The Industry of Aircraft Producers

Thèmes abordés

Porter Boeing Airbus Strategy Forces five

Résumé du document

The world of aircraft manufacturing serves the purpose of supporting aviation by producing aircraft parts as well as building aircrafts. In general, this industry can be divided into two main segments – the military and space applications of aero-structures and the civil/commercial aircrafts, the latter consisting of large and small passenger aircrafts and cargo aircrafts. Commercial aviation has increasingly been managed by private sector companies whereas military aviation is traditionally controlled by state bodies. In this analysis, however, we will primarily focus on civil aircrafts. The current aircraft producer industry is basically a duopoly with two key companies, Boeing and Airbus, competing against each other for market shares. While the Boeing Company, a US multinational aerospace and defense corporation, was founded in 1916, the roots of the Airbus Company dates back to the year 1970 making Boeing a more experienced producer. Nevertheless, Airbus has recently managed to outperform its major competitor and former market leader Boeing due to its increasingly favorable reputation and reliability. Now Airbus is dominating the aircrafts manufacturing market with a market share of approximately 50%. Although there exist other aircraft producers around the world, for example in Russia (e.g. Komsomolsk-on-Amur Aircraft Production Association is the largest manufacturer there) and China (e.g. China Aviation Industry Company I + II), their impact in the world industry is more or less negligible. The customer base of those manufacturers mainly comprises airlines from Asian countries like Russia and Vietnam.

Extraits

[...] Trains, on the other hand, although an excellent Case study on the aircraft producer industry Page 4 of 9 value-for-money alternative to airplanes, are limited to existing railway routes, which are characterized by high construction costs. The third alternative, ships, can transport huge amounts of people and freight over long distances. Unfortunately, they are lack the speed the other transportation vehicles offer. The aircraft's major and substantial advantage, which justifies its comparatively high price, is its unparalleled speed. This becomes a crucial factor if the distance that needs to be covered reaches a certain dimension. Moreover, the possibility of videoconferences via the internet may replace the necessity for business travels. [...]

[...] Mitsubishi Heavy Industries, Ltd providing Boeing with major body panels and doors), whereas some offer large structure and others concentrate on small part and sub-assemblies for final integration. This rather high number of suppliers causes tough competition in the market enabling the prime aircraft producers to easily switch from one supplier to another and bargain for the best deal. However, the situation changes when suppliers decide to retain key technologies essential to aircraft manufacturers. In this case, the supplier is a monopoly and possesses to power to name its own price for its inimitable products or services. [...]

[...] Hence, it is not a surprise that the dominant players in this industry remain to be Airbus and Boeing. One might assume that no industrialist in their right mind would even waste a single thought on investing in the aircraft producer industry, especially with competitors like Airbus and Boeing, still nations such as China and Japan find it of strategic importance to subsidize such an industry. Threat posed by substitute products - LOW The threat of substitute products exists in the construction of airplanes and engines at the component level, where materials that have previously been in common use are replaced by new material technologies. [...]

[...] At present the market is saturated with Airbus and Boeing playing the key role, however, there exists a high chance of market growth due to developing Asian countries. Current studies indicate that China alone will require around 1400 aircraft by the end of 2020. Although some Asian countries have established aircraft manufacturing industries (e.g. China, Japan), they can't keep up with their U.S. and European counterparts as regards, for example, size. As new aircraft producers will probably be entering the market, the current competitive structure characterized by a relatively low number of competitors with great power will alter accordingly. [...]

[...] In order to weather the storm aircraft manufacturers need to be inventive. At present, they are facing new challenges. Growing awareness of climate change is vital in the aircraft industry and keeps the competitors in constant search for fuel efficiency in order to reduce pollutions. So they try to improve their image as environmentally friendly companies. All in all, the aircraft producer industry has survived the crisis and is now entering the growth mode again. PORTER'S FIVE FORCES Threat posed by new entrants - LOW Potential competitors largely influence the profitability of the industry since the existing demand for aircraft would have to be divided up even further leaving every company with a smaller share of the total sales volume. [...]