Strategic management of an airline. Developing a proactive strategy for Airbus

Project Report, 2012

47 Pages, Grade: First Class


Appendix 14, exhibit 10. EFQM Excellence Model or Business Excellence Model ... 47

Executive summary
This report is for the attention of the Board of Directors of Airbus- President and CEO
Tom Enders and other board of directors: Kriss Akabusi, Marcel Rufo, Manuel
Toharia Cortes and Henning Voscherau. The purpose of this report is to give a
comprehensive analysis of Airbus organisational strategy and then use the
information we got to develop a strategic option for Airbus. We started with analysis
of Airbus mission, objectives and ethics which is a prescriptive approach, and found
out that Airbus need innovation in order to sustain its competitive advantage and
realise its vision of green airplanes. In addition, we analysed Airbus internal
resources and capabilities: how it can deliver value to airbus and which resources
deliver competitive advantage to Airbus-how such resources can be improved over
time. Using Hierarchy of resources we found out that A320 neo will bring a major
strategic shift for airbus however, there has to be an improvement in the A380,
A330/A340 and the A350.
We also analysed Airbus's knowledge, technology and Innovation using the
emergent approach-this is important because Airbus need to be aware of which
internal resources add value to the firm and how to identify and enhance them-thus
In order for Airbus to sustain its competitive advantage, enhance added value and
increase revenue it should focus its strategy on how to constantly innovate and
upgrade- through investments in R&D, benchmarking and process of learning.
Furthermore, we evaluated Airbus external environment -macro environment using
PESTLE and micro environment using Porter's five forces. These frameworks
chosen because they provide a pragmatic viewpoint to analysing Airbus external
environment however they have limitations. With regard to PESTLE analysis, we

found out that political factors, economic factors and environmental factors have the
most direct impact on Airbus.
Political factors: systematic financing through subsidies are the main catalyst to
tensions between Airbus and Boeing and their national governments (EU and USA).
Environmental factors: because of the airline industry negative impact on the
environment and we found out that innovation will be the key to achieving Airbus
vision of green Airplanes.
Economic factors: We found out that foreign currency risks and volatility in
emerging economies are main risks to Airbus; however we recommended that
Airbus should use a hedging mechanism as an insurance against foreign currency
risk and diversification in order to have wide ranges of products to offer their
customers at affordable price ­this will be achieved through innovation.
Additionally, we found out that the most important stakeholders for Airbus are the EU
government (Germany, UK, France and Spain) who are the main shareholders,
employees and suppliers however Airbus should employ a comprehensive
stakeholders' approach in order to be viable on the long run. A proactive strategy
dynamics was found to be the best for airbus because of fierce competition from
Boeing. SWOT analysis and BCG growth ­share matrix was analysed in developing
strategic option: business and corporate level respectively and a pragmatic
recommendations was given accordingly. In part four, strategy evaluation was done
from an emergent viewpoint and learning based route was chosen because of its
direct relevance to Airbus. Moreover, we noted that all the framework chosen in our
report are far from perfect, however they provide us with a pragmatic perspective to
analysing Airbus.
Finally, we concluded with a comprehensive recommendation of the entire
framework employed in this report and an EFQM Excellence Model or Business
Excellence Model as a self- assessment for Airbus management team.

"If you can't describe your strategy in twenty minutes, simply and in plain la
you haven't got a plan. `But,' people may say, `I've got a complex strategy. It can't be
reduced to a page.' That's nonsense. That's not a complex strategy. It's a complex
thought about the strategy."
- Bossidy, L (2002). Chairman, Honeywell International, in `Execution: The Discipline
of Getting Things Done'
One of the most vital tools for human success is strategy. Even- though influential
people for example, Barrack Obama, and Warren Buffet epitomizes luck, what really
made them successful was to have a clear goal, understanding of their competitive
environment and most importantly, identifying opportunity when they appeared and
to have the clarity of direction and the tractability necessary to exploit these chances-
effective implementation (see appendix 1, fig 1). Reason is that without a
consistency of direction, based on understanding their environment and a keen
awareness of how to maneuver into a position of advantage, competitors will out-
compete them (Grant, 2010).
Therefore, strategy refers to having a succinct and articulate goal, and plans to
achieving it (Yip, 2003; White 2004) - put succinctly, a good strategy is about winning
(Grant, 2010; Henry, 2008; Barney and Hesterly, 2006).
In light of constant change and relentless competition ,strategy becomes less about
building positions of sustained competitive advantage rather, more about developing
the responsiveness and flexibility to create successive temporary advantages-the
economic downturn in 2008-9, is encouraging new thinking about the purpose of
business (Lynch, 2009; Grant, 2010). Disillusion with "shareholder value capitalism"
has been accompanied by renewed interest in corporate social responsibility, ethics,

and sustainability of the natural environment and the role of social legitimacy in long-
term corporate success (Grant, 2010, p.16) - appendix 2 Fig 1.1.
This report will give a comprehensive analysis of Airbus based on strategic analysis
(internal and external) and strategic formulation and will conclude with a
Part 2- Strategic analysis:
There is always a better strategy than the one you have; you just haven't thought of
it yet"
Sir Brian Pitman, former CEO of Lloyds TSB. Harvard Business Review, April 2003.
Conducting strategic analysis
of Airbus will give us the necessary ingredients for a
constructive strategic formulation which will position Airbus on a part to success
through sustainable competitive advantage.
In this section we will give a strategic analysis of Airbus covering the following areas:
Prescriptive purpose: delivered through mission, objective and ethic
Stakeholders analysis
Analysis of Airbus external and internal environment
Purpose emerging from knowledge, technology and innovation
Strategy dynamics.
" ... a theoretically informed understanding of the environment in which an organisation is operating,
together with an understanding of the organisation's interaction with its environment in order to improve
organisational efficiency and effectiveness by increasing the organisation's capacity to deploy and redeploy its
resources intelligently" Worrall (1998).

2.1. Prescriptive Purpose delivered through: Mission, Objectives and Ethics.
In setting its mission, objective and Ethics, Airbus has to use a prescriptive
approach, because the Airline industry is highly capital intensive and thus it has to
have a well-defined strategy in advance. Hence, in order for Airbus to succeed, there
has to be a strategic purpose which are linked to another (see appendix 2, fig 2)-
shaped by vision, stakeholders and ethical issues and delivered by mission and
objectives (Grant,2010). The disadvantage with prescriptive approach is that by been
so rigid about the purpose; an organisation might miss a better option (Ibid).
Airbus purpose is linked to its ambitious visions for the future which are: Intelligent
concept carbine that provides panoramic view and seats that mould to customers
shape (see appendix 3, exhibit 1), an interaction zone where passengers can play
visual gulf (see fig 3) and a greener affordable airplanes. Axel Krein Airbus head of
R&T pointed out Airbus target by 2050 which are to reduce C02 by 75%, Nox
reduction by 90% and noise reduction by 65%. The reason is to reduce the negative
impact their planes have on the environment and also, to get a positive media
(Grant, 2010) which will help them to make more sales.

The disadvantage however, is higher costs to customers (Ibid).
Furthermore, Airbus strategic purpose will help shape the way the directors govern
the organisation through a pluralistic organisational culture
this will have a positive
significance on Airbus because employees will be content with their work and see
themselves as part of Airbus family, thus more dedicated- which will lead to
efficiency and effective output (Ibid).
All these ambitious vision are linked to the mission and objectives of Airbus outlined
in a succinct mission statement
: Through innovation, and out-of-the-box thinking,
Airbus will continue to meet its eco-efficiency goals, and ensure that air travel
continues to be one of the safest, and most eco-efficient, means of transportation
(Airbus, 2011).
The goal of the Airbus project was to spawn a resurgence of the European
aerospace industry by creating a viable competitor to Boeing and McDonnell
Douglas (Lynn 1998, p.120). Thus, its objective is to be a big player in the airline
industry and at the same time, eliminate Boeing's monopoly while creating a
European Champion (Lynn, 1998). This vision is important because they lay out a
clear and direct strategic purpose (Prescriptive) for Airbus, hence its success in the
Airline industry. However due to the nature of the environment Airbus is operating in,
prescriptive strategy alone will be disadvantageous.
Airbus cannot always satisfy all its stakeholders because the goal of different group
is different (Daft et al,2010)-thus, stakeholders analysis (see appendix 4,fig4) helps
Airbus identify those stakeholders most critical to the viability of the firm and make
sure that their needs are met (Hill and Jones,2009; Daft et al, 2010). Airbus most
important stakeholders are EU government (Germany, France, UK and Spain),
customers and employees. The EU government through their indirect subsidies,
made it possible for Airbus to survive its infancy-in fact, without EU's governmental
subsidies, Airbus would not have been able to compete against Boeing which has
organisational culture is the basic pattern of shared assumptions, values and beliefs governing the
way employees in an organisation think about and act on problems and opportunities"( Bratton et
The mission statement is the basic statement of organizational purpose, it addresses "Why we exist."
2010, p.23).

scale, scope and learning economies to its advantage (McDonald and Dearden ,
2005). However, through good corporate governance, Airbus should make sure that
other stakeholders' interests are addressed
(take a stakeholders approach in order
to avoid tensions)-for example going green, paying suppliers and banks on time and
investing in local communities (Daft et al, 2010)-this will surely put Airbus in an
advantageous position which will lead to a better financial performance (Ibid).
However, stakeholder approach is expensive and might be unwelcomed to the
shareholders whose only interest is in wealth maximization.
2.2. Internal analysis
In this section, we will analyse Airbus internal resources and capabilities: how it can
deliver value to airbus, which resources deliver competitive advantage to Airbus and
how such resources can be improved over time. We will also explore Airbus's
knowledge, technology and Innovation-this is important because Airbus need to be
aware which internal resources add value to the firm, how to identify and enhance
2.2a. Internal resources:
Airbus resources and capabilities are those assets that contribute to the generation
of value added (Lynch, 2009, p.123). These resources are categorized into:
Tangible: physical resources, examples are plant, equipment and people.
Intangible: no physical presence, examples are Airbus brand name, service level
and technology.
Organisational capabilities: skills, routine, management and Airbus leadership
(Lynch, 2009). Airbus should be able to link all these resources to various part of the
organisation effectively in order to build superior capabilities than its competitors
which will lead to competitive advantage (See appendix 5, fig 5)-however, successful
implementation is difficult and takes time (Grant, 2010).Using the hierarchy of

resources framework ( fig 6), innovation helped Airbus to increase its market share,
which leads to breakthrough resources for Airbus : A320 aircraft family
, (Hepher,
2011)-see exhibit 9 for recommendation on internal resources.
Fig 6:
2.2b. Knowledge, Technology and Innovation
This section offers a flexible approach to purpose- that is, purpose might be allowed
to be more experimental and developed from the process itself: an emergent
approach to purpose (Lynch, 2009, p.262)-see Fig 7. In order for Airbus to sustain its
competitive advantage, enhance added value and increase revenue it should focus
its strategy on how to constantly innovate, through investments in R&D,
benchmarking and process of learning (Warren, 2009). Hence, focus on knowledge
creation, technological development and innovation is vital for Airbus to be viable on
the long run-the reason is that the airline industry is an industry with high degree of
The A320 single-aisle jetliner family -composed of the A318, A319, A320 and A321 (Airbus, 2011).
"Knowledge is a fluid mix of framed experience, values, contextual information and expert insight that
provides a framework for evaluating and incorporating new experiences and information. It originates and is
applied in the minds of knowers. In organisations, it often becomes embedded not only in documents or
repositories but also in organisational routines, processes, practices, and norms".(Davenport and Prusack,
1998, p. 5).
Excerpt out of 47 pages


Strategic management of an airline. Developing a proactive strategy for Airbus
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Charles Ekweruo (Author), 2012, Strategic management of an airline. Developing a proactive strategy for Airbus, Munich, GRIN Verlag,


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