Bombardier Inc. - Case Study of a brand in an Emerging Country

Table of Contents

1. Introduction

2. History
The beginnings
Entering the mass transit industry
Entering the aerospace market
Further development of the business

3. Universal and Cultural Needs
The meaning of value for the customer
Universal needs
Cultural needs
Universal and cultural needs served by Bombardier

4. Segmentation Strategiesp

5. Positioning and Marketing Mix Strategies
Positioning
Marketing Mix Strategy

6. Opportunities and Challenges

7. Future Growth Strategiesp

8. Conclusion

9. Bibliography

10. Annex

11. Annex

12. Annex

13. Annex

14. Annex

15. Annex

16. Annex

1. Introduction

Canadian businesses have been shaped around the needs of its citizens for as long as it can be remembered. One can only imagine how the Canadian winters, the landscape, and the large territory of the country has shaped the culture of Canadian citizens. This inability to move around as freely as one could wish for during the cold winters for example has created opportunities for companies to develop products and services to Canadians in order to adapt to their needs. Bombardier Inc. more specifically was not only able to create a product that met the needs of Canadians, but was also a key player in the revolution of transportation in Canada and around the world.

Through the company’s development, Bombardier Inc. met many challenges which forced it to adapt to change quickly. This ability has been a key component of its success, a strength that has no doubt created a worldwide reputation for the company. In fact, a survey given to over 2,244 Canadians determined that Bombardier was the third company in Canada with the best corporate reputation. This result places the company on the top tier of companies worldwide with strong reputations (Cowan, 2010).

The purpose of this paper is to analyse how Bombardier was able to build a strong reputation of its brand. The research will focus on analysing the company’s engagement in international marketing, more specifically in an emerging country such as India.

2. History

The beginnings

Bombardier Inc. was created in winter 1936-1937, when a young fellow by the name of JosephArmand Bombardier produced his first snowmobiles; seven in total were created that year. He developed an interest for mechanics ever since he was a boy. Indeed, Joseph-Armand created his first type of snowmobile in his own garage in his hometown Québec. He had always been driven by the wish to overcome rural isolation in winter, but even more so when he lost his two-year old son due to isolation during the cold winter of 1934; unfortunately he was unable to bring him to the hospital in time to save him (Bombardier Museum).

After his invention, the demand for snow vehicles raised rapidly, especially during World War II, when the young entrepreneur was mandated to develop a military snowmobile. In 1942, Bombardier founded L ’ Auto-Neige Bombardier Limit é e, headquartered in Valcourt, a village east of Montréal (Bombardier Museum).

Due to weather conditions and enhanced clearing of routes in winter, Bombardier was forced to think of alternative products when the demand for snowmobiles sank. As a result, in the 1950’s, Joseph-Armand started developing all-train vehicles for different purposes. In 1959, a new era began with the launch of the recreational snowmobile called Ski-Doo (See Annex 1), which resulted in further expansion of the company (Bombardier Inc. - History, Bombardier Museum).

Joseph-Armand Bombardier passed away in 1964. Soon after, his son Germain took over the responsibilities of managing the million-dollar company but left shortly after. In 1966, the founder’s Bombardier Inc. son-in-law, Laurent Beaudoin, became general manager and led the company for over three decades (Baghai et al., 1997, p.4).

Entering the mass transit industry

Bombardier grew constantly over the next few years and became number one in the snowmobile industry until the energy crisis, which caused sales to drop considerably in 1974. Once again, the company was forced to diversify. Thanks to its existing skills and the previous acquisition of a trans- building company, Bombardier possessed useful requisites for entering the mass transit market. By breaking into this counter-cyclical industry, Bombardier realized that it was becoming less vulnerable to events such as the energy crisis. Its first major step into public transportation was in 1974 after winning the contract to build a city transit system for Montreal (Baghai et al., 1997, p.5-6).

To strengthen its position for further bids, the company made “a series of ambitious purchases” which established the basis for Bombardier to become a “premier worldwide manufacturer of transportation equipment” (Weber et al., 1998, 94). With acquisitions across the globe, Bombardier became compatible to go into the U.S. as well as into the European and Asian markets.

As one of Bombardier’s two main segments, rail transportation segment accounted for around 51.7% of the overall revenues in the financial year 2009 (Datamonitor Plc., 2010). Bombardier benefited from China’s stimulus package, which allowed limiting the impact of the global financial crisis on its transportation business. Business is furthermore prospering in India, with metro projects in cities across the country (Gandel, 2010). With American and Canadian intentions to improve passenger rail, Bombardier has the chance to skim even more stimulus funds in the near future (Cameron, 2010).

Entering the aerospace market

Bombardier’s diversification into the aerospace market happened just as incidentally as that into the transportation industry. When the Canadian government decided to privatize Canadair in 1996 - Bombardier’s manufacturer of business jets - the company took a chance to diversify its segment market once again. The investment was feasible thanks to the company’s revenues in the rail transportation segment. The following approaches were similar to those in the rail transportation segment. Bombardier made acquisitions and organized skills from outside and inside the organization to maximize its competitive capability in the newly entered sector (Baghai et al., 1997, p.15-18).

Originally only producing business jets, Bombardier later diversified into regional aircrafts. This decision made the company the worldwide third largest aircraft manufacturer, and reached a market share of almost 50 percent in regional aircraft. To enter markets, Bombardier used joint ventures, for instance with Lufthansa in Germany and China Southern Airlines in China (Baghai et al., 1997, p.21- 22).

Today, the customers of Bombardier’s aircraft products are spread over 100 countries. The company is a leader in the business jet and regional aircraft segments with market shares of 32% and 30% respectively in 2009. Bombardier’s most important contracts in this segment in 2010 include those with Republic Airways Holdings, Jazz Air of Halifax and Qantas Airways (Datamonitor Plc, 2010).

Further development of the business

In 1999, Laurent Beaudoin stepped down as CEO and handed the task over to Robert Brown, former head of Bombardier’s aerospace division. He was replaced three years later by Paul Tellier, who tenured only two years. The internal restructuring coincided with a tough time for the company’s aerospace segment. After the terrorist attacks of 9/11, Bombardier suffered from a severe decline in its aircraft sales. Laurent Beaudoin returned as CEO to prevent the company from further crashing (Castillo, 2008).

In view of a long-term healthy recovery, restructuring was necessary. Bombardier focused on geographical diversification to reduce its dependency from the U.S. market (which accounted for 70% of business aircraft sales in 2000) (Castillo, 2008). Bombardier now generates its revenues in 19 geographical segments, amongst them emerging countries like China (6.9% of total revenues), Russia (2.8%) and India (1.8%). The US market only accounts for 22.6% (Datamonitor Plc, 2010). In 2003, Bombardier sold off the part of the company that was making recreational motor vehicles such as the Ski-Doo, and the Sea-Doo. Aerospace and rail transportation are now the company’s only business segments (Castillo, 2008).

In 2008, Laurent Beaudoin resigned as CEO once again. His successor is his son Pierre Beaudoin, who had run the aerospace division until then (Castillo, 2008). He is now in charge of 62.900 employees and for operations in more than 60 countries (Datamonitor Plc, 2010).

3. Universal and Cultural Needs

The meaning of value for the customer

In the general sense, the value generated for a customer by a product or service is defined as the relationship between the product’s perceived value compared to the product’s perceived costs (either monetary or non-monetary in form of transaction- and opportunity-costs). The received value is a subjective anticipation and evaluation of what the product or service brings to oneself. This function of consumer’s estimation and implied costs is affected by intrinsic merit as well as cultural, social, political and environmental impacts (See Annex 2).

Universal needs

By establishing a widely diversified product line in different markets, Bombardier serves a great variety of different values. While aerospace industry accounts for over 50% of Bombardier’s business, the values served in this industry are to a great extent universal, more specifically economical and environmental. For example, the company manufactures smaller aircrafts specifically for environmental and economical purposes. These smaller aircrafts produce less air pollution and minimize costs. In times of global warming and accelerated globalization, being sensitive to environmental topics and establishing proper corporate (social) responsibilities are of great importance (Bombardier Inc., 2010).

Bombardier is the third largest aircraft manufacturer after Boeing and Airbus and strives to stay competitive and create sustainable business. By focusing on smaller jets, Bombardier is able to create value through fast, efficient, comfortable and rapid transportation of goods and people throughout the world (Bombardier Inc., 2009).

Cultural needs

In the railroad industry, Bombardier serves not only economic values by transporting goods and customers but also takes into account the cultural needs. Whenever airports are economically not possible to build in a region, a city or and area, transportation via train is a substitution for air transportation and hereby serving universal needs. Railroads have been of great importance, even called a revolutionary invention, since the beginning of the industrial revolution in the 18th century. Railroads became part of cultures in certain regions where it was the only transportation available to the people at the time. For example airplanes were not affordable in some countries or other countries were not allowed to use air transportation due to extreme protectionism by the government (e.g. Russia, China, and Third World Countries). Therefore, railroads became part of the culture and even to date the Trans-Siberian Railway is one of the most fascinating means of transportation. The creation of railroads was created with the intention of transporting people from one place to another but with the years companies such as Bombardier have also served cultural values by linking railroad transportation to a mean of sightseeing.

Despite the importance of economic values, the cultural aspects should not be neglected. A global company like Bombardier deals with a great variety of different cultures which impacts the business strongly. Bombardier builds a defined product but its use touches cultural aspects that cannot be denied. For example, the company serves universal needs of transportation but the sub- services in which the industry operates in makes Bombardier a company that also responds to cultural needs. For example, Bombardier adapts to certain countries by building smaller airplanes affordable to the community.

The universal and cultural needs served by Bombardier

The company works within a heterogeneous environment, it works in part with direct customers, other businesses, and governments. With Bombardier’s help for example, a country can have access to proper transportation and to industry connectivity. This implies a reduction of cost in transportation, a decline of delay in transportation also make business planning more reliable due to accelerated product shipment as well as opportunities for business growth and development.

Hereby, the needs served by the company are mainly universal focusing on the country’s and company’s crave for enhanced transportation capabilities via train and airplanes and by that providing Business-to-Business and Business-to-Government services. In addition, Bombardier’s business field of recreational vehicles offers a communication channel for Business-to-Consumer business to serve individual needs.

Even if the company first and foremost cares about the economic impacts of its business and creates universal values by reducing costs, enhancing product quality and improving time-to-market, the cultural aspects have to be incorporated in order to remain a competitive global player. Cultural influences can make or break an organization but Bombardier has learned to respond well to these cultural needs.

4. Segmentation Strategies

Companies, before they offer a service or sell a product, must determine who they are catering to. Different consumers have different demands and needs, and the company must know these demands and needs if they want to target a market effectively. It is far more efficient to classify consumers into groups or categories to determine the similarities they have, instead of attending to each individual need for each individual consumer. These groups and categories are called segments. Consumers are usually placed in demographic segments, geographic segments, behavioral segments, and psychographic segments.

Bombardier Aerospace segmentation

Bombardier has customers located in over 100 countries. The majority of these consumers are civil owner operators, or aviation service providers. The customer segments consist mainly of airlines and leasing companies for commercial aircrafts, and of corporations and wealthy individuals for business aircrafts.

Business Aircrafts Segment

Bombardier’s business aircraft customers purchase those air crafts that meet their specific requirements in terms of speed, range, cabin comfort and style, amenities, and interior customization. This segment relies heavily on reliable flight operations, and is highly dependable after sales report such as maintenance personalized customer care (Bombardier Inc., 2009).

Commercial Aircrafts Segment

Customers in the commercial aircraft segment are buying those aircrafts that meet their required range and payload, as well as those aircrafts that can provide a competitive operating cost. These aircrafts must ensure a reliable and safe service adaptation to the buyer’s business model. Products that are offered to this segment include regional airlines, commercial airlines, and low-fare carriers. The regional airlines have a carrying capacity of 40 to 100 passengers and are serviced regularly to complement mainline airlines. Commercial airlines have a capacity of 100 to 149 seats and are required to meet the capacity of those passengers who fly regularly and provide the company with a larger quantity of profit (Bombardier Inc., 2009).

Other

Emergency Services

Customers in this aircraft segment are purchasing those aircrafts that have exceptional performance, allow full operations in rugged and demanding circumstances, and provide unique operational capabilities. The aircrafts will be used in a variety of specialized missions such as search and rescue, coastal patrol, environmental protection and transportation (Bombardier Inc., 20090).

Specialized Aircraft Solutions

This market segment requires a comprehensive and unique range of aircraft platforms and solutions to meet consumer needs. The needs for this market consist of communication platforms, monitoring to surveillance (Bombardier Inc., 2009).

Bombardier Transportation Segmentation

Bombardier Transportation’s market segments consist of four categories. As Bombardier itself has stated: “our business is structured around six divisions and focuses on four key market segments: Rolling stock, Services, System and Signaling.” The six divisions are the passenger division, locomotive and equipment division, North America division, service division, system division, and rail control solution divisions (Bombardier Inc., 2009).

Roll Stock Segment

Roughly 85% of the rolling stock segment includes well financed railway operators in the public sector, such as national railways and municipal transit authorities. These organizations rely on the involvement of the public for infrastructure and operations funding. The majority operates on a regional or national basis, but some have now steered their attention towards operating internationally along with emerging private trans-national operators.

Passenger Division

This division provides a complete range of rail vehicles for numerous applications across the globe, except North America. Products such as light rail vehicles, commuter and regional trains, and high-speed trains are predominantly offered to the European market, where the metro cars are offered to both the European and Asian market (Bombardier Inc., 2009).

Locomotives and Equipment Division

This division provides an extensive line of locomotives and vehicle sub-systems for global markets. Products categories such as locomotives, propulsion and controls, and bogies are offered to this market (Bombardier Inc., 2009).

North America Division

This division provides a range of services and vehicles modified specifically for the requirements of the North American markets. Mass transit is offered to North America (Bombardier Inc., 2009).

Services (Service Division)

The customers that fall under this segment are those who require maintenance, tools, refurbishment, and material solutions (Bombardier Inc., 2009).

System (System Division)

This segment requires the development, design, and building, operating and maintaining transportation systems. Products offered to this segment include automated people mover systems, mass transit systems, and general operations and maintenance (Bombardier Inc., 2009).

Signaling Market (Rail Control Solutions Division)

This segment requires a provision of comprehensive portfolio of wayside and onboard signaling solutions that will increase safety, speed, and have the ability to track capacity on rail networks.

Products offered to this segment include signaling solutions for mass transit systems and rail control and signaling solutions for mainline transits ranging from freight traffic to regional, intercity, and high speed lines (Bombardier Inc., 2009).

5. Positioning and Marketing Mix Strategies

Positioning

When analyzing the corporate image of Bombardier, it is clearly evident that both the aerospace and transportation division are well known across the globe. This is due to the standardized procedures in positioning that the company follows. It is also evident that the company follows a differentiation strategy for positioning. This allows the company to compete by offering a product or service that is different and superior to its competitors (Bombardier Inc. 2009). When looking at the competitor analysis for the transportation section, one cannot succeed to argue against the fact (See Annex 3).

Bombardier ranks #1 in the railroad industry over competitors in all major market sub-segments. This is because the company emphasizes its positioning through its attributes or in other terms, its core competencies. Core competencies focus on passenger comfort, efficiency, service reliability, appropriate capacity, environmental sustainability, and population satisfaction (Bombardier Inc., 2009).

When analyzing the aerospace division, statistics indicate that all of Bombardier’s products are in service and not under development. Again, this is because Bombardier positions its products through core competencies, in which customer satisfaction, proper capacity, high-frequency service, and environmentally conscious innovation are the focus (See Annex 4).

Marketing Mix Strategy

The marketing mix strategy, on the other hand, is a bit different. Bombardier executes a combination of both a standardized and adapted strategy. In order to understand the effects, it is important to place emphasis on all components of the marketing mix:

1) Product: In terms of the transportation division, it is evident that the company focuses on product differentiation due to its market segments. However, the company defines its products in nontraditional marketing terms. For example, its market segments are categorized by divisions rather than traditional segments such as geographical location, demographical characteristics, and psychological benefits. More specifically, each division is categorized by having a specific demand. Each market segment, or in other words division, is composed of product lines that are adapted to its respective market segment. However, a specific product line may belong to one or more division. The following outlines the example in the Transportation segment (Bombardier Inc., 2009):

a) Passenger Division

This division focuses on providing a diverse range of rail vehicles for multiple applications across the global market. The Rolling stock product line is most associated with this division and ranges from products such as light rail vehicles, metro cars, regional trains such as the OC transit, and high speed trains.

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