Posted: June 26th, 2022

ECON600 Managerial Economics

Question:

Although the Boeing Aircraft Company has been a dominant player in the commercial aircraft market for many decades, its influence has declined over recent years.

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Airbus, its chief competitor, has experienced significant market gains and could be poised to overtake Boeing as the top commercial aircraft producer in the near future.

You can use the Chapters 1-6 material to compare how Airbus and Boeing approach the aircraft market, their similarities and differences (especially their production processes), and where they might be headed.

Answer:

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

Boeing is based in the United States of America. Airbus, however, is a European Multinational company that focuses on designing and selling civil and militaries aeronautical products.

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Boeing, founded in 1917, is a much older company that has been in operation for nearly 100 years.

Airbus, which was founded in 1970, has been a major challenge to Boeing’s market dominance and market share in the aircraft industry.

Airbus was able to capture 50% of all aircraft market orders by the large operation of its subsidiaries and market strategies (Vasigh & Fleming 2016, 2016).

This paper will focus on this issue and examine how the two major manufacturers’ approaches led to success or hindered their progress.

This report demonstrates how the competition has impacted their market share and business operations over the years.

Based on the operation, outlook, strategies, and approaches of both firms, a comparative study was done.

The discussion ends with the conclusion of the competition and some practical recommendations for dealing with the problems Being faces.

Boeing enjoys a greater market share than Airbus for a longer period of time, which indicates almost 40 years of market dominance in the aircraft market.

Boeing 747 is one of the most notable productions by the company.

Despite few economic crises around the world, the aviation industry is showing signs of resilience and has great potential to grow.

The possibility of market growth has increased with the increase in the income of the global population.

Caliskan, 2010, states that the firm’s current market outlook focuses on the long-term and helps to calibrate the emerging market.

Market strategy has been based on the overall economy and performance.

When developing strategies and policies, the firm considers the gross domestic product of each country and the population.

The firm’s strategy planning also considers the global commerce of the country in terms of international trade and transactions, as well as the emergence and composition of manufacturing.

The firm’s long-term growth projections are non-cyclical and aim to increase its contribution to the aviation sector beyond the temporary deadlocks.

Airbus is a European aerospace manufacturing company that has pioneered commercial aircraft design. This is what makes it so important.

Airbus has had to overcome previous commercial failures which forced it to develop a strategy that will allow it to be different in a market dominated by Boeing.

Airbus has always approached the market through its production and quality.

Airbus decided to innovate extensively and adopt the product differentiation strategy.

Airbus decided that the greater the product ranges that meet utility and demand, the higher the satisfaction would be. This strategy was to expand the business in the narrow market.

These two strategies have accelerated the expansion of the business, which has led to the opening of 170 new locations worldwide (Pitt & Norsworthy 2012).

The firm’s orientation towards family-oriented airplanes is another driving factor.

Airbus’ families have allowed them to operate at a lower cost, which has led to their success.

Airbus has been able to maintain low costs in inventory management and inventory management thanks to the avionics concept.

Airbus’s success is demonstrated by its partnerships with larger countries and the presence of MRO hubs on five continents.

Because of their significant contribution to the aviation industry, Boeing and Airbus face the toughest competition in the form of duopoly on the jet airline market starting in 1990.

Airbus grew as two large firms despite being merged into smaller ones.

Airbus has received 9,985 orders over the past 10 years, while Boeing received 8,978 orders (Naayagi 2013, 2013).

This shows that Airbus is still not far ahead of Boeing in terms of sales and production, even though it leads the market.

On many fronts, the rivalry between the companies is evident. The basis of their competition lies in technology, pricing, engine choice, currency and exchange rates, as well as safety and quality services.

Airbus was particularly challenged by the competition between the companies, and had to find new technology to match its well-established product ranges.

Airbus’ A300 used composite materials to automate the functions of flight engineers, allowing jets to carry a two-man crew (Caliskan 2010, 2010).

It was also the first company that introduced digital fly-by wires controls to the planes.

The national governments have a significant influence on the airlines industries around the globe.

This means that decisions are made in accordance with political criteria and the mindset of the national governments (Pitt & Norsworthy 2012).

The firms have been able to subcontract the production and assembly of components for aircraft in countries of strategic importance.

This is the basic purpose of subcontracting.

What type of engines the companies choose to use determines how competitive and strong the aircrafts from each of these firms.

Airbus has made a deal with Rolls-Royce to use their engines, while Boeing uses engines supplied by General Electric.

Airbus’ pricing structure is much lower than Boeing’s, with more discounts and allowances for customers.

Airbus is gaining market share by reducing its prices, leaving Boeing behind.

Airbus’s lower prices are due to its efficient technology and consequently lower costs.

Currency and Exchange Rate:

Airbus prices in euros, while Boeing prices in dollars.

The cost of production in dollars, or currency appreciation, makes the production of airbus more attractive and cost-efficient.

Quality & Safety:

Both companies have upheld the brand’s value in terms safety and quality of the aircraft.

This is not a competition between the companies, but rather a well-engineered structure that delivers highest quality.

The strategies and executions of each firm are what makes competition fascinating and interesting. These include factors such as how products are designed, pricing, cost, market structure, strategies they use, management decisions, and marketing policies.

While both firms are involved in the same production line and provide the largest component of the aircraft industry’s aviation industry, the key to a firm winning more market share is their managerial decisions, such as how they respond to emerging market demands and production decisions (Naayagi 2013, 2013).

These are just a few of the key factors that drive competition:

Cost and price:

Demand and production:

Market structure

Advertising and other marketing strategies

Management and Profit

Comparing sales between these two leaders, it was found that Boeing 737 outsold Airbus A320 since its inception.

With a slight decline in orders, the firm has received 7033 orders to its record of 7940.

Airbus received 4471 orders from the A320’s launching in 2010.

Airbus has sold approximately 1350 more A320s than Boeing 737s in 2017, indicating its growing market popularity.

Airbus is also ahead in terms of delivery with 7610 deliveries since its inception, compared to the 9522 and 4430 Boeing families. In 2017, there were 5501 deliveries.

Airbus A380’s launch is more important than ever given the growing demand for larger aircraft than the Boeing 747.

The A380 was a full-length, double-deck aircraft that took over the Boeing’s market share.

Boeing was compelled to create a third generation 747-8 to increase competition between the two companies in long-haul routes.

The Outcome of Competition

Although competition is a major factor in market dominance, it can also be a positive thing for the quality of the service or product as a whole.

Complex manufacturing processes can expose both firms to higher capital investments (Baye & Prince 2014).

This results in higher production costs.

Complex production and designing require more research and development.

Firms have been forced to adopt the best strategies according to market conditions and any changes.

Both firms were able to create a long supply chain throughout the globe, as well as their respective domestic markets in the USA and Europe.

Airbus appears to be following system interaction in their production within the USA.

This allows Airbus to spread the cost of production and ensures that sales are handled by a variety of domestic as well foreign partners.

Even though the final products may be assembled in the USA or Europe, major parts of the airframe are produced and then transferred to foreign suppliers through subcontracting.

Boeing was concerned about the huge competition it faced and sought to find ways to outweigh Airbus and regain market share.

This firm focuses on different manufacturing processes that combine economies of scale with economies of scope.

This allows the firm the ability to produce more in response to a greater demand. The production cost can then fall with a lower initial investment.

Boeing is more likely to make commercial and military aircrafts that can reach different markets.

Airbus is more concerned with the cost part and strives to reduce costs by producing outputs that maximize the choice of production levels at fixed or variable levels.

Airbus adjusts its long-term average cost curve by adjusting fixed factors over time, in response to market changes and growing competition.

The firm has a greater technological inclination than the Boeing, which allows it to charge lower prices due to lower costs incurred (Naayagi 2013, 2013).

This presents a huge quality challenge to the entire aviation industry, while also allowing them to capture the business share at lower costs.

One important insight can be drawn from the discussion regarding the increasing competition between US and European firms in the aviation industry. With the advent of technology and proper strategies to calibrate market, even a failing firm can rise to the top as a leading seller and producer by improving quality.

It is no surprise that Airbus could surpass Boeing, even though it was established after years of Boeing.

Airbus was able to understand the market and channelize resources accordingly. This is evident by increasing orders and deliveries comparatively

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