Harvard Case - Estimating Demand for a New Regional Transport Aircraft (A)
"Estimating Demand for a New Regional Transport Aircraft (A)" Harvard business case study is written by Jayaram Holla, Rishikesha Krishnan, Srinivas Prakhya. It deals with the challenges in the field of Organizational Behavior. The case study is 26 page(s) long and it was first published on : Mar 1, 2012
At Fern Fort University, we recommend that Bombardier Aerospace proceed with the development and launch of the CRJ700, but with a few key adjustments to their strategy. We suggest a more focused approach on market segmentation, a robust marketing and sales campaign targeting specific customer needs, and a flexible production strategy to manage potential demand fluctuations.
2. Background
This case study revolves around Bombardier Aerospace, a Canadian aircraft manufacturer, facing a crucial decision: whether to invest in the development and launch of a new regional jet, the CRJ700. The company is already a leader in the regional jet market with the CRJ100/200 series, but the CRJ700 represents a significant leap forward in terms of size, capacity, and potential market reach. The decision is fraught with challenges, including the high cost of development, potential competition from other manufacturers, and the uncertainty of market demand.
The main protagonists are:
- Bombardier Aerospace: The company facing the decision of whether to invest in the CRJ700.
- The CRJ700 Development Team: Responsible for researching, designing, and developing the new aircraft.
- The Marketing and Sales Team: Responsible for understanding market demand, identifying potential customers, and developing a marketing strategy.
- The Production Team: Responsible for manufacturing the aircraft and managing production capacity.
3. Analysis of the Case Study
The case study highlights several key areas for analysis:
Market Analysis:
- Market Size and Growth: The regional jet market is expected to grow significantly in the coming years, driven by factors like increasing air travel demand, rising fuel prices, and the need for more efficient aircraft.
- Customer Needs: Airlines are seeking aircraft with greater capacity, longer range, and lower operating costs. The CRJ700 addresses these needs, but Bombardier needs to understand the specific requirements of different customer segments.
- Competitive Landscape: Other manufacturers, like Embraer and Boeing, are also developing regional jets, creating a competitive landscape that Bombardier needs to navigate carefully.
Financial Analysis:
- Development Costs: The development of the CRJ700 will require significant capital investment, which needs to be carefully assessed against potential returns.
- Production Costs: Bombardier needs to optimize production costs to ensure profitability, considering factors like economies of scale and potential cost-saving measures.
- Pricing and Profitability: The pricing strategy for the CRJ700 needs to be carefully considered to ensure profitability while remaining competitive.
Organizational Analysis:
- Organizational Structure: Bombardier needs to ensure that its organizational structure is aligned with the development and launch of the CRJ700, fostering effective communication and collaboration across departments.
- Leadership and Management: Strong leadership and effective management are crucial for driving the project forward and overcoming potential challenges.
- Team Dynamics: Building a high-performing team with the necessary skills and expertise is essential for the success of the CRJ700 project.
Using Frameworks:
- Porter's Five Forces: This framework can be used to analyze the competitive landscape of the regional jet market, identifying key threats and opportunities.
- SWOT Analysis: This framework can be used to assess Bombardier's internal strengths and weaknesses, as well as external opportunities and threats, providing a comprehensive view of the situation.
- Value Chain Analysis: This framework can be used to analyze the different activities involved in the development, production, and marketing of the CRJ700, identifying potential cost-saving opportunities and value-creation strategies.
4. Recommendations
- Focus on Market Segmentation: Bombardier should identify and target specific customer segments with tailored marketing and sales strategies. This could include airlines operating regional routes, commuter airlines, and even niche markets like cargo carriers or specialized air ambulance services.
- Develop a Robust Marketing and Sales Campaign: The company should invest in a comprehensive marketing strategy that highlights the key features and benefits of the CRJ700, focusing on its fuel efficiency, passenger comfort, and operational advantages. This could involve targeted advertising, industry events, and direct sales outreach to potential customers.
- Implement a Flexible Production Strategy: Bombardier should adopt a flexible production strategy that allows for quick adjustments to production capacity based on demand fluctuations. This could involve partnerships with suppliers, modular production lines, and efficient inventory management.
- Prioritize Customer Relationship Management: Building strong relationships with airlines is crucial for long-term success. Bombardier should focus on providing excellent customer service, addressing concerns promptly, and offering tailored solutions to meet individual needs.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Bombardier has a proven track record in designing and manufacturing regional jets, providing a strong foundation for the CRJ700 project. The project aligns with the company's mission to provide innovative and efficient aircraft solutions.
- External Customers and Internal Clients: The recommendations focus on understanding and meeting the needs of external customers, airlines, while ensuring internal alignment and communication across departments.
- Competitors: The recommendations acknowledge the competitive landscape and emphasize the need for a differentiated marketing strategy and a flexible production approach to stay ahead of the competition.
- Attractiveness: The recommendations are based on the potential for significant market share and profitability, considering the expected growth of the regional jet market and the CRJ700's competitive advantages.
6. Conclusion
Bombardier Aerospace has a compelling opportunity to capitalize on the growing regional jet market with the CRJ700. By focusing on market segmentation, developing a robust marketing strategy, and implementing a flexible production approach, the company can maximize its chances of success. However, it is crucial to carefully manage the risks associated with the project, including the high development costs, potential competition, and uncertainties in market demand.
7. Discussion
Other alternatives not selected include:
- Delaying the CRJ700 project: This would allow Bombardier to further refine the design and gather more market data, but it could also risk losing market share to competitors.
- Focusing solely on existing CRJ models: This would reduce the risk of development costs but could limit growth potential in a rapidly evolving market.
Key assumptions of the recommendations include:
- Continued growth of the regional jet market: This is a key assumption, and any slowdown in market growth could impact the project's profitability.
- Successful development and launch of the CRJ700: This is a significant risk, and any delays or technical challenges could impact the project's timeline and budget.
- Effective implementation of the marketing and production strategies: This requires strong leadership, effective communication, and a commitment to continuous improvement.
8. Next Steps
- Conduct a detailed market analysis: This should include identifying specific customer segments, analyzing their needs, and assessing the competitive landscape.
- Develop a comprehensive marketing plan: This should include target market identification, messaging, advertising channels, and sales strategies.
- Optimize production processes: This should involve evaluating production capacity, identifying cost-saving opportunities, and implementing flexible production strategies.
- Establish key performance indicators (KPIs): This will allow Bombardier to track the progress of the project and make necessary adjustments along the way.
By taking these steps, Bombardier can ensure that the CRJ700 project is well-positioned for success, contributing to the company's long-term growth and profitability.
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Case Description
In India, air travel in the early twentieth century is mostly between major cities and has historically been driven by businesses. However, a set of relatively unused airfields exist in or near smaller cities, presenting a potential opportunity for generating air travel demand in these locations. This would require a thorough understanding of existing travel options and the design of an air travel offering that can successfully compete with these options. The three-part case describes a methodology to arrive at the appropriate new air travel offering and an assessment of the extent of potential demand in this context. In the first part (A), competing travel modes are examined and the attributes that are relevant to the design of a new air travel offering are identified. A choice-based conjoint experiment is designed and pilot data is obtained and analyzed.
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