Airbus was formed in the 1960s by a consortium of European companies from Germany, France, UK and later Spain, in response to the American manufacturers’ dominance of the aerospace industry. Airbus has progressed over the years from a ‘Question Mark’ to that of a ‘Star’ (Boston Consultant Group’s Growth-Share matrix). By adopting strategies based on the Ansoff grid, Airbus has broken through Boeing’s market domination, growing 5-10% p.a. and achieving 25% market share in 1980. As of 2010 Airbus’ market share was 52% based on net orders, in a duopolistic competition with its other major rival, Boeing.
Airbus has adopted a differentiation strategy in its ...view middle of the document...
Its flagship, the A380 was designed in line with the traditional hub-and-spoke model (as opposed to Boeing’s tendency towards the point-to-point model). Outsourcing to China has helped Airbus secure 45% delivery share there by 2011. However, Airbus needs to be mindful of supply chain risks from its vast supplier network- the A380 was delayed by 2 years resulting from production issues, causing Airbus’s share price to drop (26% in 2006) and reduced earnings by €4.8 billion in 2010.
The aerospace industry is still growing rapidly especially within Asia. PEST analysis has shown that political and economical factors, e.g. deregulation and higher living costs have resulted in increased flight routes and rising popularity of low-cost carriers. Freight is estimated to grow by 253% by 2026. Social factors e.g. the internet-savvy young generation with a global mindset has resulted in projected air travel growth of 5.3%, whilst technological factors such as computerization and innovative aircraft designs has resulted in safer and better planes. However, the volatile oil price plays a major role in affecting air travel (peaked $111.43 in Dec 1979 and again peaked $129.84 in June 2008).
To be competitive, Airbus needs to continuously maintain its core competencies (operational capabilities, innovativeness, etc) that provide sustainable competitive advantage whilst strengthening its other capabilities. Being able to react quickly to industry changes (e.g via PEST analysis is also vital to Airbus to ensure that it maintains its leadership in the aerospace industry.