Airbus is a company that manufactures aircrafts. Airbus follows the corporate strategy of its holding company EADS that is European aerospace company. Airbus is based in France and has extended operations in Europe. Airbus produces about 50% of the world's jet airliners. With around 63,000 employee force, the company has designed more than dozen aircrafts. The company had 4,682 aircrafts in December 2012 with a value of above $638 billion. The revenues and operations are ever increasing since its inception. The company supplies aircraft to almost all the countries and has started diversifying its operations. The company has been challenged by Boeing in the aircraft industry but adopts unique strategies that help it maintain a leading status in the industry.
Strategies of Airbus
Corporate strategy is about strategic scope of the company as a whole not merely its units and departments. There are often different lines of business or different categories of product or service that are managed combine. The strategy used at corporate level considers macro level activities and environmental factors and defines big picture of the company. Strategic planning at business level considers single line of business while corporate level business studies all the businesses of a company combine. It tells how capital will be used among various lines of business (Roth and Morrison, 2005). Airbus has more than a dozen aircrafts that bring huge revenue for company every year. The corporate level strategy deals with the overall processes including supply chain management, the distribution channels for all the jets, client relationship management, corporate marketing and corporate leadership strategies (Roth and Morrison, 2005). According to its official website, Airbus has following guiding principles for its corporate strategy:
Leading by Example: The management of Airbus believes in leading by example. The company has continuously grown even having faced many challenges. The company has laid examples of strategies regarding business procurement decisions, outsourcing, lean implementation, environment regulation and business direction.
Equipped to perform: The management of Airbus is expected to show excellent performance. The managers are equipped with skills, resources and staff in order to display best performance and highest productivity (Roth and Morrison, 2005). The corporate strategy believes that success of corporate is as much guaranteed as are its managers equipped. The managers get frequent trainings to remain current on existing business standards.
Management expertise: The Airbus has 2,000 top managers throughout world. It maps competencies and develops complete profile of managers and leaders so that the company is aware of what level of people it has in management team (Roth and Morrison, 2005). This strategy helps Airbus identify existing gap and to fill performance gaps. Also the company does succession planning by keeping eye on management expertise.
Expansion: Airbus believes in growth. It has been increasing since it was formed. The company grows by acquiring expertise, business operations and entering new markets. The company knows that future lies in global operations and expansion will help do so.
Outsourcing: Airbus outsources many of its operations in order to diversify risks of business operations. Nearly 80% of A380's operations are outsourced.
Using Testing Technology: Airbus uses time tested technology and selects long-term dealers to guarantee excellence. It does not select technology that is not approved or tested well.
The Global Market Forecast of Airbus regarding 2012-2031 predicts that there will be need for around 27,300 passenger aircrafts with more than 100 seats passenger capacity. The GMF also antedates there will be more than double passenger aircraft inventory that will rise from 15,500 to above 32,500 by year 2031. The factors causing rise are growth in population, urbanization, emerging demands, invention and environmental impact. The 20-year distributions of traveler predicted for 2012-2031 Global Market Forecast have around $4 trillion value comprising 19,520 single-aisle aircraft. There is air transportation growth expected for 2012-2031 that is going to be highest in expanding regions, and will be above 6% yearly income passenger kilometer.
Low costs: Airbus has the proficiency of manufacturing aircraft with exclusive design and cockpit at lesser cost that makes Airbus ahead of its competitor Boeing in the number of transports. The Airbus has sufficient funds and assets with ethnically different employees (Roth and Morrison, 2005). The company has multiple suppliers that offer an opportunity to select supplier offering material at lower costs.
The long-term success of Airbus is hidden in understanding future needs of industry. The company has pursuit to excel through its management team that can foresee. Companies are nothing without the people behind them (Nandakumar, Ghobadian, and O'Regan, 2010). It is mind and plans of Airbus team that differentiate it from other aircraft manufacturers like Boeing. It is company management that decides not to fight head to head with other companies but to differentiate itself on the basis of unique designs and high quality (Massingham, 2004). Airbus is convinced that its future depends on jumbo size airliners that will solve the problem of congestion. The airline business is seeing low profits due to high fuel costs and high fares. The aircraft manufacturers like Airbus can manufacture jumbo aircrafts that are fuel efficient. This strategy for future offers economic ferrying of more travelers (Roth and Morrison, 2005). The thinking ahead ability of management team enables high quality service and efficiency. It can hence be concluded that unique designs and futuristic approach of Airbus team is the best strategy behind company success.
There are generic strategies as well that Airbus follows. The Airbus industries include association of aerospace businesses from UK, France, Germany and Spain that compete against Boeing in scheming and engineering giant aircraft for international markets. Airbus has applied differentiation strategy to stand out its competitors (Nandakumar, Ghobadian, and O'Regan, 2010). Though, the creative designs also eased cost saving substitutes for company like fuel efficiency and conservation benefit over its competitors. Airbus manufactured aircrafts directed towards the client with aircrafts like A-318 for long-range section (Massingham, 2004). The company deployed diversification strategy by making military transport like tankers which intensely enlarged the sales revenue. Airbus manufactures unique products using high end machinery, and focuses strategy by manufacturing merchandises for military, at lower cost (Massingham, 2004).
competitive environment of Airbus
The business environment of aircraft industry is very competent. There are only a few players in the industry but because there is very huge investments and expertise involved in aircraft manufacturing (Nandakumar, Ghobadian, and O'Regan, 2010). The long business cycle of industry attracts only the patient investors that can wait and see their investment turn into profit. The size of aircraft manufacturing industry is $63 billion as calculated in 2006. The PESTLE analysis of industry reveals that international liberalization of the aircrafts is developing, and manufacturing capacity and manufacturing level is affected extremely by grants and state procurement practices. Two major players in the industry Boeing and Airbus initiated WTO measures. There is high degree of cyclist in air traffic and affects demand for aircrafts. The aircraft business is affected by high fuel costs as mentioned earlier and there are increasing environmental concerns.
The biggest competitor of Airbus in industry is Boeing. It is manufacturer of commercial jets and offers support services. Boeing's workforce is much more than Airbus and there are 159,000 employees in the company (Massingham, 2004). The corporate strategy of Boeing is running core businesses, leveraging powers in new areas, and starting new operations. It is also working on manufacture of smaller and middle size aircrafts as airlines want the elasticity of smaller airports. Boeing operates in segments including Commercial Airplanes, Aircraft and Weapon Systems, Network Systems, Launch and Orbital Systems, Support Systems, the Boeing Capital Corporation.
Airbus SWOT Analysis
Airbus is a major aircraft manufacturer in the industry. It has many strengths and weaknesses as well. This section discusses SWOT analysis of the company to find its strengths, weaknesses, opportunities and threats. The strengths of Airbus are its consortium funding; the innovation in design of its aircrafts, the large setup developed over time for aircraft manufacture and the established brand name of the company. Airbus has developed its name and standard over years and can capitalize its brand name in future operations and expansion.
The weaknesses of Airbus are not very evident. It however needs to control the employee turnover if it wants to reduce costs of human resource for example hiring, training etc. The opportunities of Airbus include the emerging new markets as a result of urbanization and population growth. The company has expertise in acquisition synergies. There are new technologies emerging for manufacturing that are an opportunity to innovate aircraft designs.
The threats faced by Airbus start with the tight economy. There is international competition and the currencies are volatile that can badly affect company profits. The markets are also becoming mature that reduces margins to increase profits. There are tight regulations of companies that may reduce subsidies and bring challenges for Airbus.