MCM 612 : BUSINESS STRADEGY & CORPORATE PLANNING

CASE STUDY ON AIRBUS - FROM CHALLENGER TO LEADER

SUBMITTED BY: G04125 - SHARAD NAGARAJU G04126 - NIKHIL PRABHUDEVA G04127 NITESH SASIDHARAN G04128 DANISH PATEL G04129 HINAL PATEL G04130 HIREN PATEL Under the guidance of Prof. Tapash Ganguly

EXECUTIVE SUMMARY


The aerospace industry is a multi-billion dollar industry and basically it has got two big players in the industry that has been competing against each other for such a long time. The case below discusses how Europes Airbus rose from a challenger to be the leader against US Boeing. It analyses the nature of competition between the two companies and the differentiating strategies Airbus adopted as against more conventional approaches of Boeing which led to its downfall. Also this case looks at the structure of the aerospace industry as a whole, and the current strategic positioning of the two companies is also discussed. Towards the end a brief assessment is furnished on the possibility of a leadership style that makes one of the company leading in the market. Airbus long term strategic plan and fundamental values by stating their vision and mission statements. The discussion of the case analyzes the external environment of the aircraft industry as a whole and then focuses in on Airbus internal environment. Strategic examination tools like Porters Five Forces ,etc are used to help guide the analysis within the discussion session. Conclusions are then drawing as to the status of Airbus current strategic plan and its adherence to their vision and mission.

Q1) WHAT ARE THE CHALLENGES FACED BY AIRBUS? HOW IT RESPONDED TO THE CHALLENGES? IS COMPANYS MISSION CLEARLY DEFINED?
It managed to attract more and more customers. Airbus success in this era was from the subsidies it Airbus changed itself from an received from European unwieldy, four partner governments & also because Financial support - European consortium into one for-profit of its production efficiency governments, provided cheap company. and innovative product loans to the consortium with no It took a decision of development. repayment conditions. developing planes with more In 1992 a bilateral deal was than 400 seats to compete signed between the European with Boeings 747 series governments and theIts decision to restructure U.S. itself on government, that limited the the lines of an Its slow integrated company. financial help to Airbus to develop decisionany new model, to 33% of its total making process. development costs Mid 90s -Raise . The agreement - repaid with finance for its interest within 17 years major Projects,

Late 1990s and early 2000s - Economic Recession compounded by terrorist attacks in the USA

1980sDifficulties in financing the A-320 project

(development of a new super jet)

INNOVATIVE PRODUCT DEVELOPMENT

Airbus offered similar cockpits across every model. That took the technological lead by offering a common cockpit configuration A-320 was designed with 7 1/2-[inch] wider fuselage Used computer software to design its aircraft. That reduced the number of engineering hours and also helped Airbus bring out better designs. Adopted the line-manufacturing method -process of assembling aircraft easier

AIRBUS VISION AND MISSION STATEMENTS

LONG TERM STRATEGIC PLAN Vision Statement: Create the best and safest aircraft (Airbus, 2009) FUNDAMENTAL VALUES can be identified in its mission statement: Mission Statement: To meet the needs of airlines and operators by producing the most modern and comprehensive aircraft family on the market, complimented by the highest standard of product support. (Airbus, 2009)

HOW IT SUSTAINED ITS MISSION & VISION:

Entered the super jet category (400 seater) A-380.

A-380 - double-decker plane with a seating capacity of 555 passengers (137 more than the Boeing 747)

Super jumbo priced at $213 million

With the introduction of the A380 to its family of aircraft Airbus is fulfilling two aspects of its mission of producing the most modern and comprehensive aircraft family on the market (Airbus, 2009). It also puts Airbus well on their way to realize their vision of creating the best and safest aircraft.
whereas Boeing felt that airlines would be buying smaller aircraft increased demand for point-to-point services rather than long-haul flights requiring bigger planes

Airbus felt that airlines would opt to buy larger aircraft to accommodate growing consumer demand.

Super jet project received further encouragement when airline companies also showed interest in the aircraft

Q2. HOW IS THE COMPETITIVE ENVIRONMENT OF AIRBUS? PLEASE ANALYSIS THE RELATIVE STRENGTH AND WEAKNESS OF THEIR COMPETITORS

COMPETATIVE ENVIRONMENT
Competition through the use of technology Effect of currency Competition through the provision of engine choices

STRENGTHS
Boeing is fast excelling in business by the use of diversified product line. It has well established family of planes from small 737 to the largest carrier 747 which allows it to serve any airlines in any category. It has strong supplier base and has many manufacturing sites. It has strong focus on R&D. It has put in place the best CAD/CAM for the design of aircrafts.

WEAKNESS
Boeing is late in adopting some of the technological innovations which its rival Airbus has already implemented. Balance sheet and income statement indicate weakness. Its long term debt is increasing and its overall return on common equity is just 8.9% which is below the average industry rating of 13.1% Boeing is also behind Airbus in getting Finance and leasing operation to support its sales.

Q3) WHAT DIFFERENTIATING STRATEGIES DID AIRBUS ADOPT TO SURVIVE AND SUCCEED OVER PAST FEW DECADES? HOW FAR DO YOU THINK THE ADVANTAGES ARE SUSTAINABLE IN THE LONG RUN? JUSTIFY STRATEGIES ADOPTED BY

AIRBUS
Innovative product development Good organization structure Production efficiency

Q4) Analyze the changes in the structure of aerospace industry over the years and evaluate its effect on competition in the industry???????

Q5 . PHYSICAL & FINANCIAL PERFORMANCE OF AIRBUS

HISTORY OF AIRBUS INDUSTRIE:

THE HISTORY OF AIRBUS DATES BACK TO THE LATE 1960S, WHEN BRITAIN, FRANCE AND WEST GERMANY LAUNCHED THE AIRBUS PROJECT. IN JULY 1967, BRITAIN QUIT THE PROJECT, AND IN 1970 THE AIRBUS PROJECT WAS REORGANIZED AND NAMED AIRBUS INDUSTRIE, A FRANCO-GERMAN COMPANY HEADQUARTER SET IN 1971 AT PARIS AND LATER SHIFTED TO TOULOUSE (FRANCE) IN 1975. EACH PARTNER IN THE CONSORTIUM WAS ASSIGNED SPECIFIC PRODUCTION AND ASSEMBLY TASKS.

PHYSICAL PERFORMANCE :
PRODUCTS LAUNCHED
1972 - Airbus first product : A-300-B A wide body twin jet plane Capacity : 226 passengers

1998 took a Gamble by announcing to develop a super jumbo jet A-3XX

First of a kind Double-decker plane A-380 was expected to fly by 2004 later postponed to 2006

1974 - Next product : A-300-B2 250 seater aircraft

Mid-90s faced a problem of financing major projects

Announced to restructure itself on the lines of an integrated company and by 2001 incorporated as an integrated company.

1978 In the two class configuration : A-310

First of its kind - two-man cockpit with a six-cathode ray tube display, replacing dials

1990s -focused on introducing new aircraft

Launched 4 product families with nine airplane models

1979 - Announced would launch : A-320 A single-aisle aircraft with a seating capacity of 130170

1987 - Introduced A-320 Had problems in financing the project

PHYSICAL PERFORMANCE :
PRODUCTS CATEGORY AIRBUS V/S BOEING

PHYSICAL PERFORMANCE :
MARKET SHARE AIRBUS V/S BOEING

FINANCIAL PERFORMANCE :

Q7) WHAT LEADERSHIP STYLE DEMONSTRATED BY AIRBUS? PRESENT YOUR ANALYSIS.



Currently (circa 2003) Airbus is in the lead and has gambled on entering the jumbo aircraft market by launching the A380.

Airbus sees the air travel market moving towards larger aircraft, longer hauls with fewer stops.

Boeing sees the market moving towards smaller aircraft, shorter hauls and more direct point to point service.

The application of any of the leadership style depends on some factors that
are of key importance in bringing a particular companys mission, vision and goals into accomplishment. There are similarities and differences on their leadership styles of both the companies.

SIMILARITIES

Employing corporate management in which different bodies are involved in the running of the organizations managerial duties

Both are managed from above. (That is the decisions are made by those in the higher ranks in the authority profile. Thus, those individuals who are much lower in the authority are given ready made materials for them to carry the work of implementation of the duties in to material which will yield firms profits or losses.)

DIFFERENCE
Lies in the process administering the decisions that are made.

The airbus managers have much characteristic that can be attached to leadership kind of management. This is because they are courteous to the junior employees and they do respect them while they are carrying out their duties. The airbus managers do some consultation with the supervisors who are the mediators of the top level management staff and the employees at the grass roots.

The Boeing company managers are depicted in several reports and sources that they commonly use command phrases towards their juniors. Thus, they portray a DICTATORSHIP kind of leadership style. This does not evoke the dedication of the workers. Hence workers are having no willing efforts to put in order fort the company to get better results.

AIRBUS CURRENT STRATEGY

By utilizing economy of scope. The differentiators being used by Airbus are being the lowest total cost (price and operating cost) first to market with operational cost reducing technology within a segment. For example the A380 will larger more cost efficient due to utilizing newer technology than the only other aircraft in the jumbo segment

THE LOW COST LEADER

DIVERSIFICATION

Diversifying into all segments of the industry (i.e. single aisle, wide body and jumbo).

Offering a bigger and more efficient aircraft. This put Airbus in a good position

CONCLUSION


In concluding the analysis, it can be said that the dominant position held by both Airbus and Boeing will continue to create barriers for new entrants to the market but there is a possibility of competitors emerging as market challengers in the long term.

THANK YOU