Case Number: 5-404-759, Year Published: 2006, Revision Date: August 20, 2007
HBS Number: KEL022
Replacement Effect, Signalling, Winner-take-all Markets, Credible Preemption, Competitive Strategy, Economics
Boeing and Airbus are contemplating entry into Very Large Aircraft (VLA) market. Both firms are convinced the market cannot support two players due the extremely high R&D costs and the limited (and highly uncertain) state of demand. The key strategic issue is the uncertainty surrounding Boeing’s development cost: To what extent would Boeing’s experience with the 747 help it reduce the R&D cost of a new VLA prototype? The main point of the case is that Boeing’s strategic moves signal its private information, and that this eliminates any first mover advantage Boeing might have had in this market.
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