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Boeing Case Essay

3051 words - 13 pages

Table of Contents
1. Executive Summary 2
2. Reasons Boeing cancelled its development of the SuperJumbo 3
2.1. Boeing had an alternative to developing a new aircraft 3
2.2. Boeing already had market share 3
2.3. Boeings market analysis did not show sufficient demand 3
3. Strategic weaknesses in Airbus’s customer strategy 4
3.1. Strategic Analysis of Airbus 4
3.2. Analysing resources and capabilities of the organisation 5
3.3. Shaping the organisation through vision, mission and purpose 5
3.4. Customer strategy at Airbus 6
4. Is the Airbus strategy driven by customers? Or rather more by a sense of rivalry with Boeing? 6
5. Airbus’s demand estimates and implications ...view middle of the document...

Their strategy was driven by customers.

Since the decision to go ahead with the development of the super jumbo was informed by their customer strategy, Airbus was able to estimate the demand for the aircraft. However, their projected need for the aicraft showed that they will only realise their return on investment after they have sold 250 aircrafts.

The development of the super jumbo signalled a new era in the aircraft market. Boeing’s monopoly over the long range market segment was broken and as a results Airbus gained sustainable competitive advantage. Although Airbus will start to make profit around the year 2017.

2. Reasons Boeing cancelled its development of the SuperJumbo
3.1. Boeing had an alternative to developing a new aircraft
The cost of developing a new super-jumbo carried a host of financial risks for Boeing. The development cost was estimated to be around US$7 billion. Rather than investing such a huge capital on a new aircraft Boeing was planning on stretching its current model to extend the number of passengers that it can carry. This means that they took a strategic decision to invest a little capital for huge returns. The idea was tempting based on the fact that the stretched model would carry more passengers with lower fuel consumption and lower maintenance. In addition, this could be achieved in a relatively short space of time and at a relatively low cost compared to developing a whole new aircraft.
3.2. Boeing already had market share
Boeing already had a monopoly in the long-haul aircraft segment and knew that it would take considerable investment by Airbus to enter the market. Since Airbus was their only potential competition in this market, there was no urgent need to develop a new aircraft since they could still satisfy the market with a stretched version of the 747.

Lawrence and Thornton (2005) believe that most potential A380 customers are already Boeing operators and with differences within maintenance and training requirements, it is difficult to change from Boeing aircraft to Airbus aircraft in a short space of time due to the investment already in Boeing fleet. Despite this, Airbus has already managed to take on new customers (eg Emirates) which indicate the need for a newer, more advanced type of craft.
3.3. Boeings market analysis did not show sufficient demand
Perhaps the major reason for Boeing not to pursue the super-jumbo project was the fact that they realised after a survey that there was a very low demand for the super-jumbo. This means that their return on invested will only be realized after a number of years if at all.

Aboulafia believes that the two primary factors in air travel that need to be considered are: Schedule and Geographic location. He believes that passengers will pay for flexibility – ie more flights per week to a greater number of locations. This is very different from the Airbus strategy which is to increase passenger volumes in order to...

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