Airbus vs. Boeing Since Strategic Management Is

Airbus vs. Boeing Since strategic management is concerned with the decisions that companies make in order to remain viable, profitable, and competitive, a decision about who to invest in must focus on which company is better equipped to adapt, innovate, and execute in both the short-term and long-term. An investment decision based on strategic management concerns is different than an investment decision based on Internal Rates or Return, Net Present Value, or Average Accounting Returns.

Whereas the latter criteria are concerned with numerical assessments of a company's profitability, the former criteria are far more concerned with qualitative concerns such as competitive advantage, relationship with businesses in the supply chain pipe line, ability to lobby regulatory agencies effectively, executive leadership, employee retention rates, and many other qualitative measures. This is not to say that financial and economic measures do not play a role in strategic decision making, they are simply not the only indicators considered.

In determining whether this specific investment consortium should invest in Boeing or Airbus I will consider what appear to be three different strategic management concepts but is really just one. I will then determine who has the advantage then make a recommendation based on the relative strengths and weaknesses of the two companies. My recommendation will be driven by consideration of the following: 1) competitive advantage indicators; 2) macro-environmental factors; and 3) firm internal resources and capabilities. Part I: Airbus v.

Boeing The competitive advantage indicator is listed first because it is the most important feature of a company's profitability and sustained success. In general, the very purpose of strategic management is to manage a company so that it is always positioned as among the chief competitors within its industry. A company is considered competitive when it is able to leverage internal resources within the larger industry environment to favor its own agenda. Interestingly enough the term competitive advantage encompasses the other terms.

It is the umbrella concept under which environmental factors, and a firm's internal resources, are pit against a company's competitors in the marketplace. Competitive advantage is a result not act.

In the case of Airbus and Boeing, the variables we are most concerned with are how dependent each company is on its competitors and regulatory agencies before they can execute their unique plans; what challenges the larger industry environment poses for both companies, what their internal resources and capabilities are, and if either company can offer significant cost advantages to the public.

Relative Firm Independence Although, not a general strategic management consideration in the aviation industry the competitors are far too consolidated and interdependent, such that a firm with the ability to act autonomously may possess a significant advantage. As such, in this instance, it is an appropriate rubric by which we may evaluate Airbus and Boeing. A large portion of firm independence in this instance is environmental. Boeing as a large company with over 100,000 stakeholders is held accountable by great numbers of interested and invested individuals and entities (Masanell, 2007).

The independence of the firm's executive and business teams are limited by the heightened public and industry scrutiny. In this instance, Airbus which is still proving itself and is a far smaller company may very well have a greater degree of flexibility and agility. Unfortunately, Airbus is a consortium of multiple European companies and governments and as such may be liable to even greater scrutiny and interference. Neither company possesses a clear advantage in this instance.

Firm Internal Resources and Capabilities An assessment of a firm's internal resources and capabilities is an analysis of the company's human capital, its technological capabilities, and financial resources. These are not the only features of a company's internal resources, but arguably, they are among the most important. The development of the super jumbo jets would require in-depth and new relationships with suppliers and developers. Japanese companies, who are very technologically advanced, seemed to express a preference in their relationship with Boeing.

For instance, as Airbus is attempting to court manufacturers in Japan, some companies, specifically, Mitsubishi, declined citing loyalty to its relationship with Boeing (Masanell, 11). The ability to leverage relationships in the market so as to prevent your competitors from developing new products is an advantage. In this instance the advantage in the human capital sector and the technological capabilities sector go to Boeing.

Macro-Environmental Factors & Industry Environment Assessments of environmental factors may include many considerations, of particular concern to the aviation industry are the technological advances, including those, in the development of jumbo jets, and the political factors which may affect consolidation. The industry environment factor of particular concern is questions about government subsidies which have for years kept the airline industry afloat. Recent changes suggest that the advantage will go to companies in the industry which can remain profitable and viable despite subsidies.

In particular, Airbus received direct subsidies from European companies at a rate far greater than the indirect subsidies Boeing received from the department of defense (Masanell, 12). In this instance, Airbus' profit making ability is far more dependent on government subsidies. Subsidies which based on emerging agreements will not be as forthcoming in the future. The question is can Airbus navigate the change successfully. In light of the fact that nearly 70% of development costs of new planes were paid by European governments, the answer is likely to be no.

Cost Advantages In terms of cost advantages, the Airbus v. Boeing analysis focuses on the advantages of economies of scale and the managerial efficacy necessary to bring about a new profit model based on jumbo jets. Particularly, the analysis is centered around which company executive team can best deploys the economy of scale and economies of learning into a significant cost advantage. In terms of cost.