Boeing vs Airbus This Paper Focuses on Essay

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Boeing vs. Airbus

This paper focuses on Boeing and Airbus. Firstly, the paper discusses the background of both companies and assesses their current performance via SWOT analysis. Secondly, the paper reviews and evaluates the current problem facing both Boeing and Airbus. Thirdly, the paper evaluates alternative policy actions taken by both Boring and Airbus. Lastly, the paper provides recommendations for action.

Case background and situation analysis:

About Airbus

The European Aerospace Company (EADS) has manufactured SAS Airbus at Toulouse in France. The start of well-known Co. Airbus put forward the association of aerospace manufacturers. A co-ordination was formed of Aerospace companies and European defence in 2001 which was partly owned by BAE Systems (20%) and EADS (80%) and was completely owned by EADs in 2006 13th October (Spadafore, 2008).

57,000 were employed in Airbus which has a network of 16 sites in for EU nations: France, Germany, UK and Spain. In end assembling is done at Toulouse, Seville (Spain), Hamburg (Germany), and Tianjin (China). Subsidiaries of Airbus are in the U.S., China and Japan (Spadafore, 2008).

An association was developed including European aviation firms and Airbus which started competing with American companies like McDonnell Douglas, Boeing and Lockheed. The reasons for which the Airbus was considered the leader of this field was given by Jean Pearson, the CEO/MD of co. as: By air travelling was considered more significant in U.S., an a Anglo-American agreement gave the authority of aircraft manufacturing to U.S. And last not the least the end of World War II left a well-structured aircraft industry (Spadafore, 2008).

Strategic Leaders

Infancy: Bernard

Bernard was the Company's CEO during the introduction phase. This was the time when the market leader was Boeing, therefore in order to attract attention the company focused on technological leadership, to bring about a difference (Mathis, 2006).

The company focused more on centralized marketing and decentralized production. It even carried forward the family concepts to lay the foundation of the marketing and production strategies (Mathis, 2006).

Growth Stage: Jean

Under growth phase stress needs to be given on distribution. Through proper distribution the organization would be able to reach its customers in a much better manner. Therefore, for attaining greater market share, stress should be laid on aggressive sales, cost cutting and obviously on product development (Mathis, 2006).

Maturity Stage: Noel

Under maturity stage material management takes place, under which people work on putting forward more innovative ideas. Noel worked on the restructuring of Airbus ownership, focused more on sales and marketing, diversified the products and side by side kept a strict eye on financials (Irwin and Pavcnik, 2004).

SWOT ANALYSIS

Strength:

The centralized marketing and decentralized production are strong points of Airbus. In addition to this, the family of planes and technological leadership are all strengths of the company (Rajalashmi, T. et al., 2013).

Weakness:

The company fails to meet its deadlines, and have diversified its locations too much plus the production cost being bared is also exceeding the budgets (Rajalashmi, T. et al., 2013).

Opportunity:

There are a few opportunities in existence for the company. Opportunities include the increasing number of transcontinental traffic, growing demand of nonstop flights, greater assistance from the government and the growing number of countries which are deregulating the aviation industry (Rajalashmi, T. et al., 2013).

Threats:

Terrorists' attacks, increasing prices of fuel, and suppliers' negligence are a few threats which can harmfully affect the financial status of the company (Rajalashmi, T. et al., 2013).

Boeing's History

Boeing came into being in 1916 and was based on Seattle. Boeing is the early pioneers of the Commercial Airline industry. With Dash 80, Boeing stepped in the commercial business post World War 2 (Boeing, 2013).

In all four categories William Boeing crossed the breakeven point in 1970s. Very soon the organization began outsourcing 60% of its components (Boeing, 2013).

From 1996 to 1997, the company lost its market share and $1.6 Billion of its earnings because of its stretched production capacity and short supply of labour (Boeing, 2013).

SWOT Analysis:

Strengths:

By the mid of 2006, Boeing took back the lead from Airbus through the increase in sales. As the families of planes were made by using a basic model therefore it became easier to share training operations and processes, thus cutting down the cost. Supply processes are managed via vertical integration. The company designed its aircrafts digitally and even assembled them virtually. Investments were made in 757 and 767 aircraft. The positive cash flows were obtained when Boeing crossed the breakeven point. The right sized aircrafts and low cost were also the strengths of the company (Rajalashmi, T. et al., 2013).

Weakness:

The company faces a high upfront cost to obtain significant share in the market. The Assembling of aircrafts is a complex task; one aircraft is made out of millions of components, bringing each one together requires time and dedication. If even one component fails to reach on time the entire production process is delayed. Moreover, the development costs for tools are also very high (Rajalashmi, T. et al., 2013).

Opportunity:

Commercial jet aircrafts demand is very unstable. This is highly dependent on the airline industry's financial health as well as on nation's economic growth. Low cost and well established airlines which make use of spoke and hub model can bring about increase in demand as well as competition. Growing demand of nonstop flights and increasing volume of transcontinental traffic are also good opportunities for the company. Making use of six sigma and lean production methods may further reduce the production cost (Rajalashmi, T. et al., 2013).

Threats:

Terrorists' attacks, increasing prices of fuel, and suppliers' negligence are a few threats which can harmfully affect the financial status of the company (Rajalashmi, T. et al., 2013).

Section 3: Evaluation of the Problem

At the product level, business as well as optional travel is negatively affected by economic downturn. Furthermore the rising fuel prices greatly increase the production costs of the company. Terrorist attacks and government interference also affects the air travel adversely (Rajalashmi, T. et al., 2013).

Two serious challenges were being faced by Airbus when Forgeard was about to leave Airbus in 2005. The midsized jets market of Airbus was threatened by the introduction of Boeing B-787 and by the future prospects of A380 (Rajalashmi, T. et al., 2013).

Both companies are global; therefore they influence and market their products to countries all over the world. At the promotional level, Airbus estimated the sales of A380 to be around 1650 in 20 years of time; whereas Boeing's prediction was of less than 400 units. According to Boeing, people mostly prefer taking direct routes or using midsized planes rather than the giant ones. This analysis was made on the basis of declined flights of 747, and the increasing number of flights of smaller jets like B-777 and A-340 (Rajalashmi, T. et al., 2013).

At the pricing level, A-380 faced a number of challenges from its own airplanes (A350 and A340) as well as from the competitors' ones (B-777,787). Besides this the high cost was another problem that was faced by A380. B-787 gave stiff competition to A330/A340 and to A380 (Rajalashmi, T. et al., 2013).

In comparison to A-350 B-787 was far better, as it was equipped with smaller cabins which were more comfortable and were able to fly over longer distances. In terms of fuel as well B-787 was efficient. A-330 was unpopular, while A-350 was to be launched in 2010. When sales of A-380 stopped and no movement of A-350 was seen, then it became obvious that obtaining a competitive edge in the Airline industry was impossible for Airbus. This demonstrates that how this three decades long duel was won by Boeing (Rajalashmi, T. et al., 2013).

Section 4: evaluation of alternatives

The company had few alternatives.…[continue]

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