1. How does consolidation improve airlines’ revenues? How might it improve their costs?

2. Are there any disadvantages to the airlines of consolidating?

3. Why do you think Southwest Airlines is (on average) the most profitable of the U.S. airlines? Should it attempt to integrate with other airlines? Why or why not?

Apple’s management had concluded that overseas factories provided superior scale, flexibility, diligence, and access to industrial skills - “Made in the U.S.A.” just did not make sense for Apple anymore. “Foxconn City,” a complex where the iPhone is assembled, has 230,000 employees, many of whom work 6 days a week and up to 12 hours a day. It is owned by Foxconn Technology, which has dozens of factories in Asia, Eastern Europe, Mexico, and Brazil.

It is estimated that Foxconn assembles 40% of the world’s consumer electronics, and boasts a customer list that includes Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung, and Sony, in addition to Apple. Foxconn can hire thousands of engineers overnight and put them up in dorms - something no American firm could do. Moreover, China’s advantage is not only in assembly; it offers advantages across the entire supply chain. Apple’s strategy of paying upfront for both the technology and capacity enabled it to induce its suppliers to make specialized investments in technologies that were well beyond the industry standard, and to hold excess capacity that would enable rapid scaling. The net result is that Apple ends up with superior flexibility and technological sophistication that competitors cannot match.

Seeming to acknowledge the advantages of Apple’s strategy of controlling device design and production, Microsoft announced on June 18, 2012, that it too would design and produce its own tablet, the Surface. It also launched its own chain of dedicated Microsoft retail stores that looked remark- ably similar to Apple stores.