The Boeing Aircraft Company - Managerial Economics Essay

The Boeing Aircraft Company - Managerial Economics - Essay Example Today, in order to break even, an jet aircraft manufacturing firm needs to sell 350 units of the aircraft to recover its development and production costs and thus break even. Because of such tremendous amount of fixed capital requirements, experts believe that the world can support at most only 3 manufacturers. However, as the first entrants in the industry, both Boeing and Airbus get a lock on the economies of scale and discouraged subsequent entry of other competitors. Back in the 1990s it was estimated that the world demand would be something in the scale of 1500 aircraft of the 300-seater type over a period of 10 years from 1995 to 2005, so that if the firm had to sell 50 aircraft average per year or 500 over this period just to obtain a reasonable return on its investment. At the beginning, Boeing had to step in the shoes de Havilland Comet in the 1950s, when that aircraft company had frequent accidents. Boeing took over and compiled a good safety record although it was not the first entrant in the industry. Boeing built on its advantages and obtained US government support for its research and development program. Boeing, located in Washington, U.S.A., is the worlds largest manufacturer of commercial jet aircraft, and today controls nearly two-thirds of the worlds market, down from its former positional advantage of a 2:1 dominance.. It is recalled that as part of a strategic industrial strategy, the US government provided substantial research and development grants to Boeing in its early years, specifically in the 1950s and the 1960s, to help the domestic firm compete in the emerging market for jet passenger planes in Boeings favor. After recently merging with McDonnell-Douglas the company has diversified more intensively its production of aircrafts and related products for military use. The government has no longer found it necessary to provide significant