Strategic Management 

Task 3: 

Strategic Management Report

Airbus versus Boeing

Submitted: 7 May 2007 (Session 1)

Prepared by: 

Sascha Mayer

Table of Contents

1 Introduction – Company Background ...  1
1.1 Airbus  ...  1
1.2 Boeing  ...  2

2 Internal analysis  ...  3
2.1 Vision and Mission Statements, Goals and Objectives  ...  3
2.1.1 Airbus  ...  3
2.1.2 Boeing  ...  3
2.2 Management philosophy and attitudes, Culture and Leadership  ...  4
2.2.1 Airbus  ...  4
2.2.2 Boeing  ...  4
2.3 Strategic Levels  ...  5
2.3.1 Airbus  ...  5
Airbus’ Differentiation Strategy – ‘Hub-and-Spoke-concept’:   ...  5
2.3.2 Boeing  ...  5
Boeing’s Differentiation Strategy – ‘Direct Point-to-Point-Traffic’  ...  6
2.4 Enhancements of efficiency, quality, innovation and customer responsiveness  ...  7
2.4.1 Airbus  ...  7
2.4.2 Boeing  ...  7
2.5 Value Chain  ...  8
2.6 Strategy Execution Process  ...  9
2.7 Financial Analysis and Comparison of Airbus and Boeing  ...  10

3 External Analysis  ...  11
3.1 Key economics and business characteristics  ...  11
3.2 PESTLE-Analysis  ...  11
3.3 PORTER’s 5-Forces and Industry attractiveness  ...  12
Strength of competitive pressure as an overview ...  12
3.4 SWOT-Analysis  ...  13

4 Conclusion  ...  14

List of references  ...  16

Appendices
Appendix 1 – Key economics and business characteristics  ...  22
Appendix 2 – PESTLE analyses of the global Aircraft Industry with specifics in the USA & EU  ...  23
Appendix 3 – Airbus and Boeing SWOT analyses  ...  33
Appendix 4 – Porter’s five forces model of competition for analysing this business  ...  44
Appendix 5 – Vision and Mission statements, goals & objectives of Airbus and Boeing  ...  50
Appendix 6 – Strategic levels of each organisation and differentiation strategies  ...  52
Appendix 7 –Efficiency, quality, innovation and customer responsiveness enhancing practices  ...  61
Appendix 8 – Value chain  ...  64
Appendix 9 – Management philosophy and attitudes, Culture and Leadership  ...  67
Appendix 10 – Strategy Execution Processes  ...  69
Appendix 11 – Financial Analysis  ...  74
Appendix 12 – Target Market Selection – Product Portfolio of Airbus and Boeing  ...  79
Appendix 13 – Aircraft orders for Airbus A 350 and Boeing B787  ...  80

1 Introduction – Company Background

The purpose of this report is to carry out a detailed strategic analysis of the two large aircraft manufacturers Airbus and Boeing. The discussion main part of this report is separated into internal and external analyses, which are reasoned in greater detail and supported with reasonable graphs and tables in the attached Appendices. Finally, conclusions are drawn as to which is the more strategic savvy and which company has the more sustainable enterprise; and there is a recommendation given in which company a potential investor should rather invest in.

1.1 Airbus

Airbus is a European joint venture between EADS and BAE Systems, headquartered in Blagnac Cedex, France. Starting in the 1970’s, Airbus has caught up becoming an aircraft manufacturer for large civil jetliners and is now fighting for the market leadership in a duopoly with Boeing. The company offers a range of single aisle and wide body aircrafts that carry between 110 and 555 passengers, a sign for strong diversification. Airbus is known as the innovation leader by using new technologies for reducing operating costs, fuel burn, noise and emissions, and simultaneously increasing range (Airbus 2004). The company has been reporting constant revenues increase since 2002 with €25.2 billion in 2006, an increase of 13.2% over 2005. Thus, Airbus is EADS’ cash cow, with 64% of EADS’ total revenue (EADS 2007a, p.III). From a strategic point of view Airbus believes devoutly in strong air traffic between major hub airports around the world and therefore regards its mega-jumbo A380 as the airline’s best solution for the future (see Appendix 6).

1.2 Boeing 

Boeing is one of the world’s leading aerospace companies and the largest manufacturer of satellites and military aircraft worldwide. Beside that it shares the market leadership for large commercial jets with Airbus. Boeing, formerly in Seattle, is now headquartered in Chicago (USA) and produces aircrafts that carry between 107 and 433 passengers (<www.boeing.com>). Boeing is one of the largest US exporters, with increasing revenues of $28.5 billion in 2006, a 33% growth caused by improvements in the production (Boeing 2006a, p.9). After having difficulties with efficiency in its production in the 1990’s and the long-term strategy due to the failed project around the high speed Sonic Cruiser, the company is back in track. By launching the revolutionary B787 Dreamliner, completely built with composite materials like carbon fibre (see figure 8), Boeing pursues the strategy to provide a mid-size airplane for the forecasted increasing point-to-point traffic on long haul (see Appendix 6).

2 Internal analysis 

2.1 Vision and Mission Statements, Goals and Objectives 

2.1.1 Airbus 

Airbus’ long-term strategic purpose is expressed in its strategic company vision of ‘creating the best and safest aircraft’. This very future-orientated and enduring message is even more confirmed by the mission statement, which follows the principle ‘to meet the needs of airlines and operators by producing the most modern and comprehensive aircraft family on the market, complemented by the highest standard of product support’. To quantify this mission Airbus formulated in its goal that the company wants to deliver strong results in a sustained manner, while commanding at least half of the world commercial aircraft market over the long-term. This shall succeed by objectives like further internationalization, focusing on key geographic markets, expanding its customer services offering and restoring its competitive edge by focusing on flexibility and efficiency (see Appendix 5 and EADS 2007b, pp.14-15).

2.1.2 Boeing 

Boeing’s long-term strategic purpose is expressed in its strategic company vision of ‘People working together as a global enterprise for aerospace leadership’. This very future-orientated and enduring message is even more confirmed by the mission statement, which follows the principle to be the leader ‘among the premier industrial concerns in terms of quality, profitability and terms of quality, profitability and growth’. For succeeding, Boeing’s “Vision 2016” formulates core competencies. These act as objectives such as customer knowledge and focus, large-scale systems integration on a global level by outsourcing and a lean enterprise (<www.boeing.com/vision>).

2.2 Management philosophy and attitudes, Culture and Leadership 

2.2.1 Airbus 

‘The company′s philosophy is always to listen to its customers and to maintain its vision -- the forward thinking which has placed Airbus at the forefront of the industry. Nothing is taken for granted’ (<http://www.airbus.com/en/corporate/ethics/mission _values/index.html>). This value of innovation and excellence is tried to be connected by Airbus’ Management with a culture of partnership – as well among the employees and the managerial levels as towards suppliers and customers. The aim is a two-way flow of views, ideas and technical ideas. The leadership idea of Airbus is about sharing responsibilities and exchanging ideas among all levels and nationalities for getting the best results, but nevertheless it is seen as essential to pursue a strong leadership with clear guidelines. (<http://www.airbus.com/en/corporate/people/ growing/>).

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