European Situated Company Free Essay Example

Executive summary

Airbus is a European situated in the EU (Toulouse, France) company that designs and assembles commercial aircraft, aeroplanes, military jets etc. the global company also has a division that specialises in data services, triangulation, protected communications, urban mobility and other solutions for customers on a global measure. The aviation sector being a global industry, the aerospace industry is one of the most investment concentrated industries in the world. The company has a footprint I over 180 locations globally. Their assembly lines are situated in Asia, Europe and America.

Airbus targets long-distance flights with hubs (An airport used by an airline to route its passengers within its network) exploitation with their biggest aircraft being the double-decker A380 that has a capacity of 555 passengers.

The aircraft manufacturer spent 12 billion US dollars in the manufacturing of the aircraft A380.

Since 2007 the global market for large civil aircraft has been a duopoly shared by Airbus and its competitor Boeing (Anderson, 2009). Airbus was named by the European multinational aerospace corporation as the world’s second-biggest aerospace and defence company in 2018.

During the year 2002 Airbus took the lead in the global market share.

Their focus was mainly catering for the market needs and innovation, this gave them a competitive advantage and a positive outlook on their share price.

The aircraft manufacturing industry being duopolistic, Airbus’s biggest competitor is Boeing. Using PESTEL’s analyses conjunction with the SWOT analyses it studies was done to determine whether the European company can maintain its share price continuously to compete against Boeing.

Boeing and Airbus have had an extensive history in the airline business. They have been known as one of the longest-standing competitors in the aeroplane manufacturing industry.

In the year 2001, the number of orders for Airbus jets exceeded the number of orders for Boeing’s jets according to the aviation Graph from The Economist, Jan 20th 2005.

Airbus Background

Overview

Listed in the Netherlands and trading shares in France, Germany and Spain, Airbus designs, manufactures and sells civil and military aerospace products worldwide and manufactures in the European Union and several other countries. The company has three main operational divisions namely Commercial Aircraft, Defence and Space, and Helicopters. The helicopter division is the largest in terms of revenue and production quantities delivered per annum.

Airbus main commercial manufacturing plant is based in Blagnac, France. The production of the aircraft starts at design phase within the organisation and final assembly production takes place in Toulouse, France; Hamburg, Germany; Seville, Spain; Tianjin, China, and Mobile, Alabama, United States.

The firm manufactured its first commercial airline called the Airbus A320. They were the first company to design and assemble the world’s largest passenger airliner, the A380.

Leadership and parent company structure

From the 11 April 2019, the board of directors have appointed a new CEO by the name Guillaume Faury. The changes are effective immediately. The newly appointed CEO has been the head Engineer for the organisation for over a decade. He has a team of appointed executives like Dominik Asam, who was appointed as a Chief Financial Officer for Airbus.

The organisation (Airbus) is owned by EADS (European Aeronautic Defence and Space Company), a European aerospace corporation. Airbus began as an association of aircraft makers called Airbus Industry. During the year 2001, the organisation company structure changed and became a joint-stock company. It is now owned by EADS (80%) and BAE (British Aerospace Systems) (20%).

13 October 2006 the joint venture consortium BAE sold all its shares to EADS, Airbus is currently fully owned by EADS.

Branches:

• 9 customer support centres worldwide (i.e. Washington, Miami, London, Hamburg etc)
• 14 Engineering and maintenance centres (Washington, Hamburg, Bangalore etc)
• 10 spare warehouses and service centres
• 4 main headquarters for flight operation services (Washington, Toulouse, Cardiff and London)

Airbus has an estimated 55,000 employees spread through sixteen places in four European Union countries namely France, Germany, the United Kingdom and Spain. The final part of Airbus aircraft making is done in Toulouse, France; Hamburg, Germany; Seville, Spain; and, since 2009, Tianjin, China.

Highlights and accomplishments

With the organisational vision being to assist build more liveable cities for urban communities worldwide, the organisation is innovation-driven.

The latest technology is incorporated in the design of the aircraft to ensure comfort and connected travelling experience. The innovative design used on their passenger aircraft has highly competitive advantages.

Passenger aircraft highlights:

• · A220 Highest efficiency and lowest risk
• · A220 Best fuel efficiency in the market for an aircraft its size
• · A320 biggest space cabin for aircraft its size currently in the market
• Environmental milestones/ achievements:
• · Carbon dioxide emissions on the aircraft have been reduced by 80%
• · Nitrogen dioxide emissions on the aircraft have been reduced by 90%
• · Noise reduction by up to 75% over the last 60 years

Innovation by design:

• · 1st twin-engine widebody aircraft, A300
• · 1st full fly-by-wire commercial airliner
• · 1st full-cabin double-deck airliner, A380
• · 1st manufacturer to make extensive use of advanced materials
• Financial and sustainability achievements:
• · Compared to 2016, Revenue Passengers Kilometres
• (RPKs) grew impressively at 7.5% in 2017, according to
• ICAO figures which were preliminary at the time of writing.

· Real GDP is expected to grow at +1.8% per year in the 2017-2037 period.· Maintenance market is set to double, from US$76 billion in 2018 to more than 160 billion a year by 2037, or cumulative 2.2 trillion over the same period.

Macro-environmental issues facing the Airbus

using Porter’s Five Forces the threat of new entrants into this market is considerably low the sustainability of Airbus’ has now come into question as three new competitors have announced their plans to penetrate the large civil aircraft market posing direct rivalry.

Political Factors:

The political factors that may influence the profitability or chances of survival of the company are quite various. The political risks vary from abrupt changes in existing political rules to civil unrest to major decisions taken by the government.

The following factors may influence the Airbus:

• The level of political stability that the country has in recent years. Countries, where there are upcoming elections, is risky due to political instability
• The integrity of the politicians and their likelihood to take part in acts of corruption. All countries that the organisation is doing business with
• The laws that the country enforces, especially with regards to business, such as contract law, as they dictate what Airbus is and is not allowed to do. Some countries, for example, prohibit alcohol or have certain conditions that must be fulfilled, while some government systems have inefficient amounts of red tape that discourage business.
•  Whether or not a company’s intellectual property (IP) is protected. For example, a country that has no policies for IP protection would mean that entrepreneurs may find it too risky to invest in Airbus
• The trade barriers that the host country has would protect Airbus; however, trade barriers that countries with potential trade partners would harm companies by preventing potential exports.
• A high level of taxation would demotivate companies like Airbus from maximizing their profits.
• The risk of military invasion by hostile countries may cause divestment from ventures.
• A low minimum wage would mean higher profits and, thus, higher chances of survival for Airbus

Economic factors:

Economic factors are all those that pertain to the economy of the country that Airbus, such as changes in the inflation rate, the foreign exchange rate, the interest rate, the gross domestic product, and the current stage of the economic cycle. These factors, and their resulting impact on aggregate demand, aggregate investment and the business climate, in general, have the potential to make a company highly profitable, or extremely likely to incur a loss. The economic factors in the PESTEL analysis are macroeconomic.

The economic factors that Airbus may be sensitive to, and in turn should consider before investing may include the following:

• The economic system that is currently operational in the sector in question- whether it is a monopoly, an oligopoly, or something like a perfect competition economic system.
•  The rate of GDP growth in the country will affect how fast Airbus is expected to grow in future. Changes in general economic, political or market conditions, including the cyclical nature of some of Airbus’ businesses
• Countries with favourable interest would affect how much individuals are willing to borrow and invest. Higher rates would result in greater investments that would mean more growth for Airbus. Countries like South Africa that are going through an economic decline are found too risky for investments
• Performance of the financial markets operates also impact how well Airbus can raise capital at a fair price, keeping in mind the demand and supply.
•  The exchange rate of the country Airbus operates in would impact the profitability of Airbus, particularly if Airbus engages in international trade. The stability of the currency is also imperative- an undesirable currency discourages international investors.
• Currency exchange rate fluctuations, specifically between the Euro and the U.S. dollar
• Increasing costs of jet fuel is a major risk to Airbus. There have been cautioned that disorder in Libya and rising oil prices could add substantial costs to the production and usage of aircraft which would result in airlines decreasing the demand on their orders while increasing the cost to make an aircraft
• A high level of unemployment in the country would mean there is a greater supply of jobs than demand, meaning people would be willing to work for a lower wage, which would lower the costs of Airbus

Social factors:

The social factors that impact Airbus are a direct reflection of the society and how the behaviour of the society is controlled that which Airbus operates in. The impact of social factors is not only vital for the operational aspect of Airbus, but also on the marketing aspect of the organization

The social factors that affect Airbus PESTEL analysis include the following:

• The demographics of the population immensely impact whether a certain product may be marketed to them.
•  The class distribution among the population is of supreme importance: Airbus would be unable to promote a premium product to the general public if much of the population was a lower class; rather, they would have to rely on very target specific marketing.
• Airbus needs to be fully mindful of what level of health standards, reactions to harassment claims and the importance of environmental protection prevail in the industry.
• Substantial disruptions in air travel (including as a result of terrorist attacks

Technological:

Technology can swiftly dismantle the price structure and competitive landscape of an industry in a very rapid amount of time. It is vital to constantly and consistently innovate, not only for the sake of maximizing possible profits and becoming a market leader but also to prevent obsolescence in future

The technological factors that may influence Airbus may include the following:

• The recent technological developments and breakthroughs made by competitors, as mentioned above. The manufacturer has designed and manufactured the biggest passenger aircraft in the market, which gives it a competitive advantage in terms of marketing. Innovation like less carbon dioxide emissions in aircraft ensures the sustainability of the organisation.
• The impact of the technology on the costs that most companies in the industry are subject to have the potential to surge or decrease the resulting profits significantly.