Mgt 723Mgt 723Dr. Martina MusteenDr. Martina Musteen

Group studyGroup studyAirbus A380Airbus A380

Daisy Hsieh, Joe WuDaisy Hsieh, Joe WuSandra Wu, Sean YehSandra Wu, Sean Yeh

Aerospace Manufacturer Industry Five-Forces AnalysisAerospace Manufacturer Industry Five-Forces Analysis

Supplier Power

• High technology

• Various supplier needed for different parts and components

Buyer Power • Fewer manufacturer choices• Price costly

Threat of Substitute

• Buyer propensity to substitute low due to nearly no alternative

•Price & performance of substitute: not attractive

Industry Rivalry

• Equally balanced competitors

• Low Differentiation

Low

Low

High

Low

High

Threat of Entry

• Safety regulations• High switching costs

• High capital requirement

• high economies scale

• High Retaliation

Neutralized Negative ForcesNeutralized Negative Forces

Industry RivalryIndustry Rivalry• Product differentiation >> A380Product differentiation >> A380• Increase capacityIncrease capacity

Power of SupplierPower of Supplier• Long-term strategic alliance with key Long-term strategic alliance with key

supplierssuppliers• Multiple-sources of key component Multiple-sources of key component

supplierssuppliers

Strategic Group – FAA StandardsStrategic Group – FAA Standards

Sources: The Airbus A380 Logistics and financing

Airbus vs. BoeingAirbus vs. Boeing

Airbus BoeingEntity An EADS Subsidiary Public

Founded1970 (Airbus Industrie)2001 (Airbus S.A.S.)

1916 (Seattle, WA)

Headquarter Toulouse, France Chicago, Il, USA

Key People Thomas Enders, CEO W. James McNerney, Jr. CEO

Industry Aerospace Aerospace & Defense

Products Commercial airliners Commercial airliners

Revenue €23.5 billion (2005) $61.5 billion (FY 2006)

Employees 55,000-57,000 153,000 (2006)

Slogan Setting the standards Forever New Frontiers

Wikipedia http://en.wikipedia.org/wiki/

A Framework of Competitor A Framework of Competitor AnalysisAnalysis

Source: Adapted from M.-J. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration, Academy of Management Review, 21: 100–134.

2–6

Airbus and Boeing

Tangible ResourcesTangible Resources FinancialFinancial

• EADS support (eg, EADS support (eg, €2,029 million €2,029 million free cash flow in free cash flow in 2006) 2006)

PhysicalPhysical

• Plants in France, GePlants in France, German, Spain, Japan, rman, Spain, Japan, ChinaChina

• Access to key suppliAccess to key suppliers worldwideers worldwide

Organizational Organizational • CoordinatingCoordinating

TechnologicalTechnological• Aerodynamic Aerodynamic

designdesign• Innovative Innovative

materialmaterial• Suppliers Suppliers

managementmanagement

Intangible ResourcesIntangible Resources Human CapitalHuman Capital

• 57,000 employees at 16 sites in 4 Europea57,000 employees at 16 sites in 4 European countriesn countries

• Close link to the Concorde project Close link to the Concorde project Innovation/Creativity/LearningInnovation/Creativity/Learning

• Innovative material: glass-and carbon-fibrInnovative material: glass-and carbon-fibre reinforced materiale reinforced material

Social CapitalSocial Capital• European base firm is a favor of Europe airEuropean base firm is a favor of Europe air

liners. liners.

CapabilitiesCapabilities

Integration – to integrate 16 sites Integration – to integrate 16 sites parts into one airplaneparts into one airplane

Design – low acoustic, wide body, Design – low acoustic, wide body, innovative materialinnovative material

Suppliers managementSuppliers management

Value ChainValue Chain

Su

pp

ort Activities

Primary Activities

Firm Infrastructure

Human Resources Management

Technology Development: developed at diff sites & integrated

Procurement : 75% external procurement, (collaborative supply chain)

Operations

- Manufacturing

- Assembling

- Integration

Marketing & sales

Service:

- Maintenance

- Training

Inbound Logistics:

-Use RFID

-Trigger notification when parts arrived

Mar

gin

Margin

Supply Chain ManagementSupply Chain Management External Collaborative ApproachExternal Collaborative Approach

• Buyer-Suppliers info sharingBuyer-Suppliers info sharing• 75% external procurement75% external procurement• Real timeReal time• Exception based (late management)Exception based (late management)• ProactiveProactive• Visibility (notify when arrived)Visibility (notify when arrived)

eSupplyChain

Four Criteria Framework – A380Four Criteria Framework – A380

Valuable?Valuable? RareRare??

Costly Costly to to

ImitateImitate??

Non-Non-SubstitutaSubstituta

ble?ble?

Competitive Competitive ImplicationsImplications

YesYes YesYes YesYes YesYes Aerodynamics Aerodynamics TechnologyTechnology

YesYes YesYes YesYes YesYes Supplier Supplier Integration AbilityIntegration Ability

YesYes YesYes YesYes YesYes Innovative MaterialInnovative Material

YesYes YesYes YesYes YesYes Marketing & salesMarketing & sales

Core CompetenciesCore Competencies

Ability to utilize the aerodynamic Ability to utilize the aerodynamic technology design to develop new technology design to develop new aircraftaircraft

Ability to integrate thousands of Ability to integrate thousands of suppliers (Supply chain management, suppliers (Supply chain management, 75% external procumbent)75% external procumbent)

Innovative MaterialInnovative Material Marketing & salesMarketing & sales

Business Level StrategyBusiness Level Strategy

cost leadershipcost leadership• Cost-efficiency, scale efficiency, product imCost-efficiency, scale efficiency, product im

provement provement to utilize the technology design to utilize the technology design

• carry more passengerscarry more passengers• CO2 emission reductionCO2 emission reduction• fuel efficiencyfuel efficiency• noise reduction noise reduction

Corporate Level StrategyCorporate Level Strategy

Related DiversificationRelated Diversification• Subsidiary of EDASSubsidiary of EDAS• transferring core competencies transferring core competencies

International StrategyInternational Strategy

RecommendationRecommendation

A380 is the right A380 is the right

long-term solution for long-term solution for Airbus.Airbus.

Rationale to Build A380Rationale to Build A380 Increase product range in Group VI arenaIncrease product range in Group VI arena Resolve Airport Congestion: high capacity aircraftResolve Airport Congestion: high capacity aircraft Take Boeing 747 replaced marketTake Boeing 747 replaced market Utilize Airbus’s core competenciesUtilize Airbus’s core competencies Extend leading technology Extend leading technology gapgap Global popularity of high Global popularity of high fuel-efficient aircraftsfuel-efficient aircrafts Larger cabin provided Larger cabin provided differentiation layout to differentiation layout to operatorsoperators

Production CapacityProduction Capacity Financial PressureFinancial Pressure

Increase capacityIncrease capacity Expedite deliveryExpedite delivery

0

200

400

600

800

1000

1200

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Delivies Airbus

Delivies Boeing

Order Airbus

Order Boeing

IssuesIssues SolutionsSolutions

ConclusionConclusion

Proceed Proceed with with

A380A380

A380 HighlightsA380 Highlights2007 Airbus delivers first A380-800 to SIA

2006 Certification and delays

2005 Maiden flight

2004 First engine delivered

2002 Component-manufacturing starts

2001 Airbus consortium was merged

2000 Dec. 12, Commercial launch of the A3xxx (€8.8 billion)

1996 "Large Aircraft Division" formed

1994 Began developing Very Large Airliner, A3xxBegan developing Very Large Airliner, A3xx

1993 Boeing canceled similar project

1991 Market demand researched

Wikipedia http://en.wikipedia.org/wiki/Airbus_380

A380 program cost: A380 program cost: US$17 billionUS$17 billionA380 unit cost: USA380 unit cost: US$319 million$319 million

A380 vs 747-8A380 vs 747-8

A380 747-8Speed 0.85 mach. 0.855 mach.

Range 10,521 mi 10,254 mi

Wingspan 261 ft 224 ft

Max takeoff weight 1,235,000 lb 970,000 lb

Capacity 525-853 450

Cost US$319 million US$300 million

Taxiway Wider Normal

Operation cost Cheaper Higher

Wikipedia http://en.wikipedia.org/wiki/Airbus_380