University of Phoenix
The case “Boeing vs. Airbus: Two Decades of Trade disputes” deals with the dispute that has existed between the US aircraft giant and the European Aircraft manufacturing giant.
Boeing has 57,000 workers in Seattle and an additional 100,000 employees in the country. Boeing has also provided 600,000 employments nationally and it is considerd to be a big force in US economy. Boeing attained its main competitor McDonnell Douglas and merged as one in 1996.
Airbus is a European manufacturer of commercial airline and its backed by four European countries. Airbus was originally a minor contestant in the airline market and was believed as improbable to face up to U.S. control. However, in early 2000 Airbus has tranfered itself to a major corporation from an association. And in 2003 the company exceeds Boeing in delivery of aircrafts.
To understand the problems in this case it is important to mention 4 points about the airline manufacturing industry and why only few competitors can exist in this market:
1) High Development costs involved in manufacturing aircrafts
2) Levels of breakeven that amount to a considerable proportion of global demand
3) considerable familiarity of level curve necessary for corporations to reach point of breakeven levels and turnovers
4) Unstable demands due to factors like fuel pricing, inflation, etc.
After the success of the Airbus, the US officials and government criticized the heavy subsidies that Airbus had gained from the four European countries: Germany, Spain, England, and France. Boeing argued that these funding were in loans form and at under interest rates received from these... [continues]
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