HW3 - citizens. Offsetting production costs can yield a...

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Do you believe Airbus could have become a viable competitor without subsidies? Many companies rely on subsidies to gain way on becoming a viable competitor, I do not believe that Airbus could have done any different. The capital required to start any company is a substantial amount in itself. But for Airbus to have the assets up front to create a next generation aircraft is unimaginable. The time required to successfully produce and then sell a product of such scale and complexity means just as much time has been spent spending money waiting for the break even point and hopefully turn a profit. Most new products are solicited to a wealthy investor for financial backing and of course would be offering a return for such an investment. National governments are some of the wealthiest investors companies can go to for funding. And why wouldn't governments want to invest in such a company? Governments may not be seeking a return of liquid assets, but often they are paying to have work and jobs created within their nation, providing for their
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Unformatted text preview: citizens. Offsetting production costs can yield a less expensive product therefore passing savings onto the airlines purchasing aircraft who can theoretically pass those savings onto their passengers. During Airbus' inception, their biggest competitors were still receiving subsidies and they are veteran companies. Boeing received subsidies from the state of Washington in the amount of $3.2 billion to offset costs of their 787 aircraft. While many question the multinational investments in Airbus, Boeing too received multinational investment. An example of this is $1.6 billion in indirect subsidies coming from the Japanese government. If a veteran competitor such as Boeing requires this much in subsidies to produce aircraft, it would only be reasonable to expect a new competitor to require the same or more to become successful. It may be possible, but the risk needed to be accounted for in order to become a viable competitor is just too great to ask Airbus to attempt without subsidies....
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This note was uploaded on 06/27/2011 for the course OPERATIONS 3423 taught by Professor Gagnon during the Spring '11 term at Arkansas.

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