SWOT Analysis for Possible Ventures. Airbus Joint Venture with Boeing - Essay Example

?SWOT Analysis for Possible Ventures Part SWOT Analysis for Airbus Joint Venture with Boeing In the proposed joint venture, Airbus will have better opportunity to advance its manufacturing capabilities. Through the joint venture, the company would be able to minimize the initial capital risk that may rise from the manufacture of Very Large Commercial Transport (VLCT). With minimized risks, Airbus will have an opportunity to develop and test its new models and technology. Currently Airbus is targeting the market dominate by Boeing 747 model that has enjoyed a good rating. From the successful joint venture, the company would be able to develop and create market for its other models. The demand for VLCT is projected to reach about 500 aircrafts within the next 20 years. In the joint venture, Airbus has strengths that would make it stand out from the any possible competition and posed threats. Firstly Airbus has advanced technology in aircraft manufacturing as compared to Boeing, its technologies such as fly-by-wire, joy stick control and laser guided riveter would make Airbus to have a bigger share of the joint venture. Secondly, the manufacturing of VLCT would take place in Europe where the company has well-established markets. Although the company stands to benefit from the opportunities presented by the joint venture there are some threats that the company needs to consider. Competition with Boeing will make Airbus to cut its prices and this will affect its profit margins. From the venture, the company will be forced to expose its technology and manufacturing techniques to Boeing. Using the strengths Airbus hopes to eliminate its weakness in the joint venture. Some of the possible weaknesses are weak corporate governance, high cost of production and inability to carry out large-scale production (Philip & Kevin, 2006). These weaknesses reflect the possible threats and competition that are likely to occur from the joint venture with Boeing as the main competitor (Philip, & Kevin, 2006). The high cost of the new aircraft might cause a delay in the expected revenue making the company to have a low return on capital invested. Part 2; SWOT Analysis for Boeing Joint Venture with Airbus In the joint venture, Boeing will have better opportunities than its rival company Airbus will. However, the two companies expect almost similar opportunities. Successful production and marketing of the VLCT will create deals that would increase the company’s capacity to market its other models. Due to the current condition of saturated airports and need for expansion there will be a ready demand for the proposed VLCT. Currently Boeing controls about 60% of the aircraft market and it hope to increase its niche from the venture. The initial cost of producing a VLCT stands at $5-$20 billion, which the company hopes to raise over the next 4-10 years. From the projected demand of 500 units for $150 - $250 million, Airbus expects to create a deal worth 1.25 trillion dollars, which is a remarkable return on investment. Boeing has many strengths that will enable it to benefit from the possible opportunities, unlike it rivals Boeing has a high control over its suppliers with some being sole-suppliers. This makes Boeing to stand out as a well-established aircraft manufacturer. Boeing has enjoyed a long-standing agreement in the production of military aircrafts and this has enabled the company to generate a lot of profit. Although Boeing is a strong company, the company has some weakness. Firstly, Boeing may lose its market share if it is unable to produce the VLCT economically. The company has a low production capacity and therefore it may not handle the extended demand adequately. These weaknesses create competition threat that the company faces from its rival company Airbus. Airbus owns or has the rights to most of the critical technologies required in the production of VLCT and therefore Boeing is threatened by possible exploitation. Part 3; Analysis of Airbus Standalone initiative Although the VLCT is a proposed joint venture, there is a possibility that Airbus may decide to make a sole venture by producing a super jumbo. Unlike the previous market scenario, Airbus requires to have advanced competitive strategies to counter any possible threats. Airbus would achieve success due its competences and the difficulties it will create to its competitors to prevent them from imitating its model (Philip, & Kevin, 2006). Unlike its competitions, Airbus has 15 different sub-assembly facilities that enable the company to manufacture the different components required in the manufacture of aircraft. The different components are later sent to France and Germany for assembly. This implies that Airbus has a high degree of specialization and this enables the company to enjoy the benefits of specialization. Specialization and having different components of an aircraft produced at different locations will enable Airbus to protect its important manufacturing information from its rivals. Unlike its rivals, Airbus has achieved many inventions such as laser guided riveting machine, fly-by-wire, and other important technologies. Airbus has acquired patent for these technologies and this make it to stand as the sole company that has the rights to apply the technology in the production of VCLT. Airbus would also consider setting barriers that would prevent its competitors from imitating its new aircraft model. The barriers would mainly target the main rival Boeing. Airbus is likely to take advantage of its new invention to create barriers for its competitors from imitating the new model. Using the inventions, the company would make imitating the model expensive and this would discourage the companies from taking the ventures. Airbus would achieve this by selling its production rights to any willing company. This will increase their production cost discouraging them from taking the venture. Secondly, the company will use its decentralization strategy to prevent its rivals from accessing its production information and technology. This strategy will ensure that Airbus is the only company capable of producing the VCLT. Airbus is also likely to apply a marketing approach to discourage any possible imitations, in this approach, the company would streamline its production strategies to enable it offer VCLTs at a competitive price. This will create a price difference between its products and any possible imitations and this would discourage the rivals from taking the venture. Reference Philip, K & Kevin, L. K. (2006). Marketing Management. New Jersey: Prentice Hall Read More