Market Structure in Aircraft Manufacturing

Topics: Economics, Airbus, Boeing Pages: 1 (282 words) Published: May 15, 2011
QUESTION: Market structure in the aircraft manufacturing industry The market for commercial passenger aircraft is an oligopoly dominated by Boeing and Airbus. Critically evaluate competitive factors which influence firm growth, new product Development and pricing in the commercial aircraft market. [60%] How is the commercial aircraft market different from the market for personal computers, In terms of market structure, new product design and growth opportunities? [40%] Ensure that you make use of an appropriate economics based theoretical framework Which employs suitable concepts developed in this course, as well as appropriate examples? Oligopoly is a form of market structure known as imperfect competition a) There are a small number of players or firms which have and exercise market power for example supermarkets in the uk.In aircraft manufacturing industry it is even more concentrated there is only two major players namely Airbus and Boeing. Implications are that the importance of a small number of large customers makes it sensible for suppliers to invest heavily in close long term relationships with them. Key account management is essential considering 80% of output is being to 20% of customers. b) Products are differentiated which allows firms to price them differently. c) High capital usage(and large fixed costs)and research and development mean that the optimal firm size is very large, resulting in a small number of sellers(producers/firms). d) Huge impacts of patents and research and development costs, as well as intellectual property rights. e) Economies of scale

f) High government regulation(health and safety)recently Air has had a number of problems with Royce Royce engines on the A380 which has led to a number of planes being grounded
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