Environmental Forces and Technology of Airbus - Assignment Example

Airbus Analysis Question 1 The general environment of modern businesses can be divided into the six segments to outline the external factors that influence a particular organization. They include political, economic, social, environmental, legal, and technological forces as per the requirements of the PESTLE analysis. Each of these external influences has a significant impact on Airbus. However, the available evidence provides a premise to believe that the ones that would rank the highest are the environmental and economic factors. Environmental Forces The environment is a matter of great concern for Airbus. The concerted efforts the company has put into enhancing the environmental sustainability of its operations are the evidence of this. A quality example in this respect is the design of the A380 aircraft. The company positions it an industry leader in eco-efficiency. According to the organization’s website, they consider environmental standards as one of their highest priorities, a consequence that has arisen during their 30 years in the industry. Despite the declared policy of contributing to the sustainable development, Airbus is believed to overlook some ecological issues in its operations. The group of 17 European NGOs focusing on the environment accused the company of not making enough effort to reduce CO2 emissions (Datamonitor, 2010). Currently, the aviation industry accounts for 5 percent of global warming with Airbus and its competitor, Boeing, accounting for a cumulative 90 percent of the total number of aviation emissions (Newhouse, 2008). Although the company defended themselves by calling the standards, the NGOs were putting forward unfeasible, the issue of whether or not Airbus is environmentally conscious is rife. Technology The second most significant segment of the Airbus’s general environment is technology. The fast pace at which the scientific and technological process is moving means that Airbus has to be ahead of its competitors to ensure it maintains the lead. The global population continues to increase, and there are estimates that the industry could have close to 4 billion customers by the year 2050 (Gorod, White, Ireland, Gandhi, & Sauser, 2015). For the company to adapt to the new conditions, it must invest in new innovative mechanisms and expands on the existing ones. In particular, it uses different technologies to increase the aircrafts’ capacity. The results of these modifications are impressive. For instance, the A380 aircraft can carry 60 percent more passengers than the equivalent of the Airbus’s rival (Newhouse, 2008). Additionally, the H160 and the CityAirbus, both innovations in helicopter technology, continue to set new goals in the airline manufacturing industry. Question 2 Porter’s five forces are a popular instrument of analyzing different industries. They include the threats of new product substitution and new competitors, the bargaining powers of suppliers and customers and the competitive rivalry. The two most significant ones to Airbus are the threat of existing rivals and the bargaining power of customers. Threat of Rivals Boeing is currently the most significant rival to Airbus in airline manufacturing. Thus far, Airbus has continued to create new products for its customers. While Boeing is known for its large capacitive aircrafts, such as the 777-300, the 747-400, the 747-8 Intercontinental and the 777-200, Airbus’s A380-800 is larger than all of them (Lynn, 2006). This plane, with a cabin surface area of 550 square meters, is 73 meters high and weighs a whopping 560 tons. The aircraft is one of the heaviest passenger planes today; it is only 80 tons lighter than Antonov An-225 Mriya (McFadden, 2017). At the same time, it is 40 percent larger than the Boeing 747-8 Intercontinental. The Airbus A380 has two decks, with a capacity of 538 on the main and 315 on the upper, totaling 853 passengers (Simons, 2014). By having one of the largest aircrafts in the industry, Airbus has managed to stay ahead of its competitor, Boeing. The A380 is one among different innovations, such as H160 mentioned above, that Airbus has introduced to beat the competition. Customer Bargaining Power The second threat is about the customers’ bargaining power. Currently, the Airbus’s airplane, the A380, which costs US$436.9 million, is one of the most expensive planes in the world, On the other hand, the Boeing 777-300 costs US$320 million. The Airbus A380 has a substantially larger capacity and more complex structure than the Boeing 77-300. Therefore, Airbus’s prices are competitive, and its customers’ bargaining power is not that significant of an issue. The purchase by the top airlines in the world, such as British Airways, Singapore Airlines, and Emirates Airlines, is evidence to this fact. Question 3 An advantage of being the first to introduce a particular product into the market is that it gives one the ability to determine their prices. Because Airbus currently holds the title for producing one of the largest aircrafts in the world, among a set of other trend-setting innovations, it can take advantage of the leading position. In light of this crucial point, Airbus should continue to introduce new products into the market. This way, the company can influence industry prices more, thereby increasing its profitability in the long-term perspective. The same strategy can be useful in managing customer bargaining power. Airbus should market their products as the market pioneers. The Airbus A380 is one of the first aircrafts of such a size. CityAirbus, which currently continues to undergo testing, is also positioned as one of the first of its kind (Eckel, Iacovone, Javorcik, & Neary, 2016). Such a marketing approach aims at exceeding the expectations of aircraft’s design since their competitors are lagging behind in that respect. Knowing that they would be paying for something that is technologically revolutionary, the customers would not consider price as much as they would have if there had been many such products in the market. Be that as it may, Airbus should still ensure that their pricing strategy is reliable and consistent. Boeing is a strong competitor, which can take advantage of the rival’s mistakes. To ensure that Airbus’s customers are satisfied with the quality and prices of the products, the company’s managers should be fully aware of their competitors’ activities and plans. By comparing their prices and product ranges more often, they can ensure that theirs are the most competitive in the market, thereby gaining an edge over rivals Question 4 Threats One of the most significant threats facing Airbus is intense competition. As stated above, Airbus and Boeing are rivals that compete with each other in different fields. Each company tries to go ahead by introducing some new features of their products. For example, both Airbus and Boeing have developed fuel-efficient models. Since the companies have mostly captured the market passenger aircrafts by dividing it into the two parts, the threat of losing to its main competitor is undoubtedly the most topical risk for both Boeing and Aircraft. Another threat facing the company is regulatory pressure (Norris & Wagner, 2009). Airbus has continued to improve fuel efficiency in their recent models. Nonetheless, there have been concerns raised by environmental authorities and NGOs over their greenhouse gas emissions. Pressure also stems from international organizations like the European Aviation Safety Agency on passenger safety. Another threat is the potential loss of key markets such as Russia and China (Norris & Wagner, 2009). The plans of these countries to develop their commercial aircrafts mean that Airbus may not sell as many products there as it used to in the past. Furthermore, China, for instance, is set to become the global leader in passenger traffic. Losing the market, therefore, will adversely affect Airbus revenues (Eckel, Iacovone, Javorcik, & Neary, 2016). The company should invest more in research and design and increase efforts to reduce CO2 emissions to ensure their products match the technological standards. This way, they would stand against NGOs and government authorities concerned with the issue, in addition to promoting environmental sustainability. Opportunities The opportunities at Airbus’s disposal are the three main categories: technology, demand, and demographics. As stated above, technology is moving at a rather fast pace. Airbus’s coping mechanisms are up to par. In developing products like the CityAirbus, the company continues to take advantage of technologies. Secondly, the demand for aircrafts worldwide is growing at an even faster rate today than in the past. Airbus has projected a market for about 33,070 airplanes over the next two decades. This demand presents a market value of US $5.3 trillion (Eckel, Iacovone, Javorcik, & Neary, 2016). By positioning themselves effectively over the projected period, Airbus can reap full benefits from the sales, making them the global leader in airline manufacturing. A third opportunity that Airbus may take advantage of is the increase in the middle-class population, especially in emerging countries. Brazil, India, South Africa, China, and Russia constitute an essential part of this market. Even if these nations introduce their line of aircrafts through manufacturing, it still will be a growing market that could positively influence Airbus’s business over time. The reason for the increasing demand of the middle-class is the improved economic conditions worldwide. More people are spending on travel, which is a unique opportunity for Airbus. To take full advantage of the growing market opportunity, Airbus should intensify their marketing efforts in the emerging markets. Question 5 Strengths Airbus is an established brand name. It has been existing for over forty years, which means that it has been building trust with customers for the four decades it is in operation. During this time, the company has sold over 16,300 aircrafts. To serve its customers, Airbus currently employs close to 60,000 people (Atma Global, 2014). The parent company, Airbus Group, had supported the aircraft branch in turbulent times when occasional economic recessions were threatening the business. Another strength in which Airbus takes pride is innovation. Most of their product offerings are revolutionarily innovative. For instance, the Airbus A350 XWB uses next-generation manufacturing and assembly. The company’s partners and suppliers in Europe make components and assemble the aircrafts in one line. The process is the only one of its kind in the entire industry. Another strength of Airbus is eco-efficiency. As stated above, the company has raised concerns in the industry over their rate of CO2 emissions. In response to this, Airbus has prioritized environmental standards in the design of the Airbus A380. The aircraft is an industry leader in eco-efficiency, borrowing from the decades-old experience the company has had in aircraft manufacturing. Another significant strength the organization enjoys is a commanding share of the market, which stands at over 50 percent. In the single-aisle category, Airbus has a 60 percent lead with their A320 over their closest competitor, Boeing 737. The wide-body category has the A330 leading with 44 percent against Boeing’s 777, 767 and 787 (Lynn, 2006). To maintain the company's leading position, it should introduce a broader range of products, which would give their customers more choices and autonomy. Weaknesses The most critical internal challenge for Airbus is the backlog of orders. The deliveries done outnumber the demand requests received. Their principal competitor, Boeing, has a lesser overload, which may influence customers to forego purchasing from Airbus in favor of their competitor. Another major weakness is operational inefficiencies. Case in point, there were delays in the A350 and A380 launches (Lynn, 2006). In fact, the latter’s postponement was for over a year. The third significant weakness is the high cost of production. The delay of the Airbus A380, for instance, led to an increase in production costs, which reduced the Airbus’s share price in the stock exchange by 26 percent (Newhouse, 2008). To address this problem, Airbus should consider shifting their production processes to places where such costs are substantially lower, such as Vietnam. Question 6 Resources, Capabilities, and Core Competencies Although the company is capable of producing more, it has currently limited the production of the Airbus A380 to just one aircraft per month (Norris & Wagner, 2009). Over the period of one year, however, Boeing can produce up to 500 airplanes. Customer demand guides the choice of how many to produce. However, as noted above, they are faced with the challenge of meeting the high market demand. One of Airbus’s most essential capabilities is producing aircraft components and performing their assembly in-house, without the need to outsource. Additionally, Airbus does their flight controls in-house, as opposed to their closest competitor, Boeing, which outsources such services. Producing their aircrafts from scratch is one of Airbus’s core competencies. It ensures greater control over their operations during the entire process. Doing so is usually the most productive way of maintaining the quality standards the company has set. It also reduces logistic issues; for example, it eliminates the costs of shipping components to a different location for assembly. Internalizing their processes such as production and flight control, therefore, increases efficiency (Gorod, White, Ireland, Gandhi, & Sauser, 2015). Another core competency Airbus has is innovation. It is an industry leader in developing unique products for the aircraft market. The Airbus A380 was a trendsetter; no other company has matched the product since its introduction over a decade ago. Moreover, the backlog is a testament to the high demand for their products, which means they have another core competency, a good command of the market. Question 7 Value Chain Airbus’s value chain involves many critical processes. Such processes include supply chain and warehouse logistics, Closed Loop asset tracking, the Airbus Transport Network, internal asset tracking, manufacturing and assembly, configuration management, cabin operations, and repair process optimization (Gorod, White, Ireland, Gandhi, & Sauser, 2015). All the above processes are interdependent. Streamlining each one of them ensures the smooth running of the company’s operations and increases efficiency. Since their production is majorly in-house, Airbus has a firm control over the manufacturing and assembly components of their value chain (Norris & Wagner, 2009). Be that as it may, most complaints against Airbus regard the inability to deliver to their customers on time. In this respect, they should increase the speed at which manufacturing and assembly take place. The supply chain and warehouse logistics also affect how fast or slow the organization’s processes move. Delivering products to customers and ensuring that the warehousing is at its optimum are interconnected processes. It may be that Airbus is not able to store a lot of manufacturing components in one place at once. In this regard, they should consider increasing their warehousing facilities. The size of the workforce also affects delivery. For example, if it would take three days to fully develop one wing with ten employees involved, doubling the number of such employees may reduce this time to less than a day. Moreover, repair processes may alleviate the need to develop new products if fully optimized. In this regard, ensuring such processes occur faster and more efficiently can boost Airbus’s value chain. Arguably, the most considerable part of the value chain is configuration management. It involves having sufficient information about the various processes in the organization and managing such information (Norris & Wagner, 2009). Any change that occurs will, therefore, reflect in the system. By applying configuration management into their decision-making, Airbus can streamline their processes and handle their products and facilities more adequately. By doing so, they will substantially enhance their value chain.   References Atma Global (Firm). (2014). Airbus versus Boeing. New York, NY: Atma Global. Datamonitor (Firm). (2010). Airbus S.A.S. New York, NY: Datamonitor. Eckel, C., Iacovone, L., Javorcik, B., & Neary, J. P. (2016). Testing the core-competency model of multi-product exporters. Review of International Economics, 24(4), 699-716. doi:10.1111/roie.12234 Gorod, A., White, B. E., Ireland, V., Gandhi, S. J., & Sauser, B. (2015). Case studies in system of systems, enterprise systems, and complex systems engineering. Boca Raton: CRC Press. Lynn, M. (2006). Birds of prey: Boeing vs. Airbus: a battle for the skies. New York: Four Walls Eight Windows. Newhouse, J. (2008). Boeing versus Airbus: The inside story of the greatest international competition in business. New York, NY: Vintage Books. Norris, G., & Wagner, M. (2009). Airbus. Osceola, WI: MBI Pub. Co. Simons, G. M. (2014). The Airbus A380: A history. Barnsley: Pen & Sword Aviation. Norries, G. & Wagner, M. (2005). Airbus A380: Superjumbo of the 21st Century. Minneapolis: Zenith Press. Gunston, B. (2010). Airbus: The Complete Story. Sparkford: Haynes Publishing. McFadden, C. (2017). Antonov An-225 Mriya: The largest plane ever built. Interesting Engineering. Retrieved from https://interestingengineering.com/largest-plane-ever-built-antonov-an225-mriya. Read More