Deakin University
Faculty of Business and Law
MMM365 – Strategic Management
Assignment 2 – Business Report:
Global Aircraft Manufacturing Industry

Business Report: Global Aircraft Manufacturing Industry

von: Florian ROTH, Stefan LACHER und Clinton GRABER

Executive Summary 4

1. Introduction  4

2. Description of the Aircraft Manufacturing Industry and its structure  4

2.1. Suppliers  5
2.2. Civil Aircraft Manufacturers  5
2.3. Aircraft Leasing Companies  6
2.4. Airlines  6
2.5. Airports  6
2.6. End user / Customer  6

3. Dominant Economic Characteristics of the Aircraft Manufacturing Industry  7

4. Industry Competition 9

4.1. Major Competitors 9

4.1.1. Airbus  9
4.1.2. Boeing 9
4.1.3. Bombardier 10
4.1.4. Comparison of the main competitors  10

4.2. Competitive Forces Analysis 11

4.2.1. Rivalry in the industry:  11
4.2.2. Substitutes:  12
4.2.3. New Entrants 12
4.2.4. Supplier’s Power:  13
4.2.5. Buyer’s Power:  13

4.3. Result of the Five Forces Analysis  14

5. Driving Forces 14

5.1. Lifestyle and Social Characteristics  14
5.2. Product Innovation and Technology  15
5.3. Globalisation 15
5.4. Government  15
5.5. Internet 16

6. Key Success Factors  16

7. Prospects for the industry  16

Reference List  18

Executive Summary

The purpose of this report is to analyse the attractiveness of the aircraft manufacturing industry. Research for this report includes information from journal articles, newspapers, and analysis of actions of the main competitors. The major findings indicated that the aircraft manufacturing industry has undergone extensive changes since the late 1990’s. Despite the negative effects of environmental change like the terrorism acts of September 11, 2001 and diseases like SARS on air travel, the aircraft industry is still attractive for new entrants. The long-term growth rate caused by globalisation, governmental support, and general need for more mobility show that there is still a large demand for aircrafts of all sizes. Due to the industry’s attractiveness, it is highly recommendable to enter the industry. Companies considering this should be aware of the high volatility in the market as well as the huge capital investments needed for the development process.

1. Introduction

Boeing and Airbus are attracting worldwide attention with their desire to become market leaders in the aircraft manufacturing industry. This report analyzes the aircraft manufacturing industry and offers recommendations for companies considering entering the industry.

2. Description of the Aircraft Manufacturing Industry and its structure

To fully understand an industry, the whole backward and forward channel must be considered. The industry value chain in figure 1 shows the civil aircraft manufacturing industry from the suppliers of the raw material to the end user who demands the service of transportation. Figure 1: Industry Value Chain of the Civil Aircraft Manufacturing Industry [Abbildung in der Downloaddatei vorhanden]

2.1. Suppliers

For the construction of an aircraft the companies need a variety of raw materials like steel plates or plastic parts. This can be purchased from many suppliers on the world market. In addition the aircraft companies need a lot of parts they can only get from a small number of manufacturers like plane tires (Goodyear, Bridgestone, Michelin) or high tech components (Siemens, Honeywell). Last and most important group are the suppliers that deliver components that have to do with the plane’s efficiency and nevertheless with its security. These are parts like the hull and the engines (Rolls-Royce, General Electric).1 The aircraft manufacturers normally develop new planes together with these suppliers and form therefore long-term strategic alliances.

2.2. Civil Aircraft Manufacturers

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1 Done 2004, p. 24