The paper uses managerial economics to analyze the two main companies in the airline manufacturing industry: Airbus, which is located in Toulouse, France and Chicago-based Boeing.
Written in 2009; 1,214 words; 6 sources; MLA; $ 41.95
Paper Summary:
In the area of commercial aircraft manufacture, Airbus controls some 46% of the world market whilst Boeing controls the remaining 54%. In the light of increasing financial difficulties within the aviation world, the paper examines, through managerial economics, the two companies and their differing approaches to company development over the next 20 years.
From the Paper:
"Airbus and Boeing are forced to invest very large amounts of capital, creating very high sunk costs due to the process involved in manufacturing airplanes. Boeing's plant in Everett, Washington receives parts from more than a thousand suppliers, who ship components by truck, rail, and air from throughout the world and all 50 states 6. Airbus spends, on average, annually $10.2B on parts, components, tooling and services with American companies2. However, their approach to manufacturing is different. Boeing utilizes the concept of economies of scope and scale. Our text, on page 188, describes economies of scale as when a company produces products together instead of separately. Boeing's Everett plant builds the 767, 777, and 787 airliners at the largest building by volume in the world 6. Airbus, however, has operational facilities in four different states and seeks to minimize costs by producing variable levels of output, optimizing the selection of fixed and variable levels of production 6. This type of process is discussed in the section of our text on long-run average cost curves. Boeing is also heavily invested in pushing for economies of scale. Jim McNerney, Boeing's CEO, told Business Week "he plans to take greater advantage of Boeing's economies of scale in the supply chain and to create a more efficient research and product development process. Both goals had been thwarted in the past by the company's balkanization. Consider the issue of global sourcing. Boeing currently buys 200 different kinds of safety glasses and 80 different shades of white paper. The defense and commercial airplane divisions each negotiate for their own aluminum and titanium, says James F. Albaugh, CEO of Boeing Integrated Defense Systems and the executive responsible for the global sourcing initiative. "Why can't we buy two or three different kinds of safety glasses? Why can't we have standard part numbers that go across the enterprise?" he asks. "It's all about making us one company.""
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