The Rise of Airbus

Prepared by: Mark Carlo Pabustan

Submitted to: Mr. Alex Andales

I.

Summary The history of Airbus dates back to the late 1960s, when Britain, France and Germany launched the Airbus project. In July 1967, Britain quit the project, and in 1970 the Airbus project was reorganized and named Airbus Industrie, a Franco-German Company. Headquarter set in 1971 at Paris later shifted to Toulouse, France in 1975. Each partner in the consortium was assigned specific production and assembly tasks. The aerospace industry is a multi-billion dollar industry and basically it has got two big players in the industry that has been competing against each other for such a long time. The case discusses how Europes Airbus rose from a challenger to be the leader against US Boeing. It analyses the nature of competition between the two companies and the differentiating strategies Airbus adopted as against more conventional approach of Boeing which led to its downfall. Also this case looks at the structure of the aerospace industry as a whole, and the current strategic positioning of the two companies is also discussed. Towards the end a brief assessment is furnished on the possibility of a leadership style that makes one of the company leading in the market. The Airbus long term strategic plan and fundamental values by their vision and mission statement helped them achieve the lead now. The discussion of the case analyzes the external environment the aircraft industry as a whole and then focuses in on Airbuss internal environment. In 2003-2004, for the first time in the history of commercial aircraft manufacturing, Airbus delivered a larger number of planes than Boeing, and since 2000 Airbus managed to obtain a larger number of aircraft orders than Boeing. The case looks at Airbuss competitive position relative to Boeing, first in the commercial industry, and second, in the military aircraft industry where EADS Airbuss parent company has become a formidable rival to Boeing and other defense contractors. In analyzing Airbuss competitive

advantage, the case distinguishes between four strategic elements:

technological leadership, cost control, product development, and families of planes. The case moves on to explore the challenges Airbus faces today (2005), and its vulnerability to a likely Boeing comeback. All in all, the case provides an analytical and thorough examination of Airbuss performance from the day it sold its first plane until June 2005

II.

Statement of the Problem Macro: Micro: Too high production cost How can Airbus sustain its leadership in aircraft industry?

III.

Alternatives a. Adoption of latest technology b. Subsidies from European Government c. Innovation of products

IV.

Pros and Cons of Alternatives a. Adoption of latest technology Augmenting the jet planes and other aircraft products with the trending and latest technology would give the Airbus a wider advantage against Boeing. Applying new technology has been the tenure advantage of Airbus already and they are known for it and therefore they should not stop injecting those technologies to improve their products. This perhaps would not give them a lower cost in production since technology would be new. b. Subsidies from European Government Seeking help from the Britain, France, Germany, and Spain would cause an enormous financial help for Airbus. With the cheaper loans that these

four countries extend to the consortium, it would definitely give them a boost to use the money for production while not worrying for the repayment of the loan that stressfully. c. Innovation of Products You cannot compete with the dominant player if you do not offer something different a quote by Roger Beteille, one of Airbus co founders. To persuade the major airlines to switch to a new supplier, Airbus had to differentiate itself from Boeing by incorporating the most innovative parts in to the plane. Being upfront and a trendsetter to the aircraft industry, the airlines would definitely look for what is new for their customers to be satisfied.

V.

Recommendations Airbus needs to apply and consider all of the alternatives for them to stay on top. Adoption of latest technology, Subsidies from European Government, and the Innovation of products all offer a great advantage for Airbus in order for the consortium to obstruct any Boeing comeback. If Airbus would consider all of the alternatives, they would certainly lower their production cost especially alternative B. using Alternatives A and C, Airbus will get a hold on to the top spot for quite sometime because the market always want something new.

VI.

Conclusion In concluding the analysis, it can be said that the dominant position held by both Airbus and Boeing will continue to create barriers for new entrants to the market but there is a possibility of competitors emerging as market challenges in the long term.