The Superjumbo Dilemma in foregoing payoffs

Question 1

The decision for Airbus foregoing payoffs in relation to its relationship with A360 Superjumbo is quite complex considering that Airbus is a major competitor of A360 Superjumbo. However, Airbus lacked any strategy to enter any market in the new superjumbo division. Thus, the most vital and essential approach for Airbus was to be a dominant buyer (Hovenkamp, 2015). Dominant buying is a strategic plan used by Airbus to purchase the 300 requirements. Besides, the strategy propels Airbus to be dominant in the market. This also allows Airbus to take the investment pay off from Superjumbo. Mainly, Airbus will require more investment of orders to break even on A380. Thus, Airbus will have to win more orders before its troubled A380 superjumbo breaks even. Ideally, Airbus needs to increase the break-even point as well as to increase its competition payments. Besides, Airbus needs to increase the costs of delivery to propel its point of profitability.

Question 2

In case Boeing finds itself less profitable, this will affect the Airbus-Boeing tactical competition. The impact will be seen because Boeing finds itself less profitable than 60% of the market share than at 45% (Hovenkamp, 2015). Thus, it would require Boeing to be strategically positioned rather than placing itself at the lower market share. This impacts will ensure that the competition doesn’t realize. Consequently, Boeing can be more profitable by competing at a lower market than Airbus.

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Question 3

There are costs that can be covered by the early penetration prices to verify the claim of European Nation on how Boeing can avoid predatory indictments. From an economic point of view, penetration pricing refers to a strategic plan that sets the cost of goods and services at low prices with an agenda of reaching a wider market (Hovenkamp, 2015). Thus, the pricing strategy assumes that the majority of customers can the ability to switch to their product due to the low-cost effect. The first category of cost argues that predatory pricing used by Boeing is not as profitable as a business strategy. Overall, the cost does not amount to dumping because predatory pricing may attract new firms that may pose health price competition in the industry.

Question 4

Despite the delay of the project to deliver at least 93 A360s Airbus is still doing significantly well in the industry. The delays may have destroyed the reputation of Boeing but that doesn’t mean that Airbus 380 is not successful. Mainly, A380 is considered as a big venture by some airlines despite their limited demand to justify aircraft operations (Hovenkamp, 2015). However, Airbus is pretty successful because its A380 are successful in the industry. Ideally, the operating cost for any flight is the same regardless of the capacity onboard. Thus, A380s are still successful because Airbus can minimize operating cost by ensuring each flight is packed to capacity. Having low cost per available seat mile is great, but Airbus ensures that each A380 flight is near full capacity which considers A380s still a success.
Part Two
Exercise 1
a. A payoff matrix for the decision-making problem
The two companies, Hitachi and Toshiba, are based in Japan. They deal with computer microprocessors through personal computers branding. Thus, the payoff matrix for the two companies is vested in low and extensive promotion as illustrated in the matrix below.
Extensive Promotion of Low Promotion
Hitachi Extensive Promotion $5 million, $5 million $4 million, $9 million
Low Promotion $9 million, $4 million $7.5 million, $7.5million

b. The dominant advertising strategy and the minimum payoff for Hitachi
Typically, the dominant advertising strategy that can bring minimum payoff for Hitachi must be independent of other player actions (McGrath, 2013). Conversely, Hitachi can choose the extensive promotion as a payout strategy because it is more even than low promotion strategy. This choice will be viable regardless of the selection made by Toshiba. Ideally, Hitachi can select a minimum payoff of $5 million even without knowing the choice of Toshiba.
c. The dominant advertising strategy and the minimum payoff for Toshiba
Typically, a dominant strategy refers to the action plan that the company utilizes to minimize the welfare of decision made in the decision-making process when the decision is independent (McGrath, 2013). The choice of Toshiba is also independent. Thus, the company should select an extensive strategy to ensure $5 million as the payoff.
d. Explain why the firms may choose not to play their dominant strategies whenever this game is repeated over multiple decision-making periods
If the case is repeated many times, then either Toshiba or Hitachi can address the other company having a dominant strategy that remains unrealistic. Mainly, the core objective of each form to gain maximum return that can amount to biases in the game.
Exercise 4
This case involves ZZ&S and AA&D as the two insurance companies that are attempting to offer services to clients through shares consideration. Thus, the companies are competing for more shares in the stock exchange market. Mainly, the additional shares demand the same expertise at the disposal of ZZ&S and AA&D. Considerably, it is quite clear that both ZZ&S and AA&D can bid the shares for $200 (McGrath, 2013). However, the new customers can only bid the shares at a lower price of $150 per hour. Thus, both ZZ&S and AA&D will be forced to low the bids below $200.
Besides, the cost of ZZ&S is less than that of AA&D thereby benefiting ZZ&S and disadvantaging firm AA&D. thus, firm ZZ&S will opt to bid the shares at the asking price set by insurance companies. The two firms will go below $100, but ZZ&S will benefit because it can bid below $66 per hour and still generate profit. On the other hand, AA&D cannot bid below that value because its standard price per hour does allow that value.
Lastly, firm AA&D has a greater movement than company ZZ&S. thus, AA&D can generate a significant value of profit by bidding or not bidding. Thus, in case AA&D does not bid, then ZZ&S will win the whole contract. In other words, ZZ&S may fail bid at $200 per hour to avoid failure of a new customer to accept the bid. Overall, ZZ&S will be forced to bid at $ 150 per hour to propel the customers to accept the bid.
Exercise 12
The decision is quite interesting to make on both ends of the companies. Mainly, the existing company can purchase the competition from a firm entering the industry using a strategy of depleting its value (McGrath, 2013). Besides, the company can attempt to acquire a new company to exist in the market. Using either strategy, both companies need to follow trends and maintain technological changes. Any company that fails to keep up at that point may lose a competitive advantage.

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