Maastricht Business School Global Corporate Strategy Submitted to Dr. Zeyad Almutawaa Name: Hadi Aljumah Student Id: 34
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Table of Content • The word of the chairman of the board Airbus Group ---------------------------------------------------------- 3 • The word of the Chief Executive Officer Airbus Group ------------------------------------------------------ 4 • The Industry and The External Environment --------------------------------------------------------------------- 6 • Vision and Mission--------------------------------------------------------------------------------------------------- 8 • Goals ------------------------------------------------------------------------------------------------------------------- 9 • Objectives ------------------------------------------------------------------------------------------------------------- 10 • Airbus Commercial Aircrafts --------------------------------------------------------------------------------------- 12 • Airbus Helicopters --------------------------------------------------------------------------------------------------- 18 • Airbus Defense and Space ------------------------------------------------------------------------------------------ 23 • Corporate Strategies ------------------------------------------------------------------------------------------------- 27 • References ------------------------------------------------------------------------------------------------------------ R
3 “2016 was a significant year for your Company. To create a simpler, more streamlined
organization we decided to integrate the Group corporate structure and functions with those of Commercial Aircraft, our largest Division. This was the year’s biggest strategic development, alongside with portfolio reshaping, as the annual report’s title “flying as one” suggests. The new entity will combine corporate and operational functions and support services. Importantly, this will reduce bureaucracy, quicken decision-making and reinforce Company-wide collaboration.
Denis Ranque
In terms of orders and deliveries, Airbus made good progress. Commercial Aircraft delivered a record number of aircraft, de-spite some operational challenges.”
“The competitiveness of its aircraft portfolio lifted the order backlog to a new industry record. Despite a challenging market, Helicopters reported a small increase in deliveries and net orders, strengthening its lead in the civil and Para public sector. Defense and Space booked healthy orders in Military Aircraft and Space Systems, although the A400M program experienced further technical issues and charges. The Board supported Airbus’ digitalization initiative, which will help to capitalize on innovative and transformational technologies and business models. At the same time, the technology function is being reorganized and refocused to enhance the direction and coordination of Airbus’ overall research and technology activities. Turning to compliance, we are determined to ensure compliance standards and processes reach a “best in class” benchmark across the Company. Staff underwent comprehensive training to raise awareness, reduce risks and, more generally, to reinforce the culture of integrity. Similarly, we supported the Corporate Social Responsibility strategy, which is being aligned with applicable UN Sustainable Development Goals. Our environmental and social goals include the philanthropic work of the Airbus Foundation and efforts to promote diversity at all levels. The Board proposed a 2016 dividend of € 1.35 per share. We intend to honor our commitment of increasing dividend per share on a sustainable basis by proposing this payment, which is about four percent higher than in 2015. The value is outside the range of the dividend policy exceptionally. It is based on our 2016 underlying performance and it demonstrates our confidence in our future operational cash generation. In terms of governance, we introduced ‘staggered’ Board terms with one third of the Directors being reappointed or replaced every year. The extension of the mandates of three Directors and the nomination of one new Director at the 2017 Annual General Meeting follow this principle.”
Denis Ranque Chairman of the Board AIRBUS Group – Annual Report 2016
4 “As
expected the nine-month performance reflects the heavily back-loaded aircraft delivery schedule, ongoing production ramp-up and transition to new versions of our A320 and A330 aircraft. For the remaining months of the year we remain totally focused on deliveries to achieve our earnings and cash guidance. The commercial environment continues to be rather healthy, with a backlog of more than 6,700 aircraft supporting our production plans and reflecting the strength of the product portfolio. Further integration of the group, as recently decided, will simplify the company’s governance and improve competitiveness.”
Tom Enders Airbus Group CEO - Letter to Shareholders Number 42 – Autumn 2016
“Our first and most important priority is to successfully manage the ramp-up in commercial aircraft. We showed last year that we are capable of it but the NEO transition is no walk in the park. With our engine and other partners we are working towards hit-ting our higher production targets, while remaining focused on delivering to our customers’ expectations. Secondly, there’s the A400M. We need to achieve a win-win outcome with our customers that give them a step change in capabilities without further unacceptable losses. This will not be simple but we owe it to all the stakeholders involved. Thirdly, we will finalize the implementation of our restructuring program, not just to optimize costs but also mainly to simplify the organization and decision-making processes in view of digitalization. Fourthly, we will continue to invest in the future through digitalization and innovation for increased levels of competitiveness. Finally, Ethics and Compliance remains a key priority and focus for us. We have been working hard in recent years to develop and implement a state-of-the-art compliance system, which includes regular training for employees on this important topic. Looking to the future, we will continue our transformation journey to deliver on our earnings and cash flow growth potential. Team Airbus made considerable progress in 2016 but this is just the beginning of an arduous but exciting journey.”
Tom Enders Airbus Group CEO - Annual Report 2016
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Source: Airbus Group Annual Report 2016
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The Industry and External Environment The aerospace industry involves the research, development, and manufacture of air flight vehicles; the industry includes sub categories like commercial aircraft manufacturing, helicopters, UAV (Unmanned Ariel Vehicles), Drones, military aircrafts, support aircrafts and business jets. According to Wheelen and Hunger (2012), the aerospace industry is considered a consolidated industry where few corporations dominate it and very low chances for new entrants to penetrate in for a market share. Competitors vary from business line to another; in commercial aircrafts the main competitor is Boeing with 40% market share, while Lockheed Martin is dominating the military flight vehicles with 55% and 36% between fighter aircrafts and transport aircrafts respectively. The external environment analysis includes Porter’s (1980) five forces analysis that include exploring suppliers and buyers power, the threats of new entrants and substitutes and the competitive rivalry present in the market; external environment analysis also includes scanning for opportunities and threats present in the industry. Due to the variation in the activities and the market structures that involve Airbus Group business lines a more in-detail study of the external environment will be covered for each business line in the business-level analysis in order to evaluate the selected strategies effectively. Airbus is a European corporation with exposure to the global market due to the products and services the group is providing through its business units and that makes chances of being affected by any change in the external environment relatively higher than companies operating only in local markets; The Geopolitical conditions, Governmental regulations, security concerns and increasing growth in population are the highlighted external factors affecting the aerospace industry in many different ways; the effects of those external factors will be further presented in details in business level analysis section of this paper. Airbus Group is a corporation that includes Airbus (Airbus commercial Aircraft), Airbus Helicopters and Airbus Defense and Space Business units, where Airbus commercial aircrafts is generating 21.7 billion Euros out of the consolidated revenues of the group standing at 29.3 billion Euros in the first half (H1) of the fiscal year 2017, which makes the business unit responsible for 74% of the groups’ revenue showing the group’s dominant diversification approach illustrated by Barney and Hesterly (2015). Airbus group holds a very strong positions in the industries where it competes with 50% of the civil helicopters market share, 39% of the commercial aircraft market share and 23%, 28% in military aircrafts between fighter aircrafts and military transport aircrafts respectively between 2015-2019.
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Vision and Mission Airbus Group is working on balancing its strategy for growth with accomplishing responsibilities to all stakeholders and focusing on significant sustainability issues and how to solve them to attain the competitive advantage for as long as possible. The vision of Airbus Group is focused on the enhancement of mobility, as an industry leader Airbus always strives to create new innovative solution that drive the industry into more reliable, sustainable and intelligent services. The mission of Airbus Group is defined as “Drive Innovation. Deliver Results. Define our Industry. Develop our People”. The mission is clear and direct and it points four essential pillars in the success of the group, Innovation, Results, Leading the industry and work on human resource asset improving skills and capacities needed to achieve the ultimate goal, which is the sustained competitive advantage. The Mission Statement of the Group is stated, “Airbus is an international pioneer in the aerospace industry. We are a leader in designing, manufacturing and delivering aerospace products, services and solutions to customers on a global scale. We aim for a better-connected, safer and more prosperous world.” According to Barney and Hesterly (2015), Airbus Group is considered a visionary Corporation where it relies its existence to serve higher purposes driven by a set of values and beliefs in the setting of its objectives rather than having profit maximization as the main objective; the group is driven by the commitment of providing better mobility solutions, driven by innovation and set the development of people as part of its mission which are considered the equation needed for success and achievement of the ultimate objective for success which is the sustainable competitive advantage. The development of People is considered an essential factor needed to achieve competitive advantage when strong human resource management drives it and the leadership qualities needed to motivate the employees and sharpen their abilities leading to organizational citizenship behavior that leads to enhanced service quality ultimately leading to gaining the advantage over competitors. The continues innovation plays a significant role in the ability to sustain competitive advantage by making the value offered by the corporation harder to imitate while insuring the rarity backed up with patents which is considered one of the corporation’s mains strengths; combining the inability to imitate the values offered and rarity due to the high entry barriers inherent with the nature of the industries where the group’s business units are offering the values with the right organizational structure to forge success and realize the group’s vision; Airbus group have successfully maintained the advantage and is continuing the pursuit of its mission .
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Goals According to Shetty (1979), Corporate goals are considered the first step taken in the path of effective management, they are the basic construction needed to continue a successful strategic management formulation, development and implementation; the setting of realistic, achievable corporate goals plays an essential role in formulating the corporate objectives which is going to be a key tool in the evaluation of the corporation’s development process and will give a proper view ensuring that the corporations processes and activities are not deviating from the propose and the mission view of the corporation, the realization of corporate goals helps in the employment of available resources to best serve the achievement of the corporate objectives and ultimately the corporate goals and the sustainability of competitive advantage. Wheelen and Hunger (2012) have defined goals as extensive statements that define where the corporation is aspiring for in a long-term rather than quantifying the progress it shall be achieving over the time of being active in order to reach that aspiration. Airbus Group Goals -
Maintain the highest standards of compliance and transparency in business practices around the world. Aligning the company's growth and technological innovation with the needs and expectations of society. Minimizing our environmental impact. Operating responsibly. Innovating for sustainable solutions. Contributing to a more prosperous world. Competences and motivation are the cornerstone of Airbus Group’s success and competitiveness. Strengthen the innovative leadership position.
Airbus Group corporate goals are extensive, broad and could be directly related to the vision and mission of the corporation, which makes them appropriate goals that can contribute in the success, and growth of the corporation.
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Objectives Objectives differ from goals, based on Barney and Hesterly (2015) goals are specific, measurable and precise targets set by the corporation that are used to evaluate the performance of realizing the corporation’s mission practically in the real world; the quality of the objectives set by the organization plays a significant role in the reliability of the evaluation outcomes resulted from them, high quality objectives should be related to mission of the corporation – ultimately leading to its realization – ensuring responsive correction to any deviation from the corporation’s mission and goals and it should be easy to measure and trace to increase the credibility of results generated and the ability to compare and analyze them. Airbus Group Objectives -
Ensure safety and quality check on 3 levels process, assembly and post assembly quality control. Improve fleet fuel efficiency of 1.5% per year between now and 2020. By 2050, net aviation carbon emissions will be half of what they were in 2005. An average of 10% reduction per decade. By 2030, 60% of the world’s population will live in cities. Accumulate 1% advancement in aircraft backlog orders every year in line with the global population growth rate. Lower noise levels – up to 50dB below ICAO Ch4 standard by 2040. An average of 7dB every 5 years. Development and Training of employees, confirm a minimum of one training course, workshop or seminar for each employee every 5 years; a minimum of 10 Continuous Professional Development (CPD) credits, or equivalents, annually for executives positions in their specific fields of operation.
Airbus group objectives are connected to the mission, vision and goals of the corporation, it shows defined, realistic and achievable milestones needed to keep the corporation on the right track leading to achieving the corporation’s mission. The objectives are covering operation, environmental responsibility and internal development which is a sign of a healthy business environment created by acting responsible with the involving stakeholders in the corporation and setting long-term objectives that achieve values added for the stakeholders involved rather than being centralized around the sole benefits for the corporation.
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Source: Airbus Group Annual Report 2016
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Strategic Plan Airbus Commercial Aircrafts FY2016 – FY2020
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Airbus Commercial Aircrafts Airbus’ commercial aircraft product line includes a wide-ranging seating capacities from 100 to over 500 seats: the single-aisle Family including A320 and A320neo, the best-selling airplane in history; the wide body, long-range A330 Family; the all-new, next-generation A350 XWB Family; and the double-deck A380. (Airbus, 2016) The Five Forces in Airbus commercial Aircraft business unit are illustrated with high levels of rivalry because of Boing’s market share and ability to sustain mass production orders like Airbus makes it the main rival in this industry, on the other hand the threat of substitutes doesn’t have a strong impact on this industry due to the nature of aircrafts as long term investments with very high substitution cost, the same level of impact applies to the threat of new entrants as the initial cost to start in this industry is very high and gaining credibility of the consumers is a difficult task specially with the increasing regulations and rules, while the bargaining power of the buyers is moderate because they have the privilege of choice between companies and the choice of special modifications done to the aircrafts if needed, the bargaining power of suppliers is considered lower as the manufacturer is involved in the process of development and design of the parts supplied and that gives the manufacturer more flexibility to choose from a wide range of suppliers to provide the parts needed. SWOT Analysis Strengths Weaknesses -Leadership in Innovation. - High production Costs. -Established Brand Image. - Operation Inefficiency. -Wide range of Aircrafts Models to meet various - Critical production issues. customer demands. Opportunities Threats - Growth in population. - Very strong competition with rivals in the - Increasing demand. industry. - Emerging new potential customers (Developing - Potential new rivals competing for market share. countries). - Geopolitical Conditions. -Technological Advancement.
O2-Increasing demand O3-Emerging new potential customers O4-Technological Advancement
Comment Demand for Flight Asia and Pacific Patents, Strong R&D
0.20
4.5
0.90
0.20
2.0
0.40
0.10
4.5
0.45
5.0
1.25
Boing Russia & China Comm. Aircraft Manufacturing
Threats T1-Strong competition T2-Potential new rivals competing for market share (need more time to get mature and ready to compete) T3-Geopolitical Conditions
0.25 0.15
4.0
0.60
0.05
3.0
0.15
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Internal Factor S1-Leadership in Innovation. S2-Established Brand Image.
T2-Potential new rivals S1-Leadership in Innovation. S2-Established Brand Image.
0.10 0.25 0.10
3.0 4.5 4.0
0.30 1.125 0.40
W2-Operation Inefficiency
0.05
3.0
0.15
W3-Critical production issues
0.10
3.0
0.45
Comment Demand for Flight Patents Boing China, Russia A3, bizlab Delayed delivery Engine Issues
• Boing • Airbus • Embrear • ATR • Bombardier
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Following the analysis of the strategic factors resulted from combining the most important internal and external factors; the strategies formulated by airbus took significant steps in mitigating the threats and developing the weaknesses found while capitalizing on strengths to empower the positions held. Success in the commercial Aircraft industry depends heavily on the ability to win future orders from buyers and deliver them on time, the nature of the product and its complexity adding to that the amounts invested in buying aircrafts gives securing orders from multiple buyers essential for a prosper business condition for companies involved in that industry, however failing to deliver on time will be critical for buyers with forecasts built and decisions made based on that delivery date promised which might have a negative effect on the business of buyers and might even lead to customers canceling orders and seeking alternatives from rival manufacturers, Airbus is aware of the importance of orders and deliveries that’s why they worked on a responsive solution for the delayed deliveries caused by engine problems and production processes and it reshaped their relationship with the suppliers, airbus group has over 12000 suppliers from various industries providing a wide range of services or parts needed to fulfill the orders and deadlines promised. Moreover the engine issues that caused many delays on very important aircrafts like the A320neo, which is the industry leader in its class, and A380, which is the flagship double deck aircraft. The following steps where Airbus’s answer to those issues and it worked very well for them recovering quickly from such critical issues with no noticeable slowdowns in orders secured for future sale, (a) Setting design alteration adjustments to mount different engines on different aircrafts; (b) Financial health of the potential suppliers is tested before engagement; (c) Continuous supplier performance monitoring and continuous assessment of suppliers in politically unrest areas to work on mitigating risks of not meeting forecasted deliveries. Innovation is an essential for a company to sustain its competitive position specially in an industry like aircraft manufacturing where technological advancements are always pushing the limits of possible everyday and the costs are high for the buyers as well as the manufacturers and the operating cost is also high and everything is accounted for especially the length of usage life of the aircraft and fuel efficiency as it directly affect the cost per seat for commercial aircraft carriers and could be an asset for them to gain competitive advantages compared to other carriers, Airbus has a strong research and development program that has around 37000 patents portfolio in different aspects and state of art designs, it also has established centers of innovation around the globe like A3, Bizlab and Airbus ProtoSpace, those centers are working on many projects to widen the gap between airbus and its competitors helping the retention of the competitive position acquired by Airbus; the innovation in airbus goes beyond the production and is reaching for participating in the development of a better world through its support and commitment to the UN sustainable development goals program.
16 The emerging markets and the strong increasing trend in orders with promising forecasts in the two decades ahead coupled with the a significant increase in developing countries economies, have caught the attention of countries interested in gaining a part of the big forecasted demand needs, stress on entry of countries because the industry has a very high cost of entry cost, the countries that showed an interest in this upcoming opportunity are People’s Republic of China and Russia; Airbus is aware of the upcoming rivalry for a share in the market and it’s answer to that was the introduction of A320neo, the plans of the rivals didn’t show any significant or potential enhancement over what is already provided today in the market and it shows they need more time before building a string R&D facilities specialized in this industry, Airbus’s plan is gaining a competitive advantage over the new comers by providing the most popular aircraft – which is the main field of the industry rivals want to compete in – in this case narrow body commercial aircrafts i.e., Airbus A320 with the most advanced technologies and engines developed for higher tier aircrafts the A330 and A350. This was a significant move by Airbus to make the gap that already existed even wider; a move only saw reactions from capable rivals like Boing with the introduction of 737 MAX but the with order advantage in the Airbus side. Results and Effectiveness of the strategies implemented: •
Airbus Record in deliveries in 2017 with 718 aircrafts with an average of 59 aircrafts monthly.
•
35% of deliveries value was delivered in Asia; which is where the emerging markets and the future main market will be, a very strong sign of the Airbus dominance and the success of A320 family modifications.
•
Industry record on backlog with value of orders with 10 billion dollars in 2017 shows the success of the company in securing the future orders; which is also showing the strength of the companies image and how fast it gained the trust of buyers after the engine and deliveries issues.
•
Airbus fleets have achieved an average of 12% less fuel consumption compared with the previous models, average 1.61% annually.
Airbus succeeded to maintain the competitive advantage on innovation and product variety because both have fulfilled the creation of value for the targeted customers, the rarity of innovation and wide variety among competitors, also significantly decreased the probability of imitation with backed up patents and very high cost required to imitate the products fused in Airbus as an organization that allows exploiting of the full potential of both factors. Over all Airbus strategies and steps taken were very effective in applying the corporate goals and sustain the mission statement integration with the operation of the commercial aircraft business unit through product differentiation, which helped the business unit sustain the competitive advantage for longer neutralizing the external threats by effective employment of available resources coupled with the proper strategy to maximize implementation gains.
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Airbus Helicopters
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Airbus Helicopter Airbus’ civil helicopter line includes the twin-engine H145 and H160; it also includes the medium-class H175. The flagships of the military line are the NH90 and H225M multi-role helicopters for tactical transport and naval applications, and the Tiger medium-weight, air-to-air combat and fire support helicopter.
The Five Forces analysis in Airbus helicopter business unit are showing low levels of rivalry in civil helicopter line because of the dominant market share of 50% held by Airbus followed by Bell helicopter holding 18% of the market share, on the other hand the military line is facing strong rivalry from Boing Rotorcraft helicopters and Sikorsky helicopters with almost equal market share of 20% among them covering almost 60% of the market share in the military line; the threat of substitutes doesn’t have a strong impact on this industry due to the nature of helicopters as long term investments with very high substitution cost, the same level of impact applies to the threat of new entrants as the initial cost to start in this industry is very high and gaining credibility of the consumers is a difficult task especially in military helicopters, while the bargaining power of the buyers is moderate because they have the privilege of choice between manufacturers and the choice of special modifications done to the helicopter, the bargaining power of suppliers is considered lower as the manufacturer is involved in the process of development and design of the parts supplied and that gives the manufacturer more flexibility to choose from a wide range of suppliers to provide the parts needed. SWOT Analysis Strengths Weaknesses -Considered by most potential customers. -Established Brand Image with successful and - High production Costs. reliable previous models. - Lower revenues compared with Comm. Aircraft -Wide range of helicopter Models to meet various customer demands. Opportunities Threats - Buyers’ willingness to have the most advanced - Very strong competition with rivals in the technologies. industry. - Increasing demand. - Potential new rivals competing for market share. -Technological Advancement requires constant - Limited potential buyers in military division modifications and services. EFAS (External Factor Analysis Summary) Weight Rating (1-5) Weighted Score Opportunities O1-Buyers willingness to have the 0.40 4.5 1.80 most advanced technologies. External Factor
O2- Increasing demand
0.10
3.5
0.35
O3- Technological Advancement
0.10
4.0
0.40
Comment Top form preparations Security concerns Post sale services
Threats T1- competition with rivals in the industry.
0.20
3.5
0.70
T2- Potential change in customer preference for political reasons
0.10
4.0
0.40
T3- Limited potential buyers
0.10
3.0
0.30
Rivals with Gov. back up
Mil. Div.
20 IFAS (Internal Factor Analysis Summary) Internal Factor Weight Rating (1-5) Weighted Score Strengths S1-Considered by most potential 0.40 4.5 1.80 customers S2- Established Brand Image with successful and reliable previous 0.10 4.5 0.45 models S3- Wide range of helicopter Models
0.10
5.0
0.50
0.30
3.5
1.05
0.10
3.5
0.35
Comment Market leader Success history Meets customer demands
Weaknesses W1- High production Costs. W2- lower revenues compared with Comm. Aircraft
SFAS (Strategic Factor Analysis Summary) Strategic Factor Weight Rating (1-5) Weighted Score S1-Considered by most potential 0.20 4.5 0.90 customers S3- Wide range of helicopter Models
0.10
5.0
0.50
O1-Buyers willingness to have the most advanced technologies.
0.25
4.5
1.125
O3- Technological Advancement
0.15
4.0
0.60
W1- High production Costs. W2- lower revenues compared with Comm. Aircraft T1- competition with rivals in the industry. T2- Potential change in customer preference for political reasons
Comment Market leader Meets customer demands Top form preparations Post sale services
Rivals with Gov. back up
Military Helicopters Marketshare
Others 3%
Sikorsky 1%
others 14%
Leonardo 17% Bill 18%
Augusta Westland 16%
Airbus 21%
Boing Rotorcraft 20%
Airbus 50% Russian helicopters 10%
Sikorsky 19%
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• Bill Helicopter • Airbus Helicopters • Leonardo • Russian Helicopters
• Boing Rotorcraft • Airbus Helicopters • Augusta Westland • Sikorsky • Russian Helicopters Airbus helicopters unit is a strong component of Airbus group as it covers an essential aeronautics division both in civil and military fields with various models that cover every need for mobility, support, tactical transport and military missions; Airbus holds a dominant position in the civil helicopter division with 50% of the market share and a long history of success with previous models and projects gave Airbus the Advantage of being the first favorable choice by potential new buyers and returning buyers after successful support and reliability experience with previous helicopters. While a well-prepared marketing tour can secure production orders, the geopolitical unease or political pressure can change the customer preference; the innovation process in Airbus is a never-ending process, Airbus A3 have lunched the Voom program for the civil helicopter line introducing air taxi and changing the way the world look at commuting, it is considered the first truly on-demand helicopter service where customers can book for a flight in as little as sixty minutes. Suppliers have a vital role in the production and deliveries forecasts of Airbus helicopters, Airbus is aware of that and have developed a strategy to strengthen the supply chain performance and ensure competency of the suppliers and the levels of supply they can provide according to their size, commitment and financial capacity; the strategy states that Airbus involve its suppliers in an evaluation conducted by an independent expert to stand on key factors helping the categorization of the suppliers into three tiers where tier one is the highest ranked with the most reliable and sustained operations. The continuous innovation, supplier segregation and introduction of new services to the market like Voom are very successful strategies implemented by Airbus helicopters and the results can be seen clearly by the dominant position held by the business unit with a noticeable gap between it and the rest of the competitors in the industry.
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Airbus Defense and Space
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Airbus Defense and Space Airbus is Europe’s no.1 defense supplier and is considered among the top ten providers globally, Airbus defense line includes tactical aircrafts including C295 and CN235; multi-role areal tankers including A330- MRTT; strategic airlifters including A400M and multi-role/swing-role combat aircrafts including Eurofighter Typhoon; Airbus is also an industry leader in secured communications and cyber security defense systems; Airbus space program is sharing other programs of Airbus group as it has a significant role and effect in the European and the global market, The space program holds many records, it is considered the European leader in the satellite industry, the leader in exporting earth observation satellite system and leading the commercial launchers in the industry globally.
The Five Forces analysis in Airbus defense and space business unit are showing high levels of rivalry both military aircrafts and the space program with three main manufacturers, Lockheed Martin, Airbus and Boeing, covering most of the market share with Airbus holding second place globally in both lines behind Lockheed Martin where Boeing came third in all of the forecasts; the threat of substitutes has a very low impact on this industry due to the significant cost of substation and the nature of the products which has a long life cycle covering its cost of acquisition, the same level of impact applies to the threat of new entrants as the initial cost to start in this industry is very high and it requires special facilities, infrastructure and more importantly skilled and trained employees, while the bargaining power of the buyers is moderate because they have the privilege of choice between manufacturers and the choice of special modifications done to the helicopter, the bargaining power of suppliers is considered low as the manufacturer is controlling the quality and specifications of the parts used with many critical components made internally to avoid risk of outsourcing know-how. SWOT Analysis Strengths -Leadership in Innovation. -Established facilities and foundation for success -Strong brand image and reputation
Weaknesses -Time and resource consuming production process - Design and development phase costs - Depends moderately on the European market
Opportunities - Rising Gov. spending in arming and defense - Increasing demand with security concerns. - High demand on intelligence and secured connections. -Technological Advancement.
Threats - Very strong competition with rivals in the industry. - Potential change in customer preference for political reasons - Limited potential buyers.
O1- Rising Gov. spending in arming and defense O2- Increasing demand with security concerns. O3- High demand on intelligence and secured connections. O4-Technological Advancement.
0.20
4.0
0.80
0.25
5.0
1.25
0.10
4.0
0.40
4.0
0.40
0.10
Comment
Threats T1- Very strong competition with rivals in the industry.
0.20
4.0
0.80
T2- Potential change in customer preference for political reasons
0.10
3.0
0.30
T3- Limited potential buyers.
0.05
3.0
0.15
Internal Factor S1-Leadership in Innovation. S2-Established facilities and foundation for success S3-Strong brand image and reputation
S1-Leadership in Innovation. S3-Strong brand image and reputation W1- Time and resource consuming production process W2- Design and development costs T1- Very strong competition with rivals in the industry. T2- Potential change in customer preference for political reasons
0.10
4.0
0.40
0.20
5.0
1.00
0.20
4.5
0.90
0.10
5.0
0.50
0.15
3.5
0.525
0.10
3.5
0.35
0.05
4.0
0.20
0.10
3.0
0.30
Comment
Market leader
Airbus defense and space unit shares the same pillars of success constructed by the Group’s philosophy and approach of involving innovation and creative solutions to achieve sustainable competitiveness in the industry where they compete, The defense and space unit is not falling short of innovation in fact it is considered a state of art institute when futuristic concepts and solutions are introduced and forged into reality. The increasing security concerns and governmental spending on defense preparations especially with the terrorism attacks and the instability in many regions increased the need for proper defense lines and security solutions, which is increasing the demand for services and products provided by Airbus Defense division. Airbus Defense and space business unit is following the product differentiation strategy to compete in the industry, the industry relies on new technologies and advanced components which are complementing the technological advancement in the research and development facilities of airbus contributing to leadership by innovation.
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Corporate Strategies
Corporate level strategies are the top-level management strategies and lay beneath it business unit strategies, According to Wheelen and Hunger (2012) the corporate strategies set the general direction of the corporation leading its path to achieving its objectives, therefore its is critical for a corporation seeking success to choose the correct corporate strategy that leads to the achievement of its objectives while maximizing the effectiveness of the resources and capabilities used in that process avoiding any conflict between corporate and business strategies, corporations have three routes in corporate strategies which are growth, stability and retrenchment. Growth strategy includes two basic ways, which are concentrating on the current product lines offered by the corporation through vertical and horizontal growth and diversifying earnings by introducing new product lines in other industries. Airbus Group is following the growth strategy to achieve its objectives and that is clearly seen from the involvement of the group in many joint ventures with other aerospace and defense corporations. Airbus succeeded in setting the objectives of its corporate strategies in the business units avoiding any conflict that could lead to slower or even deviation of the main objective path. Airbus group is maintaining its dominant position in the markets where it operates while increasing its market share in areas where competitors have the majority of shares by capitalizing on the key success factors it has including the leadership in innovation, the clear and organized code of conduct that is applicable in all of the corporation levels forming a strong harmonized organizational structure and forming partnerships and strategic alliances allowing airbus to enter the markets with strong well established base while keeping competitors with many steps behind from entering the markets in the same way airbus does.
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Corporate strategies (Joint Ventures)
Ariane Group The Ariane Group (formerly airbus-Safran launchers) is the result of a successful joint venture between Airbus Defense and Space with Safran Group to develop and produce carrier rockets and launch vehicles.
Airbus Helicopters and Mahindra Defence Airbus Helicopter and Mahindra Defence joint venture to make military helicopters in India; this strategic partnership is aiming to create a manufacturing facility in the Asian & Pacific region gaining a part of the market share dominated by Russian helicopters in the region and achieving competitive advantage with lower cost of labor available in India.
Airbus Asia Training Center (AATC) Airbus Asia Training Center is a the result of a joint venture between Airbus Commercial Aircrafts and Singapore Airlines to provide pilot aircraft training including full flight simulators for A380, A330 and A350 XWB in the Asia & pacific region.
Heavy Maintenance Singapore Services (HMS Services) Heavy Maintenance Singapore Services is a company providing aircraft maintenance services and it is specialized in Airbus wide-body aircrafts; the company the result of a joint venture between Airbus Group and SIA Engineering Company in Singapore.
Aerei da Trasporto Regionale (ATR) ATR is company specialized in short-haul aircraft manufacturing covering routes shorter than 1500 km; the company is a result of a joint venture between Airbus and Leonardo S.p.A.
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Corporate strategies (Joint Ventures) Elbe Flugzeug Werke (EFW) EFW is a company specializing in the tanker and freighter conversions of aircrafts; the company is the result of a joint venture between Airbus and Singapore Technologies Aerospace (ST Aerospace).
Eurofighter GmbH Eurofighter is a company specialized in the development and production of multirole fighter aircrafts; the company is the result of the joint venture between Airbus Defence and space, BAE Systems and Leonardo S.p.A
Panavia Aircraft GmbH Panavia is a company specialized in developing, designing and manufacturing of multi-role combat aircrafts; the company is the result of joint venture between Airbus Defence and space, Alinea Aermacchi and BAE Systems plc.
Airbus and Bombardier Partnership The partnership between Airbus and Bombardier will result in two product lines in commercial aircraft industry with a forecasted demand of 6000 aircrafts in the next twenty years.
MBDA MBDA is company specialized in developing and manufacturing missiles; the company is the result of a joint venture between Airbus Defence and Space, Leonardo S.p.A and Matra BAe Dynamics.
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References Barney, J., & Hesterly, W. (2015). Strategic Management and Competitive Advantage (5th ed.). Edinburgh Gate Harlow: Pearson Education Limited. Porter, M. (1980) Competitive Strategy, The Free Press, New York. Shetty, Y. K. (1979). New look at corporate goals. California Management Review, 22(2), 71-79. Wheelen, T. L., & Hunger, J. D. (2012). Strategic Management and Business Polices Toward Global Sustainability (13th ed.) Pearson Education Inc. Airbus official website http://www.airbus.com/ Airbus Patents in USA https://www.statista.com/statistics/632995/airbus-patents-usa-registered/ Airbus Company Profile http://www.airbus.com/content/dam/corporatetopics/publications/backgrounders/Airbus_Company%20Profile_2016_EN.pdf Airbus and SIAEC joint venture in Singapore http://www.airbus.com/newsroom/press-releases/en/2016/10/airbus-and-siaec-incorporate-mrojoint-venture-in-singapore.html Airbus and Singapore Airlines Training center (AATC) http://www.aerospace-technology.com/news/newsairbus-singapore-airlines-flight-training-jointventure-singapore-4513496/ http://www.airbus.com/aircraft/support-services.htmlservices/training/training-centersnetwork/airbus-asia-training-centre/ Airbus Helicopters and Mahindra Defense joint venture http://www.livemint.com/Industry/XpRVapWRi8kUJxqj44SzyN/Airbus-Helicopters-scouting-formanufacturing-site-in-India.html Airbus and Safran launchers becomes Ariane Group https://airitage.fr/airbus-safran-launchers-devient-ariane-group/ Airbus and Bombardier partnership http://www.airbus.com/newsroom/press-releases/en/2017/10/airbus-bombardier-cseriesagreement.html
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Airbus Voom , A3 https://www.airbus-sv.com/projects/2 Airbus half year (H1) 2017 report http://www.airbus.com/newsroom/press-releases/en/2017/07/H12017.html Airbus Civil Helicopter Market share http://www.airbus.com/helicopters/key-figures.html Airbus contribution in the UN SDGs http://www.airbus.com/company/responsibility-sustainability.html Airbus creators: Protospace http://www.airbus.com/newsroom/news/en/2016/03/Shooting-for-the-moon.html Airbus Bizlab https://www.airbus-bizlab.com Airbus responsibility and sustainability http://www.airbus.com/company/responsibility-sustainability.html Airbus Aero notes 2016 Airbus Annual Report 2016 ATR official website http://www.atraircraft.com/about-atr/organisational-structure/our-partners.html Ariane Group official website http://www.arianespace.com/about-us/ Aviation week intelligence Netwrok http://aviationweek.com/aviation-week-intelligence-network Can airbus deliver? Engine issues in 320neo https://www.bloombergquint.com/markets/2018/02/15/airbus-s-problem-planes-take-gloss-offearnings-surge Eurofighter official website https://www.eurofighter.com/about-us EFW official website https://www.elbeflugzeugwerke.com/en/ HMS services official website http://www.siaec.com.sg/jv_heavy_maintenance_singapore_services.html MBDA official website http://www.mbda-systems.com/about-us/ Panavia official website https://www.panavia.de/
Report "Strategic Plan FY2016 – FY2020 AirBus Maastricht Business School"