Question

Firm Analysis of Boeing o Market structure (perfect competition, monopoly etc.), and market share of the firm (using HHI, concentration ratios etc.) what is the Pricing decisions and strategies

Answer 1

Market structure of aviation industry is a duopoly. The two players Boeing and Airbus dominates in the market.  

The commercial aircraft market, which is a major revenue driver for aerospace companies, is fully dominated by Boeing and Airbus, which together hold 99% market share. Boeing holds around 55% of the market share.

Airbus has, however, slowly eaten into Boeing’s pie of the large commercial aircraft market by scaling-up quickly in a booming aviation market.

The global aerospace services market is worth over nine trillion U.S. dollars, with key markets in the United States, France, China, and UK. Two of the largest aerospace and defense manufacturers in the world are Boeing and Airbus with revenue streams of about 76.6 billion U.S. dollars and 78.9 billion euros, respectively. The list of competitors includes Bombardier and Embraer, as well as the Commercial Aircraft Corporation of China (Comac).

Pricing decision

This Marketing Strategy element requires an evaluation of the value of products for targeted customers. The pricing strategy of the Boeing will focus on setting the list price, credit terms, payment period and discounts.

• If Boeing decides to choose the price penetration strategy, it will have to set the lower price than competitors. The company will be able to win market share based on discounted pricing. However, management should be aware of the potential retaliation from competitors in the form of an undesired price war.
• The choice of skimming strategy will require clear communication of differentiation basis and how such differentiation justifies the extra price.

Today's customers are not interested in knowing the ‘price' but a total cost involved in acquiring, consuming and disposing of the product.

Company Competitive Advantage in the Marketing Strategy of Boeing

The survival in the increasingly competitive market requires Boeing to set the clear differentiation basis that could provide an edge against rivals. Boeing Marketing Strategy should focus on identifying unique selling propositions (USPs). Some examples of USPs are the highest quality, lowest cost or uniqueness of idea. Identifying USPs is not sufficient as the effectiveness of the Marketing Strategy of Boeing will directly depend on management's ability to communicate the identified unique selling propositions.

The Boeing can apply Porter's generic strategies model to explore how competitive advantage can be created. The pictorial presentation of the Porter Model is given below:

The company can set a competitive advantage based on cost or differentiation.

1. Cost based competitive advantage

• The cost leadership strategy will suit if Boeing has developed capabilities to reduce the cost below the industry average and achieve the economies of scale. Moreover, it will require Boeing to develop close collaboration between different functional areas.
• Developing most effective distribution channels, access to latest technological tools to assist production processes, using lean production methods and strong bargaining position when negotiating with suppliers are some indicators of setting competitive advantage based on cost leadership.

2. Differentiation based competitive advantage

The differentiation strategy focuses on developing brand loyalty by offering premium products. The company can find different ways to develop differentiation leadership, such as- by focusing on the reliability, durability, benefits and distinctive features of products, by developing strong brand recognition and by increasing expenditure on marketing efforts like celebrity endorsements and sponsorships etc. Boeing can set achieve competitive advantage by adopting product, service, quality, image, people or innovation differentiation.

3. Competitive advantage model

Following the model shows how Boeing can develop an effective Marketing Strategy by evaluating its resources and capabilities, identifying distinctive competencies and leveraging those competencies by adopting either cost or differentiation orientation: