International Business: Airbus vs. Boeing

International Business: Airbus vs. Boeing

Competing in commercial and military aviation, space and communications systems industries, Airbus and Boeing are two of the largest and most technologically advanced companies competing in these markets. At the center of Airbus' business model is a reliance on operations across 160 international locations including Research & Development (R&D) and manufacturing centers in France, Germany, the United Kingdom and Spain. In addition, Airbus operates subsidiaries in North American, China and Japan. Airbus heavily relies on an engineer-to-order strategy for synchronizing its supply chain and demand management systems (Irwin, Pavcnik, 2004). Relying on a high degree of process integration in its single-aisle (A318, A319, A320, and A321) and wide-body (A300, A310, A330, A340) commercial jets, Airbus takes a more consortium-oriented approach to product development. While this can significantly reduce the subassemblies to produce a new jet, it requires an inordinately higher level of synchronization across suppliers and partners. With 80% of Airbus owned by the European Aeronautic Defense & Space Company (EADS) and BAE Systems owns the other 20% there is also the challenge of pleasing multiple consistencies in the same organization. According to research estimates Airbus leads the world in market share for commercial jets with 29.6% of the total market (Holmes (a), 2007).

Contrasting the highly collaborative approach Airbus takes in the development, manufacturing, selling and services of commercial and military aircraft, Boeing has more of a concentration on decentralized and highly autonomous teams (Holmes, 2007). There is a high level of accountability and use of process and system integration to ensure that development cycles cane be managed to project plans and meet time-to-market goals. Boeing trails Airbus with a 25.3% market share (Holmes, 2007) yet is the world's largest aerospace company. Comprised of commercial airplane, military aircraft and missile, and space and communications system divisions, Boeing has consistently relied on internal process and systems integration including the continual adoption of Computer-Aided Drawing (CAD) systems to automate their new product development process (Olienyk, Carbaugh, 1999). This commitment is seen as critical to their development of the Model 777 (Sharma, Bowonder, 2004) which was designed and manufactured purely through the use of CAD-based design and drawing applications integrated across the many functional teams building the aircraft. Boeing also has operations throughout the Pacific Rim with development centers in Australia, Japan, Korea, in addition to locations in Russia, the Middle East and Spain. Development and engineering centers are also located in China, Germany, India, and Italy. From these fundamental philosophical differences between each company, there are significantly different approaches to their product development strategies. These differences also directly impact their approach to designing next-generation products as well, which will be shown in this paper.

Airbus: Provide a summary of its product development strategy

Given its structure as a consortium of companies, Airbus relies heavily on the engineer-to-order and mass customization concepts their initial commercial aircraft were designed using. Airbus further creates a series of parallel processes that allow for their multiple divisions to interlock on a common design series of objectives. This concentration on using engineer-to-order forces a very high level of system, process and engineering specification knowledge throughout the entire Airbus consortium. The downside of this is that development cycles can often be impacted by the lack of coordination and synchronization of complex systems and jets (Kingsley-Jones, Norris, 2005). This was certainly the case with the A380, which is now over two years overdue and also lagging in key integration steps especially in firmware and systems development (Holmes (a), 2007). The advantages of having an engineer-to-order strategy is the minimization of sourcing complexity and the number of suppliers, greater levels of supplier coordination between themselves, and a continual effort to trim subassembly costs. As a result, the typical Airbus commercial jet requires only seventy-seven different subassemblies or components to create an entire jet (Economist, 2005) specifically designed to give Airbus the opportunity to create the A340 more efficiently (Kingsley-Jones, Norris, 2005). What is evident from this strategy of concentrating on the engineer-to-order process is that the discipline it places on Airbus makes them very efficient in their lower-end and mid-range commercial jets, yet does not scale well into larger, more complex projects such as the A380.

Boeing: Provide a summary of its product development strategy

Boeing on the other hand is more concentrated on the concept of individualized product and project teams, coordinated through a centralized Project Management Office (PMO). The concept of the PMO being the centralized point of coordination on projects is an American innovation in the commercial aviation industry (Anderson, Sedatole, 1998). In conjunction with the PMO organizational structure, there are contract management process workflows that ensure airlines meet the specifications of customers. This is comparable to the engineer-to-order set of processes at Airbus yet more quickly executed to customers' specific requirements (Berman, 2004). This product development process concentrates on the PMO also coordinating next -- generation product strategies as well, with Boeing choosing energy efficiency over larger, more expensive yet more profitable planes to build.

Strategies compared: Airbus and Boeing

From the highly collaborative approach of Airbus to the project-driven strategies of Boeing, each is ideally suited for any given product strategy. Airbus ironically has created product development strategies that align perfectly with the needs of lower-cost, more energy-efficient commercial jets, yet is stressing their product development process with the behemoth A380. Contrary to their product development strategy is Boeing, which is orientated and based on a centralized PMO strategy, Airbus relies on an engineer-to-order strategy that works for component-based manufacturing. The challenge for each is the scalability of their new product development processes to support their future product strategies. For Boeing, their concentration on using CAD-based applications including standardizing the entire Model 777 development on Dassualt Software is a caser in point. The role of the PMO office and contract management, in conjunction with Engineering Change orders (ECO) is critical to their future product strategy. Boeing is more adept with its internal processes to create an A380 while Airbus excels at interlinking processes for supporting lower-end commercial jet production, which has historically been their strongest market strategy (Anderson, Sedatole, 1998).

Competition in high-speed jet liners

The competition for commercial jet airliners is in a mature stage of its product lifecycle, and estimates of the market contracting (Holmes, 2007) have been reported by a variety of research firms in the industry. Despite the slow-down in this industry, Airbus still leads the market with 29.6% followed by Boeing with 25.3% (Holmes (a), 2007). Table 1 provides the worldwide market shares of commercial jet manufacturers.