and becoming the most profitable aircraft models.Production around families of planes: To reduce manufacturing costs and increase an aircrafts future lifespan with affordable fuselage changes. Product Development: Had been the preferred growth strategy by manufacturing companies. Developing a new family of planes was necessary to secure future market share.General Agreement on Tariffs and Trade: Limited the amount of government subsidies available to both Boeing and Airbus.Airbus Industrie: A consortium of four countries pooling their resources together. Boeing/McDD and Airbus created a duopoly in the industry, characterized by intense competition to increase or protect market share.Defense and SpaceThe US government was by far the largest single customer for non-commercial aerospace products and services. This meant that all sales were strongly determined by political considerations. Foreign military sales were determined by foreign policy, while domestic sales were determined by Congress debates on the budget. This created a favorable environment because there were neither excessive risks nor volatile changes in market demand. Contracts with the military spanned many years and were paid under a cost reimbursement plan starting in the early 1990s. On the other hand, the shrinking defense budget led to large-scale mergers and acquisitions among defense contractors and a growing consolidation in the industry. This left only four remaining defense conglomerates, Lockheed Martin, Boeing-McDD, Raytheon and Northrop Grumman. The defense budget stabilized in 1997 at about $250 billion and was expected to increase moderately between 1998 and 2003.Because contracts for the military and NASA were extremely technically demanding in many fields, all manufacturers were intertwined in a web of subcontracting. Although a single contractor would win a bid to assemble and deliver the final product, a majority of the components would be subc...
