Airbus vs. Boeing in Superjumbos

Airbus vs. Boeing in Superjumbos: credibility and Preemption by Benjamin C. Esty and Pankaj Ghemawat Current Draft: direful 3, 2001 Benjamin C. EstyPankaj Ghemawat Morgan 381Morgan 227 Harvard Business SchoolHarvard Business School Boston, MA 02163Boston, MA 02163 Tel: (617) 495-6159Tel: (617) 495-6270 e-mail: besty@hbs.edu e-mail: pghemawat@hbs.edu Acknowledgements: We would like to thank Ed Greenslet and The airline Monitor for providing data on and insights about the commercial potassium aircraft industry, Mike Kane for assistance with the original teaching case, and the Division of search at the Harvard Business School for supporting this research. Airbus vs. Boeing in Superjumbos: Credibility and Preemption Abstract In December 2000, Airbus formally committed to spend $12 billion to develop and launch a 555-seat superjumbo plane cognize as the A380. Prior to and after Airbus commitment, Boeing started and canceled several initiatives aimed at developing a stretch jumbo with capacity in amongst its existing jumbo (the 747) and Airbus planned superjumbo.

This paper provides a strategic (game-theoretic) interpretation of why Airbus, rather than Boeing, committed to the superjumbo, and why Boeings efforts to introduce a stretch jumbo have, at least(prenominal) to date, been unsuccessful. Specifically, game theory suggests that the incumbent, Boeing, would earn higher operating boodle if it could somehow deter the entrant, Airbus, from developing a superjumbo, but that entry-deterrence through with(predicate) new product introductions is incredible even if the incumbent enjoys heroic cost advantages in new product development (e.g., because of line-extension economies)! This conjecture of potentially profitable preemption precluded by credibility constraints is self-consistent with a wide array of evidence from the case canvas: pro forma financial valuations, capital market reactions, plane price data, demand... If you want to get a full essay, order it on our website: Ordercustompaper.com

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