Abstract
The airline industry has witnessed increased competition in the last few decades brought about by realignment of the key players in the sector. Airbus relies on a unique business model that aims in providing cost effectiveness through engineer to order systems while Boeing places more emphasis on the interests of the customers during production.
Both companies are always investing heavily in technological developments with the aim of producing cost effective jets. There exist comparisons between the production strategies of the two manufacturers while concerted measures are required to address the inherent risks in the business. Innovation and utilisation of advanced technology remains the major driver of product development in the aircraft industry.
Introduction
The airline industry has witnessed increased competition in the last few decades brought about by realignments of the key players in the sector. While Boeing and Airbus are the dominant players in the field, other smaller entities have surfaced with innovative business strategies aimed at carving a niche ion the production of high speed jet liners.
Innovation and incorporation of the latest technology has resulted in spirited competition between the two giants with Airbus narrowing the gap on its rival in the last ten years.
The success in the airlines production business is sustained through adoption of unique and customer focused production development strategy. This essay will provide a summary and a comparison of the product development strategy for airbus and Boeing, other competitors in jet liners production and various ways in which Airbus can spread the major risks facing its ventures.
Boeing and Airbus product development strategy
Boeing Company has continually led its competitors in the production of commercial jet liners capable of ferrying hundreds of passengers at a time. While Airbus has continually challenged its grip at the helm, the innovativeness and consideration of consumers interests in the production phase has made to hold on to the market leader position.
The two companies share similarities in that their production is inherently reliant on the most recent and advanced technology aimed at fulfilling the customised demand of their customers. Boeing has dominated the business in the America region while the Asian and European airlines usually rely on jets assembled by airbus.
Airbus relies on a unique business model that aims in spreading its core activities in different countries across the globe thus ensuring the integration of all related services during the production. In fact, the 160 locations distributed across the globe are complemented by combination of research and development centers and manufacturing bases strategically situated in Spain, Germany, UK and France.
Moreover, the company operates several subsidiaries in china and recently in Japan and North America. Airbus greatly relies on a unique engineer-order strategy that has continually boosted the synchronisation of the supply in relation to the demand systems (Airbus, 2010). More importantly, the manufacturer has embraced a consortium-oriented approach in relation to its product development.
This is achieved through its reliance on the high degree of integration of the production process largely in the single-aisle and the popular wide-body commercial jets.
The integration process has resulted in airbus producing the largest airplane (A380) with the capacity to carry slightly below 800 passengers at a time that was to provide intense competition to Boeing 787 dream liner (Airbus In addition to the production systems, Airbus has established several distribution centers for its spare parts in the Far East with the sole intention of fulfilling the needs of the Chinese commercial fleet market.
The strategic move adopted by Airbus that depicted a constellation of beneficiaries in the fleet business has endeared them to chin and several governments in the globe, hence creating a competitive edge over its main rivals. On the other hand, Boeing Company came up with an innovative strategy with the sole intention of introducing jet liners with unique and new features from the available models in the world.
The company adopted a longer-range product strategy that will enhance the production of large aircraft with capabilities of achieving higher speeds and carrying more than 500 passengers. Boeing production strategy is inherently focused on developing aircraft according to the needs and demands of the customers.
In fact, their research and development team has dedicated their efforts in developing a faster and larger aircraft that would enhance time savings during travels and reduce overall transportation costs for the airlines. According to Boeing (2010), the company continuously engages in communication with its customers with regard to the type and nature of flights that could prove useful in the long term.
The customers’ desires of larger and faster aircrafts resulted in the initiation of development efforts towards aircraft that proved satisfactory to the customers. With more emphasis on custonmer preferences, Boeing has incorporated several features such as higher speeds, environmental benefits occasioned by quieter landings and largely by takeoffs in their development efforts.
More importantly, the incorporation of longer range and planes with the ability to offer comfort while cruising at higher altitudes brought new excitement in commercial aviation. Boeing production strategy is therefore reliant on distance and capacity to enhance cost effectiveness in the airlines industry (Campos, 2001).
How does Airbus’ strategy compare with Boeing’s?
Airbus and Boeing are ideal examples of a comprehensive competitive case especially in the manufacture and marketing of their products. For the last three decades, the two rival rivals have engaged in stiff competition with airbus wrestling Boeing as the market leader (Irwin & Pavcnik, 2004). Despite the fact that both rivals utilise different strategies in their production, similarities are inherent especially in their business models.
Both companies are always investing heavily in technological developments with the aim of producing cost effective jets, thereby resulting in production of more variants while taking shorter time to introduce them in the markets. For instance, airbus integrates Windchill solutions to optimise its overall performance in operations and maintenance (Parametric Technology Corporation, 2010).
On the other hand, Boeing utilises team center solutions to improve on the life cycle management of its products. Although the companies have recorded different success with the software in the past several years, both still acknowledge the merits occasioned by their appropriate utilisation (Irwin & Pavcnik, 2004).
With regard to previous setbacks in aircraft development brought about by incompatibilities in the software, airbus has embraced latest technological solutions that enhance the synchronisation of its operations.
Windchill and team center solutions has brought on board innovation and improved productivity through seamlessly linking people and product processes with invaluable knowledge throughout the life cycle (Leea et al, 2008).
Who else is competing for the high-speed jet liner?
After many years of dominance by Boeing and lately by airbus, the jetliner business is gaining momentum amid increased competition and investment in production by Chinese manufacturers. In addition to the Chinese manufacturer, Embraer has emerged as a formidable force in the jet industry and has continually increased its market share.
The Brazilian based outfit is popularly credited in the production of not only commercial and executive aircraft but also military and in the provision of comprehensive aeronautical services to airlines especially in large parts of South America.
Although the company do not have the financial and infrastructural capability to destabilise the duo-poly enjoyed by the two main rivals, the Brazilian conglomerate has created itself a niche in the narrow-body category.
In fact, the Embraer E-jets series have gained wide acceptance hence substantially improving its presence in the globe, although it faces stiff competition from Bombardier Aerospace in the manufacturing of jets especially in the regional market. The duopoly exhibited by the two giants will come under check once china unveils its fleet of home-grown jetliners.
The collaboration between several US companies with the Chinese government aims to set up the requisite infrastructure that will eventually herald the initiation of manufacture of C919. Although the first batch of the aircraft is expected not earlier than 2016, major realignments in the aviation have started shaping with many companies placing orders for the aircrafts.
The tough regulations put in place for investors and partners in the venture are likely to cause loss of business for both rivals owing to the fact that china is expected to be the single largest country to experience exponential growth in air traffic and infrastructure in the next 20 years (MacPherson & Pritchard, 2003).
The determination of the Chinese government and the heavy investments in the project is believed to enhance the successful completion of the project that will eventually set pace for china to emerge as the leading manufacture of jet liners with capacity of slightly more than 150 passengers.
Although the collapse of Soviet Union destabilised the economic power of Russia and aircraft manufacturers, llyushin and Tupolev still produce large jets despite commanding a slice of the market share.
Through their jets with capacities of between 200 to 400 passengers, the manufacturers still produce aircrafts mainly for countries in Europe although majority of the designs have since ceased production owing to a constellation of market forces (Irwin & Pavcnik, 2004). Plans are underway to create a major aircraft manufacture in Russia through consolidation of the fragmented aircraft manufacturer.
Its worth noting that there is urgent to consolidate the ineffective aircraft manufacturers while investing colossal amounts of money in order to offer any meaningful competition to Airbus and Boeing in the long term.
Spreading of inherent risks in Airbus ventures
Like any other venture, Airbus has suffered diverse challenges and setbacks in its production and largely its marketing strategy of their fleet owing to wide reengaging factors in the business environment. Delays in production and design coupled with economic factors have proved the major factors that have continually the smooth running of operations.
The weakening of the dollar and the failure to acquire requisite materials needed to ensure the aircraft conform to the projected designs has led to increased frustrations to both the management team and the buyers. In order to address the challenges, Airbus must take concerted efforts towards mitigating its production and marketing from external shocks.
Risk sharing through spreading of components of production in different continents will cushion the company from external shocks experienced in a specific country. The spread of the various components such as assembly, design and largely fabrication has ensured the airline stays profitable and also cushions it from unwarranted economic sanctions.
In fact, its embracement of a common pooling of various investors based in different countries has resulted in the popularity of its jet-liners in Europe and china. Outsourcing some of its con-core services and maintenance services can diminish the risks particularly in terms of assembly costs.
Contracting of India and Chinese firms to maintain the jet-liners plying the Far East routes will enhance savings in terms of time and money for the airlines and the manufacturer. More importantly, the internationalisation of its core operations such as assembling helps it concentrate in mass production of specific categories of its fleet (Airbus, 2010).
For instance, the final assembly point in china has rapidly enhanced the production of A320 family fleets. Risks sharing cushioned the company the hard effects of the global meltdown.
Decentralisation of its core operations will also improve the overall manufacturing process thereby meeting the consumer specifications while maintaining limited noise externally and also on the cabins.
It is worth noting that the engineer to order system employed by Airbus has enhanced its ability to cushion itself from unexpected shocks since it allows high level of process integration across the various categories of jets (Irwin & Pavcnik, 2004).
Conclusion
The divergent approaches adopted by the manufacturers in the production system have occasioned development of different variants of aircrafts that has caused realignment of customers. More importantly, Airbus has strengthened its expansion programs and upgraded its technological solutions thereby ensuring synchronisation of its core operations.
To remain cost effective and competitive in the aircraft industry, the manufacturers must whole heartedly embrace technology, take into consideration customers’ preferences and decentralise majority of the core operations to remain afloat in turbulent economic times.
Reference list
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Irwin, D. & Pavcnik, N. (2004). Airbus versus Boeing revisited: international competition in the aircraft market. Journal of International Economics, 64(2), 223-245.
Leea, S., Maa, S., Thimma, S. & Verstraeten, J. (2008). Product lifecycle management in aviation maintenance, repair and overhaul. Computers in Industry, 59(2-3), 296-303.
MacPherson, A. & Pritchard, D. (2003). The international decentralisation of US commercial aircraft production: implications for US employment and trade. Futures, 35(3), 221-238.
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