At the dawn of the twenty-first century, Boeing and Airbus, the leading manufacturers of large commercial aircraft, were locked in a battle for market share that drove down prices for their new planes. At about the same time, the two industry heavyweights began developing new aircraft families to address their projected future market needs. Large commercial aircraft (generally defined as those carrying more than 100 passengers) were among the world's most complex and expensive manufactured products. A wide-body jet comprising millions of parts and nearly 200 miles of wires and tubing could be priced at $300 million or more. Design and manufacturing took up to ten years, from initial research to a finished product. The process required large numbers of highly trained and specialized workers. It also took large amounts of capital; recent aircraft programs were estimated to cost more than $13 billion. Manufacturers had to invest in extensive and highly specialized facilities and equipment and commit to high attendant fixed costs. To maximize their development investment, manufacturers created aircraft "families" that used the same airframe or body as a platform for multiple models. Within each family were aircraft that varied in numerous dimensions, the most important of which were passenger capacity and flight range--critical determinants of the airline's strategy. In October 2007, the Airbus superjumbo A380 made its first flight. The A380 carried more passengers than any other plane in history and had as a solution to increased congestion at global mega-hub airports. Four years later, the Boeing 787, a smaller long-range aircraft, was launched to serve secondary cities in a point-to-point network. When these planes made their inaugural flights, the global environment had significantly changed from when they were first planned. China and other emerging Asian economies were growing rapidly, spawning immediate and long-term demand for more aircraft. At the same time, changes to the market for air travel had created opportunities for new products. These opportunities had not gone unnoticed by potential new entrants, which were positioning themselves to compete against the market leaders. The case provides students with an opportunity to analyze the profit potential of the global aircraft manufacturing industry in 2002 and 2011. Students can also identify the actions of participants that weakened or intensified the pressure on profits within the industry.
During the first quarter of the 21st century, the TV industry underwent rapid vertical consolidation.For decades, the industry had been divided into three basic levels: production (i.e., the studios that identified on-screen talent and facilitated the making of content); distribution (i.e., the TV channels that carried the content); and platform (i.e., the cable TV or satellite providers who brought the content to viewers). In the 2010s, however, an increasing number of companies in that value chain had begun to play on multiple levels. Streaming services such as Netflix were producing their own high-quality content, and both traditional TV channels and production companies (e.g., NBC, Paramount, and Disney) were circumventing the conventional value chain and building platforms to sell their content directly to viewers. This case uses a small set of examples--including the streaming service Netflix, the sports channel ESPN, and the movie channel AMC--to explore the economics of this new verticalized TV industry. It asks students how companies can create value and maximize profitability in TV.
At the dawn of the twenty-first century, Boeing and Airbus, the leading manufacturers of large aircraft, were locked in a battle for market share that drove down prices for their new planes. At about the same time, the two industry heavyweights began developing new aircraft families to address the future market needs they each projected. Aircraft take many years to develop, so by the time the new planes made their inaugural flights, significant changes had occurred in the global environment. First, emerging economies in the Asia-Pacific region and elsewhere were growing rapidly, spawning immediate and long-term demand for more aircraft. At the same time, changes to the market for air travel had created opportunities for new products. These opportunities had not gone unnoticed by potential new entrants, which were positioning themselves to compete against the market leaders. In October 2007, the Airbus superjumbo A380 made its first flight. The A380 carried more passengers than any other plane in history and had been touted as a solution to increased congestion at global mega-hub airports. Four years later the Boeing 787, a smaller long-range aircraft, was launched to service secondary cities in a point-to-point network. The case provides students with an opportunity to analyze the profit potential of the global aircraft manufacturing industry in 2002 and in 2011. Students can also identify the actions of participants that weakened or intensified the pressure on profits within the industry.
Founded in 1971 and acquired by CEO Howard Schultz in 1987, Starbucks was an American success story. In forty years it grew from a single-location coffee roaster in Seattle, Washington to a multibillion-dollar global enterprise that operated more than 17,000 retail coffee shops in fifty countries and sold coffee beans, instant coffee, tea, and ready-to-drink beverages in tens of thousands of grocery and mass merchandise stores. However, as Starbucks moved into new market contexts as part of its aggressive growth strategy, the assets and activities central to its competitive advantage in its retail coffee shops were altered or weakened, which made it more vulnerable to competitive threats from both higher and lower quality entrants. The company also had to make decisions on vertical integration related to its expansion into consumer packaged goods.