Airbus vs. Boeing: Porter's Five Forces Analysis

Introduction: The Airbus-Boeing Duopoly

The airframe manufacturing industry is a highly competitive environment that has come to be dominated by two firms: Boeing and Airbus. Airbus is a European joint venture between EADS and BAE Systems, headquartered in Toulouse, France, and originally founded in 1970 (Mayer, 2007). Boeing, on the other hand, is an American firm founded in 1916 in Seattle, Washington, and now headquartered in Chicago, Illinois (Mayer, 2007). As airframe manufacturing firms, Airbus and Boeing together hold 86% of the total market share, thus creating a duopoly. Through an analysis of Porter's Five Forces applied to these two firms — both as a duopoly and as individual competitors — one can better understand how influential they are to each other and to other firms within the industry.

Threat of New Entrants

The first of the five forces is the threat of new entrants. Within the airframe manufacturing industry, this threat is relatively low due to high barriers to both entry and exit (Sinha, Purnendu, Saini, Jain, & Raj, n.d., p. 7). These high barriers apply both to the Airbus/Boeing duopoly and to the airframe manufacturing industry as a whole. Entry into the market — especially to compete directly with the duopoly — is complicated by the fact that the two firms share 86% of the total airframe manufacturing market (Mayer, 2007). Other major airframe and airplane manufacturers include Bombardier Aerospace, Cessna Aircraft Company, Dassault Falcon, Embraer-Empresa Brasileira de Aeronáutica, Gulfstream Aerospace, Hawker Beechcraft Corp., Piaggio America, Inc., and Pilatus Business Aircraft, Ltd. (Huber, 2009).

Threat of Substitution

The second force is the threat of substitution. Between Airbus and Boeing, this threat is high. To combat substitution, both firms have adopted strategies to differentiate themselves from each other and from other firms within the industry. Airbus has stated that it aims to create "the best and safest aircraft" and that it also aims to "meet the needs of airlines and operators by producing the most modern and comprehensive aircraft family on the market, complemented by the highest standard of product support" (Mayer, 2007). Furthermore, Airbus has set objectives to "further internationalisation, focusing on key geographic markets, expanding its customer services offering and restoring its competitive edge by focusing on flexibility and efficiency" (Mayer, 2007).

Boeing, on the other hand, describes itself as a firm about "people working together as a global enterprise for aeroplane leadership," with objectives centered on "customer knowledge and focus, large-scale systems integration on a global level by outsourcing, and a lean enterprise" (Mayer, 2007). Airbus's reputation as an innovation leader — using new technologies to reduce operating costs, fuel burn, noise, and emissions — exerts considerable pressure on other airframe manufacturers within the industry, who must keep pace with Airbus's advances in order to remain competitive (Mayer, 2007).

Conclusion

Given this analysis, it is evident that Airbus and Boeing will continue to dominate the airframe manufacturing industry. While other firms operate within the airframe manufacturing sphere, Airbus and Boeing will continue to dictate how the industry operates. Furthermore, intense competition between the two firms — driven by their distinct offerings, missions, and visions — will ensure that each firm continually strives to be the best.