Sustainable Management Futures - Assignment Example

?Introduction Airbus is one of the leading market players in the global aircraft industry. Airbus is based in Toulouse, France. The company is so bigthat more than 50 percent market share of world aircraft industry belongs to this company. Presently, around 54 percent market share is held by airbus worldwide. It commercially manufactures aircraft on a large scale. Airbus is actually a subsidiary of European Aeronautic Defense and Apace Company that is commonly known as EADS. In 2001, EADS took a huge step towards strengthening the individuality of Airbus. In 2001, efforts have been made by EADS and BAE to formally make Airbus a single integrated firm. EADS and BAE made all of their assets to move to the newly established company. At present, EADS holds 80 percent shares of Airbus, whereas BAE holds 20 percent shares of the company. a supervisory council has been established to look into the operation of airbus. This committee is actually a shareholder committee and consists of seven members only. In this committee five members come from EADS, while the remaining two come from BAE. The committee is responsible for approving budget of Airbus (Airbus, 2010). This shareholder committee also helps in making and implementing investment strategies of the firm. Later on Airbus significant effort has been made to reorganize the company to build several centers of excellence with an aim to earn profit. Each of these centers is authorized with the power of making their own manufacturing and buying policies relating to the production of different parts of aircrafts. They are allowed to make subcontract in order to reduce costs. This kind of operational set up has been chosen by this aircraft company as for this industry, this policy seems to be the most effective way of building and maintaining profitability. Presently, airbus has four subsidiaries which are authorized to take their own operational decisions. These subsidiaries are airbus of North America, Airbus of China, Airbus Japan and Airbus Transport International. It is a very profitable company and presently it offers its supports more than 3000 aircrafts with 250 operators. Airbus has a mission of providing those aircrafts that are best suited to the current needs of the market along with supporting all these manufactured aircrafts with services of the highest quality. It holds the vision of listening to their customers’ needs and responding accordingly. This paper will make an attempt of examining sustainable management of airbus which operates on a multinational ground. First of all a rigorous analysis of the political, economic, social and technological aspects associated with the company will be conducted. Then focus will be placed on environmental aspects that the company should take under consideration. The paper will also discuss the major drivers that have forced the company to take into consideration various environmental aspects while forming its operational policies. This paper will also discuss sustainable management strategies of Airbus along with considering the benchmark requirements. Finally it will analyze the impacts of these policies. PEST analysis and analysis of Environmental Factors associated with Airbus operation: The essential items to deal with the global strategy (based on the PESTEL analysis): Political analysis: Airbus has always been the source of economic activities such as jobs, technology development, ancillary companies and spin offs. Therefore EU has provided Airbus its assistance throughout. Since Airbus is a European consortium of French, German, Spanish and UK companies, therefore EU has served it full-fledged since it a support through tax breaks, financing, loan guarantees and research and development support. In 2001, in one of the reports from European Association Of Aerospace Industries, it is seen that there have been at least 4,35,000 jobs in the aerospace sector of Europe, with 1.2 million jobs being supported directly or indirectly by the industry. There has been a friction in the relationship between US and EU majority of the compensation of the Airbus comes from the subsidy of the European Union. But US government and Boeing considered it to be unfair as Airbus is one of the most successful aircraft manufacturing industry world wide. The launch of A380 was a big example to bring in so as to reflect the fact that Airbus does not need any more government aid. In response to this accusation, Airbus and European government accused the US government for still helping Boeing with subsidies. Further more, The European Union is challenging a 3.2 dollar tax break which the Washington government has promised Boeing and its suppliers. However, the plan of Airbus to launch A350 has added more tension to the situation as Airbus is looking around for new government loans which estimates roughly about 1.6 billion dollar. This has made the political situation very complicated as Airbus plays a very vital role in the economic stability and national security of both US and European Union (Donnelly, 2005). Economic analysis: In the next twenty years, the commercial aircraft industry will require 16,600 new aircraft in service as it expects to have its worth about two trillion US dollar. The demand for these new aircrafts will come from China, United States, United Kingdom and from developing countries like India. A substantial rise in the growth rate was also expected from the Middle East. It has been estimated that in order to meet China’s emerging demand, then at least 2,200 aircrafts are needed in order to fulfill their air travel needs domestically as well as internationally. In the next twenty years, it is expected that there will be rapid growth in the international freight sector by 253 percent. The European Union governments and Airbus is not willing to give up the government launch aid as instrumental assistance has been provided to the manufacturers of the aircraft so as to become rapidly one of the leading suppliers of commercial jets in the world. Since Airbus had its inception in 1970, it has been able to grab 15 million dollar government loans including 3.2 billion dollar for A380 aircraft. Here Airbus has got an added advantage that it does not have to pay back the loan to the government if their strategy somehow fails. This government aid has helped Airbus to surpass all the risk tendencies which Boeing and other competitors are suffering with. Out of this government loan, Airbus can develop any program it wants and can also have a discounted benefit for all the schemes undertaken without even having the fear of losing its shareholders (Borak, 2005). Social analysis: Airbus has tried to give all sort of comforts in respect of aircrafts to its passengers, employees and customers. This strategy has played a vital role in company’s future success. One of the feature of Airbus corporate culture is innovation and creativity, along with internalization and globalization. An added advantage for the company is that the diversity they have in their culture and language. If they can build up effective teams of different culture, background, skills and nationalities, then that will boost their carrier in a long way. English has been the common language and a bridge to unite all diversified cultures and nationalities. Nowadays, demand of air travel depends on how much convenient the travel would be. Therefore the Airbus companies are reflecting their attention more into economies of scale and trying to minimize the environmental impact (Matlack, 2004; Matlack and Holmes, 2004). Technological analysis: In the aerospace industry huge costs need to be invested in the research and development sector of an aircraft. The European government has tried to help the aerospace industry in many ways, through NASA and Department of Defence and through export relief programs also. But this amount of aid is very less as compared to the US government. Now the industry standard demands a device called fly-by-wire which is an electronically managed flight control system. This system helps to design identical cockpits from 107-seat A318 to 555-seat A380. This has made the airlines very cost effective and the pilots can concentrate on more than one work simultaneously. According to the high personnel of Airbus, they want modern and hi-tech production facilities in order to meet up consumer demands (Sakai, 2004; Financial Times Business, 2004). Analysis of environmental factors: Two most important environmental issues that Airbus should take into account are climate change and impletion of conventional energy resources. Climate change has become one of the major environmental issues today as it is the factor that is working behind the most talked about environmental disaster of the present day, the global warming. Air pollution is not just a simple natural phenomenon. It’s a man made disaster that has become a major issue of concern of human civilization at the present time. In the last twenty years scientific knowledge has led to the understanding that anthropogenic, human made actions were responsible for the changes on global climate. Those changes are a consequence of the emission and accumulation of greenhouse gases on the atmosphere. These greenhouse gases are the major air pollutants which are not only polluting the air, but also causing the atmospheric temperature to rise   (Sakai, 2004; Financial Times Business, 2004).   In this industrial age of human civilization, human activities are increasing the natural levels of those gases, by emitting carbon dioxide from the burning of fossil fuels such coal, oil, and natural gas; methane and nitrous oxide produced by agricultural activities and changes in the use land use; and by some industrial gases that do not occur naturally but are long lived in the atmosphere. If emissions continue to grow at the present levels, the concentration of carbon dioxide will double those from pre-industrial levels during this century. Hence, to save this planet, the time has come to take appropriate measures (Sakai, 2004; Financial Times Business, 2004). The age people are presently living in can well be termed as the age of fossil fuel. Today more than 90 percent of the world’s energy is supplied by oil, natural gas and coal (“Energy resources and our future”). Over the years consumption of fossil fuels has increased by magnificent amount. The twentieth century experienced the highest level of consumption of fossil fuel since the introduction of it as an important source of energy to the human civilisation. Coal, oil and natural gas have been known to man for thousands of years. For example, in some parts of china, for the purpose of domestic heating, cooking and lighting coal and natural gas were started to be used as early as 1000 B.C. But sine last two three decades scientists have been expressing their concerns over the over use of fossil fuels. Since coal, gas or natural energies are non-renewable and over the year’s excessive use of these fuels have caused huge depletion of these, this golden age of fossil fuel power can not run for long (Sherman, 2003; Jones, 2003). Time has come to seriously think upon alternative sources of energy for the future as possession of huge amount of energy is a requisite for any kind of human civilization. Energy helps in building the basic material foundation of human civilization. It is the energy which offers the human being the freedom from hard labour with out which there could be no hour to be spent on art, literature, or various kinds of learning that have offered human civilization a rich culture (“Energy resources and our future”). The Environmental Management Systems has taken an extra care of Airbus and has ensured environmental performance in all sectors of activities, covering the entire life cycle of Airbus products. The key drivers behind undertaking sustainable management policies are presented in the following table. Table 1 Key Drivers Description 1. Depleting conventional energy sources Sources of conventional energy resources are depleting at a very fast pace. Thus it has become very vital to put stress on innovating alternative fuels, like bio-fuels. 2. Climate change External climate has been changing at a very fast pace that can bear negative impacts on the company by reducing market demand. 3. Soaring oil prices Depleting stock of conventional fuels and increasing demand is placing upward pressure on the price of fuels and thus costs of the company. Thus it has become necessary to look innovate something new to deal with this situation. Sustainable aspects of the company: Airbus has designed a bunch of sustainable management policies to meet its corporate responsibilities. The corporate strategy of airbus is to expand its business and secure profitability of the firm over long run. However, it has not forgotten to take into account its corporate responsibility programs to make itself a socially and environmentally responsible firm on a global platform. As a responsible company and market leader, the company conducts its everyday operations taking into account its commitments towards meeting the highest standards of corporate ethics. It meet ethical standards by ensuring integrity in its operation, adding transparency to its day-to-day activity and maintaining the highest level of professionalism at the time of conducting all of its business activities. Over time, Airbus is placing much important on its social responsibility as part of its sustainable management policies. For example, in 2008, it has created the Airbus Corporate Foundation in order to manage its charitable activities across the world. it has also strengthen its employee network. The Foundation places its emphasis on providing youth development, humanitarian activities and community support activities. Finally, as it’s corporate responsibility act, the company has put its focus on minimizing it environmental impacts through a number of policies. Among its sustainable management policies, environment management policies occupy the most significant place (Jones, 2003). Airbus is very much conscious about the complex equilibrium features of the nature. It is extremely committed about minimizing its environmental impacts. As one of its environmental policies, the company has designed a number eco-efficient solution for each of the life cycle stages of the company. The company has also made a strong commitment towards improving the entire air transport mechanism. In designing its eco-efficient policies the company has focused on the areas of climate change, air pollutants, energy efficiency, waste management, biodiversity etc. the company has set a number of targets for 2010, like reducing energy consumption by 30 percent, reducing carbon emissions by 50 percent, reducing hazardous waste production by 50 percent, and so on (Airbus, 2010). One of the company’s eco-efficient flagships is A380 that has been made to minimize environmental impacts. The company has also put a huge focus on developing bio-fuel. The company has also increased its efficiency in overall management of air-traffic. As far as awards or certification received by the company in the area of its corporate responsibility are concerned, Airbus is the first company in the industry of aircraft manufacturing that has received ISO 14001 certification for its efforts in minimizing environmental impacts. ISO has recognized the achievements of Airbus in minimizing and monitoring the operation as well as the operation of entire air trafficking system. Benchmark requirements: The benchmark practices associated with environmental sustainability in the industry of aircraft manufacturing directly comply with ISO 14001 requirements. The benchmark criteria for environmental sustainable activities require a company in the field of aircraft manufacturing to meet the following requirements: First, a company should recognize the environmental aspects related to its operations within the specified scope of the system of environment management. A company should identify all those environmental issues that it can influence or control. It should recognize all the new developments and newly modified activities that are relevant for minimizing its environmental impacts. Second, the company should document all necessary information that it has identified in the field of environmental management. Third, the organization should undertake effective strategies and implement its plan to minimize the negative impacts of the identified operations aspects having drastic environmental effects. The prime environmental aspects that a company should consider at the time of designing its environment management system include emission to air, releases to water, releases to land, energy usage, emission of energy, noise, and. waste generation. The most important thing that should be noted here is that the selected company in this study, i.e. Airbus, complies with all these benchmark requirements. Thus the selected company itself is a good practice firm. However, it would be also worth to note whether its performance is at par, better or worse while comparing with its competitors. Boeing is one of its major competitors. Boeing has also been concerned about its corporate social responsibilities and ISO 14001 requirements. Among its environmental protection strategies it has laid its focus on fuel efficiency and noise. Airbus is also not walking behind Boeing in this regard as it also has taken major steps in this regards. In fact, Airbus is one step ahead of Boeing in environmental protection issues as Airbus is the first company in the industry of aircraft manufacturing to receive ISO 14001 certification for its efforts in minimizing environmental impacts (Airbus, 2009). The following table compare sustainable aspects of Airbus and Boeing: Table 2 Airbus Sustainability Issues Boeing Sustainability Issues 1. Airbus is the first company in the industry of aircraft manufacturing to receive ISO 14001 certification for its efforts in minimizing environmental impacts. Boeing has received ISO 14001 certification for its efforts in minimizing environmental impacts after Airbus. 2. Airbus has launched an environment friendly aircraft model A380. However, it is not as green as the company claims. Boeing has introduced its environment friendly model Boeing 787. The 787 is the first aircraft that is made from light-weight materials. This model of Boeing is the most green aircraft in the sky at the present time. 3. Airbus has still not made any effort to introduce any aircraft that can be run on solar energy. Boeing has recently declared its upcoming new effort of launching SolarEagle aircraft that designed to run on solar energy. 4. Airbus has set a target of reducing energy consumption by 30 percent and carbon di oxide emission by 50 percent by 2020. Boeing has set a closer target. According to the management of Boeing, the company will be able to reduce carbon di oxide emission and energy consumption by 2013. 5. Airbus has stressed on using biofuel in near future. Boeing has also stressed on using biofuel. Although airbus is quite efficient in employing effective sustainable management strategies, but it still can learn a few things from Boeing. Particularly it can imitate the step of introducing models run by solar energy or setting closer target date, etc. Analysis: Airbus has undertaken a number of positive steps towards making eco-efficient operational policies. Investments for the implementation of all these policies will produce some significant positive effects on brand reputation, community engagement, innovations, new market entry etc. For example, the company’s involvement in minimizing environmental impacts will show its effort towards making a sustainable environment. Airbus’s huge interest in making a sustainable society has made it a responsible corporate citizen and thus enhances its brand reputation among people across the world. Its community engagement has been able to built a strong public relationships which is helpful for the expansion of its business. Its efforts towards minimizing environmental impacts of its operations have helped the company in innovating new eco-friendly technologies. Investments in sustainability have also helped the company in paving its way towards entering into new markets. As the company always tries to meet the requirements set by ISO 14001 that are accepted internationally, it does not confront huge obstacles at the time of entering into new markets. Here AUDIO analysis and Sustainability analysis will be employed to analyze the company’s sustainable management policies. AUDIO analysis: AUDIO analysis of sustainability policies looks into the environmental challenges like climate change, energy, water, bio-diversity, chemicals/toxics, air pollution, waste management, ozone layer, oceans, and deforestation. On the basis of the above discussion, it has found that Airbus has put its focus mainly on climate change and energy efficiency. As far as its policies relating to protection against climate change are concerned, it has employed green technology in its aircraft manufacturing techniques in order to make the aircraft environment friendly. It has developed aircraft model A380 as an environment friendly aircraft. As far as its policies regarding energy efficiency are concerned, the company has started to place its focus on bio-fuel production and utilization as the source of renewable energies are depleting at a rapid pace. The following table shows some of the factors of AUDIO analysis relating to the Airbus’s sustainability policies. The table concentrates only on those AUDIO factors that have been taken into account by airbus till date. Table 3 AODIO factors Aspects Issues Opportunities 1 Climate Change Airbus has employed green technology in its aircraft manufacturing techniques in order to make the aircraft environment friendly. It has developed aircraft model A380 as an environment friendly aircraft. The green technology is not as green as the company claims. However, in future opportunities are there to improve on this technology by looking at the ways followed by its competitors as well as innovating its own. 2 Air pollution Airbus has set a target of 50% reduction in carbon di oxide by 2020. The target date is too long given that its competitors like Boeing have set a closer target date. Various opportunities can be explored to reduce carbon di oxide emission at a faster rate. 3 Energy efficiency The company has started to place its focus on bio-fuel production and utilization as the source of renewable energies are depleting at a rapid pace. Airbus had recently declared a partnership with JetBlue Airways, IAE, Honeywell and its subsidiary UOP in order to develop a second-generation biofuel. Production of bio-fuel is quite costly at this moment as it is in its birth stage right now. In future cost can be reduced with greater production. Opportunities are there to conduct production in collaboration with other firms. Use of biofuel also gives the opportunity of saving non-renewable fuels. 4 Chemicals/toxics Airbus is paying adequate attention to composite recycling method as residual chemicals may necessitate special handling. Full control on toxic emission has still not achieved. Opportunities are there to explore newer technologies to control toxic emission in near future. 5 Waste management Airbus has set a target of 50% reduction in waste by 2020. Target date is too long. With improved technologies target can be achieved earlier. The company has still not taken any step regarding deforestation, water management, oceanic pollution control etc. Sustainability portfolio analysis: Sustainability portfolio analysis of any company’s sustainable management policies examine what kind of policies have been undertaken by the company to deal with sustainability issues and whether the sustainable management policies in the portfolio have the potential to sustain over long run. Sustainability portfolio of airbus mainly comprises of green technology implementation, bio-fuel production, and waste management. Here it has been found that as its sustainable management policies Airbus has put its major focus on protective policies against climate change and policies for energy efficiency. As far as its policies relating to climate change are concerned, the company has faced some serious criticisms for A380. First of all, the development of A380 may increase tax burden to some extent. The government has provided huge subsidy for the development of A380. But the problem is that the model has been designed with keeping in mind the concept of low-cost aviation. Thus, this model is being sold at cheap rate. But the problem is someone has to bear the cost of building this aircraft model and they are general taxpayers. This may create grievances among public for the company that is not good for Airbus. Apart form this, some environmental issues are also related to A380 model. This model has been designed to minimize environmental pollutions. But the critics are claiming that the model is not as eco-efficient as it demands to be. The model may end up with higher carbon emission. Thus A380 has created huge threat to the reputation of the company (Civil aviation, 2007; Judge, 2005). As far as bio fuel suitability is concerned, Airbus is now playing the role of catalyst for commercialization of bio-fuel. In order to make bio-fuel sustainably viable, huge investments and appropriate locations and government support for production are needed. If these three aspects are not fulfilled adequately, then the policies would not be viable for long run. Recommendation: Since the selected company, Airbus, has been found to be one of the good practice company in the field of sustainable management no significant recommendation is required to made as the company is well aware of its responsibilities and has undertaken serious efforts towards meeting benchmark standard. However, care should be given towards maintaining the standard over long term. Hence, the policies should be designed and implemented in such a way that they bear long term effects. Apart from this, all the problematic issues relating to the model A380 should be taken under consideration and addresses as earliest as possible as its bad reputation would not be quite good for the overall reputation of the company. Conclusion: Airbus is truly efficient in undertaking environment-friendly policies. Sustainable management system of Airbus is truly credit worthy. The company has met most of the benchmark criteria specified by ISO 14001. The company has even got IS0 14001 certification for achieving desired results in its efforts. The company has rightly identified all the political, economical, technological, environmental, and legal factors. However, the company should take due care about its eco-friendly model A380 as they models has failed to perform in a desired way. References: 1. Donnelly, S. B. (2005) “Cliff Hanger”, Time; January 24, 2005, 166(4) 36-37 2. Borak, D. (2005)“Who will win: Boeing or Airbus?” United Press International; March 16. 3. Matlack, C.(2004). “Commentary: Is Airbus caught in a downdraft?” Business Week; December, 27. 4. Matlack, C. “Looking down from the Airbus Cockpit; Interview with CEO Forgeard” Business week; December 27. 5. Matlack, C. and Holmes, S. (2004). “Look up – It’s a dogfight”, Business Week; October 14, 2004 The Orange County register: “WTO dispute between Boeing and Airbus” December 12. 6. Sakai, T. 10 May 2004, ‘The Fall of Boeing and Japan Airline’, Znet. 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