AIRBUS

“From Challenger To Leader”

INTERNATIONAL BUSINESS STRATEGY

Table of Contents No Content Presenter

1 Introduction – Overview of Companies Vern Siang

2 Internal Analysis – Business Model (Capabilities & Resource) Vern Siang

3 VRIO Model Vern Siang

4 Porter’s Five Forces Vern Siang

5 Porter’s Value Chain Addie

6 Lifecycle Addie

7 SWOT Analysis Addie

8 External Analysis – P,E,S,T Lee Tatt

9 Comparison – Airbus vs. Boeing Ian Chong

10 GAP Analysis Ian Chong

11 Conclusion – The Power8 Strategy 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 1970’s – 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

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

Resources & Capabilities

VRIO Model

V=valuable To customer, example wider

choice to switch to Airbus

R= Rare Against competitors,

example A380

I= Imitable

Substitute, example same “cockpit” every plane model

O=Organisation

Resources Structure Managed deliver potential

value and create sustainable competitive advantage

Porter’s

5 Forces

VRIO Model Parts Manufactured Locations

Cabin Interior Buxtehude, Laupheim (Germany)

Fuselage Hamburg, Nordenham, Breman, Varel (Germany)

Fuselage(cockpit and centre) Meaulte,Saint Nazaire, Nantes (France)

Wing Broughton, Filton (England)

Pylon, Nacelle Toulouse (France)

Empennage-horizontal tail plane Puerto Real (France), Getafe and Spain

Empennage-vertical tail plane Stade(Germany)

Final Assembly Lines

A-320 Family Hamburg(Germany) and Toulouse(France)

A-300/A-310 & A-330/A-340

A-380

Toulouse(France)

Hamburg(Germany) and Toulouse(France)

Porter’s Five Forces

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

Porter’s 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

Porter’s 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 deal’s 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 Buyer’s 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

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

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Desire

Actual

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