You are to prepare a two-page (single-spaced) paper based on the case assigned.

Question

You are to prepare a two-page (single-spaced) paper based on the case assigned. The case is listed below.

Do Not Simply Answer The Questions At the End of The Case.

Case Note Format

Your case analysis should be in the format of a two page (not counting the reference section) single-spaced Executive Summary. The report should follow the following format in sentence/paragraph form using APA format to cite sources. You are required to cite the textbook and at least one outside source from an academic peer-reviewed article.

1. Introduction of Firm

2. Overview of Firm Competitive Advantage

3. Problem(s) Statement

4. Alternative Solutions - Solutions/Opportunities

5. Option 1 Analysis

6. Pros

7. Cons

8. Option 2, Analysis

9. Pros

10. Cons

11. Add More Option Analysis as needed.

12. Decision and Support

13. Action Plan

14. References in APA format

Book

Pitt, M., & Koufopoulos, D. N. (2012). Essentials of Strategic Management. London: Sage. ISBN: 9781849201872

CASE STUDY: The macro environment of Airbus Industries and the A380

Airbus began life in the 1960s as a complicated joint venture supported by various European plane makers and their respective governments, led by the French.13 It was a political project in so far as Europe feared the near-monopoly in pas- senger aircraft of US Boeing Corporation. Airbus saw potential for a twin-engine passenger aircraft, smaller and more fuel-efficient than the large, wide-body 747 ‘Jumbo’ that Boeing was developing. The Airbus A300 first flew in October 1972. After a slow start, demand accelerated and A300 expanded into a series of aircraft. Airbus’ success forced Boeing to develop the rival 777 twinjet, yet by the early 1990s Airbus was winning as many orders for new aircraft as Boeing.

In 2000 Airbus became a conventional share-based company owned 80% by the European Aeronautics Defence and Space (EADS) company14 and 20% by British BAE Systems. It immediately decided to develop a ‘Superjumbo’, the A380, with the potential to carry up to 850 passengers, depending on internal seat layout. In 2006 EADS became the sole owner of Airbus. The A380 made its first commercial flight in 2007. Capable of flying over 8000 nautical miles without refuelling, the A380 would be ideal for long-haul passengers and freight applica- tions. By 2009, A380 production was several years behind its contracted delivery schedule and some airlines cancelled their orders. The survival and future success of Airbus, including the employment of 57,000 people at 16 sites in France, Ger- many, UK and Spain, depended critically on A380 meeting its sales targets over the medium and longer term.

Airbus and Boeing focus on medium- and long-haul jet aircraft with 100+ seats. They sell to airlines and leasing companies. High profile international airlines like British Airways, Virgin and Emirates buy and lease aircraft from Airbus and Boeing. No-frills (budget) airlines like easyJet, Ryanair, and JetBlue buy new aircraft, while other airlines constitute a substantial second-hand market. Leasing allows airlines to limit their capital investment in aircraft and provides flexibility to increase or decrease fleet numbers in line with demand. Private cor- porations and travel firms also use short/medium term leasing for charter flights.

Aircrafts have long lives (25+ years), but need very costly, regular maintenance. Many spend parts of their lives ‘mothballed’ waiting for a new operator to lease or buy them. The cycles of economic activity make demand for new aircraft volatile – new aircraft compete with pre-used ones whose lease costs are lower. Each new aircraft type tends to be quieter, more fuel efficient, reliable and have lower maintenance costs than its predecessor, giving airlines the incen- tive to update their fleets. But the cost of developing a new aircraft is huge. In future any serious competition for the Boeing/Airbus duopoly will come either from an integrated Russian aircraft corporation or the Chinese. All of the con- tenders make military as well as passenger aircraft. Various other companies make smaller passenger aircraft (jets and turboprops) with up to 100 seats; executive jets typically with up to 10 seats; and propeller-driven light aircraft with six seats or fewer. Turboprop aircraft are ideal for regional (inter-city) air transport, being fuel-efficient, generally quieter and needing shorter runways than jets to take off and land.

Explanation / Answer

Introduction of Firm

Airbus was started in 1960 as a complicated joint venture led by French with the support of various European plane makers and their respective governments in order to deal with the monoploly of passenger aircraft of US Boeing Corporation. The Airbus A300 , twin-engine passenger aircraft, smaller and more fuel-efficient than the large, wide-body 747 ‘ Boeing first flew in October 1972 and further expanded into a series of aircraft which forced the US Boeing Corporation to make twin-engine passenger aircraft 777 twinjet in early 1990s. In 2006 EADS became the sole owner of Airbus.Superjumbo’, the A380, with the potential to carry up to 850 passengers, was built by Airbus in 2000 .It made its first commercial flight in 2007 with a capability of flying 8000 nautical miles without taking breaks for refuelling .

Overview of Firm Competitive Advantage

The firm entered the market with twin-engine passenger The Airbus A300 aircraft which is more fuel efficient and smaller compared to the Boeing's Jumbo 747.This enhanced their operational effeicieny with competitive advantage . The Airbus got more orders than Boeing due to this advance technology. The Airbus was solely owned by EADS in 2006 which resulted in reducing the decision time. In 2007 , the new passenger aircraft A380 , capacity of flying 800 passengers for nonstop 8000 nautical miles took it first commmercial flight successfully.

Problem(s) Statement

The survival of Airbus depends on meeting its sales targets over the medium and longer term.If the targets are not achieved then the emlpoyment of 57000 people at 16 different sites are in danger.If it fails to do so then there are high chances of getting tough competition from Russian aircraft corporation or the Chinese.

Alternative Solutions - Solutions/Opportunities

A380 production was several years behind its contracted delivery schedule and some airlines cancelled their orders. So the company should first try to increase its manpower, capacity & required resources in order to meet this demand and complete the orders. This will improve the reputation and could get more orders. Also the Airbus should make small aircafts with passenger capacity of less than 100, executive jets typically with up to 10 seats; and propeller-driven light aircraft with six seats or fewer to gain the market share in this segment as well.

Pros

Sustainability - The Airbus will sustain in the market if it achieves the sales targets.

Trust- Timely delivery of the orders will increase the trust among the clients which will lead to repeat orders when required.

Increased Market Share - Entering the new segment will increase the overall market share of the firm.

Employment- New capacity will bring more employment in the country.

Cons

Capital investments will be required to build or expand new capacity.It will take a lot of time to start.The production of small capacity aircrafts might dirvert the attention to meet A380 sales.

Decision & Support

Strongly support the idea to build or expand the capacity to meet the sales target of Airbus 380. Manpower should be increased in order to meet this targets.

Decison to enter the small aircraft market will bring positive growth to the firm. It will bring employment in the system. It will enchance the brand image in the market which could result in more orders and competitive advantage.

ACTION PLAN

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