Costs/Cost Theory

(Based on ch 8 and 9 of the attached text)
Boeing and Airbus produce all the world’s wide-bodied jets. Boeing typically has a 70% share, but in 1994-95, Airbus doubled its output rate; should Boeing have given up more? Until recently, each Boeing plane was custom made, each with its own drawings; incremental variable costs rose. Production increased from 15 planes to 21 planes/month by hiring more workers and authorizing massive overtime. In the late 1990’s, Boeing’s price was less than its incremental variable cost (a negative operating profit margin). Boeing slowed production back to 15 planes/month to return to profitability.
Take the role as CEO of Boeing – explain what the decision making was, and why the strategy they used might be ‘right’. Then, analyze Boeing today and determine how their market share has changed since the 70% noted above.

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