Mgt 723 Dr.

Martina Musteen Group study Airbus A380

Daisy Hsieh, Joe Wu Sandra Wu, Sean Yeh

Aerospace Manufacturer Industry Five-Forces Analysis

Buyer Power Fewer manufacturer choices Price costly
Threat of Entry

Low
Industry Rivalry

Safety regulations High switching costs High capital requirement high economies scale High Retaliation

High Low

Threat of Substitute Buyer propensity to substitute low due to nearly no alternative Price & performance of substitute: not attractive

Equally balanced competitors Low Differentiation

Low

High
Supplier Power High technology Various supplier needed for different parts and components

Neutralized Negative Forces

Industry Rivalry
Product differentiation >> A380 Increase capacity

Power of Supplier
Long-term strategic alliance with key suppliers Multiple-sources of key component suppliers

Strategic Group FAA Standards

Sources: The Airbus A380 Logistics and financing

Airbus vs. Boeing

Airbus
Entity Founded Headquarter Key People Industry Products Revenue Employees Slogan An EADS Subsidiary 1970 (Airbus Industrie) 2001 (Airbus S.A.S.) Toulouse, France Thomas Enders, CEO Aerospace Commercial airliners 23.5 billion (2005) 55,000-57,000 Setting the standards

Boeing
Public 1916 (Seattle, WA) Chicago, Il, USA W. James McNerney, Jr. CEO Aerospace & Defense Commercial airliners $61.5 billion (FY 2006) 153,000 (2006) Forever New Frontiers

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

A Framework of Competitor Analysis

Airbus and Boeing

Source: Adapted from M.-J. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration, Academy of Management Review, 21: 100134. 26

Tangible Resources

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

Organizational
Coordinating

Technological
Aerodynamic design Innovative material Suppliers management

Physical
Plants in France, German, Spain, Japan, China Access to key suppliers worldwide

Intangible Resources

57,000 employees at 16 sites in 4 European countries Close link to the Concorde project

Human Capital

Innovation/Creativity/Learning
Innovative material: glass-and carbon-fibre reinforced material

Social Capital
European base firm is a favor of Europe airliners.

Capabilities

Integration to integrate 16 sites parts into one airplane Design low acoustic, wide body, innovative material Suppliers management

Value Chain
Support Activities
Firm Infrastructure
n gi ar M

Human Resources Management Technology Development: developed at diff sites & integrated Procurement : 75% external procurement, (collaborative supply chain)

Inbound Logistics: -Use RFID -Trigger notification when parts arrived Operations - Manufacturing - Assembling - Integration Marketing & sales

Service: - Maintenance
M ar gi n

- Training

Primary Activities

Supply Chain Management

External Collaborative Approach

Buyer-Suppliers info sharing 75% external procurement Real time Exception based (late management) Proactive Visibility (notify when arrived)
eSupplyChain

Four Criteria Framework A380

Valuable? Rare? Costly to NonImitate? Substitutabl e? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Competitive Implications

Yes Yes Yes Yes

Aerodynamics Technology Supplier Integration Ability Innovative Material Marketing & sales

Core Competencies

Ability to utilize the aerodynamic technology design to develop new aircraft Ability to integrate thousands of suppliers (Supply chain management, 75% external procumbent) Innovative Material Marketing & sales

Business Level Strategy

cost leadership
Cost-efficiency, scale efficiency, product improvement

to utilize the technology design

carry more passengers CO2 emission reduction fuel efficiency noise reduction

Corporate Level Strategy

Related Diversification
Subsidiary of EDAS transferring core competencies

International Strategy

Recommendation
A380 is the right long-term solution for Airbus.

Rationale to Build A380

Increase product range in Group VI arena Resolve Airport Congestion: high capacity aircraft Take Boeing 747 replaced market Utilize Airbuss core competencies Extend leading technology gap Global popularity of high fuel-efficient aircrafts Larger cabin provided differentiation layout to operators

Issues

Solutions

Production Capacity Financial Pressure

Increase capacity Expedite delivery

1200

1000

800 Delivies Airbus 600 Delivies Boeing Order Airbus Order Boeing 400

200

0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Conclusion Proceed with

A380

A380 Highlights
2007Airbus delivers first A380-800 to SIA 2006Certification and delays 2005Maiden flight 2004First engine delivered 2002Component-manufacturing starts 2001Airbus consortium was merged 2000Dec. 12, Commercial launch of the A3xxx (8.8 billion) 1996"Large Aircraft Division" formed 1994Began developing Very Large Airliner, A3xx 1993Boeing canceled similar project 1991Market demand researched

A380 program cost: US$17 billion A380 unit cost: US$319 million

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

A380 vs 747-8
A380
Speed Range Wingspan Max takeoff weight Capacity Cost Taxiway Operation cost
Wikipedia http://en.wikipedia.org/wiki/Airbus_380

747-8
0.855 mach. 10,254 mi 224 ft 970,000 lb 450 US$300 million Normal Higher

0.85 mach. 10,521 mi 261 ft 1,235,000 lb 525-853 US$319 million Wider Cheaper