Kellogg

Business Strategy

Prof. Jeroen Swinkels

School of Management

Discussion Questions for Global Aircraft Manufacturing

Synopsis
The article chronicling the bidding for Iberias 2003 aircraft order provides a unique glimpse
into the competition between Airbus and Boeing in the widebody aircraft market. To illustrate the
Five Forces industry analysis framework, we will discuss in class the rivalry between these two
firms and the competitive pressures on the industry as diagnosed by the remaining forces. With this
analysis in mind, we will then evaluate how strategic decisions by firms in the post-2003 world
affected industry profitability for aircraft manufacturers.
Assignment
Analysis
1. Use a Five Forces analysis to understand the threats to (and sources of) profit in the widebody
aircraft market. Note that the Wall Street Journal article on the Iberia purchase focuses on price
competition. Remember that you are looking for the fundamental economic issues that lead to
price competition, not just descriptions of the price competition itself.
2. In addition to the industry characteristics you described in question 1, describe the factors
particular to Iberia, including actions Enrique Dupuy has taken in the course of the negotiations,
that have helped Iberia obtain very low prices for the planes it is buying.
3. Consider Boeings decision to introduce the 787 Dreamliner aircraft. What threats to
profitability raised by your Five Forces analysis do you think the 787 will address? What
threats will it not address or even exacerbate? (Hint: Think both about the design
characteristics of the aircraft, and the supply chain decisions made in its production.)
4. Long-haul international routes are the primary target market of both Boeings 787 Dreamliner
and Airbuss A380. Do you think the A380 will be able to dominate this market? Why or why
not? Can the decision to develop this aircraft model be a success for Airbus if it does not do so?
5. What lessons do we learn from the Global Aircraft Manufacturing case?
Prepare a 3-4 page memo that answers the questions above. The answer to question #4 is not,
for the most part, directly in the case readings. Your analysis of the first three questions, however,
should enable you to address question #4.