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Boeing Case

Title of the Case: The Boeing Commercial Airplanes Group Decision (2001)

I. CASE ABSTRACT

The Boeing Commercial Airplanes Group was the core business of the Boeing Company of Chicago, Illinois. Achieving its first success in the 1920s with the B-9 bomber, Boeing had a successful history of designing and producing large aircraft for both military and civilian markets. During the 1980s and 1990s the aircraft industry consolidated, with Boeing as the sole surviving American manufacturer of large aircrafts. Paradoxically, a European start-up consortium named Airbus Industrie competed for market share with Boeing. After 20 years, using state-of-the-art technology, Airbus had garnered a market share of nearly 50 percent.

Although Fortune magazine once printed that Boeing had a license "to print money," their position was weakening, particularly with Airbus' challenge to Boeing's sole ownership of the jumbo-jet market. The Boeing 747-700 had been the world's standard for intercontinental transport and with no competitive equal, Boeing's profits were buoyed by this design. Following extensive market research, Airbus Industrie decided to create a super jumbo-jet, which it labeled the A-380.

Boeing's equally intensive market research led them to conclude the market would be too small to justify commercialization of a super-jumbo. However, Boeing had the potential to up-size the 747-400 into a 747-X, about half way between the size of an A-380 and a 747-400. The development cost would only be about one third of the A-380's development cost.

Boeing was faced with the decision of whether to proceed with the 747-X or wait and watch to see whether Airbus' A-380 was a success.

Decision Date: 2001 2000 Sales: $51,321,000,000
2000 Net Earnings: $ 2,128,000,000

Note: Commercial Airplane sales and earnings in 2000 were:
Sales: $31,171,000,000
Earnings: $ 2,736,000,000

II. CASE ISSUES AND SUBJECTS

Airframe...