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Airbus Strategic Management Report


Introduction

Airbus is an international aircraft manufacturing company with its head quarters situated in Blagnac, France. It is a subsidy of European Aeronautic Defense and Space Company N.V. (EADS) which owns 80% of the company and the remaining 20% is owned by BAE Systems plc (LSE: BA.).

The company has three other operational bases in Europe situated in Germany, Spain and in the United Kingdom. The company has a pool of 57,000 workers distributed in sixteen branches and sub branches. In 2009 the company started construction of a branch in Tianjin (China); the branch is only producing minimal products and making repairs. It is estimated to be a full brown company by the year 2012.

In its investments the company has subsidies and sub -subsidies to companies in United States, Japan, China, and India (McIntyre, 1982). Half of the worlds airplanes are thought to have been made by the company. It’s credited for having made the world’s largest airplane A380 and the fly-by-wire airliner. The success of the company has been credited to technological advancement which has resulted in production of highly efficient airplanes.

When the company was incorporated it was a consortium of European aviation. It later diverted to plane construction where it competes with companies like Boeing, McDonnell Douglas, and American Lockheed. All its major competitors are situated in United States of America. The company was established at the era where globalization had raised the need for air transport as countries trade increased.

The decision to have an airplane manufacturing company was the decision that was considered by the governments of Germany, France, and United Kingdom in 1967. In 1970, the company started it operations with Groupement d’Interet Economique as the major supporter of the company financially.

The English name for the group is Economic Interest Group or GIE. The name Airbus was the common name for planes which were large in the period and thus the company adopted the name. The first aero plane by the company was called Airbus A300 (Airbus official website, 2010).

This report is divided into three parts where the first part takes a look at strengths, weaknesses, opportunities and threats of the Airbus Company; the second part, looks at the external environment of the company and gauges the level of participation that the company have in the competitive industry. The third part will be recommendations on the measures that the company should implement to remain competitive. The first part will also have a section which analyses current trends in global airline industry.

Current position

The company boasts being the world’s largest aero plane manufacturer and specializes in large planes. It has made the world’s largest aircraft. Among the competitors of the company are Boeing, McDonnell Douglas, and American Lockheed. To remain competitive, the company has ensured that it makes products which are responsive to people’s needs.

There are different approaches that the company takes in its business. These include;

  • Making planes on order

The company takes orders from different companies, countries organizations and individuals to make different models. It gives customers the freedom to choose the level of technology that they want implemented, however the suggestions made by customers should be in line with the company’s policies.

  • Making planes and having them in its show room for sale

The company has a show room where it portrays its products for sale to its target market. It also acts as the place where the available technology and models are displayed to the customers.

  • Undertaking various researches and testing these products

The company maintains a research and development team which is mandated with the task of advising the company on the demands of the customers. They are the ones who are given the mandate of surveying the market and interpolating the competitor’s technology.

There is a wave to low fuel consumption jets and planes which require modern technology; airline is aware of the changes in technology and it’s aligning its ways to the move. The company is making large planes to ensure that their customers enjoy from economies of scale. The jumbo planes are sold mostly to national airlines of different countries and small size planes target private airline companies and individuals who buy planes.

Some military forces from different countries contract the company for planes for various purposes. When this is the case there is collaboration between engineers from the military and the company. They then aim to make planes which are responsive to the needs of the force. When making war planes, specifications and controls that are required in the planes are made in consultation with concerned parties.

Some technology adopted by the company is a “first” in the industry and thus it calls the operators of the planes and the company to join hands and offer training services. In the effort to remain competitive the company borrows from other companies and improve the technology. The move to venture in China was seen as a strategy to tap Chinese high technology.

Other than making fuel efficient planes; the company makes planes with different features to meet the demand of the market. For example, there are planes which are more comfortable, some planes have high security feature and their size varies. This is to ensure that all the markets are well catered for.

Current issues in Airplanes business

As technology advances, the transport sector is not left behind; there have been numerous developments in plane technology. Good and efficient transport is the back bone of trade and by extension economy. Other than the internet, the other development that has made the world a village is transport; more so air transport. This mode of transport has come with good things; however there are some problems that are associated with this means of transport the most serious being safety.

How safe are the passengers? Are their lives safe? Are they psychologically troubled and how comfortable are they? In the recent past, there has been plane crashes in some parts of the world with the latest plane accident occurring on June 23, 2010 in Quebec, Canada and involved a Beechcraft A100 King Air model. The pilot of the above plane had reported that the plane had a problem and when trying to land, the plane exploded. There were seven people aboard and all of them died in the inferno.

January 25, 2010 – there was another plane crash involving an Ethiopian Airlines Boeing 737-800 after taking off from Beirut airport. All the 90 passengers and crew on board perished. On May 20, 2009, An Indonesian C130 military transport plane crashed a few miles from Iswahyudi air force base in East Java. There were 110 passengers and crew members. 98 people were killed including two people who were not in the plane.

Terrorism is another problem that air plane transport is faced with. Terrorists have for long targeted planes; this has left the passengers and crew’s lives endangered. Numerous deaths have occurred as a result. For example, in September 11, 2001, an attack of the world trade centre was made possible because the terrorist were able to use a plane for the attack. This brings in another angle to the discussion involving this means of transport; not only is it dangerous to the people aboard the plane but also to those on the ground.

The attack resulted in deaths of over 3000 people both on the ground and those aboard. In 2009, there was a threat of attack to an American plane where a Nigerian student had entered the plane with a bomb; though the attack was not carried out, there was a huge panic all over the world about the safety of passengers. Air rage is another problem that is on the rise in the recent past. More and more passengers are becoming victims of attack as well as lack of comfort as they board planes.

SWOT Analysis

Strengths

Airbus strength is built on the strong brand name that is internationally recognized. There is a wide recognition of its products in all parts of the world. The strength of the company is undoubtedly engineered by its internal managerial mechanisms. In order to have a competitive edge in selling its product and services, it will be advisable for the company to take the advantage of its ability to compete favourably with equal players in the market.

Airbus is able to adopt different modalities and outreach programs of reaching out to its consumers. In a market mostly controlled by the efficiency and the affordability of the products as well as quality, it will be an open strength for the company to explore more on innovations. In retrospect, strategic marketing plan should be in a position to explicitly document the various channels that can be used by the company to allocate more resources towards improving quality.

Weaknesses

There is no one company that is perfect; there is always an area that offers a weak point. One of the weak points that the company will undergo through are internal while others are from the external environment.

Weaknesses refer to stumbling blocks that may deter the company from progressing towards a particular direction. One of the weaknesses is attitude that customers have upon new things introduced in the market. When discussing the concept of strategic market planning, we discover that resources are vital for an organization to effect significant changes. Another area of inevitable weakness is an expansion plan which entails diversifying the level of the company activities.

This may take different forms. A critical look at geographical expansion depicts a glaring possibility of other stringent market uncertainties. Right at the onset, strategic planning will demand strategic resources, both human and financial, to make any significant move. Besides, implementation of the proposed market research will require mutual consent from all the affected divisions in the company. This will not only consume time as decisions are being made, but a lot of uncertainties abound especially on the verdict of the company.

Opportunities and Threats

Opportunities and threats are external forces that a company has minimal control over. These are outside factors which may work to the benefit or danger of the company. Opportunities for the company are dependent on both the internal and external assessment criteria of the company’s profile of operation. Similar to the weaknesses discussed above, the company can still optimize on the various opportunities available to bring about sustainable growth through effective competition.

Some of the underlying opportunities for this company in regard to the macro environment are the diversification of its activities. In striking for the right opportunities, the company will have to analyze its main market rival. The strategies being employed by the competitor should be critically assessed and evaluated for necessary counter action. In addition, the general plan of the competitor in a bid to control the market is a vital toolkit which this company can use to estimate the competitive edge of the market.

Internal/External Analysis of Business Objectives

Airbus is affected by the internal and external forces. The success that it has is dependent on how well it is going to overcome challenges posed by internal and external forces. To explain the forces, we will consider five porters model forces. In 1980, Porter developed a structure for analyzing the nature and extent of competition within an industry. His argument was that, in every industry, there are at least five competitive forces which establish the nature of competition within that industry. These five forces are discussed below:

– Threat of new Entrants

– Bargaining Power of Buyers

– Threat of Substitute products or Substitutes

– Rivalry among Existing competitors

Buyer’s Bargaining Power

The success of a business is dependent with the buyers. They are the customers of a business. They shape the kind of products that a business makes. Buyers have the ability to determine which products will move first and which will not. It is through buyers that a company realizes its competitive advantage in the market.

In plane manufacturing business, there is need to produce quality goods which are responsive to the needs of their customers. In plane industry, there is a strong shift to have a move to low fee planes. This is an area the company should ensure it has made fuel efficient planes and big enough that passengers can enjoy economies of scale.

Supplier’s Bargaining Power

To create awareness of the kind of services that a company produces, there is need for marketing campaigns. In plane making-its main business, the Airbus should ensure that there is national and international awareness of activities that take place.

The company needs to employ good strategies to ensure that customers are aware of the existence of the products; it is by doing this that it can command more business. When quality products are well known by the customers, they are likely to be more accepted. Sales team should ensure that it makes the best targets and market segmentation.

Competitive Rivalry in the Industry

Within an industry, there are businesses which compete with one another for the available market share. These businesses either specialize in the production of similar products or differentiated products. In plane manufacturing, there are a number of existing companies which include Boeing, McDonnell Douglas, and American Lockheed. There are also new entrants in the business.

Threat of New Entrants

Airbus enjoys the largest plane making in the world; this does not mean though that there are no threats to its operations. The threat of new entrants to an industry depends on the number of entry barriers available. The higher the entry barriers, the fewer the number of competitors will be in the industry. These barriers include: capital costs of entry, legal constraints, and access to distributing channels.

Threat of Substitutes

The company is competing internationally and thus there is the threat that someone may decide to use another country’s products instead of those of Airbus. A substitute product is a product that meets the same needs as those met by a product produced by another company. The extent of the threat from a particular substitute will depend upon two factors; namely, willingness of buyers to switch to substitute products and the degree to which the value and performance of the substitute can compete with the industry’s product (Alter)

Managerial decision-making is the process through which managers arrive at the alternative solution to a given challenge facing an organization. The success of an organization is dependent on the quality of decisions made by its managers. One of the major attributes that make a good manager stand out is his or her decisiveness. The quality of decisions made by a manager is reflected in the performance of his or her organization (Wheelen & Hunger, 1998).

Defining the problem

The first step in making a good decision is defining the challenge that calls for a decision to be made. There are problems that require either a “no” or a “yes”, others require an urgent solution and others can wait for a certain period of time for alternative solution to be arrived.

Generally to have a job well-done, it is of great importance that people involved start from the beginning. Decision making is not an exemption. In this stage, a good context of the problem is grasped. It is only after getting the correct understanding of the problem that he/she can make a good decision.

Gathering data

In this stage the manager should gather all relevant data and facts. It is from the facts and data that he develops various alternatives of choices that can be used to solve the problem at hand. The statistics will also be the ones that will support the final decision. There are various methods of collecting data; they include researching, brainstorming, and experimentation. It is the manager’s duty to choose the right method to adopt because different problems call for different methods.

Depending on the problem, the people to be consulted differ. However, an effective manager should ensure that he/she consults those who matter and those who know. Consultation assists in making a more informed decision and assists in generating more alternatives of choice. Their opinions and viewpoints should be considered in the final decision making, but the manager should always keep in mind that it is his/her responsibility to come up with the right decision (Williams, 2001).

Choosing the best alternative

After taking time and pondering over the issues; time taken depends on the urgency of the decision, he/she chooses and implements the best alternative. At the initial stage a lot of support of the decision is required to ensure that the whole organization or the departments concerned have adopted it effectively.

It is not always that a decision made bring the expected results; thus feedback from the people on the ground and the general performance of the business should be sorted, so as areas that need improvement are recognized. In-case an area that needs improvement has been recognized, it should be addressed appropriately (Bridge & Dodds, 1975).

Today, the world is regaining from the world economic crisis that started in 2007. Every economy is trying to position itself to effectively recover. The crisis has already affected economies with a large number of them having a negative economic growth. There is hope that recovery will be attained. Different businesses have been affected in different angles. The transport business is one of the many that have suffered. Alongside the difficult economic situations, the airlines are facing stiff competition among themselves.

There are different airlines that have developed strategies that have negatively affected the other players. There is a reduced business in some to the extent that there is likelihood that they may opt to merge with others so as to make them profitable. Almost all the airlines are struggling to keep afloat; there has been high bankruptcy in both the United States and Europe.

The sector is affected by both the aftermath of gulf war and the global financial crisis. Airline business is one of the tricky businesses that entry is easy but quitting the industry is hard. There is the breaking down of the traditional pricing model; the model was offering for control of price wars in the airline market. The emergence of low cost carriers was on the rise. They charge as low as the half of the traditional costs. The major question that the sector is facing is what the future holds for it.

The costs are not going down but on the rise. The cost of fuel is on the rise, the expectation of the customer in terms of services expected, the meals have become expensive, and the general expenses are on the rise. Of late there is the terrorist attack that is continuously reducing the goodwill of airline companies. The sector is facing challenges especially those companies that do not have a large capacity to compete with the leading carriers.

The level of technology is another area that is contributing to the “unfair” competition. This is because of the new high tech facilities/ aero planes that are consuming fuel in an efficient way. The invention has made them able to charge lower prices and give good service, at the expense of the old models without this facility. There are also the jumbo planes that are capable to carry a large number of people, and thus they enjoy economies of scale. The prices charged are lower than the small planes.

The concept of free trade is another way of doing business that has made the business to develop ways that they are going to fight their competitors. This has left the control of the airlines on the hands of individuals. When the control is on the individuals, then the dominant companies are more likely to develop measures that are going to negatively affect the small players (Congressional Research Service, 1992).

Recommendations

Airline industry is undergoing a rapid change. Airbus Company is affected by the trend and the way forward is ensuring that the company embraces efficiency in its processes. Efficiency in a business has numerous benefits to the business.

It gives a business competitive advantage; to attain efficiency, there is need to ensure that all business processes are adequately addressed. Airline Company should borrow a move that was first implemented by Motorola in 1981 when the electronic industry had high competition. Motorola named the approach as Six Sigma.

Despite the fact that the project had been innovated to be used in the company; it has spread to businesses in United States and other places in the world. It has also been incorporated in management syllabuses. When Airbus implements a six sigma procedure, it ensures that there is efficiency in all processes in a business; it uses scientific methods like data analysis to make decisions in a certain area.

The process aims at attaining specializations in areas of interest in a way that the end result will give an overall efficiency in an organization. It creates special infrastructure and labels the users of such processes as “Belts”. There are “green belts” and “black belts” among others. After developing a certain route of efficiency, it lays down steps that must be followed to all people who are working in a particular area.

The steps are regarded as the path of efficiency. The path minimizes wastes in all aspects as it aims at realizing the areas of defect. Improvement of a prevailing procedure follows after that has been attained. The management tool analyses any derivative from perfection and offer management with an overview of the areas that they need to look into for a full efficiency.

The management system assumes that if Airbus has more than 3.4 defects, then the said company has a problem that need to be addressed. This is in the areas of fuel consumption level set by the company; comfort of the planes as per the required level of the company and how fast the company meet its customers’ needs.

The method acknowledges that there is no 100% efficiency level; however it is of the option that the highest attainable efficiency should be sought. It is of the opinion that there are some areas in an organization which can be improved to attain full efficiency. Airbus should works with the following objectives in mind.

  • Ensuring customer satisfaction;- this is attained through continuous improvement of processes other than processes there is the customer care that they receive from staff it should guarantee satisfaction.
  • Defect- failing to deliver what the customer wants the management tool ensures that there is complete satisfaction of customers by quality products free from defects.
  • Process- internal processes needs to be looked at to ensure that there is efficiency in production processes
  • What the customer sees and feel; stable operations- Ensuring consistent, predictable processes to improve what the customer sees and feels; and design for six sigma- designing to meet customer needs and process capability

The general way that the Airbus company management tool follows can be defined as Define, Measure, Analyze, Improve, and Control. All the processes that Airline adopts when manufacturing products should be interpolated and ensured to be efficient.

The initial stage of a six sigma if for management to agree and understand the need to develop a six sigma management tool when the decision has been reached it requires them to understand the prevailing condition. The first step in making a decision to implement six sigma management systems is defining the challenge that calls for an attention. They are involved in asking which areas require the change. Why is the change important? Generally to have a job well-done, it is of great importance that people involved start from the beginning.

Decision making is not an exemption. In this stage, a good context of the problem is grasped. It is only after getting the correct understanding of the problem that he/she can make a good decision. Concerns of customers are noted, the trade of profit is analyzed. Since company A has been operating well then there has been an almost immediate change, it means there is a place where there are defects. These defects maybe in processing, in advertising, pricing or even distribution, it is the tapes of management to realize where.

The next stage is for Airbus research team to gather all relevant data and facts. It is from the facts and data that he develops various alternatives of choices that can be used to solve the problem at hand. Customers who have complained may be called to give more details, production targets reviewed compare the company with other companies in the same industry, consider data from published and unpublished sources.

The statistics will also be the ones that will support the final decision. There are various methods of collecting data; they include researching, brainstorming, and experimentation. It is the manager’s duty to choose the right method to adopt because different problems call for different methods. When adequate data has been collected, then the company has a base to make the right decision.

After Airbus has understood the deficit in its production and depending on the problem, the people to be consulted differ. However, an effective manager should ensure that he/ she consults those who matter and those who know. Consultation assists in making a more informed decision and assists in generating more alternatives of choice.

Their opinions and viewpoints should be considered in the final decision making, but the manager should always keep in mind that it is his/her responsibility to come up with the right decision. After taking time and pondering over the issues; time taken depends on the urgency of the decision, he/she chooses and implements the best alternative.

At the initial stage a lot of support of the decision is required to ensure that the whole organization or the departments concerned have adopted it effectively. It is not always that a decision made bring the expected results; thus feedback from the people on the ground and the general performance of the business should be sorted, so as areas that need improvement are recognized. In-case an area that needs improvement has been recognized, it should be addressed appropriately (Heppenheimer, 1995).

Certainly a decision to have a six sigma tool of management will change a number of things in an organization; the following are some of things that the management of six sigma should expect in Airbus Company;

  • organizational structure; this is the way an organization set up is, it may be affected by the change about to come
  • Addition/removal of another department; some departments may prove unworthy and as the source of inefficiency, they may be script. On the other hand, there may be need to develop a monitoring department which will be mandated with the task of overseeing the entire process
  • removing procedural barriers to experimentation and change; these may be bureaucratic processes, some employees may be sucked, some deployed in other departments, and an additional employees may be required

These are processes that involve top management to be fully involved and understand the trend and effect of the process. When all is set then next step is moved into.

The last stage is control of the implemented project. When controlling there is an already set path through which processes should follow. They should start from somewhere heading to another area. When under control, there is need to have a well defined personnel’s who have been recognized to have a certain efficiency level in an area, they should be empowered to conduct their duties. If there was a department that was scrapped, then any effects as a result should be understood and addressed

Effectively project management plans are developed to ensure that the project sustainability has been attained. Though it is the final stage, it carries a lot of weight since it oversees that every process in the organization has been fully upgraded. It is not a onetime process but is a continuous one. Feedback is of importance and considered for further decision making. The following are some of the tools for this work quality control process charts, control charts, and standardization practices.

Time and again there may be possibility that the Airbus Company devise better ways of doing things and this should not be locked out of the system. There is no most efficient system but it is unique to a particular organization and industry.

All managerial departments should actively participate in this process for example, the human resource department is given the mandate of ensuring that adequate employees are available at all times in the organization; it has both quantitative and qualitative aspects. Qualitative means the right number of employees and qualitative means employees with right skills (McGuire, 1997).

Critical factors define the path that Airline takes in attainment of its mission and vision. When the business is set to go there are things that must be done to ensure that all is well for the attainment of the set goals and objectives. In an information system case the critical success factors are the number of users who are going to use the system and the system will offer them assistance in the work that they are doing.

At the same time there is the issue of market accessibility and the need for more market share as a result of the improvement. When developing an integrated system, there are the funds that go to the project and the benefit that the company is going to get as a result. When this is analyzed then the final result should be a benefit to the company.

The duration that the program will be used in the company should be analyzed to ensure that it will be good enough for the company to have reaped benefits out of the investment. Customer satisfaction is another goal that the system should bring on board, since the entire development is aimed at creating a better experience to a company’s customers.

References

Airbus. (2010) Airbus. [Online] Available from: .

Bridge, J., & Dodds., J. (1975) Managerial decision making. London. Taylor & Francis

Congressional Research Service. (1992) Airbus Industries: An Economic and Trade Perspective. U.S. Library of Congress.

Heppenheimer, T.A. (1995) Turbulent Skies: The History of Commercial Aviation. New York. John Wiley.

McGuire, S. (1997) Airbus Industrie: Conflict and Cooperation in U.S.E.C. Trade Relations. New York. St. Martin’s Press.

McIntyre, I. (1982) Dogfight: The Transatlantic Battle Over Airbus. New York. Praeger Publishers.

Wheelen, L., & Hunger, J. (1998) Strategic Management and Business Policy: Entering 21st Century Global Society. Massachusetts. Addison Wesley

Williams, S. (2001) Making better business decisions: understanding and improving critical thinking and problem-solving skills. London. Sage

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