Internal analysis
Adam Aircraft Industries Incorporation is a private limited company with the aviation and aerospace industry in the US. The firm was founded in 1998 and its headquarters are located at Englewood, Colorado. The firm has a manufacturing plant that is located at Pueblo, Colorado and another facility located at Ogden, Utah. The firm has got approximately 1000 employees (Jeff, 2009). The paper entails a case study analysis of Adam Aircraft with the objective of evaluating the opportunity presented.
The case presents a viable business opportunity. This is evident from the fact that there are gaps that have been left by other firms within the aviation industry. The opportunity emanates from the fact that there is intense market demand for a new model of aircraft within the industry. Through the pilots’ business meeting, Rick (the founder of Adam Aircraft) was able to identify the demand for a new product within the market. For instance, Beechcraft Baron Incorporation that had ventured in the manufacture of twin engine aircraft ceased the production of this model of aircraft. On the other hand, the cost of this aircraft was very high. Through an analysis of the aircraft life time, Rick identified that the average age for an aircraft is 30 years. However, the safety of the plane declines with time since it becomes hard and expensive to maintain the aircraft. This results into reduction in reliability of the aircraft (Jeff, 2009).
Through the business meetings, Rick was able to get information in relation to capital requirements for developing a new model of aircraft. It was established that the cost of developing the aircraft was $250 million which is relatively high. This made him and his team determined to cut the cost of developing the aircraft by 75%. The meeting also enabled Rick to meet and integrate professionals who were within the aircraft industry into the firm’s management. This resulted in Adam Aircraft having a strong management team. Therefore the weaknesses of the aircraft model designed by Beechcraft Baron together with the market demand presented a clear opportunity for Rick to introduce a new model of aircraft within the market.
In manufacturing the A500 model, Adams Aircraft Industries Incorporation targeted two main categories of customers. These include the individual and institutional customers who are mainly involved in business activities. The individual customers are categorized as the owner-operator customers while the institutional customers are categorized as professionally flown such as the government (Jeff, 2009). The owner-operator category of customers own and fly the aircraft by themselves while the latter are flown by non-owners.
These customer categories value a number of factors in relation to the aircraft. These include its performance and electronic systems. In addition, the two categories of customers also value the ease of servicing the aircraft and the safety of the plane. They also considered the availability of maintenance facilities such as the spare parts. The institutional owners’ consider other factors such as the planes seating capacity, luggage capacity, availability of other facilities such as entertainment systems, and toilet facilities.
Adam Aircraft has been able to develop products that are competitive within the market. This is due to the fact that the firm conducts consumer market research with the objective of adding value to their products by incorporating the consumer demands. For instance, after developing M-309, the management sampled the consumers’ sentiments with regard to the aircraft. This resulted into modification of some of the aircrafts facilities such as enlarging the empennage which resulted into increased stability of the aircraft and hence its safety.
External analysis
To effectively start a firm within the aviation industry, there are a number of resources that are to be considered. These relate to an effective human resource and sufficient financial capital. In the process of starting up a firm within the aviation industry, comprehensive market research is paramount. This will enable the consideration of the diverse market variables. Effective product innovation also demands the availability of sufficient capital. Through a market research conducted by Rick, he established that the approximate cost of developing a new aircraft is $250 million. With regard to resources, computer technology is essential in the process of designing a new aircraft. These technologies include the Computer Aided Designing (CAD) and Computer Aided Modeling (CAM) software.
Adam Aircraft has got superior management. This is evident from the fact that all those within Adam Aircraft management have extensive experience in relation to different sectors of the aviation industry. According to Jeff (2009,.p.1),the firm sourced its top management team from firms such as Lancair, Cirrus, Boeing, Martin Marietta, Eclipse, US military and the Federal Aviation Administration (FAA) and Beechcraft.
By incorporating experienced management, Adam Aircraft Incorporation was able to conduct comprehensive research and development in the process of designing the new model. This is due to the fact that the team was able to consider all the necessary market variables. The team was also able to develop an efficient tooling designing model and institute the designing and modeling tools. This enabled the firm to set up a number of engineering and tool milling centers with all the necessary computer technology more cost effectively. Owning its own tool mill and engineering centers increased the operational efficiency of the firm since all the aircraft designing became in-house reducing the cost of innovation.
By adopting its own tool milling model, Adam Aircraft will be profitable since it will minimize the cost of undertaking in the designing of its aircraft innovations. Integrating its own tooling mill will enable Adam Aircraft to undertake effective aircraft designing this meeting the market needs. The efficiency of the team was also enhanced by the fact that the team undertook innovation of the new model within a short time duration. The effectiveness and efficiency of the management team gives the firm a competitive advantage over its competitors. The opportunity presented by the environment is right for the team. This is due to the fact that the team would be able to meet the market demands by considering the market deficiency. This will culminate into an increase in the level of the firm’s profitability.
Overall Potential
To determine the overall potential of Adam Aircraft, Timmons quick screen model is considered (Andrew, Jeffery & Stephen, 2004). The table below illustrates an evaluation of the new venture.
Market variables:
The overall potential of the venture is high due to the high level of profitability. In addition, the market size is also large considering the number of customers. However, intense investment in research and development is paramount. This will help the firm improve on its competitive advantage.
Recommendation
The aviation industry is a viable business opportunity to invest in due to its lucrative nature. In venturing the industry it is essential that the investor have superior knowledge of the industry. This will help in ensuring success of the venture since all the variables will be effectively considered. In addition, it is paramount to consider investing in research and development. Considering the potential profitability of the aviation industry, it is justifiable to undertake the risk. To ensure the firm maintains a higher competitive advantage, continuous market research should be conducted. The market research should consider both the consumers and the competitors. Through consumer market research, the management will be able to identify the changes within the market with regard to changes in customer tastes and preferences. The effect is that the firm will be able to generate higher returns due to increased customer satisfaction by integrating these changes. Competitor market research should help the firm rate itself in comparison to other firms in the industry.
Reference
Andrew, Z., Jeffrey, A.T., & Stephen, S. 2004.Business plans that work: a guide for small businesses. New York: RR Donnelley Publisher. 2009. Web.
Jeff, P. 2009. Adam Aircraft. New York: Linked Incorporation. Web.