Operations Strategy Of Boeing And Airbus

A comparison of the overall Strategy and especially the Operations Strategy of Boeing and Airbus

Introduction

In the last fifty years, Airbus and Boeing Company have taken over the aircraft industry. Since then Boeing Company is involved in a major fundamental organizational transformation in its move from a manufacturer of an aircraft to a major planner of a broadly outsourced supply chain. Transition process has not been that easy. In its new role as a planner, the company encountered numerous challenges leading to general delays in assembly of its Boeing 787 Dream liner leading to major financial costs.

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Strategies involved include;

Constant improvements in value of products and processes involved:

The commitment of the company to steady and long-term perfection in their products and processes is the foundation of their key strategy. In order to achieve this, the company consistently works to improve the overall quality of their design, administrative, manufacturing and support organizations (Barnes, 2008).

A highly qualified skilled and motivated workforce:

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Human resource is the most significant resource in Boeing Company since they are the people who undertake the huge task of building and designing products and services to customers. In achieving this, it tends to combine skills, communications, training, leadership and environment. This enables their employees to achieve the needed gains in productivity and quality to meet Boeing company goals. Careful selection of managers, well training and team work is ensured by the company, to achieve the company’s long-range goals.

Boeing- Airbus

The competition between these giants, the only manufacturers of long-range or large medium passenger aircraft, has reached at the highest level. Five years ago Airbus has overtaken Boeing to be number one. This is because of its success in middle capacity Airbus A-330 and its shorter-range distinction like the A-340. In 2004 total revenues of Boeing were higher than that of Airbus. This is because Boeing gains profit from other activities such as, defense, military aerospace and space businesses. With the Airbus Company launching A380, the market share in the subsequent years will have an impact on Airbus. Though, Boeing Company will regain its market share because of the new model of 7E7, Dream liner making competition more aggressive (Mahadevan, 2009).

Segmentation

A company’s segmentation of their customers is done mainly through geographic regions. Boeing Company believes that Europe and North America will keep on ordering most airplanes with their full-grown economies. The company believes that aircraft passage within Asia pacific will go up by six per cent yearly in the next twenty years. The market share of flying within Latin America will enlarge from two to four per cent. Single aisle airlines are also factored in since they are popular in the internal short routes of Boeing’s ability to segment geographically allowing the company to determine demand patterns (Mahadevan, 2010). For instance in established economies such as Europe and North America, the company can forecast an increase in the demand for regional jets as travelers in the stated regions are demanding non-stop flights on thinner routes. Geographical segmenting enables the company to assemble other probabilities that help it in its promotion.

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Boeing’s Positioning and Targeting Strategy

Positioning

There are many criteria that apply to buying a new plane from Boeing. The main two criteria chosen are capacity and distance. These are related to Boeing’s business buyers. This is because for today’s airline businesses, the option is whether or not to manage a short or a long distance services and whether or not to have high or low capacity flights.  

Short distance and low capacity: Many

As can be seen the company believe that most of Boeing’s business airplane buyers will require planes that are extra effective at flying small distances with a low capacity. The rationale for choosing this position is that, first we can note down from the major products and services section that Boeing Company has mostly delivered to date is its 737 family, with deliveries of more than 4500 planes (Galloway, 1996).

Second reason why the company decided that this segment was where Boeing’s clients are because if we look at today’s airline business from September 11th, we do note that most airline operators are bankrupt and that the successful airlines are mainly low-cost airlines. They do operate from one point to another on a short space low competence strategy. The company believes that non existent clients may be one or two who use short distance operators who use high power planes.

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 Long distance and high capacity

A significant fraction of the company’s clients will be a component of this segment. The segment is the opposite of the first segment which indicated that Boeing had many clients. There will be demand for long distance travel unless the market faces resistance from the many short distance airline companies, but for transatlantic flights and other long abroad travel, these groups of clients will continue to exist. In this segment, products include Boeing’s 777 families that have both bigger fuel loads for a very long distance travel and higher capacity than some other planes. The 777 family is capable of carrying up to 451 passengers in a two class seating design for up to a maximum distance of 11,029Km or simply travelling to the next hemisphere without refueling. Sarcastically, this is where many clients segment for Airbus (Shim, et, al 1999).

 Long distance and Low capacity: Niche

Niche is the last segment for Boeing segment. The segment is unusual since when travelling longer distances, it is logical to use a high capacity plane. A long distance normally raises operating costs for Boeing’s corporate clients, of which can be reduced through the use of high capacity planes. Client in this segment is anybody who finds it important to undertake long distance travel and at the same time not concerned about in service costs, mostly they are clients who like to travel in ease.

Targeting

Boeing’s targeting is rather partial. Unlike Buyer to customer, in Buyer to buyer, there is very seldom a mass market and no airline industry is an exception to the rule. The company’s target is its accessible customers and the revenue margins are within the knowledge of these well well-informed customers because they are professionals who have information on the cost of production. Boeing Company has since been forced to offer certain trade discounts and also other considerable benefits to its customer with whom the company has developed a strong relationship (Mahadevan, 2010).

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The existing targeting strategy for Boeing as mentioned above is aimed at its regular clients. They are the company’s corporate customer and they include governments and governmental agencies, commercial airline companies and other non governmental organizations such as private companies. The most valuable target for Boeing Company is the commercial airline companies that it mostly serves.

Pricing strategy in the Boeing-Airbus duopoly

Boeing pricing strategy is associated to the analysis of an environment. Saving money is very important for success as well as receptiveness to the needs of the customer. Boeing is determined to realize economies of scale from its procurement, design and manufacturing processes making one of its main missions to influence prospects of economies of scale (Shim, et, al 1999).

Impact of duopoly on Boeing pricing policy

The most significant key points about the pricing strategy is related to the duopoly viable airplane structure. The duopoly progressively means a possibility of imperfect competition where the two companies Boeing and Airbus can influence the prices of their products. Actually, the two companies are far from setting their own prices. The customers, who have the option only between these two manufacturing companies, have a considerable bargaining power.

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