Airbus - Ethics and Social Responsibility, Organizational Strategy, SWOT Analysis - Case Study Example

Chapter 4 (Ethics and Social Responsibility) Airbus strives to be one of the best corporate citizens in areas where it has its operations. Its CSR is guided by its code that reads “committed to the highest standards of integrity, transparency and professionalism” (Airbus). In 2008, the firm created the Airbus Corporate Foundation to guide its social responsibilities activities. This corporate foundation prides in “supporting programmes and projects in which Airbus employees are involved” (Airbus 2011). The firm’s social responsibilities include environmental conservation, building stronger supplier relationships, employee development, youth development, humanitarian projects and community support. However, it is in environmental conservation that Airbus’s CSR is most visible. Environmental conservation is greatly linked with the firm’s strategy in increasing the number of passengers per flight in order to lower fuel consumption and reduce emissions. Airbus’ biggest competitor is Boeing. Industry analysts have accused Airbus of unethical competitive practices after it emerged that the company was in possession of Boeing’s intelligence slides clearly marked “Proprietary” (flight global, 2011). Another case facing the firm according to the Economist (2003) says that the firm corrupted some Sabena senior managers into placing orders for 34 Airbus A320s which the airline did not need. This partly led to the collapse of the Swissair owned airline. A number of other allegations have been made against Airbus most of them being favours extended to airline companies that place orders with the firm. For instance, in 1994, air Mauritius was upgraded from the Paris Orly airport to the larger Charles de Gaulle airport after buying Airbus A340S. Airbus responded to the allegations of corruptions and arm twisting through generous discounts on its products after facing a backlash from majority of its clients and global community (The Economist 2003). On the overall, Airbus seems to have performed exceptionally well under CSR. The firm has established an internal organ to specifically handle its CSR activities. The diversity of the programs that the firm has been involved in also speaks volumes about its corporate citizenship status. Compared to other multinationals, Airbus has performed exceptionally well as a corporate citizen. Nonetheless, the firm can do more especially in sports sponsorship. The only sports events that the firm seems interested in are air shows. It would be nice if the firm sponsored other sporting events more so college games. Chapter 6 (Organizational Strategy): mission and goals Airbus’ mission is “to meet the needs of airlines and operators by producing the most modern and comprehensive aircraft family on the market, complemented by the highest standard of product support” (Airbus, 2012). Its goals are listed as “delivering the aircraft on time, on cost and on quality – getting it right the first time – is the goal Airbus continually strives for” (Airbus 2006). The company strives to make its mark in the global market by offering a wide range of aircrafts for clients to choose from. These planes are high on quality and safety thus seeing to increase efficiency and profits for air operators. Porter’s five forces Threat of new entrants This is the degree to which entry barriers to the business exists (Porter, 2008; Williams 2011). Globally, the aircraft manufacturing industry is dominated by Boeing and Airbus especially for large commercial planes. The cost of establishing aircraft manufacturing plant is very high and heavily influenced by global political power play. Entrance of new players is the industry is thus kept low by the prohibitive costs of setting up a manufacturing plant and stringent government and international regulations. Again, existing clients are bound by long term supply contracts with existing players. As such, new incomers are kept at bay. Power of buyers In a market with many buyers and fewer sellers, the sellers wield more power over the buyers. Contrarily, in a market with many sellers as compared to sellers, buyers wield more power. In the case of the aircraft manufacturing industry, there are few sellers hence the buyers have relatively low power over the sellers. Buyers have very little choice in the products offered and hence they have no control over prices. Suppliers also bind buyers through long term contracts thus making the cost of switching suppliers very high. As such buyers have very little power of suppliers. This aspect makes it hard for Airbus to conquer new markets as buyers have very little power in choosing their preferred suppliers as customer loyalty is closely guarded. Power of suppliers If the bargaining power of suppliers is high in a sector, it is hard for firms in that industry to make profits as such suppliers can determine the conditions of conducting a business (Porter, 2008). In aircraft manufacturing industry, the bargaining power of suppliers is low as there are comparatively many of them. For instance, Airbus has over 1600 suppliers located in over 30 countries (Airbus 2012). The adherence to quality and contractual agreements involved between the firms and suppliers keeps the number of suppliers few hence higher bargaining power. Degree of rivalry This measures competition levels between the existing businesses (Porter, 2008). Competition between Airbus and Boeing is very high. Other players, especially in the smaller commercial aircrafts market led by Embraer, are providing stiff competition. Intense competition is eating up the firm’s market share and also its profits of all players as they compete on pricing strategies. Threat of substitute The aircraft manufacturing industry has very few substitutes. The alternatives such as rail and water transport are not as effective as air transport. The major alternative that faces the industry is competition from investment in other ventures and industries. This is very significant given the high amount of investment the industry calls for and the stringent government regulations. SWOT Strengths One of the key factors behind Airbus’s success story is its innovation in its products. The firm has embraced technology and safety concerns in a very appealing way. As a result, the firm has been able to capture market leadership from Boeing. Furthermore, the increased brand value linked with high quality and safety records of its aircrafts are major strengths. Weaknesses The firm’s narrow product range exposes it to global economic fluctuations that affect demand. Given the nature of its products, the firm is exposed to political interference both from the national and political level. Another weakness in the firm is the tarnishing of its brand name by involvement in unethical practices and corruption scandals in handling its clients. Opportunities Improving global economy implies a greater demand and growth of market. This presents the firm with excellent growth opportunities in line with its strategy. Furthermore, globalization has taken centre-stage and with increased need for air travel. High technological developments are set to improve safety of air travel and this could potentially lower the cost of doing business. Threats Airbus is facing stiff competition from other aircraft manufacturers including Boeing and Embraer. The firm also faces threats from global economic fluctuations as they affect demand of its products. BCG matrix On the BCG matrix, the industry falls under focus strategy. All the players, though producing closely similar products have chosen to target different market needs. For instance, there are commercial vs. non-commercial planes, long haul vs. short haul and passenger vs. cargo. The dynamics of the industry dictates that players compete on efficiency and safety as opposed to brand names. On the firm-level strategies, Airbus has responded to Boeings’ rivalry by developing larger planes such as the double-decker A380 and also by working n delivery time and safety. On the corporate level, Airbus has concentrated on medium haul passenger planes manufacturing and assembling. The Asia-pacific market is the mainstay as it contains emerging economics with rapid growth. Another strategy identifiable is stratified differentiation in that the firm has created major family products to serve particular market segments. This is important because the firm also serves other categories of the industry such as cargo planes. Therefore, the large passenger plane being its mainstay proves that it’s the firm’s cash-cow. The private jets markets remains to be a question mark stage. This is because there are no clear indications for where the sector is headed in future. References David, R. (2010). Strategic management: concepts and cases. Upper Saddle River: Pearson Prentice-Hall. Porter, M. E. (2008). The Five Competitive Forces that Shape Strategy. Harvard Business Review, 86-104 The economist. (2003). The secret past of Airbus, Retrieved online from, Weidner, M., Brew, L. & Zander, R. (2006). Airbus. Retrieved online from, Williams, C., Champion, T. & Hall, I. (2011). MGMT. Sydney: Cengage Learning. Read More