus. Even though both competitors’ moves were clearly marked by technology enhancements, and different target markets but both exhibited strategic interdependence.
Option with Boeing:
Boeing being the market leader for almost a decade as a manufacturer of large commercial aircraft and had also reached economies of scale, the need to sustain its market share it presumed that “customers might demand for new”. Any potential growth was only through taking super leap and making VLCT jumbo aircraft which needed huge…show more content…
DEGREE OF RIVALRY (LOW)
The competition is similar to ‘ Cournot Duopoly Market ‘-“given rivals output what best I can produce”. Not a Bertrand competition as there is no price war between the two. Also not monopolistic competition as product differentiation does not matter and not much advertising difference.
Value proposition in commonality > value of proposition in product differentiation
• Boeing and Airbus both into up end as VLCT assembly smanufacturers (compared to buyer suppliers low bargaining power) and not on downstream supplier of aircraft parts side. All the parts of airlines sourced from outside through suppliers.
• The target market is different:
➢ Boeing serves international market (62% outside U.S.) Where commonality is the most important factor for demand.
➢ Airbus is servicing for European home market where customer still look for little differentiation.
• The target segment is also different:
➢ Boeing aiming at point to point secondary hub market. Boeing was targeting second hand market too at the same time.
➢ Airbus aiming at point to point Mega hub market
5. BARGAINING POWER OF SUPPLIERS (HIGH)
• Forms the core business in the aircraft industry. Supplier is not an option for aircraft but a reason for their business
• Bargaining power highest due to strength of distribution. Most of sources ex:
Executive Summary Table of Contents Introduction/Organization Background External Analysis Industrial Organizational Model The industrial Organizational Model for above average returns has the core assumption that the firm’s external environment has more of an influence on the choice of strategies than do the firm’s internal resources, capabilities and core competencies. When analyzing Boeing through this model it is most important to analyze its key competitor: Airbus. The industry is basically a duopoly between Airbus Industries and Boeing Co. Both competitors offer airplanes in all categories based on size, range and technology. The companies compete for market share mostly based on strategic timing. The companies must forecast the market needs based on many unknowns such as what size airplane the airlines will need in order to carry an unknown amount of people, in an industry that is constantly changing. When airbus emerged as a main competitor by making midsize, cost efficient airplanes, Boeing had to analyze the industry in which it operated, using the I/O model for above average returns, to deal with its new rival. Boeing answered by analyzing its relationship with its suppliers. Boeing decided to outsource the design of its wings and parts of its fuselage to Japan, and outsource its fuselage panel work to an Italian company. This made 70 percent of the components of any airplane outsourced, leaving Boeing responsible for assembly.