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Methodology:
In order to solve this case, I will use different articles, goggle, given case text, and appendix that I
made based on my knowledge. Based on these materials I am trying to tackle these case
questions.
To answer section a. I am using textbooks relevant models & theories to explain further. Section b.
I am using textbook, PowerPoint provided by teacher during the teaching and relevant models &
theories.
a) Supply Chain Management
Logistic setup globally is very important for international companies, specially those duopoly competitions
in niche market. It is a good decision to expand their production globally to reach potential customers in
efficient way. Airbus is a huge international aircraft industry. Its production is divided in different phase in
different geographical locations located in the Europe.
Hard objectives:
The quality advantage: in regards quality, we can neither be sure nor assume because specially Chinese
products are known in different mode. Therefore this decision could affect airbus somehow. However as
1
http://www.airbus.com/innovation/proven-concepts/in-manufacturing/
and refer to appendix as well
2 http://www.airbus.com/company/aircraft-manufacture/how-is-an-aircraft-built/transport-of-major-aircraft-sections/
3 http://www.airbus.com/company/aircraft-manufacture/how-is-an-aircraft-built/delivering-to-the-customer/
4 http://www.airbus.com/company/worldwide-presence/airbus-in-china/
5
Book-logistics management and strategy – 3rd edition by Alan Harrison
The time advantage: As China is one of the biggest customers for airbus, they can obviously gain advantage
specially when produce and assemble in China. 7On side it increases the lead-time for European and
American customers, on the other side increasing demand in Asia pacific market will be enough to maintain
their demand. If one of the Chinese or Asia pacific customer orders some spare parts, Airbus China can
provide it so that Airbus can minimize the customer lead time and add customer value.
The cost advantage: As China is cheap in regards to labour, material and warehouse it gives airbus overall
the cost advantages.
Supportive capabilities:
On time delivery: Having production in China will help company to fulfill customers’ requirement on time.
Specially Tianjin is a free trade zone area, a hub to manage the transportation and location of hi-tech
industries helps airbus to maintain the demand on time.
Soft objectives:
Security: There are many security issues regarding moving airbus to China. European unions is worried
about jobs in Europe, and fear to loss of technology to Chinese counterparts. In China it could be issues on
working safety and highly skilled technicians. It is said that China has lack of strong law to save the
intellectual property, technology and various problems in copyright and products patent. Customer´s
information and confidential and secure could be as well issues on Chinese markets.
Technological resources: 8 Airbus is using ´´integrated forecasting systems´´. Basically this system gives
them reliable planning data where they can plan in the context of integration with production IT systems.
But I don’t know how Chinese partner will use this system since there is no information about it. On the
other side there could be risk of sharing information technology, transfer of intellectual property and
knowledge to Chinese employees, which may create problems for airbus. Thus China is strong itself on
information technology, China is not fully trustful due to not having strong law regarding copyright policy,
patent and intellectual property. After gaining technological knowledge and becoming independent they
could move to own home Company such as C919 for their national pride.
China is one of the biggest and ever rapidly growing on airplane user; airbus needs an advance level of
information and materials flows technologies so that they can run business smoothly.
6
http://www.airbus.com/presscentre/pressreleases/press-release-detail/detail/airbus-delivers-first-a320-assembled-in-china/
7 http://english.peopledaily.com.cn/90001/90780/91421/6945694.html
8 http://www.logisticsit.com/absolutenm/templates/article-planning.aspx?articleid=2066&zoneid=34
International Logistical setup:10Transport of parts through shipping, road and river might be risk on traffic,
natural disaster. Moving parts one place to another could be expensive and increase lead-time which
cannot assist on value adding to customers. However there are some benefits by implementing the
international logistic such as:
Inventory: Having inventories in multiple countries gives advantage for high-value products.
Handling: Company can have best practices accordingly to its prerequisite for internationalization.
Transport: Airbus could get some advantage through logistics pipelines. Airbus will save lead time while it
supplies spare parts and components from different countries. But there could be a risk of transportation
breakdown for example strikes on ports, airplane employee strikes and so on. Natural disaster for example
tsunami as well may hamper the international logistic chain.
Geopolitical threats: The war in Iraq, Afghanistan and new Middle-East revolution may impact on global
logistic. There is risk shipping way through Somalia.
Reverse logistics: Airbus should make the policies regarding to re-use its wastages from raw materials to
finished products. Reverse logistics has significant consequences for the total supply chain. Although
Europe is aware on environmental issues, we cannot see the Chinese government is pushing the industries
to be green.
There are various ways to see their competitive situation, for example if we see market demand, products,
and price so on. However both companies are outsourcing their products to be more competitive each-
other, such as some parts of airplane, spare parts and components specially to China. There are several
factors has to consider such as internal and external environment. Furthermore we can use product
benchmarking to find and understand future competitive situation.
Considering outsourcing, it might be good to understand where are they from, where are they going, and
how they do it? To answer these questions I will use ´´Porters Diamond Model´´ and ´´Internationalization
model´´.
9
http://www.guardian.co.uk/news/datablog/2010/oct/26/corruption-index-2010-transparency-international
10
http://www.youtube.com/watch?v=drlswuwWqs0
11
Given in case tex- Airbus vs. Boeing p-2
Basic factors: enough space for industries, cheaper and enough labour forces
Demand conditions:
Both aircraft are deciding to outsource strategy to China to gain political and economical benefits. As China
is the biggest customers for both of them, it would be great the support for them.
- Both aircraft could benefited by aircraft manufacturing companies in China, such as China
aviation industry corporation (AVIC), COMAC etc.
- Hi-tech electronics company
- China is a country which has strategy to develop the large-scale and innovation-oriented
airliner.
- Both companies have strategy to outsource for price and lead-time competitiveness. Both
company are leading on aircraft manufacturing, boeing was the dominant for a long period,
since airbus has established their production around 40 years before; is becoming popular on
12
Slides provided by Peter Becker in class
13
Prediction of Airbus China president- Laurence Barron
14
Given in case
15
http://www.businessweek.com/magazine/content/06_05/b3969417.htm
16
http://boeing.com/news/releases/2008/q1/080214a_nr.html
17
http://www.airbus.com/no_cache/newsevents/news-events-single/detail/airbus-joint-venture-in-china-to-increase-
a320-rudder-production/
18
http://seattletimes.nwsource.com/html/businesstechnology/2008435563_webboeing25.html
Hence both boeing and airbus can have competitive advantage as China is becoming more competitive. To
analysis further competitiveness individually I tend to benchmark the both aircraft manufacturing’s latest
product although they have various product portfolios.
19
The Airbus A380, vs Boeing 747
The latest development on competition is airbus A380 vs boeing 747. It is said supersonic cruiser of boeing
will compete with A380 but at the latest news said, it had cancelled its proposal projects due to several
reasons. 20
As long both company has own competitiveness strategy, however I must say airbus has getting more
popular in regards to price, continent as customers demand. Furthermore airbus has by now big difference
in total orders and delivery it might be the reason of reduction on customer lead-time and their superior
value add to customers.
Aircraft manufacturers rely heavily on subsidies. Recently, Boeing and Airbus are on the debate of unfair
subsidies. Both aircraft are involving to get support through their subsidies. As extracted on case boeing is
getting supports like development of airplanes, no or low-interest government loans, debt forgiveness,
equity infusion, infrastructure, tax breaks and R&D support. Airbus is also getting lunch aid through
European subsidies which have been granted tax relief, government-sponsored R&D and government-paid
infrastructure projects.
Because of various economic downturn consequences: with several airline companies closing down and the
global tourism industry in recession, aircraft prices are down by around 20 percent. Boeing has reduced
employment. Since customers’ purchasing power has decreased, the demand and supply has been
decreased as well. Political issues has been arise due to global terrorist attacks, middle east revolutions,
and supply in military equipment, which directly effect to aircraft manufacturing companies. Currency
19
http://en.wikipedia.org/wiki/Competition_between_Airbus_and_Boeing
20 http://en.wikipedia.org/wiki/Boeing_Sonic_Cruiser#Cancellation
21
http://www.airbus.com/company/market/orders-deliveries/
22
http://active.boeing.com/commercial/orders/index.cfm
23
http://www.chinadaily.com.cn/bizchina/2011-06/23/content_12760295.htm
24
Given in casetext: Strained U.S-Beijing ties could cripple boeing..
It is very crucial for such fast growing & increasing market share company specially airbus to analysis long-
term business opportunities and sustainability by considering CSR and environmental issue. There are some
relevant issues regarding to external environment on its organization.
Opportunities
o Acquisitions: not only joint-venture is possible, airbus has opportunities to merge and acquisition
many more small and medium size aircraft industries around the world.
o Emerging markets and expansion abroad: outsourcing in China will benefit airbus to gain new
markets like in Asia pacific while these marketing are rapidly increasing25
o Innovation: by entering in China, a country where everything is possible in innovate-oriented could
help airbus to be more productive and unique
o Online: internet gives chance to sale its product around the world, online order and delivery makes
business easier and continent
o Product and services expansion: airbus has very good opportunities to expand its products and
support before new rivalry comes on market such as: C919 of China.
o Political advantage: since boeing, China having weaker relationship due to military equipment to
Taiwan, airbus getting advantage
Threats
o Price wars & Competition: boeing a dominant rivalry for a long period is still a strong competitor
for airbus, furthermore a lot of small and median aircraft manufacturing are coming into the
markets & offering cheaper solutions.
o Cheaper and destructive technology: such as Chinese technologies are becoming cheaper and
market leader around the world could affect the airbus technology. Furthermore the world is
rapidly changing in a second, nobody knows what kind of technology will be tomorrow
o Economic slowdown: for more than 3 years economic turndown has given negative impact on air
industries, it will take a long period to recover its impacts
o External changes (government, politics, taxes, etc): government rules & tax are increasingly
important for business. Having said that anytime government could tackle the issues and create
barriers for the international business. For example, recently USA is supplying military equipment
to Taiwan, which is opposite interest of China, therefore China is making issues regarding boeing
airplanes, war and revolution around world is directly affecting air and tourism industries
o Exchange rate fluctuations: such fluctuations have made worth impact on air industries making
billions of loss. And nobody knows how the future will be.
o Environment: Since people are becoming more open, educated and aware in environmental issues,
are looking forward to see environmental friendly products, less emission on air etc.
Having said all, I came to conclusion that on the one hand there are several opportunities and on the other
side there are increasing challenges and threats for all aircraft manufacturing. Product must be
environmental friendly and innovative.
The end
25
http://english.peopledaily.com.cn/90001/90780/91421/6945694.html
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