Debate Points for Boeing/Airbus Case
(Jeremy Weekley)
Viewpoint: Boeing should build fewer
planes and charge more
The objective of this report is to
show that Boeing should have made the decision to make fewer airplanes and
charged more for them. The following are points that develop this argument and
support it.
Boeing was suffering in this area.
It had spent money on the Rockwell and McDonnell Douglas purchase and had let
its production costs sore as orders came in. It makes sense that if Boeing
would charge more for the planes, they would profit more. Making less increases
the demand of the product, thus Boeing could charge more. This increase in
profits would allow Boeing to put the extra money back into streamlining the
production process. They cannot compete with Airbus on price because Airbus has
a more efficient production process. Boeing could possibly lose some of its
market share, but in the long run they should be able to get it back. If they
raise the price and sell less, they will have the opportunity to streamline
production and eventually the airplane will cost less to make. Once Boeing
figures out how to make the airplane more efficiently, they can begin to up
production and then cut the price. This will cut back into Airbus’s share of
the market. As for demand…only 6 new runways were built in the 1990’s. It
usually takes about 10 years to complete one new runway, so what’s the hurry? (International
Herald Tribune 2/2/01 Alonso-Zaldivar) The airlines can only fly so much on
the existing runways.
Boeing must focus its efforts on producing quality aircraft.
The price increase will help in the image of the quality of the aircraft. The
quantity should be limited until they figure out how to produce the airplanes
more efficiently. They must reduce recalls and potential safety hazards. The
only way to achieve this is to make fewer planes.
Boeing has the chance to diversify
and not keep all of its eggs in one basket now. This gives them a cushion even
if they do lose more market share while they build fewer planes. 41% of
Boeing’s 1997 revenues came from this industry.
Airbus does not have the production
capacity right now to compete with Boeing, but they will soon. Boeing should be
able to cause some problems for Airbus by producing fewer planes and charging
more for them, because eventually Boeing will be able to up production while
lowering production costs. Airbus should be no match for them if they succeed
in this venture.