Strategic Technology Management: Airbus & Boeing

3721 words (15 pages) Business Assignment

17th Apr 2020 Business Assignment Reference this

Tags: Business AssignmentsTechnologyManagementBusinessLiterature ReviewBoeingAirbusAviation

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  1. Introduction

Airbus and Boeing are currently the two suppliers dominating the world’s airplane manufacturing industry. These two companies produce 99% of the world’s largest aircraft orders i.e. 90 per cent of annual aircraft manufacturing. These two companies serve more than 4 billion passengers annually. Their dominance over the airplane industry has been continuing from over a century now and the analysis shows that the same continues in the future. Money and history play a major role in the airplane industry, which both companies have on their side. Airplane manufacturing need lots of funds not only for the parts but also for the technology, safety etc. These two companies have their roots into domestic as well as international demands. Being the oldest companies favoured them in maintaining constant relationships with the government and organisations tied with the airplane industry. Airbus and Boeing being the leaders in airplane market enabled them to even buyout the regional companies like Bombardier and Embraer.

Boeing company was started in 1916 and since then continued to remain on the top making United states as their major customer. Even now Boeing remain the 2nd largest contractor with United States. Whereas Airbus evolved as a response to the rapid growth of Boeing in Europe. There major countries namely France, UK and Germany joined forces to start Airbus company in 1967. These countries were successful in producing the aircraft that is technically advanced and showed a significant economic growth. The design of their 1st public aircraft attracted the public as it allows them to travel more for less money. Airbus had more growth compared to Boeing but being the 1st in the industry favoured it to remain as one of the top manufacturers in airplane market.

  1. Literature Review

Technological innovation and management are an important factor that is applied by both Boeing and Airbus to gain a competitive advantage through proper planning and strategizing in the aircraft manufacturing industry. Innovation made it possible for these two manufacturing giants to create products that meet the high demands in the market.

Boeing has always incorporated adaptation strategy to the market requirements using technological innovation to gain competitive edge. In 1927, the company won a contract to deliver mail between Chicago, Illinois, and San Francisco, California. In its first year of operation, 800,000 pounds of mail, 150,000 pounds of express packages, and roughly 2000 passengers were carried by Boeing (US History). During World War 2, Boeing produced heavy bombers and the first pilotless aircraft and, in its interest, to coordinate pilotless technology, Boeing built BEMAC which is an analog system that carries a huge impact for today’s computers (Monenco, 2015). The company also developed airport surveillance system (AWACS) when surveillance technologies emerged. They started cooperating with NASA by designing and installing their telecommunications network which led to Boeing expanding their market to the space industry by getting involved in the Apollo and International Space Station project by creating innovative technologies that were important in the field (Monenco, 2015). Moreover, after the 9/11 incident, Boeing developed on-flight video monitoring system to tighten security.

In recent years, Boeing focuses their innovation on real-world issues such as the environment, comfort, safety, and cost. For example, the Dreamliner 787 was built using lighter materials like carbon fibre instead of traditional aluminium (Boykoff, 2011). The 787 is also 20% more fuel efficient which allows for airlines to cut cost and take planes on longer routes (Boykoff, 2011). A more intuitive cockpit such as using the Head-Up Display (HUD) on glass allow pilots to access data while keeping an eye on the outside world (Boykoff, 2011). Through innovation and seizing market opportunities, Boeing can stay as one of the top aircraft manufacturing giants.

On the other hand, Airbus is one of the four elements of Airbus Group, known as EADS, somewhere in the range of 2000 and 2013, Astrium, Cassidian and Eurocopter. The worldwide starting points of Airbus have been fundamental in its prosperity since its creation 40 years prior by the four noteworthy industrialized nations of Europe: France, Germany, Spain, and the UK. This European organization has exploited the best that the mainland brought to the table to envision market needs and to create innovative items. Airbus has a specialised strategy team that identifies trends by analysing the current market, economic forecasts, infrastructure development and supplier landscape to gain a competitive advantage.

The A380 is the airplane that can convey the most travellers. As per variants, it has a limit of 525 to 853 travellers and has two complete degrees of seats. It is 73 meters in length, 80 meters wide, the tallness of a 7-story assembling and is more substantial, longer and taller than a Boeing 747. It is made from progressive composite materials, lightweight, extremely solid and entirely adaptable, of 4 Rolls-Royce reactors. The organization utilizes a cooperative acquiring and open advancement with providers. The wings are made in Wales, motors in England, fuselage and the vertical piece of the tail in Germany, the composition of the tail in Spain, last the plane is collected in Toulouse, France (Brajou and Ricco 2014, p. 461)

  1. Methodology, Approach, and Limitations

3.1  Methodology and approach

The main aim of the report was to review and compare the Technology management strategies of Airbus and Boeing. There are 4 members in our group, we started by dividing the work evenly between us.

We utilised the existing data which was publicly available for this project and started with our research. We mostly referred to different previously published information, case studies and the data provided by the companies on their respective websites. We gained a lot of information from the websites of the company like previous methods of operations, current scenarios and future of the company. We went through all the content thoroughly to analyse the operations and technology management strategies of both the companies. Furthermore, we used this analysed data to review and compare the operations and managerial approach of Airbus and Boeing. We had several group discussions to gain a better perspective on working of both companies and had few brainstorming sessions to generate feasible and applicable recommendations for the companies.

3.2 Limitations

  • Since it was a quantitative approach, we were unable to conduct interviews and surveys to gain data and thus the existing data used by us is not 100% verified.
  • There is various information available for the same subject thus making it extremely difficult to filter the best content to use in the report.
  •  Also, the quantitative data was not adequate to understand the complex issues.

4. Discussions

4.1 Airbus vs Boeing (Kent Tey)

The formation of Airbus was more of a political decision than a commercial one. This is because the US conquered 75% of the commercial aircraft manufacturing market in the late 1960s and politicians in France, Germany, United Kingdom, and the Netherlands decided to take actions to strengthen the European cooperation in the aviation field. It shows that Airbus had a huge political influence in its original roots (Gordon, 2014). Boeing, on the other hand was formed by William E. Boeing and it incorporates the adaptation strategy based on the market situation.

These 2 giants both dominate the aviation market which resulted in duopoly due to a couple of factors:

4.1.1. Barriers to entry

The reason why Boeing and Airbus dominate the industry is because there is limited entry into the market as obstacles are difficult to overcome in this industry resulting in an advantage for both companies as they are shielded from new competitors. This is because the cost of production of a new commercial plane is way expensive costing up to billions of dollars. Furthermore, from an engineering perspective, it is difficult to acquire a team of experts who can design, test and produce an aircraft.

4.1.2. Bargaining Power of buyers

Buyers typically have very limited choice as Boeing and Airbus conquers almost the entire airplane market. Switching to smaller or less dependable companies can result in high cost for aftermarket service costs.

4.1.3. Threat of substitutes

There is very minimal threat to these 2 companies in terms of other transportation methods as there are no alternative for long distance journey.

4.1.4. Competitive rivalry 

Intense competition between these two giants can be witnessed as they both compete for more high value contracts with airliners. Hence, both companies can be seen lowering prices on maintenance, providing better services and cheaper pricing of the jets.

As both Boeing and Airbus are in a duopolistic market, they both focus their competitive strategy based on the product differentiation concept through technological product innovation, rather than having a direct price war. As an example, Boeing developed the 787 Dreamliner which is a long-range jet to fit more passengers which led to Airbus building the A350 XWB with a much wider body that allows for wider economy seats. Moreover, Boeing uses better engine with turbofan for better efficiency despite being behind Airbus for a couple of years in the engine department.

  1. Findings

5.1. Historical Management 

Strategic issues and/opportunities should be the spark to technological and industrial developments. In 1916 The Boeing Company began manufacturing seaplanes for the US Navy, a development to strengthen the communication and intelligence throughout the body. This aviation revolution then began assisting the Airforce in streamlined, competitive aircrafts, along with airmail carriers (D’Intino.R et al 2008). The inception of Airbus was a 1970’s act that saw consolidation of manufacturing and political stances in the European airspace sector.

5.2 Current scenario

The Boeing company and Airbus have been able to thrive forward with technology advancements through confidence in their research and development for over 90 years. Where many companies have come and gone over this time, the threat of new suppliers to the industries has never cast a shadow over the aviation giants. Boeing and Airbus have been able to show great efficiency, even though manufacturing fails, in the innovation process steps:

  • Basic research and invention
  • Applied research and functional prototype
  • Engineering prototype and testing
  • Production prototype and pilot production
  • Product testing and modification
  • Initial production and sales

The Boeing Company has developed the Global Enterprise Technology Systems (GETS), a ground-breaking protocol to managing innovation through a system engineered and strategically driven approach. This systems approach aims to address the technical, business and cultural facets of Technology Management. The mission of GETS is to avoid commonality in processes and protocols organisation wide, with the greater outlook that all business areas can be tackled specifically to their own technological demands. (Lind 2006)

The aviation industry is booming and the Boeing Company along with Airbus can see the Chinese market as the next industry to be competing in the aviation and manufacturing arena. Boeing has partnered with the Commercial Aircraft Corporation of China (COMAC) in a strong sign of support for the industry (Fuentes 2011). This partnership with the Chinese limits much bargaining power that new competing supplier have, with Boeing now on a governing level to new project that may interject their future goals. Technology transfer and internal market education is allowing Airbus to infiltrate the Chinese market. Airbus’ approach included a Cabin Crew Training Centre, whereas Boeing are focusing on the political relations and act is can influence (Eriksson, 2010).

5.3 Future Approach

Boeing’s ongoing mission is to support policies that advance U.S manufacturing in local communities. Boeing’s future game is quite clearly geared to continuing their ongoing industry support through innovation in R&D. With the apparent Chinese market boom creeping over the horizon accommodated with Airbus and Boeing’s commitment to balance collaboration and competition, shareholders seem to be on a continual aviation ascent. Through their partnership with COMAC, Boeing and the Chinese Government has stated a 5-year plan commencing in 2021 which will see their market stockpile purchase orders for Boeing’s Aircrafts (Hong, Jungbae and Woosan 2011), Airbus are hoping education and industry programs can maintain a strengthening relationship with the Chinese.

In the modern era with fuel prices on the rise, buyers in the aviation industry have the strong bargaining hand of price and need for efficiency. Boeing has committed its future projects to long haul flight aircrafts, powered by 2 engines (instead of 4) in a bid to revolutionise the international marketplace. The 777x is the $390m aircraft that Boeing see as the new stamp on an aviation industry desire.

Pilotless planes are in conceptual transit, the public need and confidence for this technology does not appear to be anything more than curiosity, though the potential to huge amount of money universally (pilot and staff costs) will impact flight costs and will see this technology heavily invested in over the next stage of the aviation evolution, the selling power for the successful air carrier will be industry changing and the competitive advantage Boeing and Airbus are used to feasting on (Marks 2014).

  1. Recommendations

The only way for both companies to complete their backorders is to focus on how to produce more efficient aircrafts and how to fasten the production process. One way to achieve the targets and to remain on the top in commercial aircraft industry is to invest in automation and to manufacture more efficient aircrafts and by incorporating the right production strategy.

Both companies are trying to win the market share and maintain their position in the market, one of the best ways to do that is to build ties with developing Asian countries and get contracts from them.

We also feel if Airbus can give more attention to the assembling process and develop new methods to speed up the assembling process, it will really help the company to make planes at a much faster speed rate and avoid further delays.

  1. Conclusions 

Boeing even after the biggest crisis remains competitive with its rival (Airbus). After two major crashes in 5 months, Boeing’s 737 Max was grounded. Even then Boeing is still in the run aiming to beat its rival by updating its software and bringing its prestigious 737 back on to the runway. However, Airbus is making it hard for Boeing to fly back into the race with its new orders from major developing countries like China. China has recently ordered 300 Airbus jets.

The competition between the companies is so close, with Airbus slightly ahead. Anyways, both have a huge backlog. Airbus beat Boeing in the backlog anyway. Airbus has about 6000 A320 aircraft backlogs whereas Boeing has around 5000 for 737 currently which benefits Boeing as the customers avoid switching to Airbus because of its huge backlogs. Boeing is Speeding up its production pace by producing 52 planes per month since the grounding.  Airbus is still a bit ahead in the run by producing 60 A320.

At the end of the day both Airbus and Boeing invest billions in technology, innovation, engineering and safety. Planes produced by both companies are very similar with very minute difference which might not even be noticeable making it hard for the customer to choose between the two. Initially Boeing was largely popular in the early times, however Airbus picked up the pace and were able to match with the popularity of Boeing.

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