DISCUSSION PROMPT

Recently, your firm was lucky enough to hire a key employee away from a rival firm, Orbital ATK. This employee shared reliable information indicating that Orbital ATK is planning to move into commercial aviation through the development of a TCAS system that it intends to market to commercial air carriers. Orbital ATK currently utilizes Search and Surveillance Weather Radar technology in a variety of its products. Orbital ATK is a global leader in aerospace and defense technologies. It designs, builds and diverse space, defense and aviation-related systems to customers around the world. Its primary products include launch vehicles and related propulsion systems; satellites and associated components and services; composite aerospace structures; tactical missiles, subsystems and defense electronics; and precision weapons, armament systems and ammunition. Headquartered in Dulles, Virginia, Orbital ATK employs approximately 12,000 people in 18 states across the U.S. and several international locations. A recent analysis indicated that the aerospace industry is dominated by 10 percent of firms that capture 43 percent of all revenues, while there is no significant concentration of the industry below this level, among the range of less dominant suppliers, where 52 percent of firms control 19 percent of revenues. (Ouimet, n.d.).

In light of this information, prepare an Advisory Opinion regarding strategic measures that might be taken to provide disincentives to Orbital ATK's entry into this market. Plan to evaluate your firm's strategic options using the various alternative suggested in Module Seven. Analyze and present three strategies that are particularly relevant to this choice.

Begin by describing the competitive environment that your firm inhabits. Utilize C4 and HHI data to characterize the degree of concentration, and explain the importance of these measures in the context of the issue at hand.

Next, suggest possible pricing and production strategies and evaluate their viability. The Federal Reserve Bank of St. Louis (FRED) offers data on interest rates (https://research.stlouisfed.org/fred2/series/FEDFUNDS). Using FRED, provide graphical or tabular data describing the current level of the Effective Federal Funds Rate and explain the importance of this measure for the decision to pursue a particular competitive strategy.

Explain why, since a rival's profit-maximizing price and output depend on its marginal cost and not its fixed costs, your firm cannot profitably lessen competition by implementing a strategy that raises its rival's fixed costs.

TASKS

Prepare an Advisory Opinion regarding strategic measures that might be taken to provide disincentives to Orbital ATK's entry into this market.

1. Evaluate your firm's strategic options using the various alternatives suggested in Module Seven. Begin by describing the competitive environment that your firm inhabits. Utilize C4 and HHI data to characterize the degree of concentration, and explain the importance of these measures in the context of the issue at hand.
2. Next, suggest possible pricing and production strategies and evaluate their viability. Analyze and present three strategies that are particularly relevant to your recommendations.
3. The Federal Reserve Bank of St. Louis (FRED) offers data on interest rates (https://research.stlouisfed.org/fred2/series/FEDFUNDS). Using FRED, provide graphical or tabular data describing the current level of the Effective Federal Funds Rate and explain the importance of this measure for the decision to pursue a particular competitive strategy.
4. Explain why, since a rival's profit-maximizing price and output depend on its marginal cost and not its fixed costs, your firm cannot profitably lessen competition by implementing a strategy that raises its rival's fixed costs.