GROUP C

AIRBUS CASE

Airbus Questions
[1] Evaluate the dynamics of a strategy of envelopment [2] Pay specific attention to details of
how
Product development strategies
When Airbus Company began as a European airline consortium of aerospace manufacturers,
their goal was clear. They wanted to be competitive with Boeing Company, the symbol of
American control of the aircraft manufacturing industry and a threat to European airline
companies. However, Airbus has since become more than just competitive and plans to
conquer the aircraft manufacturing industry with their combined resources and technologies to
produce a line of elite commercial aircraft. In 2008, Airbus announced four areas of long-term
industry leadership and one area was Internationalization. That is, the act of bringing
something under international control. Beginning as a combined European manufacturer in
Germany, France, Spain, and England, Airbus then expanded in Europe and to Asia and now has
become a threat to Boing in the United States. One example of Internationalization is the
Airbus Alabama facility, which will open in 2015. This facility also brings new support of
strategic value. Airbus is making this historical decision to manufacture the A320 family jetliner
in Mobile, Alabama, which will be the companys first U.S.-based production facility. This $600million facility will begin aircraft assembly in 2015, with the first delivery targeted for 2016.
Airbus is also building a new support strategy, where customers pay for a significant portion of
purchased services with data collected during operations. Airbus, instead of just becoming a
standalone business unit, believes that integrated customer support can help make Airbus
airplanes more attractive. In addition, Airbus has outlined plans to create a network of MRO
(maintenance, repair, and overhaul) providers. Airbus has also provided extensive Airbus "esolutions" resources for maintenance enabling low cost carriers with a single-type operation to
standardize their maintenance. This requires Airbus to look carefully at the existing differences
between older and current airplane models. This will be one of the big differences between
Boing and Airbus, because Boing likes to stay with the same basic model and prefers to upgrade
based on that model, instead of building a new model.

Airbus has a reputation of innovative design and technology, which is embodied in their
company innovation statement since their inception. Airbus has played a pioneering role in the
international air transport industrys evolution. This leadership will continue over the coming
decades as Airbus leverages innovative solutions to further improve the economic efficiency
and environmental performance of commercial aviation. In particular, Airbus is focused on wide
body product categories, such as the Airbus A-380. The manufacturing process of the Airbus A380 creates economic advantage and changes the aircraft manufacturing industry from a pointto-point manufacturing structure to hub and spoke structure. This could result from a product
improvement process and technological Innovation. Airbus also chose a double-decker design
versus a single deck standard design. This design also creates more passenger volume.
Another Airbus product strategy is to increase regional presence in additional countries. We
already see the Alabama facility; the Airbus and Singapore Airlines Memorandum of
Understanding signed to establish a Singapore-based flight training joint venture, called Airbus
Asia Training Centre (AATC); the opening of Airbus first joint parts support and distribution
facility; and Satair Airbus Singapore Centre (SASC), located in Singapore. With these new
facilities, Airbus will be able to deliver even higher levels of service for its customers in AsiaPacific, which is the worlds fastest-growing region in terms of air traffic demand. The Airbus
Asia Training Centre, which is expected to open before the end of 2014, will provide type rating
and recurrent training for Airbus A320, A330, A340, A350, and A380 aircraft types. It initially
will operate from Singapores SIA Training Centre.
According to Head of Airbus Customer Services Communication Bruno Piquet, the Asia-Pacific
regions rapid expansion is driving the demand. There will be a huge need for pilot training
moving forward, and we have to be able to respond, said Piquet. That is also why we are
partnering with major airlines like Singapore Airlinesbecause not only do we want to respond
in terms of service quantity, but also service quality. AATC will be the newest in a network of
Airbus training centers worldwide, with others located in Beijing, China; Miami, Florida, USA;
and Toulouse, France.

R&D Strategies
Based on the circumstance between Airbus and Boeing as well as research into the early days of
competition, Airbus focused on aggressive strategies carving out a path into the very large
aircraft market (VLA). Originally, Airbus and Boeing worked collaboratively on feasibility tests
for the proposed A3XX model of VLA aircrafts, but Boeing retreated on the grounds that it
would be too expensive and too risky with tremendous uncertainty in demand.
Airbus sought out the opportunity, being infamous for innovation and design, to leverage the
concept as an advantage. Airbus strategy here focused on feasibility results that yielded a
strong potential yield. In a way Airbus had placed all of their eggs in one basket so-to-speak,
given that this project was expensive with uncertain demand. However, that would not stop
Airbus from pursuing it. Airbus continued on where Boeing had left, and they began carrying
out meetings, studies, surveys from customers, clients, partners, federal agencies and airport
authorities. This allowed a definitive patch for Airbus to pursue the VLA markets and with the
feedback and outlook looking more than feasible, Airbus decided to secure orders ahead of
time before they committed to the project exclusively.
While endeavors are underway, Airbus continued to strategize in planning on long term plans,
and began to see another opportunity to gain market share by carefully designing the aircrafts
in a way that would allow for certification across the various models thus allowing an increase
in pilot utilization. Rather than producing to much varying planes, the cockpit and operation
would be almost exactly the same across planes. Pilots would not longer need to certify across
various planes and if they were certified to fly one, they could fly them all, hence increased
pilot utilization.
The A3XX VLA aircraft was certainly not without its hurdles as anticipated by Boeing. Most
concerns centered on noise, turnaround time, emissions, taxiway movements, evacuation, and
airport capacity across primary and secondary markets to allow for smooth VLA operations.
Being known for innovation and design, Airbus had successfully resolved all of these concerns
to compete on par with Boeings well established Boeing 747. For instance, the operating cost
per flight of the A3XX Models would be a mere 12% increase from the 747 contender but would

accommodate a 25% increase in volume at no additional cost allowing for more flyers but the
plane could still be evacuated in less than 60 seconds.
In modern times, Airbus continues to foster innovation as it focused on its baseline
sustainability in products. Outlined in the past five years annual reports, Airbus has invested
heavily into optimizations that would permit ramp-up in delivery, schedules and the
introduction of new products. First and foremost, Airbus is a manufacturing company that
leaves all the services and support to other companies. With focus in these areas, Airbus
would be better staged in pursuit of optimizations as a competitive advantage. Additionally,
Airbus is focusing on a distributed research and development model with specific focus on the
commercial sector. Airbus today does not only engage in the VLA markets, however they also
have a expansive line for helicopters and innovations in defense contracts and space markets.
Overall, through aggressive tactics, diligence, and innovation into new technologies and
products, and forecasts Airbus has forged their path as a competitor in the aircrafts market.
Airbus focuses on expansive feedback from various sources and clearly maps out plans based
on a industry standard twenty year forecast, that gauges expectations in the industry and
anticipations in new and existing markets. All of which, has allowed Airbus to persevere and
gain new ground with clear goals.
Manufacturing Competencies
From a manufacturing perspective, Airbus is one of the biggest in the industry with a key
emphasis on manufacturing benchmarking. In the aforementioned research and development
in optimizations, benchmarking has focused on Airbuses strong ability to leverage the learning
curve effect and less focus on support services.
The learning curve effect allows for workers to quickly grasp the task at hand and quickly
become a proficient worker. With Airbus focusing on a narrow task, as a whole Airbus has
combined this focus with the learning curve effect that keeps these specific tasks well
manageable. A jack of all trades but a master none.

Key Competencies include composites design and manufacture, architecture,

manufacturing engineering and supply chain management which is substantiated by reengineering efforts and total quality management improvements.

Manufacturing Engineering is the interface between design and product and is at Airbus
heart of the strategy to combat steep increases in the rate of aircraft production,
primarily commercial albeit defense, space

Marketing
Key marketing strategy for Airbus for the next 20 years is to focus more on emerging markets
with its low-cost model to set in Asia- Pacific and Africa. Airbus forecasts that for the next 10 to
20 years, emerging countries will represent 50% of the total aircraft market. In addition, urban
population sets to grow from 51% today to over with the increase in aviation at the center of
peoples journeys and growth in tourism and internationalism that will stimulate demand.
Airbus has a diversified product portfolio compared to its peers. The Airbus commercial product
line comprises aircraft that range in size from the 107-seat single-aisle A318 aircraft to the 525seat. Furthermore, the company markets its aircrafts to almost all the leading airlines in the
world. Some of the company's customers worldwide include world's leading airlines such as
Lufthansa, Emirates, Air France-KLM, British Airways, United Airlines, Qantas, and Cathay Pacific,
among others. Therefore, a strong product portfolio enables the company to serve different
markets and diversified customer base, which in turn reduces its business risks.

On the other hand, the global aerospace and defense market has grown in recent years. The
market is expected to grow at a more gradual pace towards 2016. The aerospace and defense
market is deemed to be the revenues accrued by manufacturers from civil and military
aerospace and defense procurements. According to MarketLine (a unit of Informa plc), the

global aerospace and defense market is expected to record revenues of approximately $1,123.4
billion in 2013, an increase of 1.5% over 2012. Further, MarketLine expects that the market
growth will accelerate further and reach a value of approximately $1,238.7 billion in 2016, an
increase of 10.2% over 2013. Airbus is engaged in development, manufacturing, marketing and
sale of commercial and military transport jet aircraft in the world. Hence, the growing global
aerospace and defense market could provide significant opportunities to the company to
further boost up its sales and revenue in future.
The air transport throughout the world is constantly changing in response to market
opportunities and challenges. The rise of new airline business models and rapid growth of air
travel in the world's emerging economies are stabilizing worldwide demand for airplanes.
According to Airbus' Global Market Forecast 2013-2032, by 2032, the worlds airlines would
require more than 29,220 new passenger and freighter aircraft worth $4.4 trillion at current list
prices. As a result, by 2032, the fleet of passenger aircraft (with 100 seats or more) and
freighter aircraft (10 tonnes or greater), will be 36,556 aircraft more than doubling the current
17,739 aircraft fleet in service. Single-Aisle passenger aircraft would represent the largest
segment of the new deliveries with 20,242 over the next 20 years. The demand for Twin- Aisle
aircraft would require 6,779 new passenger aircraft and 494 freight aircraft. Due to the growth
in traffic demand in Asia Pacific, 47% of the demand for very large passenger aircraft would be
from this region. More than 40% of all new aircraft deliveries over 100 seats would be within
North America and Europe. Much of this demand, especially in North America, is for new, more
fuel efficient aircraft to replace older less eco-efficient types.

Alliances

On March 2014, Airbus and China have laid the foundation for taking their fruitful cooperation
into the future as relevant agreements have been signed in Paris by Fabrice Brgier, Airbus
President and CEO, and the Chinese parties, witnessed by the French President Francois
Hollande and visiting Chinese President Xi Jinping. In parallel, China Aviation Supplies Holding

Company (CAS) and Airbus have also signed a General Terms Agreement (GTA) for the purchase
of a total of 70 Airbus aircraft. According to the agreements, Airbus will strengthen its mutually
beneficial cooperation with Chinese aviation industry in various fields, which include promoting
Tianjin as an Asian Centre for Airbus and upgrading industrial cooperation in both scale and
level.

In addition, to expand their Asian business, Airbus Defence and Space and Sapura Secured
Technologies have signed a collaboration agreement to establish a long-term co-operation in
the field of C4ISR (command, control, communications, computers, intelligence, surveillance
and reconnaissance). It includes the joint development of key products in the field of planning
and data fusion systems for armed forces digitalization and its commercialization in the Asia
Pacific (APAC) market. "Airbus Defence and Space is very pleased to have been selected for
establishing a long-term partnership with Sapura Secured Technologies. This confirms our
strategy in Malaysia and our ambition for Airbus Defence and Space's cooperation with
strategic partners in Malaysia. Furthermore, we are looking at extending the partnership
beyond Malaysia to address future business and market development activities in the C4ISR
global market," states Christian Scherer, EVP Sales and Marketing, Airbus Defence and Space.
On the product development side, ATK and Airbus Americas recently celebrated a successful
partnership of working together to support air transport customers around the world, and
reaching a milestone of successfully completing the 20,000th ATK composite part in support of
the A350 XWB. ATKs proprietary automated stiffener forming machines (ASFM) have been
instrumental in the development and manufacture of high-rate production composite stringers
and frames, and contributory in reaching this milestone. This highly engineered technology is
essential to manufacture the A350 XWB composite stringers and frames, which enables ATK to
produce extremely high quality, dimensionally precise and highly repeatable composite
components.