Harvard Case - Boeing versus Bombardier: Conflict over Tariffs
"Boeing versus Bombardier: Conflict over Tariffs" Harvard business case study is written by Harvinder Singh. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Dec 16, 2020
At Fern Fort University, we recommend that Boeing adopt a multi-pronged strategy to address the Bombardier C Series threat. This strategy should focus on strategic alliances, product differentiation, and lobbying efforts to influence government policy and regulation.
2. Background
This case study examines the conflict between Boeing and Bombardier over tariffs imposed by the U.S. government on Bombardier's C Series aircraft. The dispute arose from Boeing's claim that Bombardier received unfair subsidies from the Canadian government, enabling it to sell its C Series aircraft at predatory prices. Boeing argued that these low prices threatened its market share and jeopardized American jobs.
The main protagonists in the case are:
- Boeing: A leading American aerospace manufacturer, known for its large commercial aircraft, military aircraft, and space exploration capabilities.
- Bombardier: A Canadian aerospace manufacturer, known for its regional jets, business jets, and rail transportation equipment.
- U.S. Department of Commerce: The government agency responsible for administering trade laws and investigating unfair trade practices.
- Canadian government: The government that provided subsidies to Bombardier, arguing that these subsidies were necessary to support a key Canadian industry.
3. Analysis of the Case Study
This case can be analyzed using several frameworks:
Porter's Five Forces:
- Threat of New Entrants: The aerospace industry is characterized by high barriers to entry due to significant capital requirements, technological complexity, and regulatory hurdles. This force is low.
- Bargaining Power of Buyers: Airlines have significant bargaining power due to their large purchase volumes and the availability of alternative aircraft manufacturers. This force is high.
- Bargaining Power of Suppliers: Suppliers of aerospace components have moderate bargaining power due to the specialized nature of their products and the potential for supply chain disruptions. This force is moderate.
- Threat of Substitutes: There are limited substitutes for commercial aircraft, making this force low.
- Rivalry Among Existing Competitors: The rivalry among existing competitors is high, as Boeing and Airbus dominate the market and compete aggressively for market share. This force is high.
SWOT Analysis:
Boeing:
- Strengths: Strong brand recognition, global reach, technological leadership, extensive manufacturing capabilities, strong relationships with airlines.
- Weaknesses: High costs, dependence on government contracts, potential for labor disputes, vulnerability to economic downturns.
- Opportunities: Growing demand for commercial aircraft, expansion into emerging markets, development of new technologies, strategic alliances.
- Threats: Competition from Airbus, potential for trade disputes, rising fuel costs, environmental regulations.
Bombardier:
- Strengths: Focus on niche markets, innovative product design, strong customer service, government support.
- Weaknesses: Limited financial resources, dependence on government subsidies, smaller scale of operations compared to Boeing.
- Opportunities: Growing demand for smaller regional jets, expansion into new markets, partnerships with larger aircraft manufacturers.
- Threats: Competition from Boeing and Airbus, potential for trade disputes, economic downturns, regulatory changes.
Value Chain Analysis:
Both Boeing and Bombardier operate complex value chains that involve research and development, design, manufacturing, marketing, sales, and after-sales support. The key difference lies in their strategic positioning. Boeing focuses on large, long-haul aircraft, while Bombardier targets the smaller, regional jet market.
Business Model Innovation:
Bombardier's C Series aircraft represents a disruptive innovation in the commercial aircraft market. It offers a fuel-efficient, technologically advanced aircraft at a lower price point than comparable Boeing models, targeting a new segment of the market.
4. Recommendations
Boeing should adopt a multi-pronged strategy to address the Bombardier C Series threat:
- Strategic Alliances: Boeing should explore strategic alliances with other aircraft manufacturers or airlines to gain access to new technologies, markets, and resources. This could involve joint ventures, technology licensing agreements, or cross-marketing partnerships.
- Product Differentiation: Boeing should focus on differentiating its products through enhanced features, improved fuel efficiency, and advanced technology. This could involve developing new aircraft models tailored to specific market segments or investing in innovative technologies like AI and machine learning to enhance aircraft performance.
- Lobbying Efforts: Boeing should engage in active lobbying efforts to influence government policy and regulation. This could involve advocating for changes to trade laws, promoting the benefits of American manufacturing, and working with policymakers to address concerns about unfair competition.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Boeing's core competencies lie in its technological expertise, manufacturing capabilities, and global reach. These recommendations align with its mission to provide innovative and reliable aircraft solutions for its customers.
- External customers and internal clients: These recommendations are designed to meet the needs of Boeing's customers, who are looking for high-quality, fuel-efficient aircraft. They also aim to protect the interests of Boeing's employees and shareholders.
- Competitors: These recommendations are designed to address the competitive threat posed by Bombardier and other aircraft manufacturers.
- Attractiveness: The strategic alliances and product differentiation strategies have the potential to generate significant returns on investment, while lobbying efforts can help to create a more favorable regulatory environment for Boeing.
6. Conclusion
The Boeing versus Bombardier conflict highlights the challenges of globalization and the need for companies to adapt to changing competitive landscapes. By adopting a multi-pronged strategy that combines strategic alliances, product differentiation, and lobbying efforts, Boeing can effectively address the Bombardier C Series threat and maintain its leadership position in the commercial aircraft market.
7. Discussion
Other alternatives not selected include:
- Price Matching: Boeing could attempt to match Bombardier's prices on the C Series, but this would likely lead to a price war that would hurt both companies' profitability.
- Mergers and Acquisitions: Boeing could consider acquiring Bombardier, but this would be a complex and expensive undertaking with significant regulatory hurdles.
Key assumptions of the recommendations include:
- The U.S. government will continue to support American manufacturing.
- The demand for commercial aircraft will continue to grow.
- Boeing will be able to successfully implement its strategic alliances and product differentiation strategies.
8. Next Steps
Boeing should implement the following steps to address the Bombardier C Series threat:
- Develop a strategic alliance roadmap: Identify potential partners, assess their capabilities, and develop a plan for collaboration.
- Invest in product development: Allocate resources to develop new aircraft models and technologies that differentiate Boeing's products.
- Engage in lobbying efforts: Establish relationships with key policymakers and advocate for changes to trade laws and regulations.
These steps should be implemented within the next 12-18 months to ensure that Boeing can effectively respond to the competitive challenges in the commercial aircraft market.
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Case Description
Bombardier Inc., a Canadian manufacturer of business jets and small aircraft, developed the C Series aircraft amid numerous technical and financial challenges. In 2016, the US aviation company Delta Air Lines Inc. made a large purchase of the plane at an allegedly highly discounted price, which was expected to help Bombardier Inc. enter the lucrative US aviation market. In response, The Boeing Company, the world's largest aerospace company, filed a complaint about the deal with the US Department of Commerce and with the United States International Trade Commission. The complaint was consistent with the current US administration position of promoting protectionist economic and trade policies. The US Department of Commerce concurred with The Boeing Company and levied anti-dumping and countervailing duties of 292.21 per cent against Bombardier Inc. However, the United States International Trade Commission found the tariffs unjustified and overturned the decision on the grounds that The Boeing Company was not materially harmed by the transaction. The Boeing Company had multiple options for pursuing a challenge, but each option had potential consequences.
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