Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.
Civil aircraft manufacturing industry is one of the largest industries in the world which Boeing and Airbus are the two large players who dominated the industry. The main former competitors have exited civil aircraft manufacturing market, for instance, Boeing merged with McDonnell Douglas Corp in August 1997 (Boeing, 2010a), and left Airbus and Boeing operating in a near duopoly global market. Boeing now headquartered in Chicago and employs more than 158,000 people in 70 countries with $60.9 billion revenue in 2008 which founded in 1916 (Boeing, 2010b). Airbus, by contrast, created in 1970 with 52,000 employees comes from more than 80 nationalities (Airbus, 2010) and gained ââ€š¬43.3 billion revenues (EADS, 2008). Apparently, it is vital important for new player to survive and prosper by examine the macro and sector environment. This report tries to seek the critical success factors and evaluate whether this is an attractive sector to compete in by research secondary information. This report will begin with evaluate key drivers for change in order to know the external environment issues. Secondly, Porter’s five force analysis and industry life cycle will undertake to analysis the structure of this industry. Finally, the report is going to conclude critical success factors from the findings draw from last two steps.
2. Key Divers for change
Macro-environmental influences sometimes are significant important for an organisation to survive and prosper. Therefore, there are five external key diver listed below and draw from PESTEL analysis about civil aircraft manufacturing industry.
Global economic recession had impact on civil aircraft manufacturing in several aspects. On one hand, the direct influence is the two companies received fewer orders than before. For instance, the number of orders Boeing received decreased significantly in 2009 (142) compared to 2008(662) and 2007 (1,417) (Talton, 2010). On the other hand, the recession had led to downsizing in both Boeing and Airbus. For example, Boeing announced that it would cut 4,500 jobs (Weber, 2009). So the new entrants can gain access to the expertise in this industry easily. It means the new master of those staff will know not only the market but also some secret of the two main competitors.
2.2 Fuel price increased
Fuel price is also an influence for aircraft manufacturing industry. According to The Times (2008), more than $100 billion of aircraft orders have cancelled or postponed resulted from high price of fuel. It indicates that if one company can produce the more environment-friendly aircraft will attract potential buyers who want to take advantage of low fuel cost.
2.3 Political influence
Political influences sometimes are vital important for manufacturing industry. For example, IATA had introduced emission policy options in order to improve fuel efficiency and emissions for protecting environment (IATA, 2010). Otherwise, the companies need to pay huge fund. Therefore, some companies need to redesign the component such as engine and exhaust system. Moreover, some governments intervene international trade is another issue can not ignore, namely, recently Boeing suffered threat from Chinese government after United States arms sold to Taiwan (Lubin, 2010).
2.4 Government aid
Both of Boeing and Airbus regularly accuses the other of receiving unfair state aid from their respective governments, namely, the WTO Boeing-Airbus dispute (European Commission, 2007). The reason why is aircraft manufacturing company need significant mounts of money to set up and invest in research and development. For example, Gresing and Johnsson (2007) cited pure development cost of Boeing 787 was $10 billion.
2.5 Technology Innovation
Advanced technologies are one of the key factors for this industry. It helps the company not only keep the differentiation of product but also save internal resources. Boeing 787 dreamliner is a living proof to prove this, namely, 50 percent of the primary structure of Boeing 787 is made of composite materials to achieve higher strength-to-weight ratio (Hawk, 2005). In addition, Boeing announced General Electric and Rolls-Royce have developed new engines which will improve the fuel efficiency approximately 20% compared to Boeing 767 (Boeing, 2010c). The new aircraft will attract customers who want to take advantage of lower maintenance cost.
3. The Structure of the civil aircraft manufacturing industry
Porter’s five force analysis and industry life cycle will undertake below in order to evaluate whether civil aircraft manufacturing industry is an attractive sector to compete in.
3.1 Porter’s five forces analysis
Appendix 7.1 illustrates the Porter’s five forces analysis and it will describe below.
3.1.1 Threats of entrants
3.1.2 Supplier power
3.1.3 Buyer power
3.1.4 Threats of substitute
3.1.5 Competitive rivalry
3.2 Industry life cycle
Appendix 7.2 shows the industry life cycle for civil aircraft industry. This report considers the stage of civil aircraft industry life cycle is in the end of shock-out and in the beginning of the maturity because of this industry still maintains some features in shake-out stage and gain new features in the fourth stage.
Both shake-out and maturity stage have some similar characteristics, like the low and slow growth and high entry barrier. For example, boeing and Airbus suffered from the sharp deceasing number of order at Duhai show in 2009 (EASA, 2009). On the other aspect, Airbus and Boeing received government aid from Europe and United States respectively. It also indicates that it is difficult to survive in this industry without government support. In other words, at least the cost of threshold resource and competence are quite high.
However, the situation of this industry is also fulfilling the some exclusive characteristics of the two stages, namely, in shake-out stage smaller player in this industry were forced exit or acquired with the Boeing and Airbus resulted in left a near duopoly market for the two giants. Boeing merged McDonnell Douglas Corp is one example (Boeing, 2010a). Meanwhile, the fierce competition with rivals will happen due to the strong buyer power resulted from more players compete in this industry such as China, Brazil (Goodrich, 2009).
Airbus (2010) Employees from all corners of the world [Online] Retrieved from http://www.airbus.com/en/corporate/ethics/diversity / [Assessed on 23 February, 2010]
Boeing (2010a) The Boeing Logbook: 1997-2001 [Online] Retrieved from: http://www.boeing.com/history/chronology/chron16.html [Assessed on 23 February, 2010]
Boeing (2010b) Boeing in Brief [Online] Retrieved from: http://www.boeing.com/companyoffices/aboutus/brief.html [Assessed on 23 February, 2010]
Boeing (2010c) Boeing 787 Dreamliner Will Provide New Solutions for Airlines, Passengers [Online] Retrieved from: http://www.boeing.com/commercial/787family/background.html [Assessed on 24 February, 2010]
EADS (2008) Financial Statements 2008 pp.9 [Online] Retrieved from: http://www.reports.eads.com/2008/en/s/downloads/files/financial_statements_eads_ar08.pdf [Assessed on 23 February, 2010]
EASA (2009) European Aviation Safety Agency News Summary 14/11/2009 – 20/11/2009 pp.1 [Online] Retrieved from: http://www.ucl.cz/download/pdf/News_Summary_23_11_09.pdf [Assessed on 24 February, 2010]
European Commission (2007) The WTO Boeing-Airbus dispute (updated 15 June 2007) pp.1 Retrieved from: http://trade.ec.europa.eu/doclib/docs/2007/june/tradoc_134957.pdf [Assessed on 23 February, 2010]
Goodrich (2009) Goodrich and China’s XAIC Agree to From Joint Venture Companies [Online] Retrieved from: http://ir.goodrich.com/phoenix.zhtml?c=60759&p=irol-newsArticle&ID=1319837&highlight= [Assessed on 24 February, 2010]
Greising, D & Johnsson Julie (2007) Behind Boeing’s 787 delays pp.2 [Online] Retrieved from: http://www.buffalo.edu/news/pdf/December07/ChicagoTribPritchardBoeing.pdf [Assessed on 23 February, 2010]
Hawk, J (2005) The Boeing 787 Dreamliner: More Than an Airplane pp.10-11 [Online] Retrieved from: http://www.aiaa.org/events/aners/Presentations/ANERS-Hawk.pdf [Assessed on 24 February, 2010]
IATA (2010) Emission Policy Options [Online] Retrieved from: http://www.iata.org/whatwedo/environment/emissions_policy.htm [Assessed on 23 February, 2010]
Lubin, G (2010) China Threatens ‘Unprecedented Sanctions’ Against Boeing After US Arms Sales to Taiwan [Online] Retrieved from: http://www.businessinsider.com/china-threatens-unprecedented-sanctions-against-boeing-2010-2 [Assessed on 23 February, 2010]
Talton, J (2010) Boeing’s drop in orders shows recession’s effects still linger [Online] Retrieved from: http://seattletimes.nwsource.com/html/soundeconomywithjontalton/2010729937_boeings_drop_in_orders_shows_r.html [Assessed on 23 February, 2010]
The Times (2008) Threat to aircraft orders as fuel prices soar [Online] Retrieved from: http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article4327146.ece [Assessed on 23 February, 2010]
Weber, J (2009) Boeing Will Cut 4,500 Jobs [Online] Retrieved from: http://www.businessweek.com/bwdaily/dnflash/content/jan2009/db2009019_791015.htm [Assessed on 23 February, 2010]
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please: