Philip Condit and the Boeing 777

1.  What are the dynamics of competition in the commercial aircraft industry?

        One of the major downturns of the commercial aircraft industry happened after the September 11th terrorist attacks. Recent events in the aircraft and airline industry have significant impact on the competition in all around world. While the commercial aircraft sector slowly stabilizing and rebounding it self, United States airline industry is still in trouble. Commercial aircraft industry has too many uncertainties, which contain risks. It is the reason that there are two major commercial jet makers in the world. Economy is a major factor that affects the aircraft manufacturers. The decrease in the new airplane orders can be explained by the downturn of the economy. It is all connected to each other, when there is a recession, the demand for the airline travel will be poor. This will affect the purchase power of airlines. On the other hand, one of the major dynamic that affects the competition in the aircraft industry is terrorism. Terrorist attacks are not predictable and it gives passengers fear for flying, therefore customers will not use planes as their transporter. Again, demand for the airlines will affect the demand for airplanes.

        On the other hand globalization makes the aircraft industry more competitive; with the help of globalization there will be a demand for high capacity airplanes to carry more people at the same time. Aircraft manufacturers will compete with each other to serve the best needs of airline companies. Also the price of an airplane is really high and it takes years of development. Price plays an important role, because aircraft manufacturers should have to minimize their costs in order to eliminate the negative cash flow. Increased customer expectations play an important role for competition. As the information technology grows faster and faster, people in the planes wants to fly with highly sophisticated planes, that can provide them not only safety, but also information when it is needed. Especially on the transatlantic or transpacific flights people expectations become much more important due to the long range of flights. Also another dynamic which affects this industry is the production of the jet engines. It is a really costly and risky business, therefore airplane manufacturers started to work closely with the engine makers such as GE, Rolls Royce. As the engine performance improved, planes were redesigned for the new capabilities of the plane. This helped to have more seats in the cabin. Also as the rivalry among the two companies grows, competition becomes more important and challenging.  Aircraft manufacturers reduce the price of the planes they make. Another important factor that has an impact on competition is the airlines. Airlines are the ones who orders planes before their production. It is vital for aircraft manufacturers to share ideas and information with the airlines to sell their planes. Aircraft manufacturers should obtain a cost management strategy and must have a flexible lean manufacturing system to produce fast and low cost airplanes for the airlines. At last governments play an important role in the competition, because aircraft manufacturers sell defense, space and information systems to the governments. As an example Boeing is the NASA’s largest supplier and the Pentagon’s second largest contractor. Those kind of businesses with governments help companies to increase their dominant power on the industry.

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 2.  In what ways did Boeing limit the risks of the project?

        Commercial aircraft manufacturing is an industry of risks. The major reason that the aircraft manufacturers failed was the huge product cost developments. It is also very hard to break even, because it takes around 5 to 6 years to develop a jetliner and it is approximately 15 billion US dollars investment. It is very important for companies to follow the costumer tastes and the airline expectations before develop an airplane. Otherwise the commercial air plane program will not be able to make the money. Management philosophy is very ...

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