A3Xx and Boeing

Question 4

Boeing’s top priority was to ensure that their shareholders value was maximized, due to its first reported loss in 1997. Boeing could react to Airbus’ entry into the VLA market in a number of different ways, each of which is highlighted below.

It could first file a complaint against Airbus with the WTO, based on the launch aid concept of financing. However, this does not seem to be feasible since it may open itself up to sanctions for alleged subsidies and military contracts, as well as offend foreign governments, which housed its major customers.

A second option would be to develop a stretched version of its 747, called the 747X on which research had actively been carried out. However reports that there wasn’t sufficient demand does not justify in extending its fleet to meet this low demand. The low demand, coupled with the enormous costs in developing a similar jumbo jet to directly compete with the A3XX seems unreasonable due to the uncertainty in future demand and the high risk involved with the new investment.

An alternative strategy would be to cut the price of the 747. This would however lead to a price war causing both airline manufactures to repeat the history pricing their planes, which lead to high revenues and no income.

Lastly, the most feasible strategy that fits with Boeing’s aim of maximizing shareholder value is to focus on its existing line of aircrafts, aiming to make the maximum profit. By enhancing the profitability on its existing line, Boeing could effectively cut costs, try and gain more market share in the different segments, and fund a probable future project – in response to the A3XX; all while Airbus is tied up in developing the A3XX. In my opinion, this would be the smartest short-term solution, and would position Boeing in a strategically sound position to face off with Airbus with a futuristic and more efficient model in the near future.

Question 5

In order to understand if this would be a strategic...