Current And Future Sustainability Of Boeing And Airbus Marketing Essay
The objective of this thesis is to perform a comprehensive strategic analysis between the two largest airliner producers, Boeing and Airbus. These companies are viewed as the major rivals within this industry, competing in a neck-to-neck race to secure their title as market leaders in the aircraft manufacturing industry. Even though the two companies share a duopoly; every single deal or managerial mistake could determine the fate of each company. Consequently we must analyze both internal and external factors influencing both companies in order to determine who has the greater potential to become a market leader with the most sustainable future.
Internal analysis will cover the company vision and mission statements, goals and objectives as well as their managerial philosophy. Furthermore, it will also cover their value chains, and their strategy implementation processes. Regarding the external analysis, we will analyze the aircraft manufacturing industry as well as airline transport companies; we will use tools such as PEST, SWOT and Porter’s five forces in order to determine how both industries are performing so that we may have a more detailed outlook as to how this industry will respond to the short and long term strategies of Boeing and Airbus. We will also study the remaining competitors in this industry so that we may be able to predict whether or not they could pose possible threats to the viability of Airbus and Boeing’s current duopoly. This thesis will also focus on the financial data of both companies, which we will discuss in greater detail, in order to evaluate which is the safest and most profitable investment for potential investors. This will be done through analysis and comparison of Boeing and Airbus financial ratios based on year to year financial performance. Before we can focus on the analysis, we must first understand the history of the companies, as well as their current and future product lines.
Boeing is an American major aerospace and defense corporation that was founded in 1916 by William E. Boeing. For the first ten years of the company’s life, Boeing focused solely on manufacturing B &W seaplanes. In 1927 it began its first round of acquisitions and mergers by acquiring companies like Pacific Air Transport, Hamilton Standard Propeller Company, Chance-Vought and Pratt & Whitney which is still present as a market leader in the manufacture of aeronautical engines.
In the 1930s, Boeing introduced its first airliner, the Boeing 247, which was used only for its own airline business. The 247 was distinguished for its safety record and performance. In 1934 the Air Mail Act was enacted, which prohibited aircraft manufacturers and airlines to be part and parcel of the same corporation in an effort to prevent the actions Boeing took with the 247. As a result, Boeing divided itself into three smaller corporations known as: Boeing Airplane Company, United Airlines and United Aircraft Corporation and changed its corporate strategy which would lead them to sell aircraft to other airlines like Pan Am.
Its largest production era occurred during World War II, when it manufactured the noted B17 and B29 Bombers for the United States Air Force; at one point production reached 350 units a month. During the 1950s Boeing diversified its product line again, by creating and manufacturing ballistic missiles for the U.S government.
In the early 1960s, Boeing produced the first “modern” jet airliner titled the 707; owing to its high degree of technology and performance, and some variants of the original aircraft may still be in use for a vast number of airline corporations. The era of the 1960s was outstanding in terms of design and production of new jet aircraft. Boeing created the 727, 737 and the famous double-decked 747 all of which are still flying a substantial number of passengers around the world each day. The 1960s also saw Boeing’s attempt to enter the spatial industry; unfortunately, the new project was not as successful as its commercial transport business enterprise. This was due to the fact that the Apollo spatial missions only lasted a decade. The curtailment of the Apollo mission was not the only problem Boeing faced in the 1970s; a recession within the aircraft industry led to zero aircraft orders for over a year as well as the abolition of its supersonic 2707 jet program which was intended to be the direct rival of the European Concorde.
In the 1980s more than a thousand 737 aircraft were manufactured since its first flight debut in 1967, making it the most popular aircraft in history. Boeing also rejoined the spatial industry by providing many components for the Space Shuttle project as well as manufacturing a portion of the international space station. As we will see later, the 1980s were also characterized by increasing competition from the new Airbus company which produced the A300. In response, Boeing developed the 757, which was larger than the previous 737.
There were a profound number of mergers in the 1990s which contributed to Boeing’s leadership in the defense and aerospace industry, employing more than 200,000 workers. In 1996 Boeing merged with Rockwell International in a deal valued at approximately $3.1 billion. Rockwell International at the time manufactured a variety of electronic components and were present in such industries as: Aerospace, automotive, industrial and automation . In addition, it became a major U.S defense contractor. Prior to the merger, Rockwell International was seen as one of Boeings major direct competitors together with Northrop Grumman and Lockheed Martin. In August of 1997, Boeing merged with McDonnell Douglas in an effort to finalize its position as a commercial entity and one of the largest integrated aerospace companies in the world. This resulted in their achieving a 60% market share for commercial jetliners. Moreover McDonnell Douglas, at the same time, held a costumer profile of 28% commercial and 72% defense while Boeing held 80% and 20% respectively. The transaction required three years to accomplish and had an estimated value of $13.3 billion. Increased efficienw, was one of the reasons the merger occurred, It was estimated that the possible cost reduction could save over $1 billion per year.
At present Boeing focuses on providing commercial aircraft as well as aerospace and defense systems. It manufactures commercial jets which can carry from 107 to 433 passengers. In the past, after its failure to finalize its supersonic jet, Boeing focused its resources on its 787 Dreamliner, which initiated its first flight debut in the first quarter of 2010 (see Appendix 1 for detailed aircraft specifications). As the 787 Dreamliner project demonstrated, Boeing’s short to medium term strategy was to focus on point-to-point traffic on medium to long range journeys, unlike Airbus which focused on hub-to-hub transport. The 787 Dreamliner development increased overall morale, coupled with shareholder support for the new project. It was regarded as a “game changer” since Airbus prior to 2005 held the majority of market share. In 2008 it produced more than $60 billion in revenues, again establishing itself as a leader in the commercial aircraft manufacturing industry.
When Airbus was founded in 1970 it was a consortium of aerospace manufacturers which was established to compete against its American rivals such as Boeing, Northrop Grumman and Lockheed Martin, which were and still are regarded as industry leaders. From the inception of the company, Airbus was an international joint venture, constituted as Aerospatiale of France’, ‘Deutsche Airbus of West Germany’, and ‘Constructiones Aereonauticas S.A.’ which joined the team in 1971, and finally in 1979, Britain with its ‘British Aerospace.’ The arrangement proscribed that Airbus would be in charge of designing and marketing the products while its subsidiaries produced the various component parts of the airframes; the products would then ultimately be assembled at Airbus headquarters in Blagnac, France.
The first product that rolled out on the tarmac of Blagnac was the Airbus A300 on October 28, 1972. One very interesting fact about this aircraft was that its initial target-passenger-carrying capacity was 300; and an unexpected combination of increased costs and delays on delivery of its Rolls Royce engines, led Airbus to finally select the General Electric Company for its engine supply. This decision reduced the carrying capacity to 250 passengers. At the time Airbus conceded this would weaken the project. Rather, it then developed by virtue of exigencies of the market and circumstance that proved to be a competitive advantage, due to the industry’s shift to a demand for more fuel efficiency and shorter passenger capacity aircraft; by 1979 the A300 had more than 256 active orders.
A potentially encouraging development occurred when Airbus unveiled its A320 in 1984; it seated 150 passengers and was seen as Boeing’s 737 most threatening rival. Airbus had received 400 orders before even making the first flight, compared to 15 orders the A300 received before its maiden flight. This airliner is still known today as a technologically advanced and cost-efficient jet in view of advanced “fly by wire  ” technologies and the attendant “revolutionary guidance system”.
As a result of the Airbus rapid expansion in its business results and its introduction of the A320, it achieved second place position in market-share in the commercial air transport manufacturing industry by the end of 1980. In fact, it surpassed its direct rivals such as Lockheed and McDonnell Douglas, which at that time were not yet part of Boeing. Despite Airbus’s market share, it was not able to achieve any profits from its business since it had invested a substantial amount of its resources in its R&D division.
In 1988 Airbus announced it would fully commit to serving the industry with a broad range of aircraft, suited for all types of airline carriers. Due to the increasing number of passengers that demanded long haul travel as the result of third wave globalization, the company restructured its policies. It planned to deliver and enter the market of medium to long-range aircraft such as the A330 and the A340. These were introduced in order to expand the product-line market gap of Airbus. It’s vision concerning “Hub-to-Hub” transport still remains as an essential strategy policy of Airbus with the introduction of the A380.
As well as closing the gap with its rival, Boeing, Airbus posted its first profit since its creation in 1970 and increased the number of aircraft sales to American airline companies such as Northwest Airlines, FedEx, American Airlines and United Airlines; as a result Boeing management was forced to revaluate its prediction of the short life expectancy of Airbus.
1.2.2 Present Status
Today, Airbus is a subsidiary of EADS (European Aeronautic Defense and Space Company) since the year 2000. Airbus’s revenues for 2008 accounted for more than 63% of EADS’s total revenues, which reached $59 billion, and Airbus still focuses on providing the airline industry with commercial aircraft for both passenger and cargo markets. Its range of aircrafts can carry from 110 to 555 passengers (see Appendix 1 for detailed aircraft specifications) and are designed to provide short to long-range capabilities. The company is regarded as an industry leader for providing fuel-efficient, highly technologically advanced aircraft and moreover, has achieved an impeccable safety record. In spite of its record over the past five years, it has suffered a substantial decrease in market share against its rival Boeing, owing to continuous production and delivery delays of the A380 aircraft. Production delays have accounted for a substantial amount of its resources. Its present and future strategy is to focus on “Hub-to-Hub” transport and to concentrate on delivering aircraft to emerging airlines positioned in China and India.
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