Airbus Case Analysis

Strategic problem in Airbus case is the monopoly of the 747 Boeing VLA, which is a fantastic advantage and solution that can be offered is, to increase the capacity of Airbus, it would be better in terms of technologically, as an economic proficiency but Airbus still is not a silver bullet. Airbus major problems were noise, emissions, turnaround time, taxiway movements and evacuation. However, company claims they would remedy these failures.

Another problem (not strategic) that Airbus faces is the problem of wiring and they are behind schedule they are not able to fulfill their promises.

Opportunity in Airbus is there is a chance to break the monopoly of 747 Boeing with the VLA of Airbus.
The next question that appears in our minds is; the successfulness of Airbus and the ability to stay successful and not disappear in the monopoly of Boeing. The answer is the innovative design and technology of Airbus, like fly by wire, CCQ. Fly by wire technology is that substituted computerized control for mechanical linkages between the pilot and the aircraft’s control surfaces and this technology is combined with a common cockpit design permitted named as “cross crew qualification”.
Industry: for Airbus is aircraft. The aircraft industry is difficult to enter because there are some boundaries like government, waiting list and customized airplanes.
Category: is divided on the basis of the number of the passengers. The category specifically is commercial aircraft for passengers and cargo, also commercial jet (VLA), military transport, helicopters.
Segment: this title is divided into two according to seats and range. For VLA market segment is 700 seats and 7500 range.
Airbus and Boeing dominate about 90% of the air transportation market with very few major competitors on the horizon.  
The actual competitor of Airbus is Boeing, when it comes to discuss potential competitors, as mentioned above this industry is a difficult one to enter. Since, there are some boundaries. Boeing is a powerful competitor, the advantages that Boeing has can lead to cease in Airbus. If Boeing decreases its prices or promote a product, or turn out new projects and products (like Boeing 550), Airbus would be in a big trouble. Two firms, Airbus and Boeing is the dominator of Aircraft industry. For U.S Boeing has a unique importance, it is the supplier of Air Force One and F-15 fighter aircraft which are provided for the basis of political strength. Boeing is the largest single contributor to the U.S balance of payments in terms of exports. Boeing’s fleet consists of 14 models spread across 5 families, (like 747, 700, 707). Boeing has a market share of 55% and for the 777 Boeing is expected to bolster Boeing’s market share 

When we take an example of one of Airbus’ products like Airbus A3XX, we can say that, it would have more space per seat and wider aisles. In addition to that Airbus believed these features would attract passengers and would satisfy their needs for the people who are traveling on the longer routes. For the other customers they offer the safety of a four engine plane compared to two engine planes that Boeing offers. Also the initial orders, demand were positive. Airbus forecast the growth rate would be 4.9% per year. Airbus forecast demand for 14.661 passengers and 703 new air freighters over the 20 year period. The case also implies that for now, Boeing satisfy the needs of customers more than Airbus.

In the aircraft industry, there are two major companies which are Boeing and Airbus; these companies have the %90 of the market share, and the other companies have very little shares. The image of Airbus, the reputation of Airbus is, “innovative design and technology”. It is founded in 1970, and their technology is forward when we compare with the others. Fly by wire and CCQ is good examples of Airbus’ technology advancement. These features helped to explain why Airbus had received over half of the large aircraft orders. Also one of the industry journal recently declared that “Airbus has won and will become the world’s leading producer of commercial jets”. Their superior value proposition would be better if they increase the capacity of the seats and reduce the costs. In addition, Airbus’ break even point (QBep) is higher because earnings before interest and taxes are negative means no revenue is coming. Operating margin is %18 and decreasing price would also lead to decrease in operating margin.

Closing Summary:
Airbus revealed as an innovative and technologically advanced company, but Boeing has more market share in the market. Therefore, we can say that a breakthrough would be better for Airbus, not only to remain in the market but also to increase the shares that they have for now.


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This entry was posted on December 1, 2011 by in 5C Analysis, Airbus, Harvard Business Case, monopoly.
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