Example research essay topic: Mcdonnell Douglas Soviet Union - 1,712 words

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Commercial Aircraft Industry Summary B. Typical Industry Competitive Strategy C. Porter Competitive Model Analysis E. Importance of Information Technology to the Industry B. Market and Financial Performance D. Significance of Information Systems E.

Strengths and Weaknesses of Boeing as a Company Boeing Corporation Analysis Paper The objective of this paper is to analyze the commercial jet aircraft industry and more specifically Boeing Corporation to better understand the significance of the role of information systems. At the present time the industry is dominated by two global players; Boeing and Airbus, and their rivalry is in many ways representative of two seemingly incompatible not to say totally opposing market philosophies. Boeing is the free market champion, while Airbus represents the not so free approach of the European Unions organized and government subsidized competition in the so called strategic markets. The worldwide market for commercial jet aircraft is primarily dependent on long-term trends in airline passenger traffic.

And this trend can be explained by factors such as economic growth in developed and emerging markets, political stability, profitability of the airline industry, and the globalization and consolidation of the industry. Other important factors are limitations in air transport infrastructure such as government and environmental regulations and air traffic control. Finally product development strategy and overall competition between manufacturers also Figure 1: World Air Travel, Revenue passenger miles in billions, excluding the former Soviet Union airlines. World air travel has been steadily increasing at an average annual rate of 5 %, including in 1994, with the exception of the year 1991 due to the Persian Gulf conflict.

Despite the steady growth in traffic after 1991, most airlines have cut back their new aircraft orders, mainly due to their dismal financial performance, resulting in dramatic reductions in aircraft manufacturers backlogs. Air France, for instance canceled $ 500 million in orders from Boeing and Airbus in January 1995. The commercial jet aircraft market is dominated by three major manufacturers; Boeing, Airbus Industrie and McDonnell Douglas. Table 1 illustrates the revenues and earnings of the three players. Other minor players, such as Fokker, British Aerospace and manufacturers of short haul, turboprop engine commuter planes are not included in the market 1994 Earnings in $m Market Share % 1, 022 62 N/A 24 40 14 Table 1: Revenues and market share of jet aircraft industry leaders, excluding former Soviet Union. The situation in 1994 degraded significantly, and no indication of recovery is in sight for 1995.

Worldwide aircraft shipments dropped sharply from 3189 units to 2402. Boeing registered a decline of 14 % in its revenues compared to 1993, and McDonnell Douglas lost market share with its revenues shrinking by 9 %. It is likely that McDonnell Douglas will halt temporarily and perhaps permanently the manufacturing of its wide body MD- 11 plane, due to a severe shortage of orders. This may leave for the long term only Boeing and Airbus competing in the long haul, wide body carrier segment. The current struggle between the three vendors seems to develop at the clear disadvantage of McDonnell Douglas. Recently, SAS which traditionally had been a faithful McDonnell Douglas customer more than 70 % of its current fleet is Douglas, gave preference to Boeing for 35 new B 737 - 600 s over the MD- 95, a new model that Douglas was counting on SAS for its market Cancellations Net Orders 46 74 54 71 19 4 Table 2: New Aircraft Orders in 1994 In 1994 it looks like Airbus is about to catch up with Boeing in market share, while McDonnell Douglas has further receded: Indeed Airbus claimed it obtained nearly 50 % market share in 1994 s orders for new aircraft of more than 100 seats.

Table 2 summarizes the new orders received by the three manufacturers in 1994. Although Boeing has a current backlog of 959 units versus Airbus 615, if the trend continues, Airbus will soon be in the number one position. Finally, the industry is very capital intensive, it requires a long time to recoup investments characterized by long development cycles. It needs a large base of skilled workers, high tech sustaining industries and sophisticated and demanding customers to thrive. Government intervention, different countries industrial policies and international trade relationships play also a major role in shaping the industry forces. b.

Typical Industry Competitive Strategy The key competitive strategies used by the three big players can be Extensive aircraft portfolio to satisfy requirements of customer airlines across the board. Boeing is the best positioned with aircraft capacity ranging from 100 passengers (737 - 500) to 500 (747 - 400). Airbus had entered the market with small and medium sized carriers, but is fast catching up with the introduction of its four engine long haul A 340 aircraft. Only McDonnell Douglas seems to be relegated to the low end small carriers (MD- 80 and MD- 90) as its facing the Pushing high technology, electronic fly by wire techniques in order to reduce the number of pilots needed from three to toad establishing easy transfer from one type of plane to another, thus minimizing training time by developing the family concept. As an example, Airbus succeeded in obtaining approval from the FAA to have a single pool of pilots to operate its A 320, A 330 and A 340 Developing solutions to improve cost effective exploitation of their planes, such as the general trend in migration to twin engine wide body planes, providing fuel efficiencies and quick reconfiguration of seating layouts to optimize the ratio of seat occupancy by passenger Leasing and financing services to customers. As airlines face financial difficulties, financing terms become a key selling factor.

All three competitors run financial services. In 1993, for instance, Boeing's customer financing activities amounted to $ 3, 177 million, up from $ 2, 295 million while its sales went down to $ 20, 568 million from an all time high of $ 24, 133 million in 1992. Airbus is also financing itself 5 - 10 % of its sales. Alliances, joint ventures especially with foreign government funded programs and extensive lobbying, political posturing in national and international forums.

Some 45 businesses in 6 Asia- Pacific Economic Cooperation (Apec) economies provide Boeing with about 70 different parts and major assemblies... The Porter model provides a structural analysis of the industry any given company competes in. It is not limited to the use of Information Technology, on the contrary it defines in a broad sense all the competitive forces in the market, existing alliances, potential threats and other sources of positive and negative influence. The analysis of the commercial aircraft industry shows that very few competitors compete for market share namely Boeing, Airbus and McDonnell Douglas, and usually they have extremely close relationships with their suppliers and their customers.

As a matter of fact, the industry is extremely concentrated. Figure 2: Porter Competitive Model for the Commercial Jet Aircraft Industry The buyers, mainly airlines and leasing companies detain considerable power that is increasing since there is a downturn in orders. As the airlines optimize their operations and cut their investments, the competition among the suppliers becomes deadly. It can also be assumed that the regulating bodies are buyers as well as suppliers.

Indeed, the aircraft industry has to constantly deal with these institutions to convince them to approve regulations in their favor and not take decisions that would jeopardize their competitive The Bargaining Power of Suppliers The suppliers can be split in two different groups, based on their Engine manufacturers represent the single most significant group of suppliers and it can be assumed that their bargaining power is going to significantly increase as they undergo concentration. General Electric, Pratt & Whitney (US), Rolls Royce (UK), CFM (Europe) are the main competitors. However, this power is somewhat balanced by the fact that oftentimes airlines enter in separate negotiations with the engine suppliers to determine the choice of the engine for their planes. Planes are usually designed for more than one engine type. On the other hand, the required fuel efficiencies, increased reliability needs especially for twin engine transatlantic wide bodies and the need to provide more power for the new large body aircraft require aircraft manufacturers to enter in joint Regulating bodies, such as the FAA, EPA, etc. , may be considered as suppliers to the industry as they determine a number of constraints that the industry has to deal with.

The bargaining power of these institutions is considerable as they can create major obstacles for the As the industry is extremely capital intensive, all sources of investment and financing detain considerable power. A recent trend is the development of financing and leasing companies who buy planes from the manufacturers, then lease them to various airlines. ILFC (International Lease Finance Corp) is one such company that recently ordered 30 Airbus aircraft. Meanwhile Airbus Industrie itself has formed its own financing service which has access to more than $ 1. 5 billion revolving credit facility from 46 different banks. We anticipate that on the avionics and materials side, since the military markets keep shrinking and there is heavy pressure on defense suppliers to move to commercial applications, the bargaining power of these industries as they fight for additional share of the commercial market is at the advantage of the aircraft At first look, any new entrant in this market faces a steep, uphill battle. Regulations, capital requirements, extremely skilled labor needs and sophisticated support industries, necessary proven track record and the perspective of a long wait to reach profitability are but a few of the very high barriers to entry.

However, one cannot completely exclude this possibility. Just as Europe did, Japan or China may decide that this industry is strategically vital for their long term well being and encourage a highly subsidized entry in the market by their national champions. In the case of Japan, subsidies may even not be necessary as the sophisticated industrial infrastructure and naturally protective trade policies may very well encourage Mitsubishi or another firm to The former Soviet Union represents a significant growth potential for the big three, but also has its own national aircraft industry. While this market may be open to competition, it also possible that the Russian Tupolev enhances its capabilities, rationalizes its operations and s...

Research essay sample on Mcdonnell Douglas Soviet Union