Boeing versus Airbus Essay
Boeing versus Airbus: Two Decades of Trade DisputesIn the Case Study: “Boeing vs. Airbus: Two Decades of Trade Disputes” there is a very high number of competition between the two manufacturing companies, one being the US aircraft giant and the other being the European aircraft giant. Throughout the years each of these two manufacturing companies have controlled the market and won the competitive advantage over the other competitor at a particular time. In this paper, the legal, cultural and ethical challenges will be discussed, the roles of host governments, and the strategic and operational challenges (Hill, 2009).Legal, Cultural, & Ethical ChallengesOne of the main cultural challenges that goes hand in hand with the airline manufacturing industry, is the terrorist attack on the World Trade Center in NY on September 11, 2001. Other challenges include global demand and the breakeven points and turnovers. In most recent years, an unstable demand due to price increase in fueling and inflation has challenged the airline industry. With Boeing having close to 60,000 workers and over 100,000 employees in Seattle alone and 600,000 nation wide, they are considered to be the largest commercial manufacturing aircraft company in the US.
In 1996 Boeing collaborated with McDonnell Douglas, one of their main competitors and they merged into one large company (Hill, 2009).Roles that Host Government PlayedThe European airline manufacturer Airbus has been in collaboration with West Germany, Great Britain, France and Spain When Airbus began to manufacture A-300 series they were able to secure business against Boeing and in 2003 the company was delivering aircrafts which exceeded Boeing ability. Boeing and Douglas argued that Airbus had an unfair advantage because of the help it received from the host governments. Airbus came back with arguments that Boeing and Douglas received aid from US government for a long time and that “the aid it has received has merely leveled the playing field” (Hill, 2009). According to a study performed by the European Commission, Boeing and Douglas had received $18 to $22 billion in government aid from 1976 to 1990.
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It also proved that NASA contributed largely to the aircraft production and the tax exemptions gave an additional 1.7 billion to Boeing and 1.4 billion to Douglas (Hill, 2009). Boeing argued that during 1980’s only 3% of Boeings R&D spending came from Department of Defense funding and only 4% from NASA.They also argued that “since the four companies in the Airbus consortium do twice as much military and space work as Boeing, they must receive much larger indirect subsidies” (Hill, 2009). In 1992 the US and four European governments agreed to end the dispute by signing an agreement limited indirect and direct government subsidies.
In 2005 these two companies began to go at it again, and on May 31 the US filed a request with the World Trade Organization. The EU filed countersuit claiming that the U.S aid to Boeing once again exceeded the terms in their agreements and said that they are receiving “lavish subsidies from federal, state, and local governments that will amount to $23.
7 billion” (Hill, 2009). Boeing came back with an argument that said Airbus was receiving $100 billion from EU governments. The WTO will rule in mid 2008.Strategic and Operational ChallengesStrategically both companies are completely different in how they attract new business. Boeing has outsourced operations based on who can provide the most innovative solutions to the organization.
Boeing has been interested in improving technology, and innovation, which has saved the organization millions. Airbus needed to focus their efforts on international and national issues. The reason for this is because they manufacture in Europe but sell in US. This has encouraged them to keep an eye on interest rates. Another factor which affected Airbus was the fact that they had four countries involved in the design, production, manufacturing and financial issues atthe same time.
ConclusionThroughout the years there have been a drastic number of legal, strategic, and operational, ethical and cultural challenges which has affected Both Boeing and Airbus in their success. Host government played a large part in this also. To ensure the overall development of the organization, Boeing made changes that were necessary while Airbus has done little to nothing. It may appear that Airbus will not stand a chance next to Boeing because of their inability to change as the market changes.References:Hill, C. W.
(2009). International Business. Competing in the Global Marketplace (7th ed.
). New York, NY: McGraw-Hill/Irwin.