AIRBUS From Challenger To Leader

INTERNATIONAL BUSINESS STRATEGY

Table of Contents
No 1 2 3 4 Content Introduction Overview of Companies Internal Analysis Business Model (Capabilities & Resource) VRIO Model Porters Five Forces Presenter Vern Siang Vern Siang Vern Siang Vern Siang

5
6 7 8 9 10 11

Porters Value Chain

Lifecycle SWOT Analysis External Analysis P,E,S,T Comparison Airbus vs. Boeing GAP Analysis Conclusion The Power8 Strategy

Addie
Addie Addie Lee Tatt Ian Chong Ian Chong Amir

Introduction

History of Aerospace Industry

Aerospace industry dates back 1917, US government built an aeronautics research center in Langley, Virginia Investment aerospace industry was substantial, before & during the second world war Prior to world war two Britain the leader in the aerospace industry After the war, American began to dominate the global aerospace Many European aircraft manufacturer became bankrupt Main players in the aerospace industry were the Boeing in 1960 Late 1960s, big three Britain, France and West Germany forming the consortium Airbus industries

Overview of Companies
AIRBUS European Joint venture between EADS (80%) & BAE (20%) system headquarters in France 1970s became an aircraft manufacturer for a large jetliner Competing for market leadership with Boeing Offers a range of single aisle and wide body 110 to 555 passengers Known as the innovator of new technologies & best known for mega jumbo A380 for the future

Overview of Companies
BOEING World leading aerospace company manufacturer of satellites & military aircraft worldwide After second world war, shifted from the defense industry to commercial aircraft Located in U.S produce aircraft that carries 107 to 433 passenger Manufacture its first jumbo jet Boeing 747

Internal Analysis

Resources & Capabilities

Financial

Customer

Short Term Efficiency

Long Term & Growth

Resources & Capabilities

Financial Support 4 governments, provide cheap loan no repayments condition & 40% funded by Saab, 30% governments loans , 30% consortium own fund Customers More than 100 airlines worldwide Short Term Efficiency Had fewer HR problem, contract workers Long Term & Growth Average yearly growth 10% (2003-2009), higher than industry standard of 3.5% EADS Support

VRIO Model
V=valuable R= Rare To customer, example wider choice to switch to Airbus Against competitors, example A380 Substitute, example same cockpit every plane model Resources Structure Managed deliver potential value and create sustainable competitive advantage

Porters 5 Forces

I= Imitable

O=Organisation

VRIO Model
Parts Manufactured Cabin Interior Locations Buxtehude, Laupheim (Germany)

Fuselage
Fuselage(cockpit and centre) Wing Pylon, Nacelle Empennage-horizontal tail plane

Hamburg, Nordenham, Breman, Varel (Germany)

Meaulte,Saint Nazaire, Nantes (France) Broughton, Filton (England) Toulouse (France) Puerto Real (France), Getafe and Spain

Empennage-vertical tail plane

Final Assembly Lines A-320 Family A-300/A-310 & A-330/A-340 A-380

Stade(Germany)
Hamburg(Germany) and Toulouse(France) Toulouse(France) Hamburg(Germany) and Toulouse(France)

Porters Five Forces

Source: Hill, Jones and Galvin (2004, p. 83)

Porters Five Forces

Risk of threat new entrants High entry barrier - investment

Rivalry among firms Large passenger aircraft - only 2 big players Innovative technology Commercial & economical value
Threat of substitute products Video conferences High speed trains

Porters Value Chain

Industry Lifecycle

Source: Hill, Jones and Galvin (2004, p. 93)

SWOT Analysis
STRENGTHS
Niche Strategy: Continuous R&D for innovation Product Differentiation: Various models Customer Oriented Approach: Based on market demands

WEAKNESSES
Lack of shared information among partners: Unorganised and disoriented Difficult to privatise: French government

THREATS
Increased safety regulations: Must adhere to industry standards constantly updated Rumours: Tarnish reputable image

OPPORTUNITIES
Lockheed Withdrawal: Less competition Air traffic growth: 5% per annum European Union: Financial support Need for more efficient aircraft: Costs reductions

External Analysis

P.E.S.T
Political Factor
WTO Litigation between US and EU

1992 Bilateral deals key Agreement Launch Aid for new aircraft available till to Airbus until it reaches relative parity with Boeing US lodge complain to WTO on Airbus illegal Launch Aid To date, EU and US still could not reach out an agreement making the possibility of WTO involvement EU says they will not sacrifice Airbus's launch aid without a balanced cut in Boeing's various lines of support If WTO were to rule out against either company the result could be in billion in retaliatory fines, which will hurt the aerospace industry & their hundred of thousand of employees on either side

P.E.S.T
Political Factor
Buyers government policies (e.g. China & Japan) Requirement of equipping local manufactured parts

Economical Factor
Global air traffic growth 4.7%pa (Greatest demand : US, China, UK & Middle East) Oil price fluctuation

Euro currency fluctuation Airbus Sales in USD & Production in Euro

Air Traffic Growth (2009 2028)

Source: GreenAir Online http://www.greenaironline.com/news.php?viewStory=596

P.E.S.T
Socio-Cultural Factor
Change in Lifestyle Convenience vs. Price (Low Cost Carrier) Climate Change/Natural Disaster Changes / discontinue in travel pattern (e.g. Volcano Dust)

Technology Factor
Demand for development of a more efficient aircraft Carbon fiber construction of body More efficient & less noise engine

Boeing vs. Airbus

Boeing vs. Airbus

GAP Analysis
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -

Desire Actual

2018

2019

2010

2011

2012

2013

2014

2015

2016

2017

Projection average of 1205 aircraft to be delivered per year in aviator industry Projection 500 units aircraft to be delivered by Airbus with 3.5% incremental growth every year

2020

Future Strategies

Power8

Source: Power8 8 Modules to Cover Key Targets http://www.eads.net/eads/special/irpower8/en/index.htm

Conclusion

References
Hill, CWL, Jones, GR & Galvin, P, 2004, Strategic Management: An integrated approach, John Wiley & Sons, Milton. Commercial air traffic annual growth to continue at 4.7 percent over next 20 years (2010), forecasts Airbus, Available from <http://www.greenaironline.com/news.php?viewStory =596>[Accessed on 13 August 2010] Power8 8 Modules to Cover Key Targets, Available from <http://www.eads.net/eads/ special/irpower8/en/index.htm>[Accessed on 13 August 2010] The Airbus-Boeing Global Rivalry, Available from <http://www.fdu-harmon.com/Boeing% 20-%20Airbus.pdf>[Accessed on 5 August 2010] Why Airbus is outselling Boeing lately One Exec Calls It A Sobering Year, Available from <http://www.thefreelibrary.com/WHY+AIRBUS+IS+OUTSELLING+BOEING+LATELY+-+ONE+EXEC+CALLS+IT+A...-a064037332>[Accessed on 5 August 2010] <http://en.wikipedia.org/wiki/Airbus>[Accessed on 5 August 2010] <www.boeing.com>[Accessed on 2 August 2010] <www.airbus.com>[Accessed on 2 August 2010]

Thank You