International Business 1, 2) I

International Business

1, 2) I do not feel that Airbus could have become a viable competitor without subsidies. The four European governments agreed to subsidize Airbus for strategic interests. Air transport is a strategically important industry and these countries needed to have their own source of aircraft.

3,4) Airbus' position with regards to the long-running subsidies is reasonable because Boeing receives subsidies and patronage from the U.S. government and trade agreements should enhance trade rather freeze economic development by prohibiting new entrants to established markets. The 1992 agreement was a reasonable compromise.

5,6) the U.S. industry reacted with caution to the 1993 attempts to reopen the trade dispute because to do so would expose both Boeing and U.S. airplane equipment manufacturers to tariffs. Antitrust legislators allowed the merger between Boeing and McDonnell-Douglas in part because the latter was a fringe player in commercial airliners and was destined to exit the business anyway.

7,8) the threat by European authorities to have the McDonnell-Douglas/Boeing merger declared illegal was not a threat to U.S. sovereignty. I am not convinced that the EU had a strong case in the wake of Boeing's three agreements. Boeing was prudent in making the concessions. Had they not, they could have faced trade restrictions keeping them out of the European market.

9, 10) the U.S. reopened the trade dispute because Airbus was using subsidies to compete. The U.S. position was stronger. I feel that a fair and equitable outcome would be to have the EU adopt a more American-style subsidy system.

1) Toyota's lean production produced parts as they were needed. In contrast, traditional automobile manufacturers would produce parts in massive runs, store them in a warehouse, retool the factory and then when all the parts were made have them assembled. Toyota's system is superior.

2) Toyota's arms-length relationship spread the risk of overcapacity with the suppliers and reduced capital expenditures. Toyota was able to maintain the same degree of production flexibility and quality control by contracting out. The major drawback of Toyota's system was a dependence on other companies for supplies. There was also the risk of a supplier going out of business. American manufacturers did not have this risk.

3) the development of Toyota's lean production system was driven by the need to be a better competitor that U.S. automakers and the desire to offer a wide range of products. Factors unique to Japan were important because the lean production system required labor-management relations, and a strong support network called keiretsu.

4) Toyota entered the NUMMI joint venture in order to gauge the feasibility of manufacturing in the U.S. market. They were able to gain experience with American labor unions and in operating in the U.S. market. Toyota benefitted greatly from this partnership as they were able to parlay this experience into plants of their own in the U.S.