Differentiation Strategy adopted
The question remain that what differentiation strategy did Airbus employ in order to achieve a permanent position in the market. Airbus adopted strategy of a challenger being focused on the competitor and pushes the boundaries of the market (McKechnie et al, 2008). We will cover in deep the main strategies that Airbus employ in the following sections.
Production innovation is undeniably important for the survival of the existent in the cruel business environment of the 20th century. Mairesse and Mohnen (2005) help asserts this point of view through his survey of the importance of Research and Development for Innovation, which found that investment in this function of the business would affect profit marginal in a positive way. We will soon explore the difference in numbers of innovation made by both way of the civil aviation duopoly.
Boeing has introduced five main new products in the past 25 years, two of which were introduced by McDonnell Douglas; Boeing 777, MDD MD-11, Boeing/MDD 717, and Boeing 787 Dreamliner (Francis & Pevzner, 2006). Greatly modified versions of the 737, 757, and 767 were also introduced, but they are essentially advanced derivatives of existing airframes. Out of Boeing’s family of aircraft came a total of twelve different aircraft using the same base model since 1984 (Merluzeau, 2004).
Airbus has introduced the following aircraft in the same time frame; A310 – The twin crew airliner (Campos, 2001), A320 – The fly-by-wire airliner (Campos, 2001), A330 and A340 – The family concept, and A380 – The Dinosaur of the sky (Verghese, 2009). Out of this family of aircraft, came a total of twelve different aircraft using the same base model. In 20 years, Airbus was able to create a product portfolio that equaled what it took Boeing at least 35 years to achieve in development (Merluzeau, 2004).
Family concept of planes
Airbus’ families of aircraft have been the instrumental factor that enable it to offer a lower operating cost for airliners and this is the root of the their success (Merluzeau, 2004). With all common parts and avionics are interchangeable in the family concept, which in turn have translated into reduced inventory, lower parts management and maintenance costs, shorter pilot training/transition times, and, in turn, lower training costs for client airlines.
Boeing on the other hand has a great product for over 35 years of its existent, B747, B757 and B767. These products created the foundation of the Boeing family product. It acquires McDonnell Douglas jetliner and salvages it as Boeing 717. But it is rather different aircraft from all other Boeing, since it was not a Boeing to start with (Campos, 2001). Boeing tried to introduce the technological advance 777, which undermines the B747 (Campos, 2001) and lack commonality with the other aircraft.
Single corporate entity
For a long time the French and German governments justified their subsidies on the basis that they were supporting a fledgling industry that was generating a large number of high technological jobs (Strategic Direction, 2006). But Airbus has stubbornly refuses to acknowledge any difficulties – at least publicly. The company has continued to present a united front even though there is widespread awareness of the conflicts within ranks (Strategy Direction, 2007). Therefore the imminent restructuring of Airbus industry into a single corporate entity will transform it into a new company with new objectives, capabilities, and opportunities (Campbell, 1996). This will have provided Airbus with the view of a single entity which was leaded by the company Chief Executive. But due to long roots from government support, National political influence involvement are still remain a present in new Airbus SAS, and continue on to serve the best interest of each difference nations.
Airbus competitive advantage has been gained through its core competencies in product innovation of research and development. Financial support was an extend support by subsidies of the Pan European governments in form of military research projects. Nonetheless, in 1992 the United States and European community reached a bilateral agreement on trade in civil aircraft, where the agreement establishes limits on the direct and indirect (military) subsidies used to finance the development of new aircraft. The maximum allowed direct subsidies is 33% of development costs (Irwin & Pavcnik, 2004). Therefore the advantage that Airbus inherits might be at major risk if financial support is limited on its continuity core competency in research and development. If Airbus’s prime goal of creating the world biggest aircraft strategy would fails, its financial position would be badly affected. Consequently this failure would put the sustainability of it product innovation competitive advantage in endangerment.
Airbus’s new cost efficient airliners have created an advantage over it rival Boeing; this was the fact that Airbus products are design at a later time. On the other hand Boeing in 35 years history lack the innovation of current technological breakthrough in civil aviation manufacturing. But if Boeing is in able to come out with newly innovative family of aircraft, this would jeopardize the competitive advantage that Airbus has over Boeing. In reality this is not far from the truth with the introduction of the Boeing 787 Dreamliner. The Dreamliner is the result of Boeing’s new innovation. The aircraft is swift and fuel efficient, a new feature from their new fuselage design (Verghese, 2009). Matlack (2009) points out another cutting edge breakthrough in the aircraft, is the use of a plastic-based composites fuselage, which enable the liner to be lightweight in design. If Boeing continues with this technological advancement in their strategy, Airbus sustainable competitive advantage would prone to be only contemporary.