Revolution in the Jumbo Jet Market: Airbus-Boeing - Case Study Example

Your name: Course name: Professors’ name: Date Internal analysis An organization gains competitive advantage by utilizing unique internal resources to develop core competencies and distinctive capabilities. There are two types of internal resources: intangible and tangible. Tangible resources include all the physical assets such as equipment, financial strength and machinery. Intangible resources do not physically exist but they cause increase to shareholder and customer’s value such as brand name, reputation, and organizational culture (Armstrong & Cunningham, 2012). Resources and capabilities Running a successful airline manufacturing company is very difficult and requires a lot of resources, core competencies and capabilities. Boeing commercial airplane division is purposefully fit and enriched in terms of developing resources that aids the organization to advance core competencies and distinctive capabilities. The segment has unique and comprehensive services and products which are crucial in running the organization. Resources and the capabilities of Boeing Airline include Commercial Aviation Services, Boeing Capital Corporation, Flight Services, Fuel Conservation Services and Training. The organization is advanced in terms of engineering, planning and assessing the airport services. Airline financing is instituted by Boeing Capital Corporation. Customer flight support, fleet enhancement, material management, maintenance and flight operations are dealt with by Commercial Aviation Services. Fuel Conservation Services assists to develop systems that reduces the consumption of fuel therefore enhancing the efficiency of their airplanes. Training department is responsible for training the flight crew to ensure better product and service delivery. On the other hand, Airbus Resources and capabilities to the opportunities arising from the external environment are aimed at meeting the needs of the operators and airlines by producing and developing modern and unique aircraft in the market. Airbus often produces aircrafts that are unique through the design. They ensure their aircrafts design employs state of the art technology especially when customizing their planes to suit the customer’s wants. Their attractive and unique design attracts a lot of customers. Airbus manufactures aircrafts that meet the requirements of military and the advanced technology required by them. Capabilities of Airbus emerge from valued resources like its culturally diverse employees, contractors, and customers. The Airline considers the customers as part of the organization and involves them in developing new airplanes. The resources and capabilities provides a competitive advantage to the company over its rivals especially in terms of technology and design. The strong organizational culture have helped Airbus become the leader in the industry pushing Boeing to be the challenger (Wei, 2012). Airbus employs over 3000 people working on their research projects. Core competencies Boeing core competencies can be categorized into two categories: process innovation and product innovation. Process innovation is based upon Lean manufacturing policy which encompasses efficient use of inventory, supplier management, and proper use of company’s assets in achieving highest quality while at the same time minimizing on cost. Product innovation strategy focuses on market trends which is aimed at satisfying customer’s needs, wants and demands (Burdick & DiPonzio, 2013). The fundamental core competence of Boeing is putting into practice the production of large scale systems in making technologically advanced commercial airplanes. Being distinctive management and leadership strengthens their capabilities thus obtaining a competitive advantage. On the other hand Airbus also has some strengths in their core competencies. Much of Airbus strength is through their effective support system that is effected throughout the company. Better communication amongst individuals and offices within the Airbus is effected by having a very strong internal support system. Strong internal support system, provides the company with a great sense of efficiency in all the different business segments of the company (Wei, 2012). Airbus also has a diversified customer base with other planes used by different airlines globally. This makes them operate well within all the regions of the world. Having a diversified customer base impacts positive growth of Airbus by ensuring there is always an increase in the revenues. Value chain analysis Value chain analysis is employed by organization to determine how the resources are being utilized and the best way they can be employed to have a better performance Armstrong & Cunningham, 2012). Boeing often sets up value-generating activities aimed at customer satisfaction. Boeing Capital Corporation has the responsibility of providing the customers with facility to finance the commercial airplanes. The Advance Aviation Performance Program is an after sale service and a value chain activity of the company which offers 24/7 customer support service globally. The fundamental goal of the program is to offer technical support to all customers and deliver spare parts if urgently required. Alteon Aviation Training is another activity provided by Boeing to offer computerized training to customers on all features of a new product. MyBoeingFleet is a web portal that adds value by offering online information to facilitate customers maintain their fleets remotely. In addition, Global Airline Inventory Network assists customers manage and track their inventories thus improving their supply chain management. In the year 2000, Airbus initiated Radio Frequency identification in the Airbus Radar. The program was very important in maximizing benefits across the entire company. It was a coordinated activity that aimed at reducing duplication of some operations and activities so as to maximize synergies. In 2007, the company launched the Value Chain Visibility Program. Dedicated Airbus team was initiated to develop, prioritize, and consolidate activities to ensure all operations of the Airline ran smoothly (Burdick & DiPonzio, 2013). The program give more visibility to the organization on what needed to be developed or added to the existing resources. Today, Airbus often acts as a catalyst for the commercialization of efficient and clean Bio-Jet fuels. This has led to better conservation of the environment and good relations with the customers. In their Perfect Flight program, Airbus believes it can reduce the ejection of carbon dioxide to minimum. Airbus also has effected a number of activities in their Best Practices programs such as using sustainable alternative fuels, Air Traffic Management (ATM), and developing and operating eco-friendly and efficient aircrafts. Financial analysis With the increasing fuel prices, Airlines must manage their revenues appropriately to sustain their growth. Boeing saw an increase in its revenues in 2007 by 8% to record total revenue of $66,387. Following the financial crisis of 2008, the revenues were reduced to $60,909. However, the company recovered in 2009 and 2010. In 2011, total revenues summed to $68.7 billion. $36.2 billion the total revenue in 2011 were generated by the commercial airplanes. 70% of the total revenues of Boeing comes from commercial airplanes from the outside world. On the other hand, Airbus financial condition is still healthy. With the A380 commercial airplane in the market the hope to increase their revenues. In 2013, their total revenues amounted to approximately $37 billion. However, their returns on capital (ROC) exceeded Boeing by 7% over the last four years. Airbus ROE exceeds the company’s cost of equity by approximately 7.4%; this reflects good projects by the firm. Marketing strategies and objectives Functional product differentiation of Airbus and Boeing creates competition and rivalry between the two companies. With the Boeing 787 Dreamliner and Airbus A380, the two companies employ different strategies in marketing their products and services. The two companies have fundamentally different products which are based on each side vision for the future. Airbus are convinced that the future of aircrafts lies in the jumbo size airliners (Darmawan & Wandebori, 2013). Therefore, Airbus is employing an expansion strategy in both the commercial and military airlines so as make their products marketable in the future. Airbus operates by listening to their customers and employee’s needs; this ensures they market the right type of product and service for the airline. The company has created effective teams globally. These teams have different cultures, nationality, skills and background to develop and market their products and services. Though, there may be a communication problem, the strategy helps the organization understand the needs of customers throughout the world Armstrong & Cunningham, 2012). Boeing on the other hand, focuses on smaller and midsize airplanes; they believe that most airlines wants smaller airports thus encourage smaller airplanes that can travel long distances. Their success mostly depends on the 787 Dreamliner. They changed their naming from 7E7 to 787 so as to stay in line with their tradition and market their products and services effectively. Boeing ensures comfort and convenience in their aircrafts rather than the total number it ferries. This has been the marketing strategy they have adopted. It also invests heavily on test equipment, research, and development of new facilities. SWOT analysis Strengths The introduction of their largest commercial airplane A380 has seen Airbus compete favorably with the giants Boeing. Though Boeing 787 Dreamliner is an eco-friendly jumbo jet manufactured by composite materials to save on fuel, A380 can compete with it through good marketing strategies (Smith, 2013). Better communication amongst individuals and offices within the Airbus is effected by having a very strong internal support system. Strong internal support system, provides the company with a great sense of efficiency in all the different business segments of the company (Wei, 2012). On the other hand, Boeing has business segments that place it in a strong market position. Strong business segment of Boeing includes the defense market and aerospace. They are the largest and leading manufacturer of commercial airplanes. Moreover, it is the leading US exporter. Boeing also supports the US airlines and their allied government clients in approximately 150 countries (Burdick & DiPonzio, 2013). Weaknesses Boeing highly depends on the US government contracts. Though it aids in its revenues it can also be seen as a weakness since sometimes government contracts are sometimes associated with politics that can impact negatively on Boeing. For example, 38% of the company’s revenues were obtained from US government (Smith, 2013). Also, Boeing delayed 787 Dreamliner delivery because of supplier workmanship problems related to instrumentation and horizontal stabilizers delays (Smith, 2013). More delays can potentially damage the reputation of Boeing Company. On the other hand, Airbus major weakness lies on the issues and problems associated with their A380 engines, which power their largest airplane. The problems arose from manufacturing defects when designing the engines. These problems lag the company from the exact position they would have liked to be (Burdick & DiPonzio, 2013). Opportunities There is increased demand for the commercial airplanes. Following the rapid growth in air travel in most world’s emerging economies, there’s an increased demand for the aircrafts. Both Boeing and Airbus have an increasing demand for their aircraft from various companies globally. There is also huge opportunities in China and India who are spending a lot in their defense aircrafts. Threats The biggest threat to Boeing and Airbus is the increasing competition in the airline industry and the jet aircraft market. The airline industry and the jet aircraft market is extremely competitive. Boeing and Airbus are rivals and also face stiff competition from the likes of Embraer and Bombardier. All of these companies are very innovative and offer great products. Most of Boeing’s customer financing portfolio is concerted in distinct geographic regions among certain customers, mostly in US. If any of the customers having significant portion of the company’s portfolio assets refuses to renew their leases or is faced with financial difficulties, Boeing could be unpleasantly affected. Developing competitive advantage There are numerous ways in which Boeing and Airbus can develop competitive advantage, one of such ways is ensuring that they increase their reporting on CSR, especially environmental concerns. According to Smith, (2013), recent statistics reveal that increased environmental concerns increases customer purchasing chances in the company and also recommendation. As such, CSR can be used to gain competitive advantage by both Boeing and Airbus. The other option available is venturing into emerging markets. As evident, India and China are emerging economies that are increasing air transportation. Boeing and Airbus will gain a competitive advantage by being the first to venture into these markets. Increasing the ambience, the services in their planes will also boost the competitive edge of these airlines. References Armstrong, G., & Cunningham, M. H. (2012). Principles of marketing. Pearson Australia. Burdick, D., & DiPonzio, J. (2013). Which Airline Manufacturer Will Be The Industry Leader In Five Years? Datamonitor, New York. Darmawan, A. P., & Wandebori, H. (2013). Proposed strategy improvement for Citilink Airlines to increase market share. The Indonesian Journal of Business Administration, 2(14). Smith, F. (2013). The use of composites in aerospace: Past, present and future challenges. Avalon Consultancy Services Ltd. Wei, L. (2012). Research on the Library Information Service Pattern for Enterprise Technological Innovation. Information Studies: Theory & Application, 7(9). Read More