Duopoly market structure: A duopoly, only two competitors in the market, is the extreme basic form of an oligopoly, few competitors in a market. Duopolists engage in a non-cooperative game because firms are not allowed legally by many states to sit together and form a cartel where they can agree on certain prices, quantities, strategies, etc… Non-cooperative games can take the form of cournot, both firms move together and choose their quantities simultaneously, or stackelberg, the leader firm moves first and sets its output quantity and then the follower firm moves second based on the first firm's move. Given the assumption that each firm is able to have a full information of the other, they both realize the market power of each respective firm. Deviating from the plan/quantities will lead both firms to cheat and hence, the race to the bottom begins. This can be illustrated by showing the profit function of both firms by using Dixit (1979) equation: Πi(x1,x2) = xi U(x1,x2) – Ci(xi), i= 1,2 Where x is the quantity/output, Ci is the total cost, and U is the utility. A firm's action can have a substantial effect on the other. Civil aircraft industry: Gaining a substantial market power in the commercial aviation industry allows for significant impact on technological development, economic growth, employment, and national prestige (Carbaugh & Olienyk 2004). In 2010, more than any manufacturer sector, the value of aerospace industry shipment in the US accounted for more than $171 billion of civil aircraft and a trade surplus of more than $43 billion (Harrison 2011). Like any other industry, large commercial airplane industry gets affected by macro, endogenous, and exogenous factors. Several factors may influence the industry i... ... middle of paper ... ...ompetitive as more firms entered the market. Recently, Embraer and Bombarfier are the dominant producer of regional jets, <90 seats (Harrison, 2011). Although, entry to the aircraft industry is never been an easy task, government sponsored firms proved the opposite. Firms subsidized by Russia, Brazil, China, Canada, and Japan are announcing to enter the small aircraft industry by 2016. Because small aircraft manufacturing accounts for more than 50% of the total commercial aircraft produced, it can be seen as a gate way to enter the large commercial aircraft industry, hence, compete with Boeing and Airbus (Harrison, 2011). By closely analyzing the president of Boeing, Jim Albaugh, announcement, "the days of duopoly with Airbus are over in the small commercial jets", we have to realize that the future of the large commercial aircraft won't be as it looks like today.
Boeing held the monopoly in the very large aircraft (VLA) market with their 747 airplanes. Airbus made a de...
In early 2003, Boeing announced its plans to develop a new airplane (7E7 & 7E7 Stretch) in a market that was facing a tight squeeze on profits. The decline in the airline industry was attributed in large part to the war in Iraq, international terrorism, and fear of spreading SARS. The development of this new aircraft could possibly bring Boeing out of their innovation slump and potentially give them an advantage in the mid-sized aircraft market.
The article by Binyamin Appelbaum and Christopher Payne demonstrates the complexity of one of the world’s biggest supply chains. It was interesting to learn how many different components went into the production of the airplanes. The different geographic locations in which the parts were built was fascinating as well. I had no idea that a manufacturer in Alabama would have parts shipped in from places as far away as Wales and France. The amount of coordination and collaboration needed to maintain efficiency within Airbus must be incredible. Later in the article I learned that the small town of Mobile, Alabama had been trying to develop an airplane factory for more than 30 years. It wasn’t until 2012 that they finally began assembling passenger
To gain an adequate understanding of The Boeing Company’s financial and performance status within the aerospace and defense industry an examination of the financial statement figures and ratios is vital. Boeing’s financial position in relation to the industry standard is strong. For example, Boeing’s net income of $3,715 million is on par with its competitors - such as Lockheed Martin with a net income of $3,717 million. Within this examination Boeing is only - out ranked by the United Technologies Corporation with a net income of $7,204 million. Building upon Boeing’s net income figures one can see that Boeing’s financial position is stable - although not the thriving. A comparison of the company
Embark on new, riskier projects that will revolutionize the commercial aircraft industry, such as its aborted supersonic commercial jet. Besides sparking new demand and creating a new market, this project would also be a competitive weapon against Airbus’s entry into the jumbo jet market. 4) Although Boeing’s next CEO should be someone who has been created within the organization, the company should still strive to have more directors from the outside. The CEO should be an engineer who has grown to best understand the industry.
This report is based on Ryanair Holdings PLC which was established in 1985. “Ryanair obtains permission from the regulatory authorities to challenge the British Airways and Aer Lingus' high fare duopoly on the Dublin-London route. Services are launched with two (46-seater) turbo prop BAE748 aircraft” (Ryanair, ND). Ryanair Holdings PLC is an Ireland based airline which is the largest low fare airline with 32 bases & over 800 low fare routes across 26 countries, connecting 146 destinations. Ryanair fleets are made up of 196 Boeing 737-800 crafts with a seating capacity of 189 seats. Its aims are to deliver a further 102 aircrafts over the next 3 years. Ryanair currently employs more than 6,000 people and expects to carry over 67 million passengers this year. This report is giving me the chance to highlight Ryanair’s strengths, weakness, opportunities and threats which they face now and in the near future.
The United Kingdom has one of the most advanced and complex aviation systems in the world. London, the kingdom capital, is the world most internationally connected city given the range of destinations available from airports located within the city. Furthermore, majority of UK citizens (more than 70 percent of the population) live within less than an hour’s journey from an airport that offers flights to numerous destinations across the world. Nonetheless, the UK aviation industry has experienced major changes in the past two decades. Foremost, the industry was liberalized in 1997 that increased competition in the industry leading to the emergence and growth of low-cost airlines. Prices have drastically gone down especially for short-haul flights. The choice and value available to consumers brought about by intense competition among commercial aviation operators has made the current century a golden age for UK passengers and businesses that rely on aviation. The UK has become an increasingly challenging environment for airlines to operate in. industry deregulation, oil crisis, terrorism threat, global financial crisis, euro crisis and numerous industrial actions are some of the challenges that have confronted the industry. Consequently, a number of UK airlines did not survive and others merged with or were acquired by other airlines. The trend of airlines consolidation is evident in the decreased number of commercial airlines registered in the UK from a high of 56 in 1973 to 33 in 2011. The players in the industry have felt the pressures of increasing costs and dwindling market share especially after the entry of low-cost airlines. As a result, mergers and acquisitions have been utilized as the best tools to survive in the rapidly ...
Oligopoly is a market structure in which only few firms are having control over market supply and since there are high barriers of entry and exit from the oligopoly market, the existing firms enjoy the monopoly kind position.( Parkin, 2011) Following are some of the salient features of Oligopoly Market:
High capital causing Boeing to invent huge financial resources in manufacturing facilities to produce large commercial planes creates entry barriers
Latrou, K. and Oretti, M. (2007), The Airline Choices for the Future: From Alliances to Mergers, Ashgate Publishing
The aviation industry of any nation acts as a contributor to its economic growth, helps in globalisation and creating an international image. It is the best in terms of the fastest, safest and convenient mode of travel. Even though it is an expensive one, it is expanding its markets across the middle-class who are ready to spent money on leisure trips. Thus it is truly stated that aviation forms a vital core infrastructure area without which a country economy is handicapped.
Airbus produces approximately half of the world’s jet airlines. Porter stated that aircraft suppliers have more profit compared to airlines; therefore, we decided to find out what kind of business strategies help the company excel, particularly Airbus is competing with Boeing. On the other side, business strategies will support the company’s future design processes in the industry and technology needs. Airbus does not only manufacture passenger jets, they also have military and aerospace projects with its parent company. These details might be interesting to learn more about the jet airline industry.
"Boeing is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. Additionally, Boeing designs and manufacturers rotorcraft, electronic and defense system, missiles, satellites, launch vehicles and advance information and communication systems" (Boeing 2007 par.1). Boeing is the world’s leading aerospace company because Boeing has one of the best planning strategies around. Because Boeing is one of the largest companies they fully apply all four functions of management, especially the first stage of planning when they set up their strategy to market their products. The Boeing Company has been very careful to make the most of good planning and decision making to reach their full potential and continue to grow bigger than they already are.
These organisations must take into account the actions and reactions of their competitors when making business decisions – this is known as collusive oligopoly or collusion. These firms are interdependent and keep prices inelastic – if one organisation was to raise its prices then it would lose customers to its rivals and if it was to lower its prices then its competitors would follow suit so neither strategy would increase revenue. OPEC is one such organisation that restricts the supply of oil to keep the price high.
The Aviation Industry in India has faced major challenges in the last 5 years after enjoying a period of unprecedented boom since the de-regulation of the Indian Skies in the early 1990’s. The private aviation industry which saw its first carrier in Jagson Airlines, now has more than 20 players vying for a share of the lucrative Indian Aviation Market, which has unparalleled abeyance for growth.