Adam aircraft industries were founded by Rick Adam and John Knudsen in 1988. It is an aircraft manufacturer company and they produce aircrafts for government and civil markets. Company is situated in the South of Denver, Colorado at Centennial Airport (KAPA). A variety of general aviation aircraft are provided by them, including the centerline, thrust twin-engine Adam A500 and A700 twin-engine personal jet.
Rick was the son of George Adam Sr. an experienced career Air force officer. Rick born in 1946 growing up in Air force bases led him to follow his father’s foot steps and join Air force; due to deficiency he couldn’t join the force. He specialized in computer science and joined the army later on switched to the Air force. In the early 1990’s he learned to fly. He had the opportunity combined with wealth to progress in flying career but he realized that majority of other operator owned pilots are not as fortunate. There was less choices among aircrafts which made them tough to fly and hell expensive to be operated and own. He thought on this factor and came to realize the solution is only a entire new generation of aircrafts for general aviation.
He spotted the opportunity and got the insights with other pilots discussing the same issue on lack of new products availability. So he initiated and started developing plans to launch and Aircraft Company.
In 1998 Rick partnered with John Knudsen a former FAA trial attorney and experienced aviator as well with a great career in U.S Navy. They understand the need of a jet or twin piston combined with superior performance capability, they narrowed down four or five concept designs and started working on it.
Internal Analysis for Adam Aircraft (AAI)
In any organization to start and strategic management process management is required to begin an internal analysis to know the strength and weakness of the organization with analyzing its potential competencies. For formation of effective strategies company has to expend and exploit its strengths in every possible way along with reduction in its weakness. It ultimately helps the organization to achieve the targeted profits.
The potential competencies include resource and capabilities of the company, here is the detailed internal analysis of Adam Aircraft after reviewing the case study.
Efficiency in design and production
Because speed and innovation was necessary for Adam, they instituted 24-hours scheduling already used to run data centers and networks. Additionally, they was also using highly sophisticated modeling design tools, developed by their powerful aircraft competitors.
Professional management team
Adam Aircraft recruited a top executive team consists of ten members, and almost everyone is an accomplished pilot with many years of experience from all aspects of aviation industry including their biggest competitors.
Efficiency in Time for Federal Aviation Authority (FAA) procedures
Because of the advancement in technology all the designs were submitted to FAA electronically, which saved a ton of time, also assuring the high degree of accuracy in the documents submitted. Adam Aircraft as well succeeded in getting ahead of their competitors by two years.
They adopted a new concept from computer industry and built an enormous modularity into aircraft designs to be able to move around aircraft’s parts easily. This allowed company to create new planes without spending huge amount of money on production every time and with the slightly adjustment in modules they can get new jet.
Ease of maintenance
The customer of Adam Aircraft has easy access to the system which able them to get a faster, cheaper and better service.
Hindrances in design and Manufacturing new aircraft
Despite the fact of all failures in the past and the hindrances involved to get all the equipment and trained workers required for fulfilling this task. Adam Aircraft was planning to create a completely new twin-engine aircraft for owner-operators.
Limitation of time to market and increased project cost
Adam Aircraft’s management team know the situation that due to the direct relationship between project cost and its time to get certified and market, they were determined with no choice but to start introducing innovative products.
Rick Adam realized that the standard budget for a new airplane project cost $250 million. Because of the little success in this industry they had to cut their development costs by at least 75 percent to be able to finance the project.
New entrant in the market
Pilots were uncertain to adopt a new aircraft which is different from the existing ones and manufactured and marketed by an absolutely new aviation building company with no reputation in the market yet. For that reason, they have to be perfect in every possible way for customer satisfaction.
External Analysis for AAI
In the external analysis management identifies opportunities and threats to be considered in developing strategies; for instance, company will try to find to take benefit of opportunities and reduce the risk of threats, in order to attain the business’ goals mentioned in the mission statement.
Following is the external analysis of Adam Air craft along with the Porters five forces model to point out the opportunities and Threats Company has.
Huge demand in the market
There were very few aircrafts available for pilots to choose from, if a pilot wanted to switch from a single to a twin-engine aircraft. Most of the twin-engine planes were too big, too heavy and too expensive. In addition to that, since the 80s there were almost no innovations in twin-engine market.
Advances in computer technology
In the 1990s there was a big change in computer technology and establishing CAD/CAM centers all the designs and developments could be made in-house resulting in, less time and money cost.
Advancement in manufacturing and tooling capabilities
With the help of a new designing and modeling software, and owning their own tooling mill the process becomes faster with the ability to modify the tool until they get what they want.
Adam Aircraft was aware of all the past failures by competitor companies, which have tried to build a twin-engine planes, jets, etc. Therefore, they had to consider all the potential pitfalls in running this business with the huge cost involved.
Expensive and time consuming FAA system of inspections
Federal Aviation Authority (FAA) is responsible for examining the aircraft before it could be released to the market and available for use. This complex process of certification usually takes a lot of time and money creating a great challenge for Adam Aircraft.
Lack of investors in aviation business
Because of the previous failures in aviation business making it unsuccessful investors and venture capitalists did not see the potential growth in it, were not willing and hesitant to support aviation companies.
High expectations of AAI’s potential customers
The potential customers 70-80% for Adam Aircraft are the group owner-operators, who evaluate the aircraft from the pilot’s seat. While making a decision to buy the plane, they pay attention to all the aircraft’s details; its performance, handling characteristics, electronic systems, comfort, maintenance, etc.
Porter’s Five forces Model
After the complete internal and external analysis of Adam Aircraft, we analyzed the strategic problems faced by management and suggested the recommendations as critique.
After the complete analysis of the Adam Aircraft case study it is to be noted it’s an entrepreneurial business owned by Rick Adam. Since the start of the business Adam was the one who raised fund for company facing the difficulty as investors were not interested in the aviation industry. All the investment and funds raised for the company are done by Rick himself and he always busy in raising the funds with looking after the company affairs.
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No strategy has been found by the company in the situation if Adam will not be there for raising funds. In past both competitors faced the loss with the long process of certification with FAA and stopped the manufacturing. Adam having a vast experience as a pilot and business men know the risk involved in the business and cut down the cost to almost 75%. A typical aircraft costs around $250 million and the cost of certification is not included in it. But cutting down the cost is not the right solution. Also in order to increase the production capability in future after approval from FAA a huge amount of investment with employees will be required increasing the running cost of the business.
The next management problem Adam Aircraft might face or started to face is the reluctance from its potential customers or after sales service they provide. The marketing plan for its aircrafts to their customers might face this huge problem in future. From strategic point of view a proper marketing strategy is not developed yet and just by making sure that the aircraft designed is modular and easily accessible system does not assure to the customers.
Adam aircraft is in the position right now to acquire funds from partnership or from banks on long term basis. Partnership can be done in those markets where they have more than 50% customers or potential customers can be made. For instance in Asia Adam aircraft can partnership with other companies on terms and condition to avoid or share the funding required in future. Strategic way to solve this problem is to analyze a timely requirement of funds via current cash flow to be monitored and used for securing loans.
A proper financing from venture capitalist can be done only if the current manufacturing process will go with a pace securing the interest of the investors and realizing them that there money is well spent.
A strategic approach must be developed for marketing of the product not only to the potential current customer but also to find new customer in new markets. If they get the certification from FAA on time and customer will not buy the aircrafts or hesitate or they get few orders any of this problem can increase the cost for company.
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