The Rise of Airbus, 19702005

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Submitted By: F10031-F10040

Introduction
Discusses the various strategies adopted by the 3 CEOs of AIRBUS over the period of 1975-2005
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Factors affecting the Aircraft Industry Strategies of Bernard Lathiere (1975 1985) Strategies of Jean Pearson (1985 1998) Strategies of Noel Forgeard (1998 2005) Current Problems which AIRBUS is facing

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Commercial Aircraft Industry

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Huge cost of Product Development A lead time of 5-6 years from launch to first delivery

Very difficult to breakeven Price reflected high development costs Engine was most difficult to make and most expensive part of the Aircraft

Aircraft industry dependent on other industries, Material Application and electronics etc.

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Early History of Airbus

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Post-war unable to develop commercially viable airplanes Financial assistance given by French , British and German Governments

Development of A300 With no sales taking place , British govt. withdrew Consortium was formed in the year 1971

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Strategies adopted by Airbus CEOs

Bernard Lathiere, 1975-1985

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Technological Leadership
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Airbuss technological innovations focussed on materials applications, flight control systems and Aerodynamics

Airbus introduced a Computerized system of flight controls

Worlds first fly-by-wire commercial Aircraft A380

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Bernard Lathiere, 1975-1985

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Families of Planes planes built around basic model

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Shared maintenance, training and operation procedures, as well as replacement parts and components , all helped to cut costs

Decentralized Production Subcontracting as risk sharing strategy

Centralized Marketing
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Targeted large segments of emerging markets Focused on mature American market and offered U.S.

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Jean Pierson, 1985-1998

Product Development
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Airbus embarked on two programs:

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Planned, designed, produced and sold A330/340 family of planes

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Planned the development of A380 program A380 was exceedingly risky projects

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Jean Pierson, 19851998

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Sales
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Focused on North American market Airbus moved quickly to replace the Europeans with native Americans

Streamline all pricing decisions

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Jean Pierson, 19851998

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Subsidies
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Airbus Accord 1992 The accord limited all direct subsidies to 33% of developing costs and all indirect subsidies to 4% of total sales

Legitimized Airbuss right to receive subsidies

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Noel Forgeard, 1998-2005

Restructuring
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Cross Border merger between the partner companies resulted in the formation of EADS which floated AIC (Airbus Integrated Company)

This had the following advantages

Cost savings Faster decision making Leaner, more flexible Organization

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Diversification
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Airbus diversified its product line to manufacture military jetliners.

Military sales softened the impact of periodic slumps in commercial aircraft sales.

In 2001, EADS achieved 35% of its sales from defense, space and aeronautics products.

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Globalization
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Main focus is to reduce production costs and increase aircraft sales

Outsourcing

contracts with major US suppliers,

Japanese suppliers and China

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BCG Matrix
LOW A320/ A330 A380 / A350

Industr y Growth Rate

Cash Cow

Dogs

Stars 3/5/12 HIGH

??? Relative Market Share LOW

IFE Matrix

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Interpretation of IFE
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The total weighted score comes out to be 3.4 This shows that the companys performance is close to below average as judged by the matrix

Hence there is a scope for improvement in the internal factors. It should work on its weaknesses like competition and technology 3/5/12

EFE Matrix

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Interpretation of EFE
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The total weighted score comes out to be 3.65 This shows that the companys performance is average as judged by the matrix Hence there is a scope for improvement in the external factor handling and Airbus should concentrate on the problem areas

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Problems faced by Airbus

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Future prospects of A380 gamble were uncertain

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A380s cost shot up by more than $4 bn There were not enough orders The planes travel range was not up to the mark

Severe threat from Boeings 787 Dreamliner A ensuing trade war with Boeing Inability to finance A350 on its own

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What should Forgeard do?

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Continue

the

cost

cutting

programs

of

his

predecessors
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Improve the design and speed up the production of A350

Expand

the

Defense

products

business

into

Emerging markets and form strategic alliances with companies in those countries
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Avoid trade war with Boeing by not getting the aid for A350. Instead Airbus can raise

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Thank YOu

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