For this analysis of Boeing and Airbus, only the commercial planes are taken into consideration. Thus, we will not analyze the military aspect as well as the private jet market. Value proposition This part is going to analyses Airbus and Boeing value proposition: targeting audience, main value provided through services, the company’s major competitors, and how Linked differs from them. From a customer perspective, value proposition is a statement Of a specific target customer group within the product/market segment and a set of critical benefits or results you intend to offer to that target customer group.
It is also the costs customers have to pay to obtain those benefits. First of all, Boeing and Airbus have only one type of customers if we take into account only the commercial planes, airline companies. However, each airline company has different needs. Indeed, a low-cost company as Assets will look more for small or medium planes, fuel-efficient, able to carry passengers between small and medium airports. On the contrary, Qatar airways, that has built its reputation on its services and business classes, will look mainly for big jumbo jets able to carry lots of people and offering them the possibility to sign luxurious business class.
However, both Boeing and Airbus produce small, medium and big planes, and secondly airline companies need to buy planes from the two companies in order to stay independent as much as possible. That is why even if they are different, airline companies can be considered as a single type of customer for Boeing and Airbus. As explained previously, airline companies do not always have the same objectives, with different approaches regarding their services and destinations. Some of them, categorized as low-cost, have for main goal to carry passengers at the lowest price.
This is possible by buying small or medium planes, fuel efficient, and by serving small or medium airports. Indeed, they do not need big jumbo jets as they do not offer a business class, so they can carry the maximum of passengers. Moreover, fees for an airline company to serve small or medium airports are much lower than for important hubs, and big planes cannot land on these airports. Another category is the luxurious airlines companies such as Singapore Airlines, Qatar Airways, and a few other.
By the services they offer and their business class, they are clearly in demand for important planes that allow them to design assign and expensive business class to attract business men. Some of them build their own hub like Qatar airways and serve the main Fairport around the world. Of course, there are lots of airline companies located between these two extremes spots, companies that do not provide low cost but at the same time do not offer luxurious services and business classes. In order to satisfy the airline companies with different expectations, Airbus and Boeing have to imagine, create and build planes that meet these expectations.
Creating a new plane from scratch takes time, sometimes more than ten years. There is a long process behind each plane: market survey, R, establishment of a AD model on computer, outsourcing first flight, and then adapt the supply chain in order to meet the demand. Each new plane has been conceived in order to meet the needs of airline companies. Thus, planes can be ordered in three categories: short-haul, medium haul, and long-haul aircraft. Moreover, the total number of passengers is most of the time related to the range of the plane, long-haul aircrafts being able to carry more passengers in general than short-haul aircrafts.
In addition to these type of planes, Airbus and Boeing also provide lanes that become more and more fuel efficient. They also integrate more and more technologies inside to help the pilots and make the planes safer (more and more planes now are entirely designed and created on computers). Finally, the R is an important part to find new materials which would help to save gas. Airbus and Boeing are clearly the two main competitors on this market, each of them with approximately 30% of market shares. However, a few other manufacturers exist such as the Brazilian company Embracer or the American one Bombardier.
But their size and their impact on the market are much mailer than the two companies discussed in this paper. The offering of Airbus and Boeing are quite similar, both companies have planes belonging to the three categories previously explained. However, a few differences can be made about their strategy and objectives. These points of distinction will be described in the following parts of the papers, but it can already be said that it includes a different vision of the future about air traffic, the use of RIFF, a management of the supply chain slightly different.
The following part of the paper will do more in depth about the value reposition of each company as well as their main differences that bring value to customers. Nonetheless, it is important to keep in mind that airline companies, in order to play with competitors, cannot buy planes from only Airbus or Boeing to avoid losing their independence. Another important aspect that will not be described in this paper is the subsidies governments provide to these companies. Thousands of workers are involved and thus politics cannot let them down is something goes wrong.
Value delivery system Industry Supply chain, outsourcing and partnerships: Airbus and Boeing have outsourced most of their supply chain the last cascades. Indeed, planes becoming more and more complex, it was impossible to keep the entire production within the companies. However, with the number of suppliers reaching roughly 1500, the supply chain reached a high level of complexity. On the other side, the two manufacturers have around 4000 orders and build 1000 planes per year. To keep up with their productivity and to be able to expand, each of them fear the effect weak suppliers may have on the overall supply chain.
That is why they recently asked their large suppliers to buy the smaller ones, to reduce the complexity of the production and the risk of delay or mistakes. So the two companies seem to have the same strategy regarding their outsourcing and supply chain. However, the relation between Airbus and its suppliers seem healthier than between Boeing and its ones. Indeed, while Airbus support its suppliers and their processes even if it is not optimized, Boeing seems to force them to carve in their costs, around 15%.
Parker & Shooter, Airbus and Boeing push supply mergers, Financial Time, 2012 Tremble, Airbus exec’s criticism Boeing approach to suppliers, flightless. Com, 2014 Competitive advantages BRIO Framework Analysis Future competition/strategy Airbus overtook Boeing five years ago to be number one, mostly through the success Of its medium capacity long-haul Airbus A-330 and its shorter-range variations such as the A-340. With the launch of Airbus AWAY, the market share in the coming year will have slightly a change which is better for Airbus.
However, Boeing will be able to regain its market share thanks to the new model of EYE, Adrenaline and making the competition more aggressive. (future competition) Etc advances The supersonic transport is also an opportunity because an entirely whole new segment of the market will form. Commercial carriers will buy many of hose supersonic aircrafts in order to satisfy the consumers need to reach destinations quickly and on time The biggest and most cost effective technological advancement for the commercial aircraft industry is designing planes faster.
The increased production time will save costs on labor and enable better resource usage for each plane made. Boeing has utilized this technological advancement by building a new model, the Boeing 777, by using computer technology to build a prototype. This is tremendously cost effective because the company does not have to absorb the cost of the prototype that they normally would have to lid. Technological advances will also help companies use resources more efficiently.
Airplane manufacturers have been using robots to achieve this. Robots are a very efficient tool in creating airplanes Lighter materials are another way companies are trying to utilize their resources effectively. Research has said that lighter materials used in airplanes are better in aircrafts. Conventional airplanes are made of metal, which adds a great deal of weight. In the past couple of decades, scientists have come up with a new material called composite, a synthetic material made of carbon fibbers. SOOT analysis Strengths
Strong global network Broad product line that covers most major market niches / R&D development Weaknesses A hierarchical, ridged, and semi- autocratic management style, which is a product of its military heritage. ; Labor problems. Dependence on US government and WTFO-incompatible subsidies. Opportunities New aircraft to gain market share Increase demand for point to point routes Threats Slowdown in the commercial jet market Uncertain airline industry environment The company has strong international operations with customers in around 145 countries, employees in more than 60 countries and operations in 26 dates.
Worldwide, Boeing and its subsidiaries employ close to 1 88,000 people with major operations in Washington State; Southern California; Wichita, Kansas; and SST. Louis, Missouri. Boeing enjoys the ownership of a brand with good and far reaching awareness on a global scale. Strong relationships with business partners Boeing enjoys many strong alliances with many other globally powerful companies. In defended projects Boeing works closely with Northrop Grumman in programs such as the joint common missile program. Boeing is also a 50-50 partner with Lockheed Martin in the United Space alliance.
Boeing also works with many other organizations such as NASA in close relationships, which strengthen the company’s position in other markets. Boeing Company offers a wide range of product lines. For main commercial product such as aircraft, Boeing has 717, 737, 747, 757, 767, and 777 families of jetliners and the Boeing Business Jet. At the moment it is planning to release a new version, 787, which is called the Adrenaline. The company has more than 14,000 commercial jetliners in service worldwide, which is roughly 75% of the world fleet. Its product line is continuing to expand, creating new versions of its family of commercial airplanes.
This pioneering technology development helps ensure Boeing stay a leader in the industry. To remain competitive, Boeing must invest in developing the latest technologies. Thanks to its strong R& D, Boeing has been on winning side in the head-to-head competition with Airbus so far. Total research and development expense in 2003 was $1. 7 billion. The company expects research and development expenses to be between 3. 25% and 3. 75% of revenue in 2004 and between 3. 5% and 4. 0% in 2005 as spending increases on the EYE program. A hierarchical, ridged, and semi autocratic management style, which is a reduce of its military heritage.
Since the Second World War, the Boeing company still operates under a management style in which the employers makes decisions on their own with little or no input from employees. This does not fit in the modern management and for this reason; Boeing has several problems in management when it practices racial discrimination, tussles with its union workers, and then lets its executives flee the scene to avoid accountability. Labor problems When production problems delayed delivery, Boeing was forced to increase its work force, working in three shifts, to complete the planes.
This inexperienced work force created additional problems and the cost per plane is increased substantially. Moreover, the inexperienced workforce found the aircraft design too complex to implement. The managers ordered forced overtime: 50-to-60-hour workweeks became common. The problems affected other Boeing airplanes and complaints from customers began to mount. The Federal Aviation Administration (FAA) ordered special inspections of all Boeing jetliners produced since 1980 to look for defects that might affect safety. The strains of the forced overtime contributed to a 48-day strike in the fall of 1 989 that hurt Boeing financially.
Dependence on US government and WTFO-incompatible subsidies At the moment, Boeing mainly gains the benefit from the US which is 65 % of the company total annual sales. Moreover, Boeing is being criticized by Airbus for the subsidy contracts as well as foreign and domestic support all amount to aid for Boeing’s EYE model that is double what was available for the new Airbus AWAY. Whilst this fact is on one hand a great strength of the company with many opportunities it could also be construed as a weakness. With the impressive show of Airbus AWAY recently, Boeing also plans to release its powerful weapon in the competition with Airbus.
The new version Boeing 787 which inherits the most advanced technologies and advantages of the previous models is hoped to be a big hit to the airline industries. At the moment, Boeing has received a number of orders for Boeing 787- Adrenaline and this opportunity actually shows that Boeing still insists on its successful business strategy to build longer-range, more capable, smaller aircraft that could go point-to-point and, therefore, serve ice’ pairs directly rather than having to hook them up through a hub. The new 787 is the proof that Boeing does not lag behind the competition.
This is related to the booming market of low-cost airline. All the low-cost airline companies use point to point routes in order to reduce the costs substantially. Fortunately, this is suitable with the strategy of Boeing as mentioned in the previous parts. Airbus AWAY is still unsure about its future because most of the big airline companies at the moment are not gaining profit. The retreats No industry was hit harder than airline industry after the 1 lath Septet. Boeing and Airbus as well have to suffer big losses in revenues from 2001. Recently, there are some good signals recently for both of the companies with the increase of order number.
The demand for international tourism and delivery s increasing. However, it still does not reach the level before the terrorism event. Uncertain airline industry environment The airline industry environment is so dynamic and uncertain that to guess long-term or even short-term outcomes is very questionable. Competition in the commercial aircraft industry is particularly intense with regard to price, operating costs and production schedules. Increasingly, major manufacturers are teaming with global suppliers to reduce their risks, cut costs, and boost profitability.
Besides, a number of low-cost carriers continue to gain market share, remain profitable and are ordering new airplanes. There have been encouraging signs that the US economy and global air traffic are recovering and airline interest is slowly increasing. However, the timing of a commercial airplane recovery remains uncertain. Currently, airplane deliveries are likely to remain roughly flat in 2004 and 2005 and begin increasing in 2006. Segmentation Since economic and traffic growth rates vary by region Boeing’s segmentation of its customers is done solely through geographic regions.
Boeing believes that North America and Europe will continue to order the most airplanes with their mature economies. It believes that airplane traffic within Asia pacific will increase by six per cent annually over the next twenty years and that the market share of flying within Latin America will increase from per cent to four per cent . One must also consider that single aisle airlines are more popular in the domestic short haul routes of Europe and North America and that in Asia-Pacific a mix of both single aisle and twin-aisle airplanes is required.
It is due to these differences in global air travel that Boeing uses Geography as its segmentation tool. Short haul routes represent over ninety per cent of world departures and therefore appear to reveal that Europe and North America is the more attractive segment. Boeing’s ability to segment geographically allows the company to truly determine each segments demand patterns. For example in mature economies such as North America and Europe the company can predict an increase in the demand for regional jets as air travelers in these regions are demanding non-stop flights on thinner routes.
Boeing can equally predict that this trend will also occur in China within the next twenty years as the country has a large geographical landmass and would achieve more by using a similar strategy to that Of Europe and America which relies more on frequency flying. China’s airline industry is expected to have a network and fleet rationalization process which will pave the way for regional carriers to fly between China’s regional gateway cities and thus provide a more frequented point to point service.
Through segmenting geographically the company can also assemble other probabilities that aid it in its marketing, probabilities like America will require the most airplanes over the next twenty years because it has a large number of experienced travelers and has an aging fleet that will need to be replaced. Other probabilities that Boeing is assuming through its geographic segmentation is that the most 747 or larger aircraft orders will come from Asia with its less developed short haul route infrastructure. Positioning From a buyers point of view there are many criteria that apply to buying a new plane from Boeing.
The main two criteria we have chosen are capacity and distance. These criteria are relatable to Boeing’s business buyers because for today’s airline companies the choice is whether or not to operate a short distance service or a long distance service and whether or not to have high capacity or low capacity flights. The positioning map below identifies four any positions for Boeing’s clients to be in. Before looking at these criteria in more detail we would first like to mention other criteria which we feel are less important for the buyer but are nevertheless worth mentioning.
They include the actual cost of the purchase, the length of their relationship with Boeing, whether or not they will receive a trade discount, the company’s current strategy and if there is financial aid. Short distance and low capacity: Many As can be seen we believe that the most of Boeing’s commercial airplane buyers will require planes that are more effective at flying short distances tit a low capacity. The reason for choosing this position as Boeing’s many clients is based mainly on two’0 reasons.
Firstly we can note from the major products and services section that Boeing’s most delivered products to date has been its 737 family, with deliveries of over 4500 planes. The 737 family are particularly low capacity designed planes, incorporating seating capacities Of between 1 10-189 seats and are also relatively short distance planes with a maximum range of up to 3365 statute miles which is considerably less than some of the companies other products. From this information it would appear that Boeing’s planes which are suited for low capacity short distance travel are where its current many segment lies.
The second reason why we decided that this segment was where Boeing’s many clients are is because if we look at today’s airline industry post September 1 lath we can note that many airline operators are bankrupt or close to being bankrupt and that the successful airlines are mainly low-cost airlines operating from point to point routes on a short distance low capacity strategy, Airlines such as Continental Airlines in the United States and Ryan in Europe. Incidentally both impasses have a large fleet of Boeing planes, mainly from the 737 family. The current trend in customer demand is entirely non-stop service until ones ultimate destination.
Short distance and high capacity: None We believe that Boeing’s non existent clients albeit there may be one or two, are short distance operators who use high capacity planes. The reason why we chose this segment as the None segment is because when airline companies are operating a short distance route the need for loading the plane with passengers is nonexistent. Essentially if the company wants to transport more passengers from one route to another the plane can simply fuel and return. With high capacity airplanes the travel time is increased.
Besides for the companies themselves it’s more profitable to carry lower capacities for short distance routes in a quick and repeated motion. 0 Long distance and high capacity: Some Some of Boeing’s clients will be part of this segment. This segment is the complete opposite to the first segment which was where Boeing had many clients. There will always be a need for long distance travel unless the market was controlled fully by multiple short distance airline companies, however for transatlantic flights and other significantly long overseas travel these types of linens will continue to exist.