Airbus is one of the divisions of EADS parent company particular in aerospace defence. The purpose of Airbus division is to develop, manufacture, market and sell commercial jet aircraft known as Airbus. Is the biggest competitors of Boeing and Bombardier (factivia 2010) and leading market share 64%. The main focus of this report will be on Airbus’s critical success factors. By using Bowman’s Strategic clock, which identifies customer perception and strategy choices of airbus. By describing resources and capability this report will establish whether the current strategy works against future competition.
According to the Critical Success factors that conclude 3 aspects in assignment 1
Airbus is very reliable in terms of customer satisfaction (Airbus 2009) through the development of its products according to the needs and requirements of the customers (sizes, comfort, etc.) Airbus launched a first VIP version of its ultra long-haul A340-600, on demand of Saudi Arabia group in 2006. (Mintel 1) Also provide product warranty and services for any technical problems if they do occur. (Airbus 2009) System of MRO providers (maintenance, repair, and overhaul), and have provided an extensive account of Airbus “e-solutions” for maintenance. Hence, Airbus is very reliable in providing on time product delivery for it customers (Airbus 2009).
Safety is a top priority in these specific industries. Airbus has very good reputation in terms of technological quality. Airbus is considered as an innovative leader in the aircraft industry and has created a history of innovation and customer satisfaction. (Airbus 2010) Airbus corporate with Air New Zealand, adopts the required navigation performance that influence safety (Data monitor 1 2009) dealing with highly trusted and dedicated suppliers like General Motors, Rolls Royce, Mitsubishi, Bridgestone etc. (Data Monitor 1 2009) that ensure company product quality satisfaction..
The satisfied customer creates a deeper loyalty towards the brand image, and is more likely to be back in the future to purchase new products or to replace old ones. Positive feedback in airline industry will indicate new buyers that give the stability in terms of financial resources. “Emirates airline has declared larger number of order for the Airbus A380 apart from the 58 aircraft that has been ordered (Mintel 2009 2) Qatar have ordered 24 A320 for $1.9 billion” (Mintel 2 2009)
Airbus is focused on innovative technologies and is well-positioned to participate in future development programs. Airbus invests in Research Development more than Boeing. (MacPherson, 2007) (Appendices 2) This has given the organization its capabilities to design unique future strategies. Airbus has serious concerns about long-haul flights that reduce fuel consumption and CO2 emissions (Data Monitor 1 2009). Airbus strongly focuses on environmental issue to improve project “PurePower” efficiency technology in coming years. (Data Monitor 1 2009) This accoutre because of the massive environmental demanding.
Due to eruption of volcanic ashes in Iceland, which affected the airline industries quite severely, provided an opportunity for Airbus to implementing new technologies that avoids any interference of volcanic ashes. (Airbus 2010) This opportunity is unique and at the same time would ensure maximum safety.
Bowman’s Clock and Airbus Strategic Choices (Appendices 5)
According to (Johnson 2008) The Bowman’s strategy clock recognize perception and market from the customer point of view and strategies that are adopted to gain competitive advantage against competitors. A differentiation strategy intends to propose diverse benefits which add value for consumers that other competitors do not supply.
Market has different customers and competitors, therefore, the customers have different options available to purchase goods from the market (Roger J. Best, 2008).
Airbus mainly deals with business customers and in business-to-business marketing, customer focus predominantly on value rather than tastes and aesthetics (James, Anderson, James, Narus, 2007). To reconsider the strategy of Airbus, then they always try to differentiate in the market and to provide value that been mention is section 1 CSF. Value is worth in monetary terms of economic, social, technical and service net benefits which a customer receives in exchange of the price so they pays for it. (James, Anderson, James, Narus, 2007). Airbus planes are usually larger in size than Boeing and actually targeted towards large airports or Hubs only. The aircrafts are designed in such a way that they could meet multiple segments in the market due to their differentiation and functionality (Center for Aviation, 2006). To consider A380, it is designed in such a way that it is larger than Boeing Dream liner and 747(Boeing 2010). It provides competitive advantage as it competes with both 787 and 777 of Boeing (Vijay Verghese, 2010). In addition it provides more value to target businesses because more passengers can travel in the planes of Airbus and thus they get high value in monetary terms and cost savings. Therefore, according to this strategy of Airbus in the past five years, they should be placed at 4 Differentiation (Appendices 4) because it is focusing on differentiating and also providing high value to its target customers.
In order to bring down costs, Airbus makes use of advanced technology and believes in innovation (Data monitor 1 2009). This technology orientation provides both differentiation and high value in the entire value chain (ABB Press Automation Systems, 2006). Airbus is recognized in the market for its innovation and technology orientation and it is the main source of competitive advantage for Airbus (Airbus 2009). Airbus is developing new products highly equipped and dominated by technology to create high value and differentiation. (Airbus 2010)
According to their strategy, Airbus is always buying from General Electric and Rolls Royce. Choosing a vendor for engine is always a source of competitive advantage in the aircraft industry. Airbus provides these sellers some incentives because both work with Boeing too. Therefore in order to gain a competitive advantage, Airbus retains its vendors to achieve differentiation and competitive advantage (Geoffrey Thomas, 2008). Those facts place Airbus in position 4.
Resources and Capabilities
Airbus strategy is significant and mostly focused on CSF factors and resources and capabilities; Airbus has successfully gained a competitive advantage over their biggest competitor Boeing. Differentiation strategy have given them an advantage to gain suitable accessibility to new markets and costumers to deliver services all around the world in large scale by using their knowledge and manipulate the resources and value chain (appendices1) Differentiation strategy highlights Airbus’s main resources which are financial stability and Reputation.
Strong support from parent company EADS (EADS 2009) gave them advantage of financial base and stability. According to Airbus “revenues of the financial year 2008, it was equal to â‚¬24,361 mill. ($38,285.7 mill.) An increase of 5.4% over 2007.The operating profit of the company was in 2008 â‚¬1,763 mill. ($2,594 mill) compared to operating loss â‚¬904 mill.($1,330.1 million) in 2007”. (Orbis 2008) The revenues shown above indicates that every coming year Airbus improve their capabilities and managing system.
Diversity and adequate process in large scale give competitive advantage and influence on brand image, “The Company has been awarded as a leader in the industry, Global most admired companies for information technology services” (Factivia 2010)
This been achieved by experiences learned by decades, that new approach rivals not necessary may have.
Airbus global network, diversity and costumer trust gave them ability to convince the governments around the word to get easily to gain new market (mintel3). This influence differences on both company orders Boeing total order of 3,350 aircraft compared with Airbus 3,426 .(Factivia 2010) According to differentiation shows that Airbus have ability in terms of added value and customer satisfaction by using global customer service that have international character,(Airbus 2009) Improved communication between company and costumers takes advantage against rivals.
Focus on their value-chain (Appendices 1) in term of in inbound logistics that can be linked to procurement: each country has their own ability and plays a major role in manufacturing stages. “Airbus, using the five main managing hubs whilst collaborate with 1500 suppliers in over 30 countries” (Data Monitor2009). Sufficient customer service, unique and reliable project design, and latest technologies that been mentioned in section 1 gives Airbus a strong edge in terms of primary activities.
Airbus operations can be linked closely to high technology growth. Through innovation, and international presence, Airbus manufacture in different countries. This gives them ability to produce the best quality and valued products for competitive costs (factivia 2010). Highly qualified labor had influence in that decision. (Airbus 2010) There are many different aspects of its manufacturing costs that influence companies and the leading position. Airbus covers its cost by dealing with highly trusted and dedicated suppliers Airbus considers; also through innovation and products that gives ability of creating unique future planes (Airbus 2009).
Outbound logistics also goes with the company infrastructure, implementing the concept of lean logistics to compete against competitors like Boeing. It is actually improving their outbound logistics by bringing more players into action like More MROs, OEMs and outsourcing of some operations. Airbus has a plan to develop such a strategy to integrate the supply chain in such a way that it would not only bring down costs but also provide speed of distribution with quality directly to it costumers (MRO Conference in Dallas, 2009)
In addition to the above mentioned areas it is clear that their competitive advantage is very noticeable.
Suitability, Feasibility and Acceptability
Airbus assesses the current environment very carefully (Appendices 6), the most specific to the current environment is the growing demand for the product through globalization and give chance to invest in the developing economies. Airbus finds new and more competitive market gains in Asia and the Asia Pacific regions. Airbus has “launched a manufacturing center for aircraft multiple parts in Harbin, China” (Leithen Francis, 2008). This movement will bring the company a significant income which is up to $2.8 trillion in the near future. By 2027 the passenger traffic will rise in Asia 4.8% (Appendices 3) this give opportunities and predict numbers of new order 28,600 new commercial airplanes (Airbus 2009). Airbuses also predict new profitable market that will have influence for Airbus future. According to product forecast “Middle East 32% and Africa total of 34% of the market between 2010 and 2025”. (Data Monitor 2009)(Appendices 6)
The global economy downturn that Airbus face had direct influences on its financial performance “Therefore the recession mainly affected the company compared to Boeing whose orders declined 70% from 1,439 aircraft in 2008 to 413 in 2009. Airbus lost just 39 orders, reducing its net order in total to 271, while Boeing suffered 121 cancellations, dragging its net total to 142”. (Flight global 2010) Because of the fact that airbus insures themselves against rising markets such as China as well as low-cost airlines that have grown worldwide (Carol Matlack 2009)
This highlight concept concludes that Airbus have chosen a strategy which preserves their competitive advantage through differentiation which is appropriate. Strategic planning during economical downturn can increase market share through their image and it also gives them the advantage with their experience against new entry rivals.
The economic downturn has damaged financial stability mainly comparing with rivals, which means that Airbus is more remarkable as a brand in term of capabilities in large scale over their competitors. According to the value-chain, it is evident that the marketing activities link with company infrastructure, are prominent. Close relation with governments and other public sectors gives the company the capability to contact them directly. This chosen strategy can be classified as differentiation. Safety and technological investment and brand recognizing help pass through the most difficult time and gives opportunity to face new goals. Airbus have also won 60 new plane orders in the first quarter of 2010, and had no cancellations. (factivia 2010) Airbus’s biggest strength is the fact that they know exactly who their customers are, by maintaining their booking details. This gives them the edge in order to contact them and manage relations.
Concerning the financial returns at the beginning of 2008 Airbus had 138 orders , this leads a market share in this segment of 63%.The company’s leading market position confers economies of scale and enhances brand image of the company.(Data Monitor 1 2009)
Airbus has provided equitable returns to EADS in (EADS 2008, the airbus division recorded revenues of â‚¬26,021 million ($38,285.7 million), an increase of 5.4% over 2007. (Data monitor 2 2009) also providing financial returns to shareholders and cost effectiveness to its target clients. Airbus takes risk into consideration. If Airbus will not provide reasonable returns to its shareholders, it can limit those financial resources which will link to a limit of investment. The Airbus expenses will have a strong influence on product cost that can affect customers. The customers are very sensitive in terms of price and hence, could immediately switch to a competitor in order to gain cheaper options.
By focusing in resources and capabilities Airbus have the ability to bring up operations on a large-scale. Differentiation and being ethical have raised its customer base specifically on long lasting loyalty. Brand image allows them to adopt market share to 64% in this segment industry and to predict future plans against rivals.
Appendices 1 the value chain and them
Supporting activates and primary activates
Airbus and Airbus Military can be considered as two SBUs of EADS. They play an important role in all the connections that occur in the folder business of EADS.(Eads 2010)
Human Resource Management:
Airbus has a very well managed system of human resource management and it has a concept of treating employees as its partners. It is offering special training, incentives and insurance to its employees. The employees are paid well to motivate them enough for better quality. It has a very well managed human resource management system at Airbus. Due to a highly motivated workforce, Airbus is making progress through quality in operations and productions. (Airbus 2010)
All the aircraft’s require a high level of R&D. Improve fuel usage reducing co2 emission, easy maintenance, design incorporate leading high-tech technology.
Most of decisions of Airbus are politically influenced by European governments. But in the recent years, Airbus has come out of this political influence and is outsourcing its operations to bring down costs and to use more technology. Therefore it is sustaining and differential advantage and value creation in the entire market and value chain. For example, in 2009 Airbus has opened an assembly plant in Tianjin, China for manufacturing of its A320 series aircrafts. (Leithen Francis, 2008)
Each country has its own capability:
Manufacturing stage in different counters
corporate with 1500 suppliers in over 30 counters
for highly trained specialist in different parts of the world
inspiration drive governments all around the world to corporate and provide easy access to their market
Dealing mostly In â‚¬ that are more stable rather then $
Strong customer service
-is very technologically driven organization
is very technologically driven organization which believes in efficient use of technology and it has a well managed operations system which provides it a competitive advantage It is further making progress by making more improvements to its operations to win against competitors like Boeing. It actually calls its operation centers as centers of excellence and it has a strategy of making rapid innovations in the market to gain a competitive advantage over Boeing and others. (Airbus 2010)
rapidit distribution to costumers
bringing more players into action like More MROs, OEMs
Marketing and sales
Airbus known all around the world because of the limited players on this market.
Good Relation with all around world governments, public sectors.
There is a strong message for example through its website. To target general segment.
EADS promote Airbus in military cargo
Availability of Customers service aircraft maintenance
Maintenance services provide packages of support elements that match the operator’s chosen support concept to optimize aircraft availability and life cycle cost
Invest on Research Development compare to Boeing
Top of Form
RD- Research Development
Image Caption: Investment by Airbus. (MacPherson,2007)
Top of Form
Image Caption: Investment by Boeing
Passenger traffic forecast
Airbus strategy: Differentiation 4
Bowman’s strategy clock 1996
Governments support, depending of aircraft modules based on new regulation, schedules of pricing,
After recession plans
Demand of travelling
Reaching destinations in a short time
Implementing new technological solutions best for future
Co2 omissions, fuel isse