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Boeing Aircraft Company vs. Airbus

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Boeing Aircraft Company vs. Airbus
Prepared for:
Professor Nicolas Kuzm

Topic Paper 3:
Boeing Aircraft Company vs. Airbus

Managerial Economics
Fall 1, 2012
Section OB

September 2, 2012

Introduction:

For decades, Boeing and Airbus have struggled for dominance in the large commercial aircraft market. In 2010 and 2011, the World Trade Organization ruled that each firm has received illegal subsidies from the governments of the United States and the European Union, which have enhanced their competitive positions. This paper considers the nature of these rulings and the future competitive environment in the global jetliner industry. This paper will also demonstrate how Boeing and Airbus approach the aircraft marketplace, how they are alike and different (particularly their production processes), where the rivalry is likely to head, and the most probable outcome of their ongoing competition.
History of the two Companies:
In 2000, America had a services trade surplus of $79.8 billion and a good trade deficit of $449.5 billion, resulting in a total trade deficit of $369.7 billion (U.S. Census Bureau, 2001). Founded in 1916, Boeing Company was the only maker of big commercial jets in the United States and is the largest U.S. exporter today. If Boeing loses substantial market share to its foreign competition, the U.S. trade-deficit situation will almost certainly worsen and the U.S. economy (in terms of good-paying jobs and future technological developments) will unavoidably suffer.
During the 1996-2000 period, Europe-based Airbus boosted its global market share in the over-100-seat airplane market from 21 percent to nearly 50 percent (Matlack et al., 2001). The March 6, 2001 issue of The Wall Street Journal reported (Michaels, 2001): From its base in France, Airbus has eaten steadily into the home market of U.S. aerospace icon Boeing Co. over the past decade, and it hopes to keep biting off market share. Today, almost 10 percent of the big commercial jets flying around the U.S.



References: Airbus Industries (200Ia). About Airbus. Retrieved August 30, 2012, from the various parts of Airbus ' web site: http://www.airbus.com Airbus Industries (200Ib) Air Safety Week. (2001). Double deck evacuation. August 31. Retrieved from the Dow Jones Interactive database. Brown, S Cordle, I. P. (2001). Experts defend Boeing, question viability of Airbus ' 800-passenger jumbo jet. The Miami Herald, February 22. Retrieved from the Dow Jones Interactive database. Hartley, R Hill, C. W. L. (2000). International Business (3rd ed.). Boston: The Irwin McGraw-Hill Company. Matlack, C., Holmes, S, Reed, S., & Dawson, C Michaels, D. (2001). With its market share rising, Airbus opens a charm offensive in the U.S.-Pan-European jet maker touts use of American suppliers as subsidy issue heats up. The Wall Street Journal, March 6, B1. Reuters (2001) Reuters English News Service (2001). China: Airbus sees 100 A380 superjumbo sales by year end. August 31. Retrieved from the Dow Jones Interactive database. Taylor II, A The Associated Press (2001). U.S., EU dispute Airbus financing. January 12,2001. The Wall Street Journal Europe (2010) U.S. Census Bureau (2001). U.S. international trade in goods and services highlights. Retrieved August 31, 2012, from the World Wide Web: http://www.census.gov.library3.webster.edu/indicator/ww w/ustrade.html

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