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Aviation Strategy Research Paper


Executive Summary

The Boeing and Airbus Companies are the world’s largest manufacturers of commercial and military jetliners. The companies date back to 1916 and 1969 respectively. Boeing being in operations for a long time had experienced a long period of monopoly in the manufacture of large commercial jetliners. To deal with this monopoly, Airbus came up with a plan to introduce one of the largest airplanes, Airbus A380 in the world.

The introduction of this airplane came at a time when Boeing introduced Boeing 787. The companies in their attempts to outdo each other used different strategies of flight with Boeing adopting point-to-point strategy while Airbus adopted hub-to-hub strategy.

The disparities in strategies made Boeing Company more successful than Airbus Company due to efficiency and reliability of its strategy and the size of Boeing 787 that would be accommodated in most of the airports. To react to this, Airbus introduced Airbus A350 model that had a medium size almost equal to that of Boeing 787 with the aim of helping the company to adopt the point-to-point strategy as subsidiary of hub-to-hub.

Boeing then reacted to Airbus move by introducing Boeing 787-8 model. The paper seeks account for the difference in the visions, analyse competition between the two companies, give an analysis of the current situation, and forecast the future trends of the two companies.

Introduction

The Boeing Company was founded by William Boeing in 1916 in Seattle, Washington. It is an American Multinational aerospace dealing with manufacture of commercial jetliners as well as military aircraft (Yenne 2005). To date the company is ranked one of the World’s leading aerospace and the largest jetliner and military aircraft manufacturer.

The company designs and manufactures electronic, rotorcraft, defence systems, launch vehicles, satellites, missiles, advanced information, and communication systems (Yenne, 2005). The company being a service provider to NASA operates international space and space shuttle stations. In addition, the company provides numerous commercial and military airline support services (Yenne 2005).

The company has a market of its products and support services in 150 countries all over the world. The company being a leader in aerospace and innovation aims at meeting the emerging customer needs in products and support services. This is done through gathering information about the customers’ tastes and preferences according to their current needs as well as market demand.

The company range of capability includes creation of new products, integration of military platforms, creation of more efficient members of their commercial airline family, integration of war fighter and defence systems through the use of centric- network operations and creation of advanced technology solutions aimed at reaching all the business units (Yenne 2005).

The company employs approximately 165,000 people in US and over 70 other countries who are motivated for high productivity in their duties. The company has an amazing culture that mirrors the heritage of aviation through aspiration, imagination, and innovation. The company holds to its vision statement of “people working together as a global enterprise for aerospace leadership” (Boeing Website).

To achieve the vision, the company aims at running healthy core business, opening of new frontiers and transformation of the company strengths into new products and services. The company further achieves its vision through a detailed research on customer knowledge that gives a basis to understanding, anticipation and response to the customer needs.

The company also has co-values that act as guidelines in helping the company to become what it would like to be. These co-values include leadership, integrity, quality, customer satisfaction, people working together, good corporate citizenship, enhancing shareholders value and a diverse and involved team (Yenne 2005).

The company follows the values, which make it meet its goals or objectives as well as making the employees working environment habitable. Since its foundation, the companies have managed to manufacture different types of products and services in the commercial and military fields.

On the other hand, Airbus founded on May 29, 1969, Jean Chamant and Karl Schiller deals with the manufacture of military airlifters and commercial jetliners. The company has its headquarters in Toulouse France and other places in Germany, Netherlands, and United Kingdom (Christian 2011). The company has sixteen sites in the four European countries.

Airbus company major concern is the use of technology and innovation in the production of airlines that are environmental friendly and co-efficient in business enterprise (Christian 2011). “The company builds on its proven record for eco-awareness and innovation, along with the research of alternative energy source and a strong environmental management systems to outline and organize the company’s efforts” (Airbus Website).

With this objective in mind, the company has made great contributions to the aviation industry in its 40 years of operation. To measure its progress towards its goal, the company has developed a strategy that focuses on seven Ps- products, plants, profits, process, perception and procurement with each P having its measuring criteria (Christian 2011).

The company like Boeing Company also uses its innovation in design, manufacturing, operations and fleet support. In addition, the company offers support services such as engineering and maintenance, e-solutions, training, upgrades and Material, logistics and suppliers’ services (Christian 2011).

Further, the company offers flight hour services through specialized solutions. The company has over 290 customer representatives situated around the 150 countries that the airline serves.

On culture, the company thrives on the mix of ideas, knowledge and vision. The company enjoys a diversity of employees, expertise and special experience from over 80 countries represented by over 54,000 employees. The company emphasizes and encourages its employees to be innovative, creative and develop individual talents that would help in realization of the company’s heritage (Christian 2011).

The company further believes in career growth that allows employees not only to move from one position to the other but also to relocate to other countries.

The company takes pride of the diversity of employee and the increased number of women employees who take responsibilities believed to be for men. In products and services, Airbus has managed to offer a wide range of products and support services to both commercial and military fields.

With the background that includes the visions of the two companies, the paper seeks account for the difference in the visions, analyse the events of competition between the two companies, give an analysis of the current situation, and forecast the future trends of the two companies.

Visions and Strategies

The two companies as observed in the introduction that gave the companies background have difference in visions. Boeing airline vision is “people working together as a global enterprise for aerospace leadership” while that of Airbus is the production of aerospace that are eco-efficient and environmentally friendly. The difference in the visions makes the two companies have disparities in their operation.

Boeing visions aims at achieving the best from its operations by uniting the people working all over the world to have a leadership in the aerospace. Its objectives are to ensure that all the global aerospace employees work together to achieve the best in all fields. It further emphasises on its vision with its profound values that calls for it to be the excellent leader in all business aspects.

This is set to ensure that the company leads as an example so that all the other business enterprises can follow its trends. Further, the vision leads the company to the production of quality airplanes, ensuring customer satisfaction, practice of the highest ethical standards and valuation of the team skills, strengths and perspectives.

These values enhance the company’s growth as they help in ensuring that it has offered the right services to the customers. The company thus focuses on customer needs more than any other concern that helps to attract more customers. On the other hand, Airbus company vision is on ensuring that their airline productions are eco-efficient and environmental friendly.

The major concern of this company is to ensure that they meet the business requirements by ensuring they manufacture airlines that are eco-efficient and give the business the advantage of realising great profit margins. In addition, the company focuses on the seven Ps in its manufacturing. The evaluation and measurement of these seven Ps help the company in evaluating its capabilities in meeting its objectives.

This difference between the visions may have helped Boeing in its success than Airbus. According to the analysis, it is evident that Boeing airline has more concern of the customer needs than Airbus Company.

In any business enterprise, an enterprise that focuses more on the customers’ needs usually has a competitive advantage over its competitors (Mahoney 2005). Likewise, the success of Boeing airline would have been due to its greater concerns of the customers’ needs than in the case of Airbus Company.

In the analysis of the strategies used by the two companies, Boeing point-to-point flight refers to means of flight where the travellers do not change their planes during their travels (Hill 2000). In addition, point-to-point flight may refer to a nonstop flight from place of origin to the destination.

The connection of secondary towns by Boeing airline means that the passengers would take flights from their point of origin to their point of destination non-stop or else without change of planes. The hub-to-hub strategy used by Airbus Company involves the change of plane or routes to take the passengers to their destination (Mahoney 2005). The strategy is usually applicable in airports that do not have direct route connectivity.

The passengers may change the plane, or even the route to their destination. The two strategies are very different as point-to-point strategy creates a direct connection between the place of origin and the destination while hub-to-hub uses airline hubs in connecting the place of origin, and the passenger intended destination.

Point-to-point flight strategy allows connections to multiple destinations. This ensures that passengers travelling from one destination to the other use less time as they do not have to use a hub to connect to their destination (Hitt, Hoskisson & Ireland 2009). The strategy saves time as compared to hub-to-hub strategy. The strategy is also cost effective as it reduces the cost of flight expenses due to reduced distances.

The direct connection between the cities shortens the distance travelled. This makes the costs incurred in fuelling and other flight expenses to reduce and that consequently reduce the flight charges. The other advantage of the strategy is that it is reliable and efficient to the passengers as it gives them the assurance of reaching their destination without change of planes or travel companies (Hitt, Hoskisson & Ireland 2009).

The strategy also offers the passengers comfort during their travel. The shortening of the travel distances reduces the time spent on the flight that consequently reduces tiredness, which makes the passengers to be comfortable during their travel. Point-to-point strategy also helps in reducing congestion in the airports that act as airline hubs through the provision of opportunities by the strategy to bypass the hubs.

This further makes the airline hubs to run effectively. Point-to-point services also give the passengers convenient schedule choices as they do not depend on the times allocated for the plane connection as in the hub-to-hub strategy.

On the other hand, the method has a draw back in that it is less efficient especially between routes with few passengers (Hitt, Hoskisson & Ireland 2009). This causes most of airlines to find it difficult in its application. Further, this causes the strategy to be only applicable to small and medium-sized airplanes. Hub-to-hub strategy has its pros where the method is efficient for the routes with few passengers.

The airlines are able to connect and interchange the passengers, which makes the airlines using this strategy to have enough passengers for their trips (Mahoney 2005). The method is thus applicable for large airplanes. This ensures that airlines reduce the cost of flight expenses thus becoming more economical.

However, the strategy has cons in that it is time consuming. The use of hubs makes the distance travelled by the planes longer as they have to stop at different destinations (Koontz & Weihrich 2010). In addition, the change of planes and routes also consume a lot of time thus making the strategy inefficient. The strategy is tiresome due to long hour travels that make it unreliable.

The strategy is also expensive as the costs incurred by the plane such as fuels cost are huge and affect the flight charges (Grant 2005). The strategy is also unreliable as the use of airline hubs may cause delays in case of an emergency or climatic changes at the hub point. This makes the passengers change their arrival times or even days depending on the impact of the effects.

With the knowledge of the pros and cons of the two strategies it is easier to analyse them and find out what worked for Boeing that made it successful than Airbus. The use of point-to-point by Boeing Company exposed most of the customers or passengers to the advantages of using the method. The customers considered the efficiency of the strategy, reliability, cost and time consumption.

The method being more efficient, more reliable and less time consuming attracted most passengers. Similarly, passengers considered the comfort of the flights that made majority to choose Boeing rather than Airbus. This advantage gave Boeing Company a competitive advantage over Airbus Company.

Analysis of Events since the Launch of Boeing 787 and Airbus A380

The launch of these models increased the competition between the two companies due to the intention of the two companies to prove their strengths. The main intention of Airbus realising Airbus A380 was to challenge the Boeing in the monopoly of manufacturing large-aircraft. Airbus intensified its move to ensure that it challenges Boeing in the large-aircraft market.

The Airbus A380 a double-deck airliner with a capacity of over 500 passengers brought competition in the air market, as it could carry many passengers at once. In addition, the airliner, which is the largest in the world, could fly a distance of 15,400 kilometres that increased the competition as it could use the point-to-point strategy.

The capacity of A380 supports the intention of Airbus to use hub-to-hub strategy, as it could not have accommodated the point-to-point strategy. In addition, the A380 airline only landed in large airports or otherwise the airports had to improve or modify their facilities in order to accommodate the airliner. This hit the Airbus operation in most of the minor airports thus less success in its strategy.

On the other hand, the release of Boeing 787 that had a capacity of about 210 to 290 passengers increased competition. The aircraft was of moderate size that would allow the company to use its strategy. Similarly, the aircrafts had the ability to fly for long distances without stopping and this made it possible to adopt the strategy effectively.

The use of these two models led to stiff competition in the air market with Boeing concentrating on both minor and major airports while Airbus only concentrated on major airports.

The difference of airports and route concentration made Boeing to have a competitive advantage over its competitor as its plane model could be accommodated in many airports. The two companies also produced fuel-efficient airplanes that made both companies to be more competitive.

After Airbus realisation of the challenges facing it in the market due to the large size of the A380 model, it introduced another model to A350 that was extremely small compared to A380. The new model had a capacity of 270-350 passengers that was mainly meant to compete with Boeing 787.

To react to the introduction of Airbus A350, Boeing introduced Boeing 787-8 that had a capacity of 210-330 passengers depending on various classes. This further intensified the competition between the two companies. Airbus changed the strategy and started incorporating the point-to-point strategy by the use of A350.

This has caused a great challenge to Boeing Company as the Airbus has both large economical airlines as well as medium sized airlines that can operate in both strategies. The situation has even become worse due to the shift in the sales in the air industries. In the recent years, Airbus has made a great come back due to the introduction of A350 model that is easier to accommodate in many airports.

The events of the introduction of the models by the companies have been characterized by competition between two companies in their attempt to attract more customers.

Similarly, the competition has led to improvement in the quality of the airlines manufactured, the use of technology and the comfort of the passengers during the flights. In addition, there are better flight charges as every company attempts to have the competitive advantage. The two companies have therefore competed as they try to prove their superiority and strengths over each other.

Analysis of the Current Situation

Market: Recently, the major competition in the aerospace industry is between Boeing and Airbus (Christian 2011). This is due to its advancement in the aerospace as a result of high level of technology and innovation. The two companies compete in both the manufacture of commercial and military aircrafts as well as in the production of support services to various aviation industries.

In the recent years, Airbus has been more competitive in the market due to its stability attained through the expansion of its operation sites in most of the nations. In addition, the company market expansion is boosted by its operation in the best world and European economically developed countries.

The economic stabilities in Germany, France, England and Netherlands make Airbus company to have an advantage in its operations. This has further helped in opening markets for the company products in the European Union. On the other hand, Boeing has been the leading company in the United States. The company enjoys most of its market from the American nations where the company is well established.

Market size: currently, Airbus holds a half of the aerospace market due to its improvement in products that are both environmental and economically friendly to the users. Similarly, in its operation in the airline industry, the company has adopted a two-way strategy to ensure they take the full competitive advantage.

The company applies both the point-to-point and hub-to-hub strategies that were made possible due to the introduction of Airbus A380 and A350. The company uses A380 in hub-to-hub strategy and Airbus A350 for point-to-point strategy. This has helped the company to dominate the market that led to its tremendous market growth. On the other hand, Boeing holds one third of the total aerospace market.

The company’s use of one strategy has given Airbus Company the advantage to penetrate most of the markets. Boeing Company has been able to capture this market due to its high quality airplanes and efficient services that it offers. The company’s concern of meeting its customer needs has helped in ensuring that the customers are loyal.

SWOT analysis: the SWOT analysis gives an evaluation of companies in reference to their strengths, weaknesses, opportunities and threats (Aaker & McLaughlin 2010). The strengths analysis evaluates what a company has managed to do better than its competitor and the achievements it has made in meetings its goals, objectives and vision.

The weaknesses evaluate where the competitors are doing better and the challenges faced by the company (Grant 2005). In opportunities analysis, the company evaluates the unexploited business venture such as markets, technology and the trade rule that would control its business operations. The threats analysis evaluates the external factors that would affect the operations of the company (Aaker & McLaughlin 2010).

Boeing Company current strengths include its ability to hold to its vision as it has offered its leadership in the aerospace field. The high rise of Airbus Company is attributed much to the existence of Boeing Company through its stiff competition experienced between these companies that have led to its extensive growth.

The company has also managed to use improved technology and innovation in the manufacture of high quality airplanes as its values dictate, which has helped the company to market its products. Boeing Company has managed to offer better prices to the customers compared to Airbus Company. This has made the company to improve its market size.

On Airbus Company, the company has been able to utilise its employees to innovate and use high technology in the improvement of its airplanes. The company has also managed to respond effectively and with right decisions to the competition from Boeing Company, which has led to a vast and tremendous growth in its market (Hill 2000).

Airbus has also managed to hold to its vision of the production of eco-efficient airplanes both in environment and economic. This together with the high quality of its airplanes has made the company’s market expand more than for Boeing Company.

It has also managed to invest in different countries in the world that has led to development of good relationship with the company that eventually has resulted into market expansion (Hill 2000). The two companies also have the strength of managing to have a diversity of employees from different countries thus increasing the level of their technology, innovation and creativity.

In weaknesses, Boeing Company has not managed to counter competition from Airbus. After the introduction of Airbus A350, Boeing market growth has been stagnant while that of Airbus grows every day.

Further, Boeing Company has been unable to handle the economic inflation in the United States, which has affected its operations in the last few years.

The company has further been exposed to internal employee crisis with most of its expertise shifting from the company. Airbus on the other hand has a weakness in that its prices of the airlines are generally high as compared to Boeing airplanes. This has given Boeing an advantage to do well in the market.

On the opportunities, both companies have exposure to several opportunities. The two companies been in a position to overspecialize gives them high potential of business ventures. The two engage in manufacture of airplanes, and provision of support services. This gives the two companies the ability to expand their business activities globally.

The expansion to other parts of the world is even possible due to globalization that reduces the cost incurred in trade (Grant 2005). In addition, globalization of labour put the companies in a better position as they can easily hire expertise from any part of the world (Hill 2000). The two companies also enjoy the economies of scale due to production in bulk (Hill 2000).

According to the market trend, the companies have increased demand every year that makes them to have a chance to produce in large quantities. With the advanced technology, the two companies have opportunities for more ventures through maximum use of innovative means. The companies should concentrate on the advancement in technology to manufacture airlines that use other sources of energy other than fuel.

On threats, the two companies expose each other due to their extensive competition. Similarly, the two companies being the major competitors challenge each other in terms of labour. Recently, Boeing Company has experienced expertise shift, with potential destination being Airbus Company.

The companies have exposure to risks associated with economic inflation and has also been the case with Boeing Company. The rate of inflation causes the companies to incur high cost of production that lead to high product prices that consequently decrease the sales and profits.

Product analysis: The two companies deal with different types of products. The companies believe in innovation that acts as a boost to their quest for new products. Competition has led to the introduction of more products in the market by the companies.

The latest of the airplanes in the market are the Airbus A350 family and Boeing 787 family that are fuel economical and travel for long distances without stops. In addition, the companies have many support services in the airline and aerospace fields.

Forecast of the Future Trend

According to the trends experienced in the past between the two companies, the companies remain as the world largest aerospace manufacturer because there are no other major manufacturers to compete with. With the advancement of technology and the increase in the rate of innovation and creativity accompanied with the competition between the two companies, they stand at a point of transforming the aerospace and airline field.

The companies’ focus on innovation will help them to manufacture more complicated airplanes that are user friendly thus reducing the challenges in the air travel sector. However, the companies have exposure to the economic changes in the globe that may affect their operations.

Recommendations

Competition between the two companies helps in the advancement of the aerospace and airline industry. The companies should focus on challenging each other in the manufacture as well as in the airline industry but ensure that they do not expose each other to risks.

The two companies being the main competitors should not view each other as a threat but should work together through innovative programs and technology advancement researches that would help them to experience more growth in their field.

This will consequently ensure that the customers have the quality products as well as ensure that the companies’ competition is healthy. The companies should also focus on making their training programs more extensive to the airline industry to help in the improvement of services and efficiency.

Conclusion

The competition between Boeing and Airline Companies has enabled them to grow in technology, innovation, creativity, market, sales and profits. This has been generally caused by their reaction towards each other in the competition in order to take the competitive advantage.

The struggle to outdo each other has benefited the customers of the two companies involved in the airline sector due to production of high quality and efficient commercial and military airlines.

In addition, the competition has led to the adoption of different flight strategies that have eased the passengers travel as well as giving them the choices of the kind of flights to make. In nutshell, the competition between the companies has led to a transformation in the airline and aerospace industry, which will have great impact in the future of the industry.

References

Aaker, D & McLaughlin, D 2010, Strategic market management: Global perspectives, John Wiley & Sons, United Kingdom.

Christian, U 2011, How the macroeconomic environment of the airline industry affects the strategic decision of Boeing Vs airbus: A case study, Grin Verlag, Norderstedt.

Grant, R 2005, Contemporary strategy analysis fifth Eds, Blackwell Publishing, Malden.

Hill, T 2000, Manufacturing strategy: Text and cases, (Third edition), Irwin McGraw-Hill, Boston.

Hitt, M, Hoskisson, R & Ireland, D 2009, Strategic management: Competitiveness and globalization cases (eighth edition), Cengage Learning, Mason.

Koontz, H & Weihrich, H 2010, Essentials of management: An international perspective, Tata McGraw Hill, New Delhi.

Mahoney, J 2005, Economic foundations of strategy, Sage Publication, Inc, London.

Yenne, B 2005, The story of the Boeing Company, Zenith Press, Michigan.

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IvyPanda. (2019, May 31). Aviation Strategy. Retrieved from https://ivypanda.com/essays/aviation-strategy/

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"Aviation Strategy." IvyPanda, 31 May 2019, ivypanda.com/essays/aviation-strategy/.

1. IvyPanda. "Aviation Strategy." May 31, 2019. https://ivypanda.com/essays/aviation-strategy/.


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IvyPanda. "Aviation Strategy." May 31, 2019. https://ivypanda.com/essays/aviation-strategy/.

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IvyPanda. 2019. "Aviation Strategy." May 31, 2019. https://ivypanda.com/essays/aviation-strategy/.

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IvyPanda. (2019) 'Aviation Strategy'. 31 May.

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