AAANALYZE CASE OF AIRBUS AND BOEING [Year]
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Curtin Business School
School of Management
CONVENER
: Professor SAMIR CHATTERJEE
STUDENT NAME
: PHAN CAM TU
ID NUMBER
: 13785882
UNIT TITLE
: DYNAMICS OF INTERNATIONAL STRATEGY 601
DUE DATE
: July 23 2007
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TABLE OF CONTENTS
INTRODUCTION OF BOEING AND AIRBUS ...................................................................... 4
THE SIMILARIES BETWEEN AIRBUS AND BOEING ....................................................... 4
THE DRIVERS OF GLOBAL STRATEGY ........................................................................ 4
COST DRIVERS ............................................................................................................... 4
MARKET DRIVER ........................................................................................................... 5
ALLIANCE STRATEGY ...................................................................................................... 5
Exhibit 1. The Global Product Division Structure at European Aeronautic Defense &
Space Company (EADS) ................................................................................................... 7
Exhibit 2. The 7E7 Structures Work Shares ................................................................. 8
Exhibit 3. The partners in producing the components of A380 project ................... 8
Exhibit 4. The Partners in Producing The Components of Boeing 787 Project ..... 9
TURN THE PROBLEMS OF AIRBUS INTO THE ADVANTAGES OF BOEING ............ 11
Exhibit 5. The orders and delivery of Airbus and Boeing for five years ............................. 11
Exhibit 6. The Value Chain ................................................................................................. 12
STRATEGIC CHOICE IN A GLOBAL MARKET ............................................................... 13
ADAPTATION AND DIFFERENTIATION TO BE SUCCESSFUL ............................... 13
DEMAND CONDITION ..................................................................................................... 13
Exhibit 7. Compare between Boeing 787 Dreamliner families and Airbus .................... 15
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CONCLUSION ........................................................................................................................ 17
APPENDICES ......................................................................................................................... 18
Appendix 1. The Airbus A380 Orders ................................................................................. 18
Appendix 2. The Boeing 787 Orders ................................................................................... 19
REFERENCES ........................................................................................................................ 20
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INTRODUCTION OF BOEING AND AIRBUS
“Boeing is the world’s leading aerospace company and the largest manufacturer of
commercial jetliners and military” (About Us: Boeing in Brief). It was established by
William Boeing in 1916 in Seattle, Washington. Its international headquarters now has been
located in Chicago, Illinois. The major products are commercial airliners, military aircrafts,
munitions, space systems and computer services (Wikipedia, Boeing). With respect to its
commercial airplanes, this company has launched into the world market such these models:
737, 747, 767, 777, and the latest one is 787 Dreamliner (Commercial Airplanes).
“The European Aeronautic Defense and Space Company EADS N.V. (EADS) is the
large European aerospace corporation” and was founded on July 10, 2000 from the merger
among Aerospatiale-Matra of France, Construcciones Aeronauticas SA (CASA) of Spain and
DaimlerChrysler Aerospace AG (DASA) of Germany (Wikipedia, EADS). It has two headoffices: one is in Ottobrunn, Germany and the last one is in Paris, France (EADS at a Glance:
A Driver of Change in Aerospace and Defence). This company mainly focuses on developing
and producing the civil and military aircrafts, missiles, space rockets, satellites and related
systems. Airbus is one of its important divisions (refer to the Exhibit 1). This branch has
penetrated into the global market the five big aircraft families including A320 family (A318,
A319, A320, and A321), A300/A310 family, A330/A340 family, A350 family and the
newest one-A380 (Airbus).
THE SIMILARIES BETWEEN AIRBUS AND BOEING
THE DRIVERS OF GLOBAL STRATEGY
COST DRIVERS
Both Airbus and Boeing aim at launching their products into the global market. The
initial investment capital for R&D activities and production of per aircraft is so high. For
instance, Airbus spent around Euro 8.8 billion (The Wing of The Web: The Airbus A380) on
the 10-year A380 project in 1999 and the final budget estimated was above Euro 12 billion
(Airbus A380). As a result, “for the efficiency reasons” they are forced to expand globally
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and “seek international markets to justify the huge R&D expenditures” (Inkpen &
Ramaswamy, 2006, p.23:5). Moreover, the technology used in the aviation industry develops
rapidly. The new model of aircraft is given birth always is followed by the more improved
and modern technology. The 787 Dreamliner is a good example. It is supposed to utilize the
advanced VHF and satellite communication radio in its communication systems and the
terrain awareness warning systems, weather radar, traffic alert, Collision Avoidance Systems,
and airport moving map in its situational awareness systems (Boeing 787 Dreamliner longrange, mid-size airliner, USA). These pressures compel Airbus and Boeing to sell their
product in the global range as quick as possible in order to survive and compete with their
competitors. Furthermore, airplane is a special product and belongs to the heavy industry. For
this reason, it uses the minimum of distribution channels and centralizes in purchasing and
supplying of its products to lower its costs.
MARKET DRIVERS
Their domestic markets or the “single-country market” including Spain, Germany,
France and United States of America nearly were saturated; hence, cannot provide many
opportunities for their growth and be not “large enough for the local business to achieve all
possible economies of scale and scope” (Chatterjee, 2003). In the meanwhile, the emerging
markets such as China, India and United Arab Emirates progressively become their big and
potential customers (refer to the Appendices 1 and 2). Airplane is considered as a “globally
standardized product” (Pearce & Robinson, 2005, p.120) and accepted by “global customers”
with “homogeneous needs” (Chatterjee, 2003). The differences in tastes, preferences, cultures,
ethics, geographies and so forth are almost flat in this industry (Global Strategic
Management). These companies do not need to base absolutely on the local responsiveness in
producing the products. Additionally, the brand names-Airbus and Boeing-have been wellrecognized by the whole world, therefore via the global advertising they can be transferred
smoothly and broadly from country to country.
ALLIANCE STRATEGY
In order to take advantage of the other nations’ comparative advantages in technology,
material and labor (Pearce & Robinson, 2005, p.136), to “achieve the economies of scale and
to reduce excess capability”, Airbus and Boeing apply the “strategic alliance” including
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“joint R&D efforts and joint production of a particular component or subassembly” (Inkpen
& Ramaswamy, 2006, p.81). It means they did not produce all the opponents of their planes.
Instead, they share their jobs to their partners or concentrate on “the activities in low-cost or
high skills countries to increase their productivity and reduce costs” (Chatterjee, 2003). In
consequence, they can pay attention to what they can do the best and otherwise they can
reduce the costs of their production (refer to the Exhibits 2, 3, and 4).
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Exhibit 1. The Global Product Division Structure at European Aeronautic Defense & Space Company (EADS)
HEADQUARTER
AIRBUS
DIVISION
MILITARY
TRANSPORT
AIRCRAFT
DIVISION
EUROCOPTER
DIVISION
EADS ASTRIUM
DIVISION
Source: EADS at a Glance: A Driver of Change in Aerospace and Defense
DEFENCE &
SECURITY
SYSTEMS
DIVISION
OTHERS
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Exhibit 2. The 7E7 Structures Work Shares
7E7 STRUCTURES WORK SHARE
Boeing
35%
Japan
35%
Vought/Alenia
26%
Others
4%
Source: Boeing unveils Dreamliner plane
Exhibit 3. The partners in producing the components of A380 project
PRIME CONTRACTORS
COMPONENTS FOR A380 MANUFACTURED IN
France
Australia
Germany
Austria
The United Kingdom
Belgium
Spain
Canada
Finland
Italy
Japan
Malaysia
Netherlands
South Korea
Sweden
Switzerland
United States
Source: Airbus A380
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Exhibit 4. The Partners in Producing The Components of Boeing 787 Project
COMPONENTS OF BOEING 787
SUPPLIED BY
Tail fin
Frederickson, Washington
Ailleron, moving leading, trailing edges & flaps
Tulsa & Boeing Australia
Fairings
Beoing Canada Technology
Wings, composite nose sections & fuselage
Japanese companies in Nagoya, Alenia in Italy,
fairings
Kawasaki Heavy Industries in Japan, Winnipeg in Canada &
Spirit AeroSystems in Wichita, Kansas
Passenger doors
Latecoere, France
Cargo doors, access doors & crew escape door
Saab, Sweden
Landing gear
Messier-Dowty, France
Integrated flight display & electronical power
Thales, France
conversion system
Flight control, guidance & other avionics systems
Honeywell & Rockwell-Collins
Power distribution & management systems
Connecticut (USA)-based Hamilton Sundstrand
Flight deck & fuselage
Wichita, Boeing company
Center wing box & install the wells
Japan's Fuji Heavy Industries
Wing box
Mitsubishi Heavy Industries
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Nacells & thrust reverser
Goodrich
Source: Boeing 787 Dreamliner long-range, mid-size airliner, USA.
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TURN THE PROBLEMS OF AIRBUS INTO THE ADVANTAGES OF
BOEING
Although Airbus likely possesses the better and sooner commencement, it now has to
face the loss of its order contracts loomed large to the long-standing competitor-Boeing. For
recent five years, Airbus usually has led Boeing in the qualities of orders and delivery (refer
to the Exhibit 5).
Exhibit 5. The orders and delivery of Airbus and Boeing for five years
Source: Wikipedia, Airbus
In addition, it has supplied to the world market the A380 in 2007-one year earlier than
Boeing with 787 Dreamliner. However, it presently encounters some serious issues in its
value chain (refer to the Exhibit 6). Its postponement in providing its A380 superjumbo jet in
2 years later, especially in the case of UPS due to its wiring systems isusses pushes it to the
peak of the crisis. This delays have cost Airbus Euro 4.8 billion losses and made a good
opportunity for its rivalry-Boeing-to gain the $2.8 billion order contract for 10 of the
freighters (Airbus Postpones Freighter Version of Superjumbo A380: Updated 4). Besides the
causes of its operations, Airbus also confronts with the problems of Human Resource
Management. The plans have intention to “cut 10,000 jobs over four years and sell or find
partners for six factories due to the A380-related costs”. These lead to the reduction in value
of the EADS shares falling to Euro 24.62 in Paris and to $70.12 in New York Stock Market
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and provoke the protests of Germany unions and its employees. It also has to take the charge
of Euro 680 million in the case if it persists in carrying out this strategy (Airbus to Cut 10,000
Jobs, Take EU680 Million Charge: Update 6). In addition, it must cope with the gap and
fluctuation in exchange rate between dollar and euro. Its inputs have been cost in euro but its
prices are fixed in dollar. Hence, there is a small and slightly negative change in dollar value;
it can cause the big loss to Airbus.
Exhibit 6. The Value Chain
Firm infrastructure
Support
Activities
Margin
Human Resource
Management
Technology Development
Procurement
Inbound
logistics
Operations Outbound Marketing Service
logistics
& Sales
Margin
Primary Activities
Source: Kluyver and Pearce, 2006, p.76
On the contrary, on Sunday 8 July 2007 in front of 15,000 employees, customers and
suppliers at the Boeing Company plant in Everett, Washington States, US the “elaborate
unveiling ceremony of the entirely new, mid-sized and long-range Boeing 787 took place
(Boeing unveils lean, clean Dreamliner 787). The outstanding features of the new model
adding to the readiness to supply at any time of Boeing become the real threat for Airbus.
Airbus must take actions as soon as possible before its order contracts would pass to Boeing’s
hands.
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STRATEGIC CHOICE IN A GLOBAL MARKET
ADAPTATION AND DIFFERENTIATION TO BE SUCCESSFUL
Following the changes in the natural and competition environment, Airbus and
Boeing are propelled to adapt and be varied from the other competitors. Airbus and Boeing
are the age-old and global opponents. Whichever market has the presence of one, the left will
immediately jump in. If one has a new product, the other will at once penetrate into market a
newer one. This looks like a continuous and untired combat. The Boeing 787 has been born
to compete with the A380 of Airbus. It has many outstanding features compared with the
same kinds (refer to the Exhibit 7). “All corporate strategic planning is based upon a
company’s vision of the future” (Chatterjee, 2003). “The market trends, new technologies,
customer demographics, and new products and initiatives of competitors” can affect this
vision. The natural resources especially the crude oil and mineral gradually become scarce.
The urgent issue tabled whole the time is how to decrease the fuel we used but it still
guarantees the engine’s capability or even operated at the higher level. Boeing is on the way
ahead of its time. It has a desire to be the market leader to acquire whole the benefit because
Airbus has to wait until 2013 to have capability to produce the A350 XWB. It is relatively
late, but Airbus nowadays is aware that “The future of airplanes is plastic, not
aluminum”. Airbus step by step moves to the production of the composite or carbonfiber by seeking partners who can help its three plants transferring from work with
aluminum to composite materials.
DEMAND CONDITION
So as to survive and develop, both Airbus and Boeing ought to elaborate and do
research on the market demands (Inkpen & Ramaswamy, 2006, p.36). They are obliged to
predict and determine the trends and the changes of the demands of customers as well as the
markets. However, Airbus and Boeing have different directions in producing their airplanes.
In respect of Airbus, this European firm has the inclination to the big superjumbo to meet the
increasing of passengers in major hubs. On the contrary, Boeing centers on the smaller planes,
especially the medium-sized ones that can service in smaller airports (Boeing unveils
Dreamliner plane).
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Exhibit 7. Compare between Boeing 787 Dreamliner families and Airbus
Boeing 787 Dreamliner family
787-3
Seating
Class cabin
configuration
Enter service
Height
Internal Cabin Width
Length
Price
Range
Take-off weight
Wing span
Special features
787-8
290-330
787-9
210-250
2
17.4 m
56 m
$146151.5m
6,500 km
136,075
kg
51.5 m
555 (max 840)
3
2008
17.4 m
5.4 m
56 m
2010
17.4 m
$157-167m
$189-200m
15,700 km
15,370 km
62 m
205,400 kg
223,000 kg
58.8 m
58.8 m
Can carry passengers non-stop on routes of up to
16,000km at speeds up to Mach 0.85 (=646.85 mph)
50%
A350
XWB
A380
250-290
3
Lighter weight because
Carbon-fiber composites
Airbus
314
3
2007
24.1 m
6.58 m
73 m
€ 235.4m251.6m
($ 295.6m-316m
or
£ 161.9m173.1m)
15,200 km
560,000 kg
79.8 m
Double decks
2013
5.58 m
15,000 km
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Aluminum
20%
Titanium
15%
Steel
10%
Others
5%
Twin and lighter engines supplied by General Electric
GENX & Rolls-Royce Trent 1000, so can save 20%
on fuel
Higher humidity makes passengers feel more
comfortable
Designed with repeated sweeping arches in internal
cabin
Produces 20% less CO2
Cargo revenue capacity increases by 40%-60%
Wider aisles & seats and larger windows
Source: Table was compiled from Boeing 787 Dreamliner will provide new solutions for Airlines, Passengers, Boeing
unveils Dreamliner plane, Boeing year orders up to 580, trailing Airbus, Boeing 787
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CONCLUSION
The external environmental conditions have changed, they lead to the adjustment of
each corporation in order to subsist and move forward. Boeing checkmated Airbus when it
can get ahead of Airbus in designing and producing Dreamliner 787. To retaliate against
Boeing, Airbus needs to resolve its issues and be more dynamic in its international strategies.
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APPENDICES
Appendix 1. The Airbus A380 Orders
AIRBUS A380 ORDERS
NO.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
AIRLINES
A380
Emirates
43
Lufthansa
15
Qantas
12
UPS
10
Singapore Airlines
10
ILFC
10
FedEx
10
Air France
10
Virgin Atlantic
6
Thai Airways
6
Malaysia Airlines
6
Korean Air
5
Kingfisher Airlines
5
China Southern Airline
5
Etihad Airways
4
Qatar Airways
2
Total
159
Source: Airbus A380 Orders
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Appendix 2. The Boeing 787 Orders
BOEING 787 ORDERS
NO.
AIRLINES
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Qantas
Chinese Airlines
All Nippon Airways
Air Canada
LAN Airways
Japan Airlines
Air India
Continental
Singapore Airlines
ILFC
Northwest Airlines
Korean Airlines
Ethiopian Airlines
China Southern
Kenya Airways
First Choice Airway
Air New Zealand
LOT
Monarch Airlines
Air Pacific
Vietnam Airlines
Royal Air Maroc
Icelandair
Blue Panorama
Total
BOEING
OPTIONS
787
65
20
60
50
37
46
32
30
20
27
25
20
20
20
18
50
10
10
10
10
9
8
8
7
6
4
5
3
4
4
4
4
473
173
Source: Data were collected from Boeing 787 Dreamliner long-range, mid-size
airliner, USA and Wikipedia, Boeing 787
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REFERENCES
About Us: Boeing in Brief. Retrieved July 19, 2007 from
http://www.boeing.com/companyoffices/aboutus/brief.html
Airbus A380 Orders. Retrieved July 11, 2007 from
http://www.airbusa380.com/
Airbus A380. Retrieved July 19, 2007 from
http://www.airbusa380.com/
Airbus Postpones Freighter Version of Superjumbo A380: Updated 4. Retrieved July 19,
2007 from
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aM5_PcaquZdk
Airbus to Cut 10,000 Jobs, Take EU680 Million Charge: Update 6. Retrieved July 21, 2007
from
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a911Km9o8lFw
Airbus. Retrieved July 19, 2007 from
http://www.eads.net/1024/en/eads/eads_overview/airbus.html
Boeing 787 Dreamliner long-range, mid-size airliner, USA. Retrieved July 11, 2007
from
http://www.aerospace-technology.com/projects/dreamliner/
Boeing 787 Dreamliner will provide new solutions for Airlines, Passengers. Retrieved
July 21, 2007 from
http://www.boeing.com/commercial/787family/background.html
Boeing 787. Retrieved July 20, 2007 from
http://en.wikipedia.org/wiki/Dreamliner
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Boeing unveils Dreamliner plane. Retrieved July 21, 2007 from
http://newsvote.bbc.co.uk/1/hi/business/6282820.stm?dynamic_vote=ON#top
Boeing unveils lean, clean Dreamliner 787. Retrieved July 19, 2007 from
http://www.newscientisttech.com/article.ns?id=dn12221&feedId=online-news_rss20
Boeing year orders up to 580, trailing Airbus. Retrieved July 21, 2007 from
http://www.reuters.com/article/businessNews/idUSN1227934020070712
Chatterjee, S.R. (2003). Readings in Dynamics of International Strategy. Curtin University of
Technology Press
Commercial Airplanes. Retrieved July 19, 2007 from
http://www.boeing.com/product_list.html
EADS at a Glance: A Driver of Change in Aerospace and Defense. Retrieved July 19, 2007
from
http://www.eads.net/1024/en/eads/eads_overview/eads_overview.html
Global Strategic Management. Retrieved July 19, 2007 from
http://www.quickmba.com/strategy/global/
Inkpen, A & Ramaswamy, K (2006). Global Strategy: Creating and Sustaining Advantage
Across Bothers. Oxford University Press
Kluyver, C. A. De and Pearce, J. A., (2006). Strategy! A View From The Top. Pearson
Prentice Hall
Pearce, J.A. & Robinson, R.B. (2005). Formulation, Implementation, and Control of
Competitive Strategy. The McGraw-Hill Companies, Inc.
The Wing of The Web: The Airbus A380. Retrieved July 19, 2007 from
http://www.airliners.net/info/stats.main?id=29
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Wikipedia, Airbus. Retrieved July 19, 2007 from
http://en.wikipedia.org/wiki/Airbus
Wikipedia, Boeing 787. Retrieved July 19, 2007 from
http://en.wikipedia.org/wiki/Dreamliner
Wikipedia, Boeing. Retrieved July 19, 2007 from
http://en.wikipedia.org/wiki/Boeing
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