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Introduction: International Business Across Borders
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Entering in the international market is the need of the time for the organisation as there are a large number of opportunities present. However, these strategies change with regions. In this report, the international entry of Airbus had been elucidated. These comprise forming joint ventures, acquisition and mergers, and providing services to the host country. In addition to this, the completed competitive dynamics of the company was elaborated and it was revealed that the aviation industry has fierce competition due to duopoly in the market. The customers have limited options and high switching cost restricts them to stay with the company for a longer duration. In addition to this, the hierarchical structure of the company was discussed in the report and functions of each level was explained. At last, the Knowledge Management of Airbus was outlined and some important features were highlighted in the report.
Corporate Strategy is characterised by the organisation's strategic scope as a whole rather than any specific department or unit. Organisations, especially Multinational Enterprise (MNE) are more concerned about their strategies and approaches while operating and excelling in the international market where conditions might not support their strategic goals. There are many risks that organisations face. A strategy is planned considering those risks. In this report, the foreign entry strategy of Airbus is discussed briefly. In addition to this, the complete competitive dynamics is elaborated in the context of the company. At last, knowledge management and innovation are elucidated in the report.
1.1.Company Overview: Airbus is a Multinational Enterprise that manufactures both civilian and military aircraft. The company is headquartered in France and is operating from various countries in Europe. It is registered in Netherland. At present, the world's 50% aircraft are manufactured by the company (Airbus, 2018). The company employs over 133,671 employees across the world. In 2018, the company recorded an overall profit amount of €3.05 billion. The company supplies its products to almost all the countries and is currently focused on diversifying its product line (Airbus, 2018). The major competitor of the company is Boeing but with its unique approach in the international market, the company is maintaining the leading status in the aviation industry. Furthermore, the organisational structure is decomposed in order to build a better understanding of the facts related to Airbus.
2. Foreign entry strategy
For Airbus, the foreign market strategy differs from nation to nation and sometimes the region as well. For instance, the strategy with which Airbus deals in Europe may be a bit different from what it follows in the Asia Pacific Region. In addition to this, foreign market approaches vary with the degree of risks associated with them (Baier, et.al, 2014). However, all such strategies help the enterprise in leading in those market. These approaches are elaborated in this section.
- Building Local Engineering and Innovation for Growing in International Market: This strategy is opted and well suited in the Asia Pacific Region countries, especially in India where the government is campaigning “Make in India” propaganda. In such region, Airbus usually establishes its Engineering and training center and provide the local talents a knowledge of Aviation technology and hire them (Airbus, 2018). This way the company develops aircraft technology even at a lower price. This strategy has helped the company to improve and mature its aviation capabilities in terms of avionics software, structural analysis, system installation, and digital mock-up. Airbus has established two dedicated design center in India with over 1000 engineers in India.
- Direct Investment: Airbus, being one of the biggest Aviation enterprises of the world, is financially stable and hence, it has the potential to carry out direct investment in the foreign market for setting up the production unit. The company has opted this approach in Germany, Spain, China, Canada, Alabama, and other European countries. This was done either by acquiring some small players in the market or building the manufacturing unit from scratch which is also called Greenfield investment (Beghin and Bureau, 2017). All this depends on the degree of risks associated with the approach. The acquisition is the most suitable strategy for Airbus as it involves lesser risks in comparison to the latter market. Greenfield investment is risky in the new international market and it's time-consuming as well. Hence, Airbus usually goes with the acquisition approach.
- Providing Dedicated Customer Services:Airbus has established a dedicated customer service entity for the South Asian countries, such as Bhutan, Nepal, India, Maldives, and Sri Lanka. The center is established in 2018 in New Delhi and has a team of 70 members that provide customer support, tailored support programme, maintenance, flight training, and quality management (Beghin and Bureau, 2017). In addition to this, the team also carries out business development for the company in the Asian countries. The unit is also a spare parts distribution centre for one of the subsidiaries of Airbus- ‘Satair’.
- Innovation and R&T Activities with Local Partners:Another foreign strategy Airbus opts is building a network of research collaborations in host countries. It conducts research and technology (R&T) in various advance domains, such as high performance of aircrafts, big data analytics, signal processing, computer vision, and distributed computing. With its world-class team of scientists and engineers, the company provides advanced technology to the host country and its allies. It collaborates with the leading universities and educational institutions and advances their infrastructure for carrying out research and development activities.
The global aviation industry is very competitive in nature. However, there are only a few key players in the market but the competition among them is very rigorous due to huge investment and large expertise required for the manufacturing. The industry analysis of the industry reveals that after the liberalisation, the industry was affected severely by the state procurement practices, grants, and subsidies. The main competitor of Airbus is Boeing that deals in both civilian and defence aircrafts and also offer some support services to the clients. The workforce of Boeing is way larger than that of Airbus (Mocenco, 2015). The business strategy of Boeing is based on leveraging resources in new and potential domains, running core operation while seeking new operations. The company is known for its small and medium-size airlines and hence, they are most suited for the smaller and compact airports. Talking about the segment it deals in, it comprises commercial aircraft, network systems, weapon systems, support systems, launch and orbital systems, and Boeing Capital Corporation (He, et.al, 2015).
There is a duopoly existing in the aviation market. This might be due to a number of reasons. First and foremost is the limited entry in the aviation market as the entry cost is high and the already existing leaders enjoy a better position due to their brand value. In addition to this, there is a very low bargaining power buyer enjoy due to limited choice in the market. Plus, there is a low threat from substitutes (Mocenco, 2015).
For a better understanding of the competitive dynamics, it is important to understand the factors leading to high competitive rivalry. The first and foremost factor can be low differentiation in products. Both companies manufacture aircrafts for common uses and military purposes. Hence, there are only a few differences between their models. In addition to this, both companies shares market commonality as they compete in world's six most important geographic regions, namely Europe, North America, Latin America, Asia Pacific, Middle East, and Africa(Brouthers, et.al, 2015). Hence, the rivalry is expected to be fierce. Boeing had been dominating the market since 1916 and have a longer presence in the market (He, et.al, 2015). On the other hand, Airbus is currently dominating because of its strategic planning and innovations. At present, Boeing and Airbus cumulatively capture 92% of the world’s aviation market. The product portfolios of the two organisations are completely different. One is manufacturing the large size passenger aircrafts and emission-controlled military aircrafts. On the other hand, Boeing manufactures small size aircrafts (He, et.al, 2015).
The Airbus Group has a well-established organisational structure and is one of the ideal examples for other organisations dealing with the same approach as that of Airbus. The whole enterprise is divided into 3 autonomous entities, namely the Airbus, the Airbus Headquarters, and the Airbus Defence & Space. The overall management of Airbus has undergone numerous changes and restructuring since its establishment (Baalbergen, et.al, 2017). The current hierarchy of the company is providing all the decision-making powers in the hands of the board of the directors. The complete organisational structure of the company is described in the figure shown below:-
The company has a hierarchical management structure, wherein all the strategic decisions are made only after a consensus of the Board of Directors. At the top the organisational structure lies the board of directors that comprise 12 members. These individuals have shares of the company and have the power to appoint or dismiss any member of the board. In addition to this, the board makes crucial decisions about the company. Furthermore, the working of the directors is governed by the Charter of Directors that obligate them to follow certain rules and carry out duties for the betterment of the company (Baalbergen, et.al, 2017).
The next in the organisational structure of the Airbus is the CEO who is obligated to take care of all the operations of the organisation and lead the company on the track of success. The CEO is appointed by the Board of Directors and he/she is answerable to them only. In addition to this, the vision and mission of the Airbus are created and implemented by him only. Most importantly, the CEO is responsible to maintain the competitiveness of the firm, identifying the expansion opportunities for the company in the local as well as an international market while carrying out industrial development.
At the next level of the hierarchical management lies the Chairman who is also appointed by the Board of directors. The role of the Chairman in the Airbus is to lead the company and formulate or present all the policies and goals of the company. He/she is responsible to form the link between the senior management and the lower-level employees. The chairman is among the leading representatives of the company. He is responsible to determine the structure and composition of the board. Moreover, the Chairman ensures that every stakeholder is getting the information through a valid and well-established communication mode.
The next one is the executive committees which is one of the significant parts of Airbus. This committee works with the CEO and assists him in carrying out day to day operations in no time and with high effectiveness. In fact, the CEO is the head of the committee. This entity is constituted for a period of five years.
The next and lower level in the hierarchy management of Airbus lies two management committees, namely the Audit Committee and Remuneration, Nomination, and Governance Committee (RNGC). The former one is mainly constituted for carrying out evaluation and analysis of financial components and suggest some recommendations to the Board. In addition to this, the committee gets approval from the Board regarding the yearly expenditure of the company. In Airbus, this committee meets 4 times in a year for discussing the external and internal audits and remunerations. Talking about the RNGC, it is established to help the Board in the matter of appointing the members of EC, members of the Stakeholder committee, and the company secretary. This committee analyses many components associated with the appointment and provides its valuable suggestions to the board.
5. Knowledge Management
It is first important to understand the meaning of knowledge management. It is a systematic approach followed by the knowledge assets of an organisation for the purpose of meeting tactical & strategic requirement and meeting tactical needs. The process of knowledge management comprises processes, initiatives, systems, and strategies for sustaining and enhancing assessment, storage, refinement, sharing, and most importantly, the creation of knowledge (Anjum, 2017).
At Airbus, they have developed a special Knowledge management system that they called it the Knowledge Management Overall Diagnosis (KMOD) system. It acts as a facilitator for the organisation by providing the required information and knowledge for a process. It assists in various fields, such as Engineering, Finance, and R&D (Brouthers, et.al, 2015). The KMOD system assists in helping the researchers at Airbus in elaborating their knowledge strategy and carried out the suitable diagnosis (Anjum, 2017). The KMOD also assists in ensuring the effective use of the available resources for knowledge dissemination and sharing information associated with the processes and innovation tools (Damijan, et.al, 2014). The process is well evaluated in the diagram given below:
At Airbus, the KMOD process is operated by the Engineering team. The whole process of knowledge management consists of determination, evaluation, and prioritisation of the areas providing knowledge running along with the different suitable assessment process in an operational centre and department (Anjum, 2017). The steps of determining and assessing the knowledge domains. The most crucial aspect of the KM is that each step needs to get the approval of the respective authority or team leader in order to make the final decision. Once all the relevant knowledge needs of a particular department is identified, the solutions are formulated followed by the preparation of action plan. Once this is done, the prioritisation of the KM solutions is done. The outcome of thisprocess is the above-shown knowledge management map.
By making use of KMOD, various departments at Airbus can gather and use relevant information and knowledge for carrying out important functions and facilitating the senior management of the innovating ideas developed by the series of KM tools. A few of such tools are ExTra, Reuse, Improve, and Share Experience (RISE), KCP and Yellow Pages. By making use of KCP, the researchers at Airbus can update themselves regularly with the best practices in carrying out a certain task. RISE is the design rationale, lessons learned, and best practices database that can be assessed through the Airbus Intranet Portal. This tool offers a wide range of solutions for reusing and sharing lessons learned. Talking about the Yellow pages, these can be assessed through the internet. The user can share contact details, past experiences, current duties and responsibilities, and some relevant information about the colleagues.
Being the leading organisation in the Aviation field, Airbus dominates in innovative technologies.The prime motive of carrying out innovation is to sustain the position of a global leader. Every year, Airbus spends €3.5 billionon Research and development process. As a result of which, the company holds nearly 37000 patents globally. There is more than 10,000 scientists associated with the company. The innovation processes carried out by the company helps in developing the fuel-efficient engines for the aircraft. Airbus invests heavily in Research and Development operations in order to develop innovative solutions to the problems (Nickels, 2015). For that purpose, Airbus inaugurated one of its kind fully-owned pilots and engineering training centre cum research centre in Delhi. These types of establishments are also present in France, Canada, and Germany. The main motive of such initiatives is to cater to the rising demand of talented and trained pilots and aviation engineers. This would also pace up the manufacturing and innovation processes of Airbus. The company is aiming at building a global network of the aviation industry’s accelerators. For that purpose, it has established Bizlab in various manufacturing units. Bizlab is the part of the company’s business innovation plan that aims at bringing together the talented entrepreneurs and their start-ups and work them for pacing up the generation of ideas and their transformation. This would add not only value to the business but also assists in beating the competition.
In addition to this, every year Airbus sponsors and organises a number of tech competitions and challenges in which start-ups and entrepreneurs participate in large numbers. The main aim of doing so is to provide brilliant minds to work with and for Airbus to solve the real-world problems with an innovating and technology-based idea. Some of the challenges sponsored or organised by Airbus are:-
- The Moon Race
- OneAtlas Sandbox
- INNOspace Masters
- Copernicus Hackathon Programme
- Airbus Multi-Data Challenge
- Act in Space
- Space Exploration Masters
- Défi INSA AI
The Airbus Chief Technology Officer looks for the collaboration of the company with the Top institutions of the UK, India, Japan, Germany, and China for providing internships to the best talents and helping them in improving simulation, computing, homeland security, and navigation. In 2017, the company established a "Protospace" in Bengaluru, India. This would facilitate in the conceptualization of technology and developing their prototypes. Airbus is pioneering in the aerospace and aviation industry. It promotes cutting-edge and cost-saving ideas and technologies for contributing to the global progress, thereby shaping the future of the aerospace industry. It is currently working on reducing the emission and lowering down the noise levels by means of electricity-based flights.
Before ending on the high note, it is concluded that strategic planning is a crucial part of business operations. This not only helps in sustaining the business in the local market but also in expanding in the international market. In this report, the foreign entry strategies of the Airbus were elaborated. It was determined that the Airbus usually go with forming joint ventures and acquisition strategy rather than opening a new unit from scratch. This is due to the low degree of loss in the former alternative. In addition to this, the competitive strategy of Airbus was also discussed in the report. Furthermore, it was revealed that Airbus has a hierarchical structure that is headed by the Board of Directors. The report ended by discussing the knowledge management system of Airbus along with the innovation initiatives taken by the company to solve a real-world problem.
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