STRATEGIC ANALYSIS

AIRLINE INDUSTRY

FINANCE B - BUSINESS STRATEGY

2/13/2011
 TABLE OF CONTENTS

INDUSTRY ANALYSIS.....................................................................................................................................................................3
PORTER’S 5 FORCES .................................................................................................................................................................3
COMPETETIVE STRUCTURE ................................................................................................................................................4
AIR BUS ..................................................................................................................................................................................................5
SWOT ANALYSIS..........................................................................................................................................................................5
STRENGTH .................................................................................................................................................................................5
WEAKNESS .................................................................................................................................................................................5
OPPORTUNITY ........................................................................................................................................................................5
THREATS.....................................................................................................................................................................................5
CORPORATE & BUSINESS LEVEL STRATEGIES........................................................................................................6
BOEING ...................................................................................................................................................................................................7
SWOT ANALYSIS..........................................................................................................................................................................7
STRENGTHS...............................................................................................................................................................................7
WEAKNESS .................................................................................................................................................................................7
OPPORTUNITY ........................................................................................................................................................................7
THREATS.....................................................................................................................................................................................7
CORPORATE & BUSINESS LEVEL STRATEGIES........................................................................................................8

2
INDUSTRY ANALYSIS

PORTER’S 5 FORCES

THREAT OF NEW ENTRANTS: LOW COMPETITIVE RIVALRY: HIGH

• Existing Brand Loyalty
• High costs of switching companies
• High R & D costs
• Government legislations
• Scarcity of resources
• High competition arising from
duopoly
• High exit costs
• Mature industry – Results in
excessive eating of each other’s
market share

POWER OF BUYERS: MODERATE THREAT OF SUBSTITUTES: LOW

• As there are only few suppliers • Very high Technological expertise
required

POWER OF SUPPLIERS: MODERATE

• Limited suppliers
• There are no substitutes
• High switching costs
• High product relevance

3
COMPETETIVE STRUCTUR E

DUOPOLY

4
AIR BUS

SWOT ANALYSIS

STRENGTH

 Centralized marketing
 Family of planes – will enable the customers to lower maintenance costs
 Decentralized production
 Technological advantage

WEAKNESS

 High upfront cost

 Longer lead time for product development
 Not able to meet production schedules

OPPORTUNITY

 Increasing demand for more frequent nonstop flights

 More and more countries deregulating the aviation industry
 Growing volume of trans-continental traffic
 Govt. subsidies

THREATS

 Terrorist Attacks
 Jet Fuel Prices – Higher costs predicted in future
 Failure of the Hub & spoke model – If the industry does not grow as per analyzed

5
CORPORATE & BUSINESS LEVEL STRATEGIES
CORPORATE LEVEL STRATEGIES
Increasing sales
Extensive cost cutting
Developing new planes
Decentralized production
Stream lining of production process
Improving financial results
Centralized marketing
Family of planes
BUSINESS LEVEL STRATEGIES
Technological advancements in material
management
Change of sales strategy
Streamlining all pricing decisions
Cost Cutting
Job cuts
Stream line of production process
Leaner and more flexible organization
after restructuring
Outsourcing
6
BOEING

SWOT ANALYSIS

STRENGTHS

 Production of new low cost aircrafts

 Families of planes
 Designed new aircraft digitally and assembled virtually
 Boeing 787 along with 737 and 777 jets to take on Airbus 380 head on
 Positive Cash Flows

WEAKNESS

 High initial costs

 R&D Costs

OPPORTUNITY

 Demand for commercial jet aircraft is economy dependent

 Demand for more frequent nonstop flights
 Growing volume of transcontinental traffic
 Lean production
 Six Sigma
 global sourcing

THREATS

 Success of Hub & Spoke model

 Terrorist Attacks
 Jet Fuel Prices
 production and assembly line delays

7
CORPORATE & BUSINESS LEVEL STRATEGIES
CORPORATE LEVEL STRATEGIES
• Outsourcing
• Reduced Development costs
• In positive cash flows - Breakeven of
their earlier models
• Increase the profits – Banking on
increase in point to point flight traffic
BUSINESS LEVEL STRATEGIES
• Lean Production and Six Sigma quality
improvement
• Reducing cost of production
• Introduced moving assembly lines
• Advancement in inventory mgt.
• Benefits from government subsidies