ANALYSIS at Airbus and Boeing companies from the

ANALYSIS OF BEHAVIOUR OF AIRBUS
AND BOEING COMPANIES FROM THE GAME THEORY PERSPECTIVES

SUMMARY

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The goal
of this work is to look at Airbus and Boeing companies from the Game Theory
perspectives. That’s why; in this work, we are going to study that what Airbus
and Boeing companies are and the analysis of behaviour of these companies from
the point of view of Game Theory. The Game Theory with the most basic
definition is to be able to explained the human behaviours through games. In
various parts of business life and daily life, we can come across game theory.
Leaders and managers should grasp the game theory and be able to successfully
enforce it in business processes. At this point, we are going to examine that
how we can associate Airbus and Boeing companies with game theory. Firsly, we
are going to define Airbus and Boeing companies and what the Game Theory is and
then we are going to evaluate these two companies in terms of Game Theory
perspectives.

 

ABOUT AIRBUS

Airbus
S.A.S was established in 1970 as a French-German partnership. The company is
currently grounded in Germany, France, Spain, the United Kingdom and the
Netherlands. The center of it is in   Toulouse in France.

 

These
countries are liable for manufacturing different parts and parts of the
different models manufactured. The A320 model, which includes the A318, A319,
A320 and A321 models, is pieced together in Hamburg, Germany, while the other
models are pieced together in France. The first aircraft to be produced is the
a300-b series, and after extensive research, this model has developed and is
now the world’s largest passenger aircraft manufacturer.

 

The first
model to be manufactured is the A300, followed by A310, A320, A330, A340 and
the latest A380 respectively. The A350 XWB model is also made a design of  and made available.

 

ABOUT BOEING COMPANY

Boeing,
the world’s leading aviation and space company, is the world’s biggest airplane
producer while both commercial and military airplane manufacture are apprised
together. Boeing also designs and produces helicopters, electronic and defense
systems, fuzzers, satellites, launch vehicles and advanced knowledge and
transmission systems. As one of NASA’s major service providers, Boeing is the
major contractor of the International Space Station. The company also offers a
number of military and commercial airline support services. Boeing provides product
and support services to cuntomers in 150 countries and is one of the biggest
exporters of the United States (USA).

 

Boeing
owns a long custom of leadership and innovation in space and aerospace, and
keeps expanding its product range and services to satisfy showing up consumer
wants. Boeing keeps expanding its range of products and services to satisfy
altering consumer requirement  in the
space and aerospace sector, where it owns for many years been leading and
innovating. Within the extensive ability of the enterprise; improving new and
more efficient members for commercial aircraft families, achieving integration network
platforms, military platforms, security systems and combat aircraft,
manufacturing high-tech settlements expanding to work units, providing aircraft
with electronic data transfer ability, communicating with mobile platforms and
manufacturing financial settlements for our consumers .

 

DIFFERENCE BETWEEN AIRBUS AND
BOEING COMPANIES: THE CONTROL SYSTEMS

While
the US media was locked in a deal for 260 flights between American Airlines and
Airbus, the debate prompted the “Which company is better” question.
Pilots say that the two most important differences between the two companies
are control systems. Airbus’s planes are managed by “wire-controlled
flight”. This means that it is managed by joystick on board. The Boeing
has a steering wheel. Pilots say that the Boeing system allows them to feel
that there are fewer electronic vehicles between them. In other words, the
pilots compare the joystick control method to the video game. Another
difference between the two brands is security systems. The computers on Airbus
do not allow you to configure the pilot’s settings, which the car feels is in
danger. Boeing gives more freedom to planes pilots.

 

WHAT IS GAME THEORY

Game
theory is a metaphor for statistical science, used in social sciences (most
economically), biology, engineering, political sciences, computer science
(fundamentally artificial intelligence studies) and philosophy. Game theory
tries to capture the mathematical behavior of some strategic circumstances that
the person makes choices that his achievement relies on the choices of others.
Even if it was originally improved to settle rivals where a person’s income is
at the expenditure of the others (zero sum games), he has started studying a
broad range of interaction, ground on many aspects. Today, “play theory is
a ‘unified field’ theory or a type of umbrella for the rational aspect of
social sciences, which the ‘social’ term covers in large terms human and
non-human players (computers, animals and plants). Game theory started through
the book Theory of Games and Economic Behavior written by John von Neumann and
Oskar Morgenstern within 1944. This theory has been improved by many academics
in the 1950s. Even though similar improvements were going in the 1930s, biology
was applied  in the 1970s. Many areas
have been known as a significant tool. In the economy, 8 game theorists have
received the Nobel Prize, and John Maynard Smith has been rewarded the Crafoord
Prize for his practice in biology.

 

This
theory plays a so significant role in the past, the future, the social
sciences, and is also used today in many different academic areas. At the
beginning of the 1970s, game theory was implemented to animal behavior,
including evolutionary theory. He has took advantage from many acts,
particularly the prisoner dilemma, to portray the considerations of political
science and ethics. In recent times, game theory, artificial intelligence, and
cybernetics have been used to cope with the attention of computer science.

 

THE ANALYSIS OF AIRBUS AND BOEING
COMPANIES FROM THE POINT OF VIEW OF GAME THEORY

Simple
game theory tools can take some ways to return to preduence. Both Boeing and
Airbus can manufacture a logical motivational order in spite of struggling with
successive amazing activities in the “super jumbo” game: Boeing, by
Hayhurst’s statement, played a psychological card in a game he knew that they
could not acquire. At
the heart of the script, the Game Theory is a simple way to visualize investor
ideas within circumstances where the market is not able to sustain competitor
investments. In the Game Theory, every player owns two options whether to
invest in improving a new product or not. If only one player decides to improve,
that player is going to acquire significant earnings on market domination which
is going to be got  in the future. If
both of two players decide to improve, it is probable to generate the product
loss for both of them. If neither advances, the market is going to remain
profitable. Airbus soon was doubtful of  Boeing was not interested in taking
irreversible undertakings. The reason for this was not that Boeing wanted to
run with full dominance of the new market, but rather to use the more retarded
tactics to preserve the monopoly of the over 400 seat old aircraft market.
(Boeing’s 307-year-old 747 jumbo design has 420 passengers, the biggest Airbus,
state-of-the-art A330, with only 330 capacity.)  According
to this interpretation, Boeing was not caught in the Dilemma of the Developer
in the first place, because a new market that was not used meant monopoly
earning. (Boeing gains $ 45 million for each $ 150 million jumbo it
manufactures.) Airbus has even claimed that Boeing’s high jumbo sellings enable
it to subsidize selling of mid-dimension jet. From the perspective of game
theory, Boeing’s decision not to benefit the new market was negative, and
Airbus’s earning was negative. Boeing’s greatest interest was to decelerate the
improvement of the alternative jets in over 400 categories, finishing Boeing’s
jumbo monopoly of interest to Airbus. In 1995, Airbus decided to leave alone.
The VLCT was abandoned. Behind him was the A3XX Airbus for 550 passengers. Improvement
costs were estimated about $ 8 billion. Boeing objected, declaring a taut
double-deck jumbo carrying 600 passengers through an improvement cost of only $
2 billion. In terms of game theory, Boeing’s response should be viewed as a
threat by altering Airbus’s potential earning to improve an alternative 400-plus
seater: If you keep over Airbus, we will use you to reduce you (Boeing) using
our available designs. At the end, however, the threat was called a try-on. Two
airline companies did ground on the most crowded airports and taking into
consideration adding a bigger car to their squadron, British Airways and Singapore
Airlines have refused the technology of the current Jumbo by deeming it
prescriptived. This enforced Boeing to make a revisation its first $ 5 billion,
then $ 7 billion improvement predictions. Consolidating
the jet-fueled sector left only 2 big players rivaling on a global ground. Such
a competitive landscape makes it clear that game theory modeling, of a player’s
decisions depends on the spurts hoped of the other player. Airbus keeps
becoming a bulky consortium of 4 major companies, many of which are European governments
and thus taxpayers own an important share. In particular, that makes Airbus
undefended to psychological attack (but it can succeed in transforming itself
into a suitable business before the beginning of the millennium). Boeing noticed that if both
players decide to improve a super jumbo, they would lose. For this reason it
tried to alter the game. But unfortunately, it failed twice. Being doubtful of
the VLCT and threatening to play the A3XX’s gold did not dissuade Airbus’s
decision. Boeing’s latest venture was the cancellation of the improvement
project, which was published intensively in the global press last year and backed
by detailed assertions on changing consumer demand. Industry analysts at once
pressurized Airbus’ 4 European joints, waiting for the consortium to follow
with calling off A3XX. This is game theory, it estimates that it is unlikely to
become.  Boeing’s Mr. Hayhurst said in his annulment
annunciation: “The airbus will have to deal with the problems we have to
deal with, what is the dimension of the market, what are the improvement costs
and how will the income flow look?” Mr. Hayhurst’s actually meant:
“If we destroy us otherwise, we should not investigate a potentially
lucrative market “and” We must prevent our rivals who enters these
markets. Bringing a new jet through over 400 seats to the sector is no doubt a
risky venture, but the game theory indicates  that Boeing is more risky than Airbus.

 

HOW DO WE COME ACROSS GAME THEORY
NOWADAYS ?

I am
going to explain this topic over Airbus and Boeing companies. To explain game
theory, Boeing and Airbus competition, which the whole business world is
curious at the end of the 1990s, is a good starting point. The investment
decisions of these two giants seem to be one of the best examples in which
companies take into account the many risks involved in making investment
decisions and set up strategy sets with the possibility of competitors making
the same investments as themselves. This seems to be the main reason behind
Boeing’s cancellation of 500-1000 passenger capacity “Superjumbo”
production. Our business decisions are not a one-time decision, and they are a
constant game that depends on the decisions of our competitors. Owners of the
superjumbo project, John Hayhurst, announced that the market was not ready when
the project was canceled. The market, measured by Boeing for its investment of
over 10 billion dollars, was around 400 vehicles for Boeing’s main rival,
Airbus, while it was under 500 vehicles for 1997-2014, with the thought that
passengers would prefer small direct flights. Boeing publicly announced the
cancellation of the project, but in fact it made a psychological move,
reporting that it would not enter a game that neither side would win, and was
aiming to influence decisions made by the rival. This emerges as an analogy to the prisoner confession which
has been used extensively in the narrative of game theory since the 1950s. If
we  apply this dilemma for Airbus and
Boeing companies, we can summarize the situation like that. each player has two
options: whether to develop  a new,
large-capacity passenger plane or not. If two players develop high-capacity
aircraft, the market is not big enough for the two companies, so investment
will not be available and a loss situation will exist for both companies. If
one of the players develops and the other player does not develop,while the company
which developed, will win, the other player will lose. In the case where two
firms do not develop, there is no loss for two firms as there is no investment
while there is no gain. Due to the fact that both companies are aware
of the situation, Airbus and Boeing have cooperated and decided to develop a
plane with a strategic cooperation called Very Large Commercial Transport
(VLCT). Thus, the two companies shared the risk and removed a situation that
they would lose on both sides. But because of the two companies’ worries about
each other, this cooperation has not made progress. In this case, a new
situation emerged while Boeing’s monopoly continued in the 400+ passenger
aircraft market. I n this new situation, where the likelihood of
losing is likely to be higher or risky, Airbus has given up on the Superjumbo
project. From a game theory point of view, Boeing could be perceived as a
threat because Airbus’s Superjumbo affected aircraft sales. Explaining that
Boeing gave up on the project, Airbus abandoned entering the market, which it
saw as risky. While John Hayhurst explained the cancellation of the project and
said that Airbus would reach the same market-related results, he actually gave
the message, “If entering a potentially profitable market would destroy
one of us, let us not enter that market.” As a result of the
consolidations, the passenger transport sector dominated by two big players is
seen as a typical example the game theory comes into play. The actions that a
company will take are directly determined by the response of the other company.

CONCLUSION

Game theory examines the human behaviors (preferences)
of strategic situations in which each player adds his own moves by taking into
consideration the actions that others will make. From past to today, we come
across a lot of examples associated with Game Theory but in this study, we try
to examine Game Theory by associating Airbus and Boeing companies. As it is seen
in this work, Boeing company would produce a new jet which is called ‘
Superjumbo’. This project would be an overcosting project and they gave up on
it because of the fact that they want to share risk with Airbus.  Also Boeing company aimed to effect the
decisions of its competitor ( Airbus ) through this decision that they made, as
well. When being explained Game Theory, this situation is often used. Because
this situation is a very good example for Game Theory. As we can see in this
work, too ; companies  make a decision by
taking into consideration their rivals. Because in order to exist within the
sector, they need to do this and we state this situation as ‘Game Theory ‘.  

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