BUSIESS STRATEGY MANAGEMENT: Airbus and Boeing Porter's Five Forces

This case study provides a strategic analysis of Airbus and Boeing within the aerospace industry, utilizing Porter's Five Forces framework. It examines the threat of new entrants, bargaining power of suppliers and consumers, the threat of competitors, and the threat of substitute products. The analysis reveals that the high capital requirements pose a significant barrier to new entrants, and the limited number of suppliers reduces their bargaining power. The study also reflects on general environmental factors that could shift the industry in the future, such as consumer demand and increasing competition. The assignment further answers five questions related to the case, addressing market dynamics, barriers to entry, future demand, and strategies for new entrants, concluding that Airbus and Boeing maintain a strong market position due to their brand image and scope for international growth. Desklib offers a wealth of similar solved assignments to aid students.

BUSIESS STRATEGY

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Introduction
This report is based on the process of strategic analysis which is used by the companies to
develop the strategies. Porter’s Five Forces Analysis is used to analyse the external
environment of the companies Gans (1). In this report, the case study of Airbus and Boeing
has been taken into consideration to analyse the environment. Airbus and Boeing are the
manufacturing companies of Aircraft. These are operating under the aerospace industry
which design, manufacture and deliver the aircrafts to the companies.
Porter’s Five Forces Framework Analysis
Porter’s Five Forces Framework Analysis is a tool which is used by the companies to analyse
the external environment forces. It helps to identify the competition level in the market in
order to beat the competitors by developing the strategies Greiner and Julian (2) As this case
study is based on the growth of the companies in the industries that is why, it is an
appropriate tool for this situation because it helps to analyse the position of the company as
well. The factors which included the different factors and these are as follows:
The threat of new entrants
This force helps the companies to analyse the threat of new entrants in the market. It has
been analysed that the companies have low level of threat of new entrants just because of
high capital requirement. According to the case, the companies require the commercial cost
to bring the new aircrafts in the market. It is difficult for the new entrants to bring the large
amount to develop the aircrafts. Boeing invests $18 to $20 million to develop the latest
aircrafts in the market. Risk is the factor which affects the new entrants to enter the market.
According to Hill, Schilling, and Jones (3), the companies also have the risk in the industry

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due to high value of goodwill in the market. It is observed that only Boeing and Airbus have
the capability to develop the new large commercial aircraft.
Bargaining Power of suppliers
Bargaining power of suppliers states that negotiation power of suppliers while providing the
raw material to the companies Mordern (4). The bargaining power of suppliers is low due to
less number of companies in the market. According to the case study, the cost of equipment
of aircraft is high which cannot be delivered by large number of suppliers.
Bargaining Power of Consumers
This force helps to evaluate the negotiation power of consumer while dealing in the goods
and services. It has been seen that the bargaining power of consumers is low due to less
number of companies and the high quality of services. As per the case study, it has been seen
that the demand of new aircraft is determined by the demand of air travel. The
manufacturing costs of the aircrafts are high due to which the companies offer the high prices
to the consumers. As there are less numbers of companies, the consumer have no other option
to take the similar services with the other companies in the less amount.
The threat of competitors
This force helps to analyse the threat of competitors to the companies in the market as per
their market position. Airbus and Boeing have lower level of threat of competitors just
because of less number of new entrants. The three companies enter the market with the small
narrow bodied jets with the 100 seats capacity which reflects the growing situation of the
industry Zhao, Zuo, Wu PH, Yan, Zillante (5). The companies are coming to gain the market
share but Airbus and Boeing develop their own agencies to compete the competition.
The threat of Substitute

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This force helps to identify the threat of substitute products and services which can easily
replace the services of the company. The companies have the lower level of threat of
substitute because it is difficult to produce the product which can replace the aircraft. The
companies themselves manufacture the fuel effective vessels for the own narrow bodied
planes which have the chances to replace the some parts of aircraft.
Reflection on general environment
I think the bargaining power of consumer and the bargaining power of new entrants affects
the growth of the industry. As per my analysis, it has been seen that the demand of the
consumer will affect the growth of the industry. If the demand of the consumers is increases
towards the travelling then the large number of companies enters the market. Bargaining
power of consumer helps the company to determine the growth of the industry.
The another force that influence the rivalry in the future of the industry. Increasing the new
entrant increases the competition level in the market. Increasing new entrants in the industry
will grow the industry with the high profits and revenue by target the large number of
consumers. Growing industry attracts the large number of companies to invest in this industry
by entering the market Jarzabkowski and Kaplan (6). According to my analysis, the industry
will grow in the market but the competition is also rises in the companies. I think the threat of
competitors is also a force which influence the competition and affect the growth of the
industry.
Question and Answer
1. Boeing and Airbus are considered as the wide-bodied segment of the large
commercial jet aircraft industry. These two players are the quite popular in the market
that is why the demand of the aircrafts is also high. High demand is the sign of high

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profit in the industry. Cost and good brand image of the existing companies are the
barriers for the new entrants.
2. The barrier into the wide-bodied segment is not same as narrow bodied segment due
to its popularity and high demand. Wide-bodied segment requires more in the market
and the companies who operate in this segment are highly demanded which is a
barrier for the narrow-bodied segment.
3. The future demand develops an enormous profit opportunity for the two main
companies of wide bodied segment. As per the 20 years of prediction, the economy
will grow at 3.2% per annum due to which the airline traffic will continue grow at 5%
per annum. The growth of the airline traffic reflects the high demand of the consumer
for the aircrafts. The whole industry will grow high with the high percentage rate in
the next twenty years as per the developing technology and customer demand. The
both the segments are differ in the context of growth. The wide-bodied segment
requires the high cost but narrow-bodied segment less cost as compare to wide-bodied
segment. Wide-segment is more popular in the comparison of narrow-bodied segment
that is why the growth of these differs from each other. It has been seen that the
demand of narrow bodied segment will also grow as per the growth of economy but it
grow less than the wide-bodied segment.
4. The objective of the company is the main strategy to survive long in the market. As
new entrants into the bottom part of narrow-bodied industry, I will develop a long-
term plan in order to achieve the success in the future. Define the business goal,
include staff, sales and marketing plan are the steps of included long-term plan
strategy. The porters generic strategy also use with the long-term plan strategy for the
companies to survive for long-time.

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5. Boeing and Airbus are the companies who develop their own efficient vessioes of
their own narrow-bodied planes. The new offering is an appropriate step for entering
industry and keeps the new entrants down at the bottom end of the market. Offering
new services attracts the large number of customer towards the companies. Increasing
demand of the consumer helps to grab the high market share which helps to keep the
new entrants boxed into the bottom.
Conclusion
From the above analysis, it has been seen that the Airbus, and Boeing are the only companies
in the industry those have high brand image. It reflects that the companies have the high
scope in growing the business at the international level. The porter five forces framework
analyse the forces which affects the growth of the company. But as per the analysis, the
threat of new entrants and bargaining power of suppliers are the force which affects the
industry and influence the competition.

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References
1. Gans J. Value capture theory: A strategic management review. Strategic Management
Journal. 2016;38(1):17-41.
2. Greiner M, Julian S. An Empirical Test of the Five Forces Model. Academy of
Management Proceedings. 2017;2017(1):11870.
3. Hill C, Schilling M, Jones G. Strategic management. 12th éd. USA: Cengage Learning;
2017.
4. Morden T. Principles of strategic management. UK: Routledge; 2016.
5. Zhao ZY, Zuo J, Wu PH, Yan H, Zillante G. Competitiveness assessment of the biomass
power generation industry in China: A five forces model study. Renewable Energy. 2016 Apr
1;89:144-53.
6. Jarzabkowski P, Kaplan S. Strategy tools‐in‐use: A framework for understanding
“technologies of rationality” in practice. Strategic Management Journal. 2015 Apr;36(4):537-
58.