Airbus Marketing Strategy - Assignment Example

Running Head: THE AIRBUS MARKETING STRATEGY The Airbus Marketing Strategy Name Institution SECTION I: Introduction Brief of the Company The airbus company is one of two leading manufactures of commercial airplanes in the world the other one being Boeing. In fact the company currently obtains almost half of the word’s orders on airplanes that have more than 100 seats. Airbus is a subsidiary company of the European Aeronautic Defense and Space Company (EADS) based in Toulouse, France and the company has significant investment across Europe. The Airbus Company was established in 1970 by the EADS and has continued to expand into other sectors for instance the military transport aircraft sector (Kundnani, 2009). Brief of the Question Once the company was established it failed to attract customers and consequently it failed to get orders for aircraft manufacture for a period of over eighteen months. However, the company adopted measures that gradually overcame those difficulties by extensive marketing among others. This report discusses these initial problems faced by Airbus and the analysis of the strategies adopted by the company to overcome them (Kundnani, 2009). This report focuses on the strategies applied to achieve the market leadership and the sustainability of strategies over a long run. Finally this report analyses the structures of the aerospace industry over all these years of the existence of the Airbus Company up to the summer of the year 2009. As well, the essay will report on the effect of the aerospace industry with respect to the competition between the chief players; Airbus and the Boeing. Purpose of the Report The purpose of this report is to present a case study that focus on the Airbus as an aircraft manufacture company with respect to the following considerations: a brief history of the company, the initials marketing problems experienced and the strategies used to overcome them, the nature of the competition between the airbus and the Boeing and the survival techniques the Airbus used given the fact that Boeing was already well established in the market and also the sustainability of these techniques in future (Kundnani, 2009). Overview of the Report This report is organized into six sections. Section one deals with the introduction of the Airbus Company. This section also gives a briefing on the three questions that directs this case study. Section two addresses the initial problems faced by Airbus and how they were solved. Section three explains how the company achieved market leadership in the aerospace industry for commercial aircraft and the future of the company to hold this position. Section four analyses the structure of the aerospace industry up to the summer of the year 2009 and how this industry has had an impact on the competition between Boeing and the Airbus airplane manufacturing companies. Section five gives the references from where the information is obtained. Finally, section six contains the background information on the company as well as any other relevant information concerning this case study. SECTION II: Question I Initial Challenges Faced By the Airbus Company The airbus company faced enormous challenges upon the inception of the Airbus aircrafts, firstly the company found an almost established monopoly in the market, the Boeing Company, therefore the first challenge the airbus faced was to convince the Boeing customers that Airbus was a credible substitute of Boeing Company (Connolly, 2009). Until this point the aviation industry of the European countries lagged behind and by far from the America’s aviation sector led by the Boeing. For the A300 to be successful it was decided that it had to be economical to operate. October 28, 1972 market the first flight of the Airbus Company made Airbus A300 a month ahead of schedule. This marked the first signs of success of the corporation. Rodger Betelie and the Henri Ziegler, the directors of the airbus company were aware of the challenge that for this company to be successful it had to crack the lucrative US market amidst the competition by the American owned Boeing. For a period of eighteen months (black period) the customers ignored the company and failed to give it orders for any aircraft manufacture. To overcome this problem the management had to engage in to some un-common courageous move that involved the taking the A300 aircraft on an exhibition tour across North and the South America for six weeks with a purpose of this trip of illustrating the benefits of the plane to the Americans. On board were the sales team, engineers and the spare parts for the exhibition. Additionally the aircraft was loaded with crates of choicest champagne as refreshment for thousand of guests who have been invited to view the aircraft at the respective stopovers. This journey started from Toulouse in France, then to Dakar Senegal the team flew to Sao Paulo in brazil then they headed for Florida and Chicago in north America and lastly to Mexico city. In one incident a bird strike caused an incident in one of the engines but the preparedness and the easiness of the replacement only served to impress the potential customers. The United State’s Boeing officials who were watching were now convinced that the Airbus Company was equal to the task (Kundnani, 2009).. Furthermore this Airbus adventure had made a significant influence on the former Apollo astronaut, frank Borman who headed the eastern airlines. In a period of three years the assistance and the cooperation shown by frank went a long way to the eventual success of the airbus airlines company. The flight between Paris and London for the A300 exposed its advantages of economy, technological standards and efficiency over the rivals of the American tri jets made by the Boeing (Mark, 2004). The Airbus company policy was to use technology selectively for the benefit of the firm, the passengers and the customer and not just the using technology for its own sake. Such use of technology was aimed at achieving the clear pay offs in safety operational capability and profitability benefits. This wise use of technology enabled the company to offer airlines a twenty percent savings on the operational costs of each trips when compared to other competing passenger tri jets. These techniques positioned the airbus company in a good place for competition with the archrival the Boeing. The airbus company had made an impact in to the aviation sphere of the world and gradually the orders started streaming in. For instance the company congured the South East Asia vital market by winning orders for airplane manufactures from South Korea by signing an agreement to purchase three A300B2 (The Insider News, 2009). When the Bernard Lathière became the leaders of the Airbus Company, he instigated a sales policy that aggressively campaigned for deals with other airlines. This was the time the competition was at its helm. This leader managed to sign a deal with the Indian airlines. Using his Indian heritage Bernard was able to convince the Indian government of the viability of the company in supplying these aircraft. Latherie had been born in the country and was able to produce a picture of himself with Gandhi in their boyhood. This antique was aimed at persuading the airline’s president to support the Airbus by confirming its order for three A300s, with three options. Latherie again adopted the ‘silk road’ strategy. This was a deal with the Thai airways for the supply of two A300s in May 1977. Latherie then decided to take a risk by persuading Frank Borman of the Eastern Airlines- an American carrier, to take on lease four Boeing A300 for six months and then make a conclusion on whether to buy the planes failure to which the Airbus Company would take back the aircrafts. The experience with these four airbus A300s became an eye opener for Borman. He realized their efficiency and their economy. On March 1978 Borman signed for the delivery of twenty three A300B4s. This was a breakthrough for the penetration of the US market. By the end of that decade airbus had proudly delivered eighty one A300s to 14 airlines in forty three countries serving 100 different cities. From that point the Airbus order book flourished and the company nurtured plans to manufacture the second aircraft in line with the policy of the Airbus family an A310 (Kundnani, 2009). In conclusion therefore the use of an odd and aggressive marketing strategies, the influence of the frank, Borman head of eastern airlines carrier and the and the use of technology for efficient operation all solved the initial problem of lack of orders placement for the aircraft manufactures. SECTION II: Question II Airbus Market Leadership and Competition with Boeing We have looked at how the airbus company carved a niche in the aerospace industry that was initially dominated by the America’s Boeing (Connolly, 2009). The four decades of its existence has seen increasing trust with the customer due to the efficient and convenient use of technologies to optimize the benefits as far as sitting space, the fuel consumption and all the engineering capabilities are concerned. Airbus has achieved airspace dominance through flight characterized by turbulences both inside and outside the company and in fact by the year the early 2000s. This competition can be traced from the inception of the Airbus Company. One of the reasons for the competition is the fact that the two companies dominate the jet airliner manufacture sine the 1990 when the Airbus Company upped its stake on competition and proved to the airlines that it was a credible manufacture of the plane. The tough competition between these two companies is partly as a result of the fact that other smaller aircraft-making companies have pulled from the arena. For instance Convair, Lockheed in the US and Fokker and Dornier in Europe have ceased the manufacture of commercial aircrafts citing among other things the economical problems, disappointing sales, and the collapse of the Eastern Bloc (The Insider News, 2009). Their collapse has left the Boeing and the Airbus as a duopoly to satisfy the market needs for the commercial jets with special emphasis on the wide and narrow body aircrafts and jumbo jets Airbus has gotten an upper hand in this battle, if we focus in the year 2008, records shows that the Airbus Company obtained 6,378 orders whereas the Boeing received 6,140 orders by the national and the private carriers. When Douglas Mc Donnell was adopted by the Boeing; the company increased its venture on the manufacture of aircraft with over one hundred passengers. Similarly this has been the trend for the Airbus Company to specialize in that manufacture of the commercial jets. The airbus has managed to maintain a led over the Boeing concerning the aircraft manufacture due to a number of reasons. One of the reasons for this trend is that the European Union has continued to support the company with subsidies. It is worth mentioning that the airbus company is a symbol of pride for the European countries. Further more the Germany and the British governments never wanted to leave the global aircraft market with United States of America, therefore they had to develop strategies that would put the airbus company at a better competition position with Boeing-through subsidies (Samuelson, 2004). On the other hand the Boeing Company has been mismanaged since it had been involved in numerous court charges involving corruption as regards to winning of military contracts. Moreover Boeing lack of new innovations and improved technology saw it gradually lose position to the Airbus which was prepared to use the most modern technology while incorporating the newest innovation by its engineering team. Similarly the Boeing Company failed to invest enough resources in development of new model of its Boeing family. While Airbus kept growing its family of Airbus ‘A’ three hundred series the Boeing just continued the production of the Boeing 747 that was launched in 1990 (Robert, 2001). Then from the year 1998 up to 2001 the Boeing Company spent a lot of resources buying its stock back. These finances that could have otherwise been used for future investment, expansion, research and innovation meant that while Airbus was growing Boeing’s growth had stagnated. Thus by the year 2000 the Airbus was miles ahead of Boeing in all aspects of innovation, variety of planes and most importantly the sales(The Insider News, 2009). Furthermore the weakness of the Boeing’s largest customer, the Delta American Airlines ensured fewer purchases for the plane. Another fact is that the European customers have been running away from Boeing. Boeing has over the past years reported that the European countries volume of purchases for the American made aircraft has been going down. On the contrary the American market has been open to Airbus Company and in fact the market for European made planes is thriving(Samuelson, 2004). This has been interpreted as European political influence aimed at bringing Boeing down completely. Another angle on this trend is the affordable prices for the offered by the Airbus unlike the Boeing whose airplanes are more expensive. The latest airliner competition involves assemblage of two jets by the respective companies. Airbus has manufactures a new Airbus A380 which is the largest commercial jet with a sitting capacity of 555 passengers (Gatsby, 2005). On the contrary the Boeing Company has assembled the new Boeing 7E7 that can carry 250 passengers across 10,000 miles thus achieving lower operational cost. The two models of the aircrafts are inspired by different believes: Boeing believes that for the airlines to be able to accommodate growths they need to fly at smaller planes while flying more routes. The Airbus believes that the airlines need bigger planes that will accommodate an increasing number of passengers. The competition does not stop here because the airbus has developed the Airbus A350 that competes well with the Boeing 7E7. Similarly the Boeing Company has developed Boeing 787 Dreamliner that has a capacity of 220-300 passengers to compete with the airbus A380 (The Insider News, 2009). The Dreamliner is made by using super light composite material making it efficient on fuel. This has spurred the airbus to redesign the Airbus A350 which has doubled the company’s development cost creating a new problem. The two aircraft manufactures can have equal market share under level playing ground. However the strategy adopted by the airbus puts it at a competitive vantage point. The reason is because the Boeing cannot topple over a state supported Airbus if the European Union countries fail to disavow subsidies (Samuelson, 2004). SECTION III: Question III Changes in the Structure of Aerospace Industry and its Effect on Competition The aerospace industry is made up of companies producing aircraft, space vehicles, guided missiles, aircraft engines propulsion units and other related parts. Included in here also is the aircraft overhaul, rebuilding and conversion. Changes in the aerospace industry can be traced in by major scientific development in the industry. First was the balloons developed in the 18th century. Next was the wood-and-cloth plane by the Wright brothers, then in 1969, the successful mission to the moon by Apollo 11. Today the changes are observed through the new and exciting aircraft that are continuously under development by the main airplane manufacture companies; Boeing, Airbus, and Bombardier. However aircraft manufacturing firms comprises the largest part of the civil aircraft section of the industry. Most civil aircraft are produced on orders from the airlines mainly for passenger’s transportation business or for cargo shipment. Apart form the civil aircraft there is also the general aviation aircraft which ranges from the leisure designed planes like the small two-seaters to the corporate jets for business transport. The aircraft engine manufactures design and makes engines with respect to the aircraft design and the performance specifications given to them by the aircraft manufacturers. Military aircraft are made with specifications from the governments and have special characteristics that make them easier to maneuver and hard to detect. Other aircraft like the un-manned airplanes are used for gathering intelligence for defense like the radio signs and monitoring ground movement. In the same way the missile and missile propulsion units are made strictly for the governments and the military institutions. This branch of the aerospace industry also produces the space vehicles and launching rockets. The consumer for these products is mainly the NASA, DOD, the news organizations and television companies (Gatsby, 2005). The model of the aircraft is always under revolution due to the need to cut cost and increase the delivery speed. The computer aided design and drafting CADD has facilitated this by designing and testing of individual parts through computer. The customers, engineers and the production workers join their expertise in every phase of the aircraft manufacture. Commercial airlines and private business invite bids for crafts they want to purchase once they specify the requirements such as cargo capacity, range, size, engine type and sitting arrangement. Selection of the winner of the bid is based on: the ability of the manufacturer to supply a reliance aircraft best to the specifications of the purchaser, the lowest cost and also the favorite financial terms (James, 2000). This bidding aspect brings about the spirit of competition between the commercial aircraft manufacturing companies. These companies invest a lot in making a model the will fit the purchaser’s expectations. On the other hand each of these companies ensures that it has offered the purchaser with the most attractive payment package that will entice the purchases to always place orders on the maker. This strategy has ensured that the airbus company has obtained more customers than the Boeing Company (Kundnani, 2009). Airbus offers the most attractive financial package and the most efficient aircrafts and therefore it continues to lead in orders for new aircraft from the airliners. Conclusion The Airbus Company have come along way in achieving the European dream of being a dominant force in the world’s airspace. Apart from the support it obtains from the European Union the company put in place measure that ensures that it is technologically ahead through innovations. Similarly the aggressive marketing by the sales team has played a very big role to its current position as the leading supplier of commercial aircrafts to the global airlines. SECTION V: References Samuelson, J.R. (2004). The Airbus Showdown: The Greatest Battle Just Got More Entertaining. The Washington post Journal, 8(122), P. A31 Connolly, J. (2009). Boeing Dreamliner vs. Airbus A380. The Partner Centre Journal, 38, P. 56 The Insider News. (2009).Boeing vs. Airbus. The Greatest International Competition in Business. The Insider News. 4 (12), p 122. GLG Expert Contributor. (2009).Airbus pulls ahead on orders: it’s Significance Black-program. (2), p. 2 Kundnani, H (2009). What's the problem with Airbus? The Guardian Journal. 25, p 21-45 Gabbai, J. (2005).Complexity of Aerospace Industry: Understanding Emergence. Bureau of labor statistics Journal. 12(5), 25-45. James, B. M. (2000). Airbus Company: The Marketing Strategy. The Airlines Journal, 2 p. 45- 46. Mark, K. H. (2004). The Superiority In The Air: Who Will Win The Battle? The Airline Superiority Journal, 45(12), p. 12-100. Robert G.G. (2001). The Europe Bad Tactics for Boeing: Unacceptable Subsidies, American Air Journal, 6(12), p. 125 Gatsby, K. E. (2005). Marketing Tactics for the Airline: Aircraft Supremacy. The European Airline Journal, 12 (8), P. 54-60. SECTION VI: Back Ground Information On May 29th May 1963 the French minister of trade chaired a regional meeting aimed at designing a new aircraft company destined as he put it to “reshape the aviation industry” (Connolly, 2009). An agreement was signed officially by the France and the Germany governments that launched the manufacture of A-300, the world’s first twin engine wide body passenger jet. The aircraft was to be manufactured by a French-German consortium in conjunction with the Dutch and the British. This decision by the governments marked a formal establishment of the Airbus program. This realized a dream hatched in 1967 by the governments of German, France and Britain aimed at strengthening the European cooperation in the field of the aviation technology hence promotion of technology and economic progress across the continent (Kundnani, 2009). Read More