GSBS6008 Global Business Management : Problem Identification and Analy

Introduction:

The aircraft manufacturing industry is recognized as one of the largest industries globally, with Airbus and Boeing being the two dominant key players. A majority of companies in the aircraft manufacturing industry have failed to survive rapid competition and ended up exiting the industry. For example, McDonnell Douglas Corporation failed to sustain high competition in the industry after incurring huge losses and low orders. The company ended up merging with Boeing in 1997 leaving Boeing and Airbus companies operating in duopoly global market (Olienyk and Carbaugh 2011, p.1). Apparently, it is important to determine both external and internal environments in the industry to evaluate what Airbus Group have done and should do in order to experience fast growth and survive competition forces. Therefore, the report seeks to identify and analyze the problems faced by Airbus Group, opportunities, and expansions barriers and strategies that have been adopted by the company for expansions of its products and services to other countries beyond the European continent.

Airbus Group

Airbus Group is an organization dealing with aircraft manufacturing in the aircraft manufacturing industry. The company was formally established in 1970 as a European consortium and has its head office based in France (Mocenco and Dudian 2015, p.264). The company operates with both internal and external stakeholders. Internal stakeholders include staff, executives, partners and suppliers while external stakeholders include passengers, businesspersons, students, tourist, military and government. Partners and airbus committee are the most powerful stakeholders with executive committee owning approximately 30 percentage and partner’s twenty percent. Airbus Group operates a multinational nature of the business. It designs and sells both military and civil aerospace products. Furthermore, the company has developed manufacturing sites in Spain, Germany, UK and owned subsidiaries in North America, Japan, and China. The company has divided its product into three divisions: Helicopters, defense and space, and commercial aircraft. All three products are differentiated. For example, defense and space products are different from commercials. Furthermore, Airbus is ranked as the third largest in the Aerospace industry in terms of helicopter deliveries and revenue generations. Airbus has a unique workforce integrating more than 80 nationalities speaking 22 languages. The core human talent, hard works and missions keep the company as a leader in the competitive markets. Furthermore, the company has over 55,000 workforces who operates for more than eighty different nationalities (Lejot 2016, p. 1). This cultural diversity is a key factor to why the company has recently experienced success.

Problem Identification and Analysis

Airbus Group has recently experienced diverse problems within, in and outside the European continent. Recently, the company was in the headlines due to delays of bringing Air Bus A380 in the market for a period of 2 years and uncounted loss of 2 billion euros (Marsh 2010, p. 10). The delay was believed to have caused by technical problems and cultural differences like problems with writing. In 2016, autumn report portrayed that different perceptions of cultures in Airbus has high stereotypes and some of the experienced and skilled staff are not satisfied.

Airbus Group has encountered operation issues. Airbus operating under large geographical area and having multiple country consortium makes it slow in making decisions. For example, in the 1980s, the company encountered great challenges in financing A-320 project because the partnered government took long to approve the program (Petrescu et al. 2017, p.1) Furthermore, the company was slow in reaching final decisions because consortium partners safeguarded their own interest instead of making decisions that were beneficial for the entire organization.

Airbus being a multinational company has faced economic recession challenges ever since the company was started. According to Fairlie (2013, p. 207) economic recession is a significant decline in economic activities for more than six months affecting real income, employment, industrial productions, and wholesale-retail trade. The global economic recession has had a significant impact on Airbus Group while manufacturing civil aircraft on several aspects. During the recession, Airbus has directly received few orders than before. For example, during the 2008 global economic crisis, the number of orders that were received by Airbus Group decreased significantly to 142, as compared to 662 in 2008 and 1417 in 2007. The recession also led to the downsizing of the Company. For example, the Airbus announced immediately during the recession that it would cut a significant number of jobs. The cut of employees was a success beneficial strategy for new entrants as they gained access to experts who have capabilities of utilizing their skills and experience and later on emerge as a competitive threat to the company (Gittell and Bamber 2010, p. 165). Furthermore, the staff had good knowledge of the market and secrets of the company.

In terms of economy, finances and capital of operation is also a challenge faced by Airbus Group. Monetary policies, employment rates and high inflation rates in some countries have been a problem. Some countries have very low GDP hence the consumption of Airbus products becoming low. Inflations have been a contributing factor to fuel changing trends. Furthermore, fuel prices have been increasing unexpectedly influencing internal and external operations of the company. The increase in fuel prices has facilitated to postponing or cancellations of more than $100 billion orders of aircraft (Bjelicic 2012, p. 10)

Political influence in some countries has facilitated to high corporate taxes and licensing fees. The trade barriers and a high tariff on big corporates have been a challenge to why the company is experiencing low-profit margins in some countries. For example, Spain has recently revised its tariffs, trade regulations and taxations on foreign companies. This foreign trade regulation imposed by the government has slowed Airbus ability to expand its operations to diverse regions across the world. For example, Airbus suffered government threats from the Chinese government when the United States of America arms were sold to Taiwan. Furthermore, some politicians and environmental bodies have criticized the company for not complying with the principle of Corporate Social Responsibility (CSR). Airbus Group has previously linked to environmental pollution and incurred high costs of redesigning aircraft components like exhaust systems and engines.

Airbus Group has faced a great problem in terms of social-cultural and technical problems. Various ways of communications and leadership styles have been linked with economic nationalism that has distorted private transactions through discrimination of foreign investors in the name of national interest. For example, Germany is known for preferring collective decision-making, Spain is flexible but has inferior complex decision-making process while French prefers centralized decisions. The cultural dimensions between different countries have resulted in ideological differences. For example, Germany cultures are linked with low power distance while France cultures are linked high power distance (Hofstede 2011, p.8).

Rapid competition in the industry has posed a significant challenge to the Airbus Group. The market is growing every day and many companies are venturing in the industries with new techniques and innovations attracting more customers. The main competitors of Airbus Group are Boeing, Embraer, and Bombardier. Each of these companies competes for available resources and customers. The competition have seen the companies differentiate its products. For example comparing Airbus with Boeing the main competitor each company has its way of running its operation in order to increase profit margins and the same time comply. For example, Boeing produces faster airplanes like 787 Dreamliner while Airbus produces bigger Airplanes like A-380. Passengers who are in hurry will prefer Boeing at high costs than Airbus.  Economical passengers like low and middle class will prefer Airbus. Furthermore, entrant of new companies in the industry is the main reason why big players are forming alliances. New entrants in the market like COMAC, of China, Irkut-united Aircraft of Russia and Mitsubishi of Japan have bombed the market with innovations (Breuer 2016, p.1). The new entrants have also been significantly supported by their countries. For example, in China domestic companies experiences low taxations, interest tariffs and high business confidence as a way of encouraging domestic investments. Therefore, it is clear that barrier of entrant in the market are high in the industry. The market has encountered competition rivalry between the different firms that have posed a serious threat for Airbus Group to expand its operation. In the industry, the main rivals are Airbus Group and Boeing competing for the prices and customers. The intense of the rivalry has seen Airbus Group dropping its market share and bargaining power of customers increasing as they focus on cost-sensitive products offered by Airbus. Furthermore, Airbus has faced high bargaining power of customers hence charging low costs as compared to its competitor Boeing due to its comparatively leaner manufacturing system.

Evaluation of Strategies Adopted By Airbus Group

The strategy of Airbus has evolved significantly over the last decade. The organization was small in the late 1990s. McDonnell Company and Boeing who were producing most of the aircraft worldwide dominated the market. The initial strategy of Airbus was to acquire a high market share through the aggressive targeting of the many routes that were short. The strategy would see the use of cheap and small aircraft that were suited to the requirements of the highly growing low-cost carriers at the time (Barmeyer & Mayrhofer 2014, p. 430).

Strategic Alliances, Joint Ventures

To pursue international growth opportunities, Airbus has formed a strategic alliance with the Defense Science and Technology Organization (DSTO). The alliance will enable the collaboration between Airbus and DSTO in the aircraft systems for defense and communication. The strategy will initially be focused on the maximization of the ADF aerospace fleets capability throughout the life that the company would serve, and the improvement of the capability of communication. The non-strategic alliance which would run for a ten-year period will be of benefit as it will support rotary wing assets. The strategy will also present opportunities for DSTO in accessing the facilities and capabilities of Airbus. In addition, the strategic alliance would strengthen the aerospace capabilities of ADF. The company’s market portfolio will be diversified which will boost its market exposure (Cansino & Román 2017, p. 117).

In addition, Airbus has partnered with China on the A380 to create a joint venture under the agreement that the country purchases the world’s largest passenger jet from Airbus. Unless Airbus wins new customers through international growth to access new markets, the future of the world’s largest passenger jet is in doubt. Airbus also increased production at its final assembly line of Tianjin where it has increased its production of the A320 single-aisle aircraft to five a month.

Furthermore, Airbus Group has collaborated with Routehappy, a move that will encourage international travelers in making bookings on the basis of cabin quality rather than fares. Routehappy and Airbus Group will work with airline customers for the creation of targeted and compelling merchandizing content that will display features of the cabin including jet lag mitigating ambient lighting, connectivity, in-flight entertainment, personal space, and seat width. The aspect has been fueled by flyers who need better information in navigating the options that are ever-changing, with the industry needing a platform to assist them in displaying the products they offer. The alliance has provided Airlines an added incentive for the creation and distribution of content that is rich and is becoming a key feature in how customers shop for flights.

Business Strategies

The business strategy of Airbus has seen the company cut more than 80% of its suppliers, a move aimed at reducing the suppliers to 500 from the initial 3000 over 3 years, thus reducing their material costs by 1 billion dollars (Greitemeier et al. 2015, p. 169). Airbus has built an integrated customer support as part of its international growth strategy, instead of being a standalone business unit. The strategy has made Airbus Group airplanes more attractive in international markets. The company has created e-solutions for maintenance which is a network of Maintenance, Repair and Overhaul (MRO) providers.

Diversification Strategies

Airbus has implemented various diversification strategies which include positioning, targeting, segmentation, restructuring, mergers, and acquisitions in order to achieve rapid international growth. The organization has implemented various segmentation strategies including psychographic, geographic, and demographic strategies so as to respond to the demands of customers from different nations. The organization uses the selective targeting strategy since various sets of customers have been segmented to be serviced by its different aircraft. Airbus has positioned itself as an airline carrier which offers aircraft which are value-based, aesthetically designed, technologically advanced, safe and secure.

Multinational Structure and Strategies

To promote its international growth strategies, Airbus Group has a strong multinational structure which has assisted the organization in surviving in diverse markets. The organization uses the complex integration strategy which consists of specialization in regards to the existent technology and workforce capabilities in the local market. As a result, all subsidiaries have solely been able to perform a certain function or they can collaborate with Airbus. Constant flows between Airbus and the subsidiaries have led to the insignificance of the status difference. Therefore, the company resembles a network thus the organization’s total performance is depended on the results of all subsidiaries

Ownership Strategies

Airbus Group began a consortium of manufacturers of international aerospace at various points in some previous years which many thought it would fail. In 2001, Airbus Group formulated and implemented ownership strategies which saw the structure of the company becoming consolidated through the ownership of the British Aerospace and defense company BAE Systems and the Franco-German group EADS. In 2006, the British sold out although the governments of Spain, Germany, and France continued to, directly and indirectly, own stakes. Wrangling between the diverse owners which included manufacturing locations and over-engine choices were meant to overshadow the achievements of Felix Kracht and Roger Beteille, who are pioneers of the company. Airbus Group controlled 50 percent of the market for commercial aircraft worldwide within 25 years (Slocombe 2014, p. 28). The company became the largest supplier globally in 2003 measured by the deliveries of planes thus beating its main competitor, Boeing. In addition, the company makes the largest passenger aircraft globally, has the best-selling jetliner aircraft range ever, and manufacturers the most advanced plane for military transport. In 2013, Airbus Group had a backlog of 5000 not-yet-delivered planes, had received $240 billion in orders, and delivered more than 600 aircraft (Plötner 2018, p. 36).

Corporate Social Responsibility Strategies

Airbus Group has been keen on the corporate social responsibility debate which is focused on the organization. Airbus Group is committed to foster innovation in becoming an international enterprise which is eco-efficient. The organization has been striving to achieve the introduction of the philosophy of management and to fully integrate it within the business and turn it into a culture of the company. Airbus Group is making use of innovation to find the solutions to today’s issues which are most critical, including the evolution to a low-carbon economy, the security of nation-states, and sustainable mobility

Operations Process Strategies

According to Mocenco and Dudian (2015, p. 57), the operations process strategy of Airbus Group can be characterized clearly as a job process. Although the majority of the organization's aircraft are similar and use the same techniques for manufacturing, they are so large. The aspect makes it physically impossible to see the manufacturing process plan to be anything more than a job process through the analysis using specific operating process models. The manufacture of the A380 superjumbo aircraft is a very specific operation and significant engineering that specific operations are required for various operations and areas, for example, the upper wing skin panels (Richter and Witt 2017, p. 7). The aspect has been caused by the vast scale of the manufacturing process used to shape the skin of the plane’s wing thus each skin has to be separately tooled and formed to ensure it meets the modern airliner’s rigorous requirements. In addition, while the operations process of the company strongly resembles the process of a job, the company is still aimed at integrating and maximizing efficiency through the adoption of other processes of operations and the use of more modern techniques for production where possible.

Airbus Group has recently completed a major research project which has led to a high level of automated drilling within the organization. Precisely, Airbus Group has ventured into the development of robotic platforms which are of low cost and can be used in some manufacturing process to turn the job process into more of a mass production process or a batch process. The organization has manufactured machining robots for horizontal spindle capable of producing airplanes’ structural ribs in a faster and efficient manner as compared to a pure job process. The aspect has resulted in Airbus Group manufacturing the ribs of its planes efficiently and quickly thus turning part of the manufacturing process into a process of mass production. The remaining part of the project is completed in a more traditional job process manner.

Conclusion:

The paper has demonstrated that Airbus Group has developed and implemented global market expansion strategies which are well structured. The strategies are critical to Airbus Group as they have assisted to develop, build, market and produce large and complex aircraft. Air transport continues to change throughout the world in order to respond to market challenges and opportunities. The dynamic international growth of air travel and the new airline business models in the emerging economies are diversifying for airplane demand throughout the world. Although there was a global decline in air transport in 2009, there were still many business models and markets which experienced growth.

Recommendation:

To survive the rapid competition and expand operations to other countries, Airbus Group should consider investing more in implementing innovation and differentiation strategies. The strategies will provide unique products in the market with high customer satisfaction as compared to competitors. Furthermore, the company should add more professionals in research and development for innovation of new products and identification of what customers need to remain loyal to the company.

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