Developing the World's Largest Commercial Jet
In this case, we will be analyzing strategic interaction between Airbus and Boeing, the two leading producers in the global commercial aircraft industry. In particular, we will be considering Airbus' proposed launch of the A3XX, their entry into the intercontinental jumbo jet segment, and Boeing's potential competitive responses to this entry. We will attempt to answer the questions: Should Airbus enter the jumbo jet segment? If so, how? And, what should Boeing do about it?[1]
An appropriate analysis of this situation requires the integration of a variety of tools and concepts to which you have been introduced both in this course and the rest of
…show more content…
To simplify the game, we are going to believe Boeing's repeated claim that it will not build a superjumbo. With this assumption, Boeing's options are limited to launch the 747X or not launch and continue with 747. [3] Given the players and their potential actions, we need payoffs.
The payoffs for a formal game should be the net present values (NPVs) of the entry decisions made by each firm. To find the payoffs for each possible scenario, we need a separate cashflow analysis for each scenario where the NPVs depend on the competitive decisions of the rival firms. We then put the pair of NPVs into the appropriate cell of the entry game for each scenario and can solve the game as we have discussed in class.
Step 1: Find the Optimal Pricing Strategy for Each Scenario
In a particular scenario, if we set the prices for Airbus and Boeing to a particular level, the cashflow analysis in the spreadsheet will tell us the NPV associated with that set of prices. Unfortunately, if we change the prices, the NPVs will change. Before we can put the NPVs of a particular scenario into a game cell, we need to know the correct (optimal) prices for that scenario. You can think of this as a two-stage game. In the first stage, the firms choose whether to enter. In the second stage, they choose their optimal prices to compete in the chosen
The purpose of the report is to assist Aircraft Solutions (AS) in indentifying the most significant Information Technology (IT) security vulnerabilities. AS products and services are at the forefront of the industry and the protection of such is very important as they are an industry leader. The vulnerabilities that will be discussed are the firewall configuration, virtualization of their
“A Tale of Two Airlines” is an article written by Christopher Elliott to educate to economy on travel planning. He was born on May 31, 1960. He is a journalist and consumer advocate who writes for people who want to become more informed travelers (www.nbcnews.com/id/10912488/ns/travel/t/Christopher-elliott/#.Vc_RIO9RGM8). He is known for his many articles with the National Geographic Traveler Magazine and being a travel columnist with the Washington Post and USA Today. A Tale of Two Airlines or is Good Vs Evil in the air; Southwest Airline vs Spirit Airlines.
The decisions or strategies one company chooses will likely motivate other competitors to respond. Using the game theory allows a company to assess and understand more about itself and its competitors so that it can adjust and shape the competition to maximize its win probability (Johnson, 2014). Some examples of how A&D companies apply the game theory in their decision making are:
Airbus was planning to introduce the A380 in direct competition to Boeing 747 to compete in the large aircraft sector. The rivalry between Airbus and Boeing was already intense. Boeing’s market share reduced from 70% in 1974 to 45% in 1990 while Airbus’s market share had increased from 1% to 34% during the same time (Exhibit 5). Encouraged by this increase in market share, Airbus was contemplating the introduction of A380. Development of new product line is extremely expensive in the Aircraft sector. Following is a quantitative analysis of the project to calculate the risks involved in introducing a new line of Aircrafts.
With the BCG Matric analysis, we can argue that Easy Jet enjoys a viable competitive position because of its actual market growth. However, its prices have been compared with those of rival firms. This has clarified that Easy Jet emphasizes on being a low-cost carrier with no surplus in-flight services. Writers such as Quelch & Deshpande (2004, p. 71) argue that the Boston Consulting Group growth/share matrix has offered an opportunity to establish the market share of Easy Jet and the company's growth rate. In the context of the company's low cost market, it is clear that the market is still are still increasing. In addition, with the current fleet volume of 80 aircrafts, Easy Jet can serve 160 routes across Europe. Industry experts have associated such massive penetration with the rise in numbers of passengers and a relative rise in market share. Consequently, it is clear that the company has become a star. Nevertheless, Easy Jet must expand its market share for it to transform into a source of income after the decline of the market's growth rate. With respect to the company's Boston Consulting Group growth/share matrix analysis, we can claim that the cash flow of Easy Jet from operating activities have declined as well as the annual finances. Nevertheless, the acquiring firm's cash flow statement is the main area of focus (Butler &
Accordingly, the corporation can capitalize either to buy over any of the existing airways or transfer a section of its fleet to the budget jetliners. In this context, the rear one is preferable to distribute the available resources. Ultimately, it must manipulate and screen the execution of the scheme.
Northwest Airlines and American Airlines will be compared thoroughly in many aspects. Globalization, diversity, ethics and technology will be addressed in various ways. All four themes will be addressed through the strength, fit and adaptive ness of both company's cultures. The overall organizational culture of both Northwest Airlines and American Airlines will be clear.
147 (1) Assume that BlueSky purchases three identical aircraft. How many coach seats should BlueSky order for the three new aircraft? (2) Now suppose that the three aircraft can be different sizes, between 240 and 380 coach seats. (a) How do you think the three aircraft should be allocated among the six routes? In other words, should the same aircraft always fly the same routes? Why or why not? (Hint: You do not need an optimization model to answer this question). (b) How many coach seats should BlueSky order for each of the three new aircraft? (3) Because it is cheaper to manufacture three identical planes, Airbus is offering BlueSky a one-time, $5 million discount if it will order three identical aircraft. Should BlueSky take the discount? In deciding this, you may assume that BlueSky operates 3 banks per weekday through Houston, and that the revenues and demands for every bank on every weekday are equal to the demands in Tables 1 and 2 of the (A) Case.
Ever since I was little I was amazed at the ability for a machine to fly. I have always wanted to explore ideas of flight and be able to actually fly. I think I may have found my childhood fantasy in the world of aeronautical engineering. The object of my paper is to give me more insight on my future career as an aeronautical engineer. This paper was also to give me ideas of the physics of flight and be to apply those physics of flight to compete in a high school competition.
Joe Plane is one quirky individual, from his punk rock music to his soft heart, his excited giggle to his serious faces. This man is one amazing coach with weird but genuine qualities. You’d expect a coach to be some hard-headed, always mad, get in your face type of person, but then you take a good look at Coach Plane and it’s a geeky, family-oriented, leader figure.
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.
1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).
A pilot does not have to be an aeronautical engineer to learn to fly an airplane. However, it is a good idea to have good knowledge of aerodynamics and flight theory to be able to fly safely. There are four basic components in making an airplane fly, lift, drag, thrust, and weight. All of these work in unison to make a plane stay in the air. If one of the first three is taken out of the equation, gravity and weight will take over and cause the plane to descend. It is up to the pilot to understand how to make them equal in order to keep the airplane in flight or descend at an acceptable rate, in order to safely land the airplane. Before staring work to get a pilot’s license it would be a good idea to understand several aspects before the
Airbus predicts that there would be demand for more than 1500 super jumbos over the next 20 years that would generate sales in excess of $350 billion. And they could sell as many as 750 over jumbos over the next 20 years with a break even on undiscounted cash flow basis with the sales of only 250 planes. There is a huge profit in this business if Airbus succeeds in the industrial launch of A3XX jumbo jets.
What would Ryanair do? How would easyJet respond? If easyJet assumes that Ryanair is going to increase its frequency of flights from London Heathrow to Hamburg, its best solution would be to raise its frequency as well; so both would earn a profit of £1000. If easyJet would in this case remain with its current flights, Ryanair would make £1000 more profit. If Ryanair chooses its second available strategy namely to continue its current flight rate, easyJets best response would be to raise its frequency as well. On this occasion easyJet would make a profit of £1500 and Ryanair only a profit of £500. This leads to the conclusion that no matter what Ryanairs preferred strategy is, easyJet will do better in increasing its flight frequency. As this game is perfectly symmetric the same solution is given for Ryanair. Their dominant strategy is to increase its flight frequency as well. With having two dominant strategies, there is a Nash equilibrium given for increasing the frequency of flights. The payoffs for each player would be £1000 and there would not be any incentive for them to deviate from this result. It shows that the best strategic decision in this game is given by a solution where no competitor has the incentive to change his strategy given the other competitors’ strategy, here to increase the flight frequency.