HI6006 Competitive Strategy Editing Service
Delivery in day(s): 4
Aircraft manufacturing industry was recently recognized as one of the largest industry globally with Airbus and Boeing being the two dominant key players. Majority of main competitors has failed to survive rapid competition and ended up exiting the industry. For example, McDonell Douglas Corp merged with Boeing Company in 1997 leaving Boeing and Airbus companies operating in duopoly global market (Kovacic 2008, p.903). Apparently, it an important to determine both external and internal environment in the industry to determine what Airbus have done and should do in order to industry experience first growth and survive competition forces. Therefore, the report seeks to identify and analyses the problems faced by Airbus Company, opportunities, and barriers of organizational expansion and strategies that have adopted by the firm recently to expand its operations to other countries.
Airbus Company is an organization dealing with aircraft manufacturing in the aerospace industry. The company was formally established in 1970 as a European consortium and has its head office based in France. The company has both internal and external stakeholders. Internal stakeholders include staff and suppliers while external stakeholders include passengers, businesspersons, and government. Partners and airbus committee are the most powerful stakeholders are an executive committee and partners owning approximately thirty percent. Partners own twenty percent. Airbus Company operates a multinational nature of the business. It designs and sells both military and civil aerospace products. Furthermore, the company has developed manufacturing sites in Spain, Germany, UK and owned subsidiaries in North America, Japan, and China. The company has divided its product into three divisions: Helicopters, defense and space, and commercial aircraft. Airbus is ranked as the third largest in the Aerospace industry in terms of helicopter deliveries and revenue generations. Airbus has a unique workforce integrating more than 80 nationalities. The core human talent, hard works, and missions keep the company as a leader in the competitive markets. Furthermore, the company has over 55,000 workforces who operates for more than eighty different nationalities. This cultural diversity is a key factor to why the company has recently experienced success.
Airbus Company has recently experienced many problems. Recently, the company was in headlines due to delays of bringing Air Bus A380 in the market for a period of 2 years and uncounted loss of 2 billion euros. Further research by Marsh (2010, p.10) has revealed that the delay was caused by technical problems and cultural differences like problems with writing. In 2016 autumn report, portrayed that different perceptions of cultures in Airbus has high stereotypes and some of the experienced and skilled staff are not satisfied.
Airbus Company has encountered operation issues. Airbus operating under large geographical and having multiple country consortium makes it slow in making decisions. For example, in the 1980s, the company encountered great challenges in financing A-320 project because the partnered government took long to approve the program (Wal-Mart, 2012 p.235) Furthermore, the company was slow in reaching to final decisions because consortium partners safeguarded their own interest instead of making decisions that were beneficial for the entire organization.
Airbus being a multinational company has faced economic recession challenges ever since the company was started. According to Fairlie (2013, p. 207 economic recession is a significant decline in economic activities for more than six months affecting real income, employment, industrial productions, and wholesale-retail trade. The global economic recession has had a significant impact on Airbus Company while manufacturing civil aircraft on several aspects. During the recession, Airbus has directly received few orders than before. For example, during the 2008 global economic crisis, the number of orders that were received Airbus Company decreased significantly to 142, as compared to 662 in 2008 and 1417 in 2007. The recession also led to the downsizing of the Company. For example, the Airbus announced immediately during the recession that it would cut a huge number of jobs. The cut of employees was a success beneficial strategy for new entrants as they gained access to experts who have capabilities of utilizing their skills and experience and later on emerge as a competitive threat to the company (Gittell and Bamber, 2010 p.165). Furthermore, the staff had good knowledge of the market and secrets of the company.
Finances and capital of operation is also a challenge faced by Airbus Company. Fuel prices have been increasing unexpectedly influencing internal and external operations of the company. According to Brinkman (2014 p.1), the increase in fuel prices has facilitated to postponing or cancellations of more than $100 billion orders of aircraft.
Political influence in some countries has facilitated to high corporate taxes and licensing fees. The trade barriers and a high tariff on big corporates have been a challenge to why the company is experiencing low-profit margins in some countries. For example, Spain has recently revised its traffic and taxations on foreign companies. Furthermore, some politicians and environmental bodies have criticized the company for not complying with the principle of social corporate responsibility (SCR). Airbus Company has previously linked to environmental pollution and incurred high costs of redesigning aircraft components like exhaust systems and engines. In addition, the company has also been affected by some government international trade. For example, Airbus suffered government threats from the Chinese government when the United States of America arms were sold to Taiwan.
Airbus Company has faced a great problem in terms of social-cultural and technical problems. Various ways of communications and leadership styles have been linked with economic nationalism that has distorted private transactions through discrimination of foreign investors in regard to national interest. For example, Germany is known for preferring collective decision making, Spain is flexible but has inferior complex decision making while French prefers centralized decisions. The cultural dimensions between different countries have resulted in ideological differences. For example, Germany cultures are linked with low power distance while France cultures are linked high power distance (Hofstede, 2011 p.8).
Rapid competition in the industry has posed a significant challenge to the Airbus Company. The market is growing every day and many companies are venturing in the industries with new techniques and innovations attracting more customers. The main competitors of Airbus Company are Boeing, Embraer, and Bombardier. Each of these companies competes for available resources and customers. Furthermore, fueling of the companies in the industry is the main reason why companies are forming alliances. New entrants in the market like COMAC, of China, Irkut-united Aircraft of Russia and Mitsubishi of Japan have bombed the market with innovations. The new entrants have also been significantly supported by their countries. For example, in China domestic companies experiences low taxations, interest tariffs and high business confidence as a way of encouraging domestic investments. The market has encountered competition rivalry between the different firms that have posed a serious threat for Airbus Company to expand its operation. In the industry, the main rivals are Airbus Company and Boeing competing for the prices and customers. The intense of the rivalry has seen Airbus company dropping its market share and bargaining power of customers increasing as they focus on cost-sensitive products offered by Airbus. Furthermore, Airbus has been charging low costs as compared to its rival competitor Boeing due to its comparatively leaner manufacturing system.
The strategy of Airbus has evolved significantly over the last decade. The organization was small in the late 1990s. McDonnell Company and Boeing who were producing most of the aircraft worldwide dominated the market. The initial strategy of Airbus was to acquire a high market share through the aggressive targeting of the many routes that were short. The strategy would see the use of cheap and small aircraft that were suited to the requirements of the highly growing low-cost carriers at the time.
To pursue international growth opportunities, Airbus has formed a strategic alliance with the Defense Science and Technology Organization (DSTO). The alliance will enable the collaboration between Airbus and DSTO in the aircraft systems for defense and communication. The strategy will initially be focused on the maximization of the ADF aerospace fleets capability throughout the life that the company would serve, and the improvement of the capability of communication. The non-strategic alliance which would run for a ten-year period will be of benefit as it will support rotary wing assets. The strategy will also present opportunities for DSTO in accessing the facilities and capabilities of Airbus. In addition, the strategic alliance would strengthen the aerospace capabilities of ADF. The company’s market portfolio will be diversified which will boost its market exposure.
Airbus has implemented various diversification strategies which include positioning, targeting, segmentation, restructuring, mergers, and acquisitions in order to achieve rapid international growth. The organization has implemented various segmentation strategies including psychographic, geographic, and demographic strategies so as to respond to the demands of customers from different nations. The organization uses the selective targeting business strategy since various sets of customers have been segmented to be serviced by its different aircraft. Airbus has positioned itself as an airline carrier which offers aircraft which are value-based, aesthetically designed, technologically advanced, safe and secure.
Airbus has a strong multinational structure which has assisted the organization in surviving in diverse markets. The organization uses the complex integration strategy which consists of specialization in regards to the existent technology and workforce capabilities in the local market. As a result, all subsidiaries have solely been able to perform a certain function or they can collaborate with Airbus. Constant flows between Airbus and the subsidiaries have led to the insignificance of the status difference. Therefore, the company resembles a network thus the organization’s total performance is depended on the results of all subsidiaries
Airbus Group began a consortium of manufacturers of national aerospace at various points in some previous years which many thought it would fail. In 2001, Airbus Group formulated and implemented ownership strategies which saw the structure of the company becoming consolidated through the ownership of the British Aerospace and defense company BAE Systems and the Franco-German group EADS. In 2006, the British sold out although the governments of Spain, Germany, and France continued to, directly and indirectly, own stakes. Wrangling between the diverse owners which included manufacturing locations and over-engine choices were meant to overshadow the achievements of Felix Kracht and Roger Beteille, who are pioneers of the company. Airbus Group controlled 50 percent of the market for commercial aircraft worldwide within 25 years. The company became the largest supplier globally in 2003 measured by the deliveries of planes thus beating its main competitor, Boeing. In addition, the company makes the largest passenger aircraft globally, has the best-selling jetliner aircraft range ever, and manufacturers the most advanced plane for military transport. In 2013, Airbus Group had a backlog of 5000 not-yet-delivered planes, had received $240 billion in orders, and delivered more than 600 aircraft.
Airbus Group has been keen on the corporate social responsibility debate which is focused on the organization. Airbus Group is committed to foster innovation in becoming an enterprise which is eco-efficient. The organization has been striving to achieve the introduction of the philosophy of management and to fully integrate it within the business and turn it into a culture of the company. Airbus Group is making use of innovation to find the solutions to today’s issues which are most critical, including the evolution to a low-carbon economy, the security of nation-states, and sustainable mobility.
Airbus Group has collaborated with Routehappy, a move that will encourage travelers in making bookings on the basis of cabin quality rather than fares. Routehappy and Airbus Group will work with airline customers for the creation of targeted and compelling merchandizing content that will display features of the cabin including jet lag mitigating ambient lighting, connectivity, in-flight entertainment, personal space, and seat width. The aspect has been fueled by flyers who need better information in navigating the options that are ever-changing, with the industry needing a platform to assist them in displaying the products they offer. The alliance has provided Airlines an added incentive for the creation and distribution of content that reach and is becoming a key feature in how customers shop for flights.
The paper has demonstrated that Airbus Group has developed and implemented global market expansion strategies which are well structured. The strategies are critical to Airbus Group as they have assisted to develop, build, market and produce large and complex aircraft. Air transport continues to change throughout the world in order to respond to market challenges and opportunities. The dynamic growth of air travel and the new airline business models in the emerging economies are diversifying for airplane demand throughout the world. Although there was a global decline in air transport in 2009, there were still many business models and markets which experienced growth.
To survive the rapid competition and expand operations to other countries, Airbus Company should consider putting more efforts on implementing innovations and differentiation strategies. The strategies will provide unique products in the market with high customer satisfaction as compared to competitors. Furthermore, the company should add more professionals in research and development for innovation of new products and identification of what customers need to remain loyal to the company.
1. Kovacic, W.E., 2008. Rating the competition agencies: What constitutes good performance. Geo. Mason L. Rev., 16, p.903.
2. Marsh, G., 2010. Airbus A350 XWB update. Reinforced plastics, 54(6), pp.20-24.
3. Wal-Mart, F.V., 2012. The role of the finance industry is to produce, trade, and settle financial con. Rethinking the Financial Crisis, p.235.
4. Fairlie, R.W., 2013. Entrepreneurship, economic conditions, and the great recession. Journal of Economics & Management Strategy, 22(2), pp.207-231.
5. Gittell, J.H. and Bamber, G.J., 2010. High-and low-road strategies for competing on costs and their implications for employment relations: International studies in the airline industry. The International Journal of Human Resource Management, 21(2), pp.165-179.
6. Brinkman, T., Maracle, K.T.B., Kelly, J., Vandyke, M., Firmin, A. and Springsteen, A., 2014. Impact of fuel costs on high-latitude subsistence activities. Ecology and Society, 19(4).
7. Hofstede, G., 2011. Dimensionalizing Cultures: The Hofstede model in context. Online readings in psychology and culture, 2(1), p.8.