Globalization has increased tourism and business travel with most of these people moving from one place to the other preferring air transport. This growth in air transport resulted in preference to understand the airplane manufacturing industry. This study is an analysis of Boeing Company Corporation’s legal social and economic environment and compares it to that of Airbus Group which is the main competitor of Boeing.
Boeing is the largest commercial airplanes, defense aircraft, and weapons systems in the U.S. The company is the growth and development has been as a result in its innovation and ability to engage in domestic and international consumers. The company started as a defense aircraft supplier in the 1920s and WWII before transforming to a commercial plane supplier. The company’s relationship with the U.S. government made it succeed as it is still the supplier of all U.S. government planes and Jets. Boeing has faced intense competition from Airbus Group that has in the past decade earned a significant market share. However, the financial and vast experience has enabled Boeing to remain the dominant company in the industry. The aerospace and defense industry that both companies operate in have been stable with the mergers and acquisition making the two manufacturers have over 98% market share (Plunkett, 2017). However, Boeing defense segment that deals with the production of government defense, space and security makes the company enjoy greater profits compared to Airbus with the commercial planes segment market share being close to equal portions.
Delegate your assignment to our experts and they will do the rest.
Company Culture and Performance
Since the Concord incident, plane manufacturers have focused on improving the safety of air transport. The demise of Concord is a depiction that such a strategy results at the end of a company, therefore, safety and security of planes have been the center of companies. Both companies have focused on the innovation to make airplanes easier to control and detect mechanical problems (Dalkilic, 2017). Workers at these companies focus on the change thus building a culture of innovation. It is evident from the autopilot innovations, and the companies have intensified other controls that enable easier for the pilots to boost their efficiency. Rather than focus on increasing the number of seats in the commercial airliners, these companies have focused on enhancing consumer comfort, safety, speed and sustainability of the planes to undertake longer flights without having to stop for fuel (Dalkilic, 2017). The changes time conscious passengers make airline providers purchase the flights that suit their passenger’s needs. The market is a duopoly has not tampered with the willingness and investments in improving the planes produced by these companies with each company trying to exploit the opportunities provided by globalization.
Promotion Policies
The companies do not prioritize on promotion policies because most of the contracts are long-term and their logos are in the airplanes, therefore, engaging in negotiations with the air transport companies is vital to expanding their markets. Airliners such as the Fly Emirates and Qatar airlines indirectly advertise for these companies as they promote their service provisions. However, engaging in social responsibilities such as supporting college or university projects increases the popularity of each brand. The companies have invested most of their marketing resources in enhancing the designs that are attractive to the potential consumers. The employment of plane specialists in the marketing department makes it possible for the companies to negotiate with airline companies.
Management Strategies
The two multinational producers have in the past focused on performance-oriented managerial strategies and management. However, both companies have different factories at different locations. For instance, Boeing has factories in Asia, Europe and America whereas Airbus Group in France is almost equal to that of its firm in America. The multiple locations and the many numbers of suppliers make the companies organization structure diverse and complex for effective management. Although the companies’ administration is centralized, the different objectives tend to limit pooling of resources to enjoy the competitive advantage. However, unlike Boeing that adopted a cost-minimizing strategy following the recent economic downturn, Airbus Group focus on enhancing its skilled and experienced employees to engage in innovations and undertake researchers on ways to gain an advantage over its superior competitor (Plunkett, 2017). Boeing strategy to outsource in the bid to cut its production costs have increased communication breakdown since the multiple contracted companies have divided attention and objectives.
Economists have criticized the move of outsourcing almost all its production processes. The economists have argued that the move will limit the ability of the company to maintain control over these contracted firms ((Bidwell, 2012 & Szymanski, 2011). Airbus, on the other hand, has played the role of challenger since its start, therefore, focuses on building an organization team efforts to improve its market share as it continues to challenger Boeing dominance. Decision-making in both companies involves many people thus making it difficult to react fast to emergencies, but Airbus structure allows team-based strategizing and decision-making compared to Boeing does due to outsourcing. Lastly, Boeing marketing team focus on increasing the number of customers whereas Airbus focuses on maintaining its consumers. The different strategies are evident by the high number of the new consumer of Boeing to that of Airbus and the recent deal with Dubai of over $12 billion with Boeing.
SWOT Analysis
Strengths
The industry is a duopoly thus share the market (Fontagne, Bénassy-Quéré & Raff, 2009). The high costs of market entry make it possible for the two companies to continue expanding their businesses without fear of the new entrants. The long-term contracts in the industry mean that no company can suffer the loss of all consumers, therefore, the corporations remain competitive. Experience and growth over the years have enabled the companies to gain massive profits and access credit which help them acquire funds for their businesses and researchers.
Weaknesses
Boeing outsourcing most of its process makes the company lose control which can result in the decline in the company’s growth as shown by the losses since 2011 (Bidwell, 2012). Airbus Group inability to negotiate deals with the U.S. government due to the long-term contracts and other large producers reduces its chances to gain a more significant market share than Boeing. Trade in different countries results in the companies following different legal requirements and taxation policies which can adversely affect the financial status of the companies.
Opportunities
Although airliners have encountered financial decline, surveys depict that air transport has increased for the last decade with projected increment at 10% in the next three decades (Becker Professional Education, 2017). These projections provide opportunities for both companies to exploit. Lastly, the continued aerospace support by the governments in most developing nations in Asia and Africa offer unexploited markets to the companies to operate.
Threats
The September 11, terrorist attacks are one of the multiple threats that have changed the consumption of commercial planes. The increment in such attacks and other forms of terror can result in compromising the airplane control, for instance, hacking the autopilot controls (Becker Professional Education, 2017). Lastly, fuel cost and environmental issues have led the companies being required to invest on studies to reduce carbon emissions and incur pollution taxes.
References
Becker Professional Education. (2017). Acca approved - p3 business analysis . Becker Professional Education Ltd.
Bidwell, M. (2012). Politics and Firm Boundaries: How Organizational Structure, Group Interests, and Resources Affect Outsourcing. Organization Science , 23 (6), 1622-1642.
Dalkilic, S. (2017). Improving aircraft safety and reliability by aircraft maintenance technician training. Engineering Failure Analysis , 82 , 687-694.
Fontagne, L., Bénassy-Quéré, A., & Raff, H. (2009). Exchange-Rate Misalignments in Duopoly: The Case of Airbus and Boeing. SSRN Electronic Journal .
Khalfallah, M., Figay, N., Barhamgi, M., & Ghodous, P. (2014). Standards Compliant Platform For Product Design In Dynamic Environments. Services Transactions On Services Computing , 2 (2), 44-57.
Plunkett, J. (2017). Plunkett's Aerospace, Aircraft, Satellites & Drones Industry Almanac 2018 . Houston, TX: Plunkett Research, Ltd.
Szymanski, A. (2011). The competitive analysis of the commercial aircraft industry .
