Business Jet Industry in China: Analysis, Expansion, and Forces

This report provides a comprehensive analysis of the business jet industry in China, examining the market through Porter's Five Forces framework, discussing the unique resources and capabilities required for competitors, and analyzing the formal and informal institutions that impact the industry's growth. The report also identifies the United States as a potential market for expansion, providing justification based on industry, resources, and institutional perspectives. The analysis includes a discussion of key players like Gulfstream, the impact of government regulations, and the overall growth potential of the corporate jet market in China and the US. The report leverages both quantitative and qualitative data to provide a thorough overview of the industry's current state and future prospects.

Running head: BUSINESS JET MAKERS IN CHINA
BUSINESS JET MAKERS IN CHINA
Name of the Student
Name of the University
Author Note

1BUSINESS JET MAKERS IN CHINA
Table of Contents
Introduction........................................................................................................2
Porter’s five forces of Corporate Jet Industry in China......................................2
Discussion of unique resources and capabilities that competitors have to
compete........................................................................................................................3
Formal and informal institutions in China that accelerate or constrain growth of
Corporate Jet Industry..................................................................................................5
Analysis of US as a country in which Corporate Jet companies can expand...6
Conclusion.........................................................................................................8
References.........................................................................................................9

2BUSINESS JET MAKERS IN CHINA
Introduction
Business jets or corporate jets are the jet aircrafts that are designed for the
purpose of transporting small groups from one place to another. Business jets can
also be adopted for many different roles like the evacuation of casualties or the
express delivery of parcels. The earliest business jet that had started its flight was
the Lockhead JetStar that had a seating capacity of ten passengers and two crew
members. Around 204 aircrafts were produced from the 1957 to 1978 that were
powered by the various engines (Andrews, Linn and Yi 2017).
The report will be built on the study of the Corporate Jet Industry that has
been developed in China. The Porter’s five forces framework will be used in order to
analyse the variations that have taken place in the Jet Industry in China. Different
institutions that have an impact on the growth of the industry will also be discussed in
the report. The resources and capabilities that the competitors need to gain will also
be analysed with the help of details related to Corporate Jet Industry.
Porter’s five forces of Corporate Jet Industry in China
The Corporate Jet Industry of China is affected positively by the huge number
of business men who are a part of various industries in the country. The investments
that are provided by various foreign firms are able to provide support to the
improvement of business jet industry. Porter’s five forces framework can be
implemented in order to analyse the Corporate Jet Industry of China in a detailed
manner (Bereznoi 2015).
Bargaining power of the suppliers – The power that has been gained by
the suppliers in airlines is quite high. The suppliers of aircraft, labour and aviation
fuel are able to play a major role in deciding the prices of services that are provided

3BUSINESS JET MAKERS IN CHINA
to the customers. Corporate Jet Industry of China is also affected in a huge way by
the suppliers in country who are able to provide various raw materials.
Bargaining power of the consumers – The power of consumers in the
corporate or private jet industry in China is also quite high. Business travellers use
the jets based on their personal needs and the costs also depend on their budgets
(Bourjade, Huc and Muller-Vibes 2017).
Barriers to entry of new companies – The barriers that are mainly related to
entry of new firms in aviation industry are quite high. The requirement of capital is
considered to be a key aspect that has an impact on operations of various firms. The
entry in aviation industry is influenced negatively by the levels of capital
requirements (Budd and Goetz 2016).
Threats provided by the substitutes – The threats based on substitutes that
are faced by the organizations in business aviation industry are low. The time
requirement related to the usage of flights for private travel is low and this is a major
factor that cannot be substituted by any other mode of travel.
Intensity of the competitive rivalry – The intensity and levels of competitive
rivalry in the industry are not quite high due to the absence of similar services that
are offered by other organizations in Corporate Jet Industry of China (Eriksson and
Steenhuis 2015).
Discussion of unique resources and capabilities that competitors have to
compete
Unique capabilities that competitors have to face - The resources and
capabilities that are required by organizations in order to compete in the jet industry

4BUSINESS JET MAKERS IN CHINA
are quite huge. The major organizations that are a part of the industry include
Cessna, Beech Hawker and Gulfstream. Other traditional competitors in the industry
are Dassault Falcon of France and the Learjet of Canada. The key capabilities that
are offered to the consumers are related to high levels of privacy, luxury and long
range (Ghemawat and Hout 2016).
The top three jet makers in the industry are Airbus, Boeing and Embraer of
Brazil. The current leader in the Chinese Corporate Jet Industry is Gulfstream. The
company has sold more than 100 jets and also has the highest share in the market.
Gulfstream has aimed at gaining buyers in the industry by implementing different
strategies and approaches to attract them and retain them as a part of the
organization. The demands for the business jets developed by Gulfstream has also
increased in the last few years due to the services that are provided by the firm to all
its customers (Gilchrist 2016).
The sensitivity that is shown by Gulfstream to the various cultures is
considered as a major capability of the organization. The market-oriented efforts that
are undertaken by the organizations have an impact on the organizations and the
customers as well. The services that are consistently offered by organizations in the
Corporate Jet Industry to customers have an impact on the image that is developed
by them in their minds (Goetz and Sutton 2017).
Unique resources that competitors have to face - The financial resources
that have been gained by the organizations operating in Corporate Jet Industry are
quite huge and they are able to uphold a position in the industry with the luxurious
services that are offered. The premium services that are gained by customers are
considered to be an important part of the resources that are used by the

5BUSINESS JET MAKERS IN CHINA
organization. The companies in China are able to maintain their operations with the
support that is provided by the financial and the human resources as well (Griffin,
Kruger and Maturana 2017). Gulfstream has been able to develop an important
position in the Corporate Jet Industry of China by using the financial resources in an
efficient manner. The deals that are made by the company have the ability to
increase the levels of resources that have been gained in order to offer the services
to customers (Huang and Lin 2016).
Formal and informal institutions in China that accelerate or constrain growth
of Corporate Jet Industry
The business aviation related activities have increased in China in the last few
years after the global financial crisis that had taken place in the year 2008. The huge
organizations who had gained value in the aviation industry had started making
investments in the purchase of private jets. The virgin skies of China had also been
used in an extensive manner by the owners of various business organizations. The
military of China had a major control over the skies of the country. The submission of
flight plans and getting approval for them is also a tiresome process that the
organizations have to go through (McAlister and Ferrell 2016).
The take-off slots that are provided to the business jets in China are quite
limited and this is able to affect the flight plans that are made by the business
owners. Taxes and duties are able to play a key part in growth of the influence on
the purchase of business jets. The luxury tax is able to influence the prices of luxury
jets in the Corporate Jet industry of China. Anti-corruption campaigns developed by
the President and provided negative influence on the state-owned organizations as
well (O’Connell 2016). The barriers that are mainly provided to organizations in

6BUSINESS JET MAKERS IN CHINA
Corporate Jet Industry are based on the issues that are faced due to different
institutions like military organizations. The flights of business jets are influenced in a
huge manner by the regulations that have been developed by the military of China.
The lack of support from such an institution is considered to be a key aspect that has
an impact on the organizations and their operations as well (Ringham and Miles
2018).
On the other hand, the support that is offered by the government of China is
considered to be a major driver that helps in the development of the operations of
organizations in Corporate Jet Industry. The plans that are developed by the
Chinese government is able to support the non-airline aviation of the business and
private jets as well. The government has also provided instructions to the military to
provide chunks of air space to the business jets. The government claimed that
business travel was not only based on luxury, it is also able to help the organizations
in increasing the levels of productivity that have been gained in their respective
industries (Soshkin 2016).
Analysis of US as a country in which Corporate Jet companies can expand
The Corporate Jet companies can plan to expand their operations in a major
economy like the US that can provide major opportunities to the organizations in
order to maintain their profits. The aviation based activities that are performed for
business purposes are a significant part of the operations of organizations in the
Corporate Jet Industry. The business aircrafts are able to transfer small groups of
people from one place to another for various business purposes (Spreen 2016). The
evacuation of casualties at the time of emergencies and parcel deliveries are also
considered to be other major activities that are performed by the business jets.

7BUSINESS JET MAKERS IN CHINA
US has the largest market for aviation organizations in the world with around
21400 business aircrafts that are currently operating in the country. The community
of business aviation in the country comprises of companies of various sizes that can
rely on different types of aircrafts that can fulfil the needs of people. The capacity of
business aviation has shown moderate levels of growth in the last few years and is
able to attract many different organizations from various parts of the world (Taneja
2016). The fleet size of business aircraft has increased from 19894 in the year 2015
to 21339 in the year 2018. The total flight hours in the business aviation industry of
the US has also increased from 1.41 million to 1.59 million. The overall growth of the
industry is however not able to translate to the individual growth that is shown by the
individual firms that are a part of the industry. The annual revenues of the leading
organization in the US has decreased since the year 2015 (Ringham and Miles
2018).
However, the major levels of opportunities that are provided by the US
business aviation industry have an impact on the proper development of business
aircraft fleets that are able to accomplish needs of business travellers. The entry of
modern organizations in the business aviation industry can help in improvement of
the industry and provide major contribution to the growth as well. The huge market
that is offered by the US to various companies can help in proper improvement of the
revenues and profitability (Eriksson and Steenhuis 2015).
The growth of individual firms is also assured with the support that is offered
by the huge customer base in the country. The presence large number of major
business organizations in the US is considered to be a major factor related to the
increase in number of business travellers who can use the business jets. The
individual companies can thereby gain huge levels of revenues by fulfilling the

8BUSINESS JET MAKERS IN CHINA
demands of business organizations in the country. The business aviation industry in
the US has major chances of improvement and can maintain revenues of individual
organizations that are a part of the country (Goetz and Sutton 2017).
Conclusion
The report can be concluded by stating that the Corporate Jet Industry in
various countries have shown immense levels of growth in the last few years. The
firms that function in the industry have been able to maintain their growth in an
effective manner. The Corporate Jet Industry in China has also provided major
opportunities to the organizations so that they are able to provide their services to
the business travellers. The private jet or corporate jet industry is becoming a major
part of the economy of various countries. The business aviation industry of the US is
also capable to attracting different organizations towards the large customer base of
the country. The slow growth of the industry will also be improved with the help of
entry of various new organizations in the country.

9BUSINESS JET MAKERS IN CHINA
References
Andrews, A., Linn, S. and Yi, H., 2017. Corporate governance and executive
perquisites. Review of Accounting and Finance, 16(1), pp.21-45.
Bereznoi, A., 2015. Business model innovation in corporate competitive
strategy. Problems of Economic Transition, 57(8), pp.14-33.
Bourjade, S., Huc, R. and Muller-Vibes, C., 2017. Leasing and profitability: Empirical
evidence from the airline industry. Transportation Research Part A: Policy and
Practice, 97, pp.30-46.
Budd, L. and Goetz, A.R., 2016. The geographies of air transport: An introduction.
In The geographies of air transport (pp. 17-22). Routledge.
Eriksson, S. and Steenhuis, H.J. eds., 2015. The global commercial aviation
industry. Routledge.
Ghemawat, P. and Hout, T., 2016. Can China's Companies Conquer the World: The
Overlooked Importance of Corporate Power. Foreign Aff., 95, p.86.
Gilchrist, A., 2016. Industry 4.0: the industrial internet of things. Apress.
Goetz, A.R. and Sutton, C.J., 2017. US Airline Industry. Low Cost Carriers:"
Emergence, Expansion and Evolution, 199.
Griffin, J.M., Kruger, S. and Maturana, G., 2017. Do personal ethics influence
corporate ethics?. Available at SSRN 2745062.
Huang, C.W. and Lin, C.Y., 2016. Do aircraft perquisites cause CEOs to withhold
bad news?. The North American Journal of Economics and Finance, 35, pp.189-202.

10BUSINESS JET MAKERS IN CHINA
McAlister, D.T. and Ferrell, O.C., 2016. Corporate governance and ethical
leadership. In Business ethics: New challenges for business schools and corporate
leaders (pp. 68-93). Routledge.
O’Connell, J.F., 2016. Airlines: an inherently turbulent industry. In Air Transport in
the 21st Century (pp. 109-146). Routledge.
Ringham, K. and Miles, S., 2018. The boundary of corporate social responsibility
reporting: the case of the airline industry. Journal of Sustainable Tourism, 26(7),
pp.1043-1062.
Soshkin, M., 2016. The US Aerospace industry: a manufacturing
powerhouse. Business Economics, 51(3), pp.166-180.
Spreen, W.E., 2016. Marketing in the international aerospace industry. Routledge.
Taneja, N.K., 2016. Airline Industry: Poised for Disruptive Innovation?. Routledge.