Case 12

By the end of the 1960s, Lockheed established itself as the leading high-tech military aircraft manufacturer with a significant competitive advantage in speed, performance, efficiency, safety and ease of handling. Lockheed’s product portfolio included interceptors (T33 Shooting Star and F104 Starfighter), transport aircraft (C141 Starlifter) and special reconnaissance (U2 Spy Plane and YF12 or SR71 Blackbird). All of these aircraft featured a very sleek or streamlined look, plus utilized special materials that facilitated the aforementioned advantages. This characteristic carried over into the Tri-Star: the L1011’s tri-jet configuration featured one jet under each wing, and the third, center mounted with an S-shaped duct air inlet embedded in the tail and upper fuselage. With the Cold War still at its peak in the early 1970s, Lockheed’s expertise in this field was a most valuable national security asset. The company’s competitive advantage in all the facets of this area resulted from a bold and visionary strategy implemented by its famed Skunk Works operation that handled top-secret classified projects. - See more at: http://businessthinker.com/lockheed-tri-star-redux-a-play-to-win-strategy-v2/#sthash.td10My9L.dpuf

A synopsis of the facts of the case is as follows: The L1011 Tri-Star is a wide-body commercial aircraft with a capacity of up to 400 passengers. Lockheed was late to enter the market due to jet engine production delays by Rolls Royce (sole supplier for the Tri-Star). In the early 1970s, Lockheed sought a $260 million federal loan guarantee to secure bank credit to complete its L1011 Tri-Star aircraft. Preproduction costs were $960 million during 1967-71. The production phase beginning in 1972 would be in the range of 210 – 300 aircraft, and extend as far as 1980. The project was regarded as inventory intensive and front loaded; 35 planes per year was the planned annual output. Unit production costs were given at $14 million for the low