Introduction
Bombardier aerospace is a division of Bombardier Incorporation that deals with the production of aircrafts. In the past, the company has been among the leaders in production of business jets as well as regional aircrafts. Nevertheless, there has been dynamics in the customer tastes and preferences thus requiring rather customized aircrafts.
On the same note, the issue of global warming has brought about new dimensions in the requirements of aircrafts. Moreover, there has been increased competition among aircraft manufacturers each seeking to offer the most comfortable aircraft at the lowest cost. The Bombardier case study focuses at the case of Bombardier aerospace and how the company deals with the challenges in the aircraft industry.
Analysis of the Industry
The aircraft industry is a very competitive industry with each player aiming at maximizing its revenues and profit margins. Planning in advance after taking into consideration the changing tastes and preferences, is critical. This is the reason why Bombardier plans to introduce new aircrafts into the market. The Cseries generation of aircrafts is not only aimed at enhancing market share, but also at offering better services than its competitors.
Nevertheless, the market is highly unpredictable and certain unprecedented issues can lead to far reaching effects in the industry hindering individual plans. The September 11th terrorist attack for example highly reduced demand of flights as well as demand of aircrafts. Moreover, disease outbreak in one region can cause a sharp decline in demand all over the world.
The company has seen substantial growth over the years with its production increasing tremendously. It can be shown that since 1974 to 2006 the average production has been increasing despite the fact that there are some years when production actually declined. Demand of aircrafts is projected to grow up to year 2025.
It is important to note that due to the introduction of the hubs-and-spokes routes network means that the demand for small aircrafts with the capacity of between 80 and 120 will increase sharply. This is an opportunity for Bombardier to increase its market share given that this directly increases demand of its products since it majorly specializes in the production of this aircrafts.
On the same note, contribution of Bombardier aerospace to bombardier Inc. is quite significant and remains high compared to the other division. Moreover, total revenue of Bombardier aerospace has been increasing on average over the years despite small variations. Cost is a crucial factor in the manufacturing of aircrafts given the fact that each airline company wants an aircraft that is cheaper to maintain and fuel.
Nevertheless, comfort is also vital and balancing between the two aspects in a single aircraft has been a challenge. To solve the problem, Bombardier produces two types of aircraft: CRJ which has a turbo-reaction engine thus fuel –efficient and comfortable, and the Q-series which has a turbo-propulsion engine thus requiring less maintenance costs. Another challenge of Bombardier is the frequent change in management especially since 1992.
The frequent changes are highly likely to affect implementation of organizational strategy since each person could be having different policies. It is crucial to note that, consistence is vital for the success of any organization. The firm operates in an industry that requires heavy initial capital investments for a new entrant. To a certain extent this has been a hindrance to new firms that would have liked to venture into the market.
Nevertheless, there have been moves by several countries to enter the market. The main reasons behind these moves have been noted as being national interests as well as the high potential in the industry. Some of these countries include China, Japan and Russia.
This is a threat to Bombardier given that firms in some of these countries are the main parts suppliers of Bombardier and therefore some vital information regarding the industry and plans of the company. Moreover, the problem is escalated by the fact that global demand is shifting towards BRIC countries at a very high rate. The main strategic objective of the company is to become a global leader in the manufacturing of aircrafts and everything possible is done to achieve this.
The announcement that the company was planning to introduce new and arguably more efficient Cseries aircrafts is a move towards ensuring that the firm maintains its leadership in aircraft manufacturing. Nevertheless, one cannot be confident because there is a possibility that other firms in the industry are silently planning their moves. In this industry it is not possible to monitor the moves of a rival.
Main Problem Facing Bombardier
As any other player in the industry, Bombardier recycles the technology it uses in production of its aircrafts. Most of the technology in production has remained the same over the years with slight modifications. This has brought the dilemma of the Cseries with skeptics saying that the aircrafts will be just like the old ones. In the aircraft industry, recycling of aircrafts and technology used to manufacture the aircrafts is the order of the day
Despite the increasingly changing customer demands as regards tastes and preferences, Bombardier has shown little or no efforts in coming up with new technology in manufacturing of aircrafts. The same old technology is just modified a bit and a new aircraft is released to the market. Nevertheless, there is increasing technological discoveries in various sectors of the economy including the aircraft industry.
For efficiency to be attained in any given scenario, cutting age technology is crucial. Investment in research and development is therefore an important part of any organization in this age of globalization. However, though a lot of money is injected into research and development in Bombardier Aerospace, there is no new technology that has been developed for a very long time.
It is crucial, however, to note that the outsourcing of some services like Bombardier does is one move to ensure that new technologies are integrated into production of commodities. Nonetheless, not all services are outsourced and not all outsources services are delivered at the latest technology.
Therefore, it is upon any company to ensure that its research and development department comes up with new improved technologies. For the case of Bombardier, critics have learnt that the firm uses its old technology and this is not good for the business. Rivals can take that opportunity and increase their competition. This is a serious threat that management needs to emphasize on.
Strategic Alignment
Each organization aims at enhancing it strategy so as to take full advantage of the market. However, for any strategy to succeed there should be commitment from each stakeholder and especially employees. On the same note, the strategy should take into consideration the external and internal environment in which the country is operating.
As a result any firm will need to align its structures and its strategy to the prevailing external environment. This process is referred to as strategic alignment and it is crucial in ensuring that a firm’s performance is improved. It should be noted that understanding the goals and visions of an organization is the first and arguably most crucial stage in accomplishment of the goals.
It has been noted that people will work better when they understand and appreciate the goals of their company. Similarly, knowing what impact one’s individual efforts make to the general organization will increase the willingness of one to work hard. The main strategic objective of Bombardier is to become a global leader in the production of small aircrafts.
As a result, each and every structure should be aimed at enhancing this objective. Therefore, the announcement of a new and more efficient Cseries aircrafts is a very good move at achieving this objective. The company has taken the move ahead of other market players which is crucial for any market leader.
Without strategic alignment, the probability of loosing focus of the main goals of the business is high. Strategic alignment ensures that there is connection between individual and corporate goals so that each person and structure is committed towards success of the firm.
Given the competition that exists in the aircraft industry, a firm cannot afford to assume strategic alignment. Each firm is aiming to beat its competitors and increase its market share. As a result, it is upon each firm to take the lead if it has to gain.
Different Decision Making Methods
There are different strategic decision making ways that are used in any organization. Among the major ways is the group decision making method. Bombardier had a group of people that were involved in overseeing the process of Cseries production. Even after the project was halted for a period of time still there were 50 people left with that task.
Group decision making has various advantages which include objectivity as individual feelings will be eliminated. Moreover, the possibility of diversity in information in a group ensures that decisions made by a group are of high quality. However, this method also has various disadvantages which include increased time before the group can reach a consensus regarding something.
Moreover, there is a possibility of some people fearing to express their minds in the fear of being the only ones against the group. Another strategic decision making method is Participative decision-making where all employees are allowed to contribute to the decision making process. This method is crucial because it creates a sense of belonging among employees which increases their morale and hence output.
Moreover, this enhances teamwork in an organization and commitment of employees towards organizational success. The main drawback of this method is that it is sometimes difficult to clearly know the motive of management to include employees in the decision making process. Moreover, it takes a lot of time to collect the contributions of every stakeholder before making a decision and this cannot be used in critical situations.
Trivial but Crucial Decisions
There are several decisions made by Bombardier that seem to be trivial from the outset but which have far reaching effects on the firm. Choose for example the decision to announce that the firm is planning to bring into the market a new generation of aircrafts named the Cseries. After some period of time the management of Bombardier announces that it has halted its plan citing that the time is not the right one.
This may seem as a very casual announcement but it has complicated effects. To begin with, the announcement can make competitors aware of the moves that are likely to be taken by the firm as well as the time frame. Competitors can use this to shock the company by moving faster and producing equivalent aircrafts.
Moreover, halting the process may send the wrong information that the firm has not been able to come up exactly with what it wanted or that there are some internal problems that hinder success of the project. As depicted, already critics have pointed out lack of technological improvement as a possible cause for the delay. This decision can impact on the firm to the extent of compelling the firm to redesign its strategy.
Challenges in Developing Aircrafts
Aircraft production is very complicated. Firstly, aircrafts are made up of very many parts which require different level of expertise. However, it is very difficult to have all the required technology in one firm and this call for outsourcing. Nonetheless, one has little control over the outsourced services and this increases production time.
On the same note, aircraft production is a very expensive exercise that requires heavy capital investment and this can be a problem to acquire. Furthermore, there is a lot of competition in aircraft production and some countries support their own manufacturing firms. This leads to unfair competition that affects players in the industry.
Strategies Used by Bombardier
Bombardier applies different strategies at different levels of its business. At the corporate level, Bombardier applies global strategy because the demand for aircrafts is more or less global. Cultural beliefs do not have much impact in the aircraft industry while customer taste and preferences are rather universal. Consequently, the company can afford to use one strategy for every country to which it supplies aircrafts.
This can be depicted by the fact that the firm has centralized manufacturing units. This strategy is crucial in the aircraft industry since it allows a firm to benefit from economies of scale. However, on the business level the firm uses integrated differentiation and cost leadership approach. This is depicted from the fact that bombardier aims at producing aircrafts that are fuel efficient and cheaper to maintain.
On the same note, Bombardier has differentiated its products into two major categories so as to take care of the diversity in demand. This approach is crucial as it ensures that the firm is able to take advantage of any opportunity that comes along. It is important to note that not all people really care about cost. There are some people to whom comfort is crucial than cost. The integrated approach enables the firm to diversify its aircrafts.
Recommendations
Technology is the driving force in the world nowadays given the current wave of globalization. Therefore, it would be crucial for Bombardier Aerospace to ensure that it comes up with new technologies in the production of aircrafts. This will increase consumer confidence and therefore increase its demand. On the same note, stability in management is crucial for the success of the firm. Consequently, there is need to decrease the frequency with which top management is changed.