V.

AREAS OF CONSIDERATION

In this SWOT analysis, we will be taking the Commercial Aerospace Industry as an

example to expand what New Trade Theory is.

In Commercial Aerospace Industry, A European-based firm namely Airbus was the first
one to enter the industry of producing superjumbo jet aircraft and that is the A380, 550 people
seater jet. As Airbus was the first to produce superjumbo jet, it has the First-mover advantages.
Airbus was followed by the Ameica’s Boejing company which also produce what Airbus can
offer.

STRENGTHS

New Trade Theory makes two important points. First, through its impact on
economies of scale, trade can increase the variety of goods available to consumers and
decrease the average cost of those goods. This point directly tackled what economies of
scale is, which means reduction of unit cost associated with a large scale of output a
country or producer can offer to other country.

Second, in those industries in which the output required to attain economies of

scale represents a significant proportion of total world demand, the global market may be
able to support only a small number of enterprises. Thus, World Trade in certain products
may be dominated by countries whose firms were first movers in their production

Nations may benefit from trade even when they do not differ in resource endowments or
technology.

WEAKNESSES

For the later entrants to a certain industry, the First movers have the ability to
create barrier for them – the late entrants. The barrier may not limit the later entrants in
joining a certain industry but probably possess a disadvantage over the first movers. This
assumption may lead to a case wherein the late entrants may not enjoy few benefits the
first movers are enjoying such us proper knowledge and control about economies of scale
and establishing worldwide reputation.

OPPORTUNITIES

One of the opportunities from the implications of new trade theory is that variety
of products increased and made available to consumers as trade allows a nation to
specialize a certain thing or product attaining economies of scale and buying products
from the other nation that they do not produce.

THREATS

In relation to the Commercial Aircraft industry wherein Airbus and Boejing are
both undoubtedly dominated the said industry, those who are trying to establish their own
name in Commercial Aircraft Industry would be threatened to enter as a new competitor
specifically in the lines specialized by 2 early entrants. Although Japanese firms might be
able to compete with Europe’s Airbus and America’s Boeijing, they have decided not to
enter the industry but rather be a major subcontractor of both early entrants.