Harvard Case - Airbus versus Boeing (A)
"Airbus versus Boeing (A)" Harvard business case study is written by Ramon Casadesus-Masanell. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : Jan 25, 2016
At Fern Fort University, we recommend that Airbus and Boeing adopt a strategic approach that leverages their core competencies while navigating the evolving aviation landscape. This strategy should prioritize innovation, sustainability, and customer-centricity to maintain their competitive edge in the global market. We recommend a combination of organic growth strategies, strategic partnerships, and targeted investments in key areas like technology, sustainability, and emerging markets.
2. Background
The case study focuses on the intense rivalry between Airbus and Boeing, the two dominant players in the commercial aircraft market. The industry is characterized by high capital intensity, long product development cycles, and significant technological advancements. The case highlights the competitive dynamics between the two companies, including their strategies for market share, product development, and technological innovation.
The main protagonists are:
- Airbus: A European consortium formed in 1970, known for its wide-body aircraft like the A380 and A350.
- Boeing: An American company with a long history in aviation, known for its iconic 747 and 787 Dreamliner.
3. Analysis of the Case Study
We will analyze the case study using a combination of frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: High barriers to entry due to high capital requirements, complex technology, and established brand loyalty.
- Bargaining Power of Buyers: Moderate, as airlines have some leverage but are limited by the limited number of aircraft manufacturers.
- Bargaining Power of Suppliers: Moderate, as suppliers are concentrated but crucial for aircraft production.
- Threat of Substitutes: Limited, as air travel remains the primary mode of long-distance transportation.
- Competitive Rivalry: Intense, driven by market share competition, technological advancements, and price wars.
2. Ansoff Matrix:
- Market Penetration: Both Airbus and Boeing focus on increasing market share in existing markets.
- Market Development: Both companies are expanding into emerging markets like China and India.
- Product Development: Both companies are investing heavily in developing new aircraft models with improved efficiency and sustainability.
- Diversification: Both companies are exploring diversification into related areas like defense and space.
3. BCG Matrix:
- Stars: Both companies have several 'star' products, such as the A350 and 787 Dreamliner, which are high-growth and high-market share products.
- Cash Cows: Both companies have 'cash cow' products, such as the A320 and 737, which are low-growth but high-market share products.
- Question Marks: Both companies are investing in developing new 'question mark' products, such as the A330neo and 777X, which have the potential to become stars.
- Dogs: Both companies have some 'dog' products, such as the A380 and 747, which are low-growth and low-market share products.
4. Key Trends:
- Environmental Sustainability: Growing pressure to reduce emissions and improve fuel efficiency.
- Digital Transformation: Increasing use of data analytics, AI, and automation in aircraft design, manufacturing, and operations.
- Emerging Markets: Rapid growth in air travel demand in developing countries.
- Customer Experience: Focus on enhancing passenger comfort, connectivity, and personalization.
4. Recommendations
1. Innovation and Technology:
- Invest in R&D: Continuously invest in developing new aircraft models with improved fuel efficiency, range, and passenger experience.
- Embrace Digital Transformation: Leverage AI and machine learning for aircraft design, manufacturing, and maintenance.
- Develop Next-Generation Technologies: Explore disruptive technologies like electric and hybrid aircraft propulsion systems.
2. Sustainability and Environmental Responsibility:
- Reduce Emissions: Implement fuel-efficient technologies and sustainable manufacturing practices.
- Promote Biofuels: Invest in research and development of sustainable biofuels for aviation.
- Carbon Offset Programs: Offer carbon offset programs to airlines and passengers.
3. Customer-Centricity:
- Enhance Passenger Experience: Focus on providing a comfortable, connected, and personalized travel experience.
- Tailor Products to Market Needs: Develop aircraft models that meet the specific requirements of different airlines and markets.
- Build Strong Customer Relationships: Invest in customer service and support to build long-term relationships with airlines.
4. Strategic Partnerships and Alliances:
- Collaborate with Technology Companies: Partner with tech companies to develop innovative solutions for aircraft design, manufacturing, and operations.
- Joint Ventures: Explore joint ventures with airlines or other industry players to expand into new markets or develop new technologies.
- Strategic Alliances: Form strategic alliances with suppliers, service providers, and research institutions.
5. Global Expansion:
- Focus on Emerging Markets: Target high-growth markets in Asia, Africa, and Latin America.
- Localize Products and Services: Adapt products and services to meet the specific needs of different markets.
- Build Local Partnerships: Establish partnerships with local airlines, governments, and businesses.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Building on Airbus and Boeing's existing strengths in aircraft design, manufacturing, and technology.
- External Customers: Addressing the evolving needs of airlines and passengers, including sustainability, digitalization, and personalized experiences.
- Competitors: Staying ahead of the competition by investing in innovation, sustainability, and customer-centricity.
- Attractiveness: Evaluating the potential return on investment for each recommendation, considering factors like market size, growth potential, and competitive landscape.
Assumptions:
- The aviation industry will continue to grow in the coming years.
- Environmental regulations will become stricter, driving the need for sustainable aviation solutions.
- Technological advancements will continue to transform the aviation industry.
6. Conclusion
Airbus and Boeing are at a crossroads, facing both opportunities and challenges in the global aviation market. By embracing innovation, sustainability, and customer-centricity, they can maintain their leadership positions and navigate the evolving industry landscape. A strategic approach that combines organic growth, strategic partnerships, and targeted investments will be crucial for their long-term success.
7. Discussion
Alternative Options:
- Mergers and Acquisitions: While a merger between Airbus and Boeing is unlikely due to antitrust concerns, both companies could consider acquiring smaller companies with specialized technologies or market access.
- Vertical Integration: Both companies could consider expanding their operations by acquiring or partnering with airlines or other industry players.
Risks:
- Technological Disruption: The emergence of new technologies like electric aircraft could disrupt the industry.
- Economic Downturn: A global economic downturn could impact air travel demand and reduce aircraft orders.
- Political Instability: Political instability in key markets could affect business operations.
Key Assumptions:
- The global economy will continue to grow.
- Technological advancements will continue to improve aircraft efficiency and sustainability.
- Airlines will continue to prioritize cost-efficiency and passenger satisfaction.
8. Next Steps
- Develop a Comprehensive Strategic Plan: Define clear strategic objectives, key performance indicators (KPIs), and resource allocation strategies.
- Invest in R&D and Innovation: Allocate resources to develop new technologies and products.
- Build Strategic Partnerships: Identify and cultivate partnerships with key players in the industry.
- Expand into Emerging Markets: Develop targeted strategies for growth in high-potential markets.
- Monitor Industry Trends: Continuously monitor the aviation landscape and adapt strategies as needed.
By taking these steps, Airbus and Boeing can position themselves for long-term success in the dynamic and competitive global aviation market.
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Case Description
Looks at the development of the competitive actions between Airbus and Boeing from 1992 to 2006. Begins with the question of whether Airbus and Boeing should collaborate on the development of a VLCT (Very Large Commercial Transport) or whether Airbus should develop their own. The case series moves through to the events thereafter of Airbus' decision to pursue the A380 and Boeing's decision relating to developing a stretch 747.
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