How Has Airbus Sustained Its Place in an Innovative Market with Tough Competition?

Business & Management (SL) IA:

“ How has Airbus sustained its place in an innovative market with tough competition?”

Candidate Name: Omar Rahhal

Candidate Number: 000195-0074

Word Count: 1496

Table of Contents

Introduction ------------------------------------------------------- 3

Investigations and findings----------------------------- 4

        Market share and market leader--------------------- 4

        S.W.O.T Analysis---------------------------------------- 5-7

        PEST analysis---------------------------------------------- 8-9

Analysis------------------------------------------------------ 10

Conclusion------------------------------------------------------- 11

Bibliography--------------------------------------------------12-13

Appendixes---------------------------------------------------14-20

Supporting Documents-----------------------------------21-

1.Introduction:

Airbus, a leading manufacturer of aircrafts, has been visioning innovation since the beginning of the 1940s. The company started with the A 300, the first twin-engined wide body aircraft which was considered an engineering marvel at the time it entered the commercial service in 1974. In 1980, Airbus entered the market with another aircraft, the A310, such a development in technology offered Airbus a large market base.  Later on, the most successful aircraft family was developed, as the A320, A321, A319 and the A318 were introduced. In the late 1990s, Airbus started to introduce the A300/A340 family. In addition, other innovations were developed in the 2000s as the company introduced the A380 in 2007 and the A350 XWB jetliner in 2014. The latter is considered the leading aircraft in its class with innovative technologies and aerodynamics. ^[1]

The aircraft manufacturing industry is competitive and challenging. It appears that only two major companies are dominating the market. Furthermore, the market is   lead by innovation and reincarnation of products that could cost up to $500,000,000. Hence, the scope of my investigation will tackle the following question: “How has Airbus sustained its place in an innovative market with tough competition?”

2. Investigation and findings:

2.1 Market share and market leader:

Airbus and Boeing are two aircraft manufacturing companies that are well established, trusted and highly regarded in terms of quality and safety. Their dominance is clearly visible through their market share. The market share for the global market is about 38% Airbus and 28% Boeing, with Airbus leading the way towards the future (appendix 2). Comparing both companies, it is shown that Boeing has the overwhelming amount of aircrafts in service all over the world (appendix 7).  However the demanded orders have shown that consumers are changing to Airbus, as they are becoming the leading power towards the future of the aircraft industry^[2]. In 2007 Boeing lunched the new 787 Dreamliner in response to the A380 that was lunched in 2005, an example of the level of competition between the two companies. [pic 1]

2.2 SWOT Analysis:

SWOT analysis is a tool that evaluates the strengths, weaknesses, opportunities and threats affecting a business.

[pic 2]

Strengths for Airbus as a market leader are important for the company to sustain its place in the market. These strengths are the introduction of the A380, an aircraft that is able to carry a high number of passengers with luxury and comfort (appendix 6). Furthermore, the A380 allowed Airbus to dominate the market as it is the first and still is a two full deck aircraft, along with its quality, impact on the environment and economy. Moreover, Airbus offers a wide variety of mixed aircrafts produced upon request. This would allow Airbus to capitalize on the market and offer products to a larger market base.  

Weaknesses of Airbus are considered to be their status as a new company as it entered the market in the 70’s, however its competitors are considered much older. The A380 is considered an engineering marvel as it is considered a pioneer in its class. However the cost of R&D on the A380 and other aircrafts resulted in a shortage in liquidity. Furthermore, the Airbus A380 requires adjusted airports in order to accommodate the plane, this means that most airports will have to adjust to the new requirement of the plane.    

Opportunities for Airbus are prosperous, as it has started to expand to countries like Japan and china. As when referring to (appendix 5) it shows that the market in Asia is increasing in size and building aircrafts in Japan and China would give an advantage to Airbus by helping them minimize costs and benefit from economies of scale. Also, Airbus controls the aircraft industry in Europe as studies showed that most aircrafts in Europe are from Airbus^[3]. Such an advantage would help Airbus prosper, as they would monopolize the market in Europe without difficulties and eliminate competition. The demand on luxury aircrafts also allows Airbus to capitalize on the market as it has various products that meet the requirements of the target market (appendix6).

As for the threats associated with Airbus, all orders are considered not enough, meaning that the company has to either find new clients or limit their production as the amount of aircrafts that they are currently producing is not enough to allow the company to expand. As Airbus aircrafts developed, they are considered difficult to fly and operate meaning that pilots must become qualified to fly new aircrafts with the same capacity, as a result pilots have to spend more time training on the aircraft, and airliners have to spend more money on training there pilots.

New entries are considered a threat, as there are newcomers like the introduction of a Russian and Italian partnership to create Sukoi Super-jet 100 by the Tupolev Tu^[4]. They are changing the aircraft industry by taking market share from the giants and even competing with them in some markets^[5].  As for the threats of existing competition, it is seen that competition is tough as Airbus and Boeing are considered market leaders and each year one overtakes the other. Such a competition results in the spending of large amounts of money that both companies could need in the future.