Competitive Strategy Moves for Boeing

Introducing new products into a marketplace can be a response to changes in the competitive landscape. When evaluating the demand for new products, and in deciding whether and how to commercialize new product offerings, firms have to consider how long the demand for a given product will last, as well as how much initial demand they will face. Every product line has a different life cycle (compare washing machines to transistor radios, for example), so some products have to be developed and sold over short time-spans. But there are also products that have very long product development phases, lasting for years or even decades. The airline industry is characterized by longer phases.

As the leading manufacturer of jet airliners, Boeing has long been locked in competition with Airbus Industries, a European company. Started as a consortium of European defense manufacturers, Airbus has been increasingly successful with its line of jets, meeting Boeing face-to-face in most product categories, but especially in small- and medium-size segments. Any airline, wherever it operates in the world, is quite likely to have jets from both companies in their fleet. One product category where Airbus has less success is in the jumbo category, in which passenger loads of 300 or more are suitable for trans-Atlantic or trans-Pacific flight. Boeing initiated this product category in the 1970s with its successful 747 series. Early in 2001, Airbus announced its plans to enter this category with a new airplane, the A380, as a "superjumbo" with seats for 550 passengers. Boeing promptly announced that it would re-design the 747-400 -- the largest model of the 747 -- as the 747X, adding additional passenger capacity. Things changed, however: a few months later, Boeing announced a different strategy, choosing to target a market sector that was not based on size, but on speed and distance instead. They would execute the strategy through product design and manufacturer.

Their solution is a "Sonic Cruiser," which is expected to have around 250 seats, only a medium size. What it lacks in seats is compensated by improvements in speed and distance. It will be able to fly farther and faster, thus making it possible for trans-oceanic customers to get directly to their destination city from major hubs in the U.S. or Europe, or directly to the ultimate destinations in Asia and Australia.

Trans-oceanic flight inevitably requires multiple flights and stops. Boeing perceives that passengers will prefer direct flights. Adding thousands of miles to its range and using more powerful engines will make the Cruiser more suitable for airlines to meet the demands of more specific and narrowly defined travel segments.

Last Lunsford, J. L. "Boeing Plans Longer-Range Model of 747", The Wall Street Journal, April 13, 2001, PA3.
Martin, Peter. "Boeing Needs Sonic Tonic", The Financial Times, May 20, 2001.
"New Boeing Airplane to Include Range of Possibilities", Boeing News Release, April 26, 2001.

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