Boeing and Airbus: SWOT analysis and competitive strategy

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 4: evaluation of alternatives

The company had few alternatives. It could have focused on quick turnarounds. The company could have emphasised more on flying point to point. The crew should have been cross trained and limited service would have been offered to the clients. Moreover, non-unionized workforce should have been hired. Finally, company should target volume markets.

Boeing has undertaken following steps as part of their corporate level strategy:

1. Positive cashflows have been used to make investments in wide bodied 767 and narrow bodied 757.

2. Development costs are reduced by subcontracting the work. 60% of the work of 777 has been outsourced (Rajalashmi, T. et al., 2013).

3. Boeing has gone into a merger with McDonnell Douglas, which will help the company to expand its business in defense and aerospace industry as well. After this, commercial aerospace business will account for 60% of total revenues.

4. Chicago was made the corporate headquarters by replacing Seattle.

5. Keeping in view the demand of point to point flights, right sized and low cost aircrafts need to be produced.

6. 787 aircraft has proved to be a tough competitor for Airbus A380 and A350 (Rajalashmi, T. et al., 2013).

Section 4: Recommendations and Actions

Boeing can make the most of its inventory, space and time by employing Six Sigma quality improvement process and Lean Production system. Adoption of such methodologies would help the company in reducing the cost of production. Boeing has also introduced moving assembly lines, which delivers the tools and parts at the workstations rather than going to fetch them. Every shift is now saving 20-45 minutes due to assembly line. Furthermore, Moonshine teams have reduced inventory by redesigning equipments for the machines. Finally, Boeing has benefited from government subsidies. NASA has invested in Boeing so that the company develop advanced commercial jet aircrafts (Rajalashmi, T. et al., 2013).