Harvard Case - Bombardier Aerospace: The CSeries Dilemma
"Bombardier Aerospace: The CSeries Dilemma" Harvard business case study is written by Louis Hebert, Ali Taleb. It deals with the challenges in the field of General Management. The case study is 21 page(s) long and it was first published on : Sep 19, 2011
At Fern Fort University, we recommend that Bombardier Aerospace pursue a strategic alliance with a larger aircraft manufacturer, such as Airbus or Boeing, to secure the long-term viability of the CSeries program. This alliance should leverage the CSeries' strengths in fuel efficiency and passenger comfort while mitigating the financial risks associated with competing independently in the highly competitive commercial aircraft market.
2. Background
Bombardier Aerospace, a Canadian multinational aerospace manufacturer, faced a critical dilemma with its CSeries program. The CSeries, a new generation of fuel-efficient, single-aisle aircraft, was designed to compete with Airbus' A320neo and Boeing's 737 MAX. However, the program faced significant challenges, including high development costs, delayed production, and limited initial orders. This led to a financial strain on Bombardier, prompting the company to explore various strategic options to secure the CSeries' future.
The main protagonists of the case study are:
- Bombardier Aerospace: The company facing the dilemma of how to proceed with the CSeries program.
- Airbus and Boeing: The dominant players in the commercial aircraft market, posing significant competition to the CSeries.
- Investors and stakeholders: Concerned about the financial viability of the CSeries program and its impact on Bombardier's overall performance.
- Customers: Airlines seeking efficient and cost-effective aircraft, with potential interest in the CSeries' fuel efficiency and passenger comfort.
3. Analysis of the Case Study
Strategic Framework: Porter's Five Forces analysis provides a useful framework to understand the competitive landscape of the commercial aircraft industry.
- Threat of New Entrants: High barriers to entry due to significant capital investment and regulatory hurdles.
- Bargaining Power of Buyers: Moderate, with airlines having leverage in negotiating prices and specifications.
- Bargaining Power of Suppliers: Moderate, with suppliers holding some leverage due to specialized components and technology.
- Threat of Substitutes: Limited, with few viable alternatives to commercial aircraft for long-distance travel.
- Rivalry Among Existing Competitors: Intense, with Airbus and Boeing dominating the market and constantly innovating.
Financial Analysis: The CSeries program faced significant financial challenges, including:
- High development costs: Exceeding initial projections.
- Delayed production: Impacting revenue generation and market entry.
- Limited initial orders: Raising concerns about market acceptance and profitability.
Marketing Analysis: The CSeries possessed key strengths:
- Fuel efficiency: Attractive to airlines seeking cost savings.
- Passenger comfort: Enhanced passenger experience through design features.
- Operational efficiency: Lower maintenance costs and reduced environmental impact.
Operational Analysis: Bombardier faced challenges in:
- Production scale: Limited production capacity compared to competitors.
- Supply chain management: Managing complex global supply chains for specialized components.
- Marketing and sales: Building brand awareness and securing customer orders.
4. Recommendations
- Strategic Alliance with a Larger Manufacturer: Bombardier should pursue a strategic alliance with either Airbus or Boeing. This would provide access to their global sales network, production capacity, and financial resources, mitigating the risks associated with competing independently.
- Leverage CSeries Strengths: The alliance should leverage the CSeries' strengths in fuel efficiency, passenger comfort, and operational efficiency to attract airlines seeking cost-effective and environmentally friendly aircraft.
- Focus on Niche Markets: Bombardier should target specific niche markets where the CSeries' advantages are most pronounced, such as regional airlines and emerging markets.
- Continuous Innovation: Bombardier should continue investing in research and development to maintain the CSeries' competitive edge in fuel efficiency and passenger experience.
5. Basis of Recommendations
Core Competencies and Mission: The alliance aligns with Bombardier's core competencies in aircraft design and manufacturing while securing the long-term viability of the CSeries program.
External Customers and Internal Clients: The alliance addresses the needs of airlines seeking fuel-efficient aircraft while providing Bombardier with access to a larger customer base and financial resources.
Competitors: The alliance positions Bombardier to compete effectively with Airbus and Boeing, leveraging their strengths to counter the dominance of these industry giants.
Attractiveness: The alliance offers significant potential for growth and profitability, with the potential to increase market share and generate substantial revenue.
Assumptions:
- The alliance partners will share knowledge and resources effectively.
- The CSeries will maintain its competitive advantage in fuel efficiency and passenger comfort.
- The global demand for commercial aircraft will continue to grow.
6. Conclusion
Bombardier Aerospace faced a critical decision regarding the CSeries program. By pursuing a strategic alliance with a larger aircraft manufacturer, Bombardier can leverage the CSeries' strengths, mitigate financial risks, and secure its long-term viability in the highly competitive commercial aircraft market.
7. Discussion
Alternatives Not Selected:
- Independent Development: This option carries significant financial risks and requires substantial investment in marketing, sales, and production capacity.
- Sale of the CSeries Program: This option would relinquish control over the program's future and may not maximize its potential.
Risks and Key Assumptions:
- Integration Challenges: Merging operations and cultures with the partner manufacturer could pose significant challenges.
- Loss of Control: Bombardier may lose some control over the CSeries program's development and marketing.
- Competition from Other Manufacturers: The alliance may face competition from other emerging aircraft manufacturers.
8. Next Steps
- Due Diligence: Conduct thorough due diligence on potential alliance partners, assessing their financial health, operational capabilities, and cultural compatibility.
- Negotiation: Negotiate a mutually beneficial agreement that addresses key issues such as ownership structure, resource sharing, and intellectual property rights.
- Integration: Develop a comprehensive integration plan to ensure a smooth transition and minimize disruption to operations.
- Marketing and Sales: Develop a joint marketing and sales strategy to promote the CSeries to airlines and secure new orders.
- Continuous Improvement: Implement a continuous improvement program to enhance the CSeries' performance, efficiency, and customer satisfaction.
By taking these steps, Bombardier can successfully navigate the CSeries dilemma and secure its position as a leading player in the global aerospace industry.
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Case Description
In July 2004, Bombardier Aerospace announced its intention to develop a new family of aircraft called CSeries. In May 2007, three years after the initial announcement, the final decision on whether to proceed with the initiative was still pending. Moreover, during this period, the company released several confusing announcements that raised concerns among investors and industry analysts regarding the sustainability of the company's long-term strategy. In the meantime, Brazilian Embraer had invested heavily in research and development (R&D) and taken the leadership position in the regional aircraft segment from Bombardier. Consequently, Bombardier was faced with a serious dilemma: launch or not launch the CSeries project. Whatever the decision was, it was expected to have a major impact on the future market positioning of Bombardier. Students may be asked to act as advisors to Pierre Beaudoin, president and chief executive officer (CEO) of Bombardier Aerospace, and recommend whether the company should proceed with the CSeries initiative. More specifically, students should do a full analysis of the company's external environment, identify the alternatives available to Beaudoin, assess these options based on internal and external environments and recommend a course of action. For Beaudoin, the recommendation was due before the annual meeting of shareholders, scheduled on May 29, 2007.
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