Analyzing Airbus Company’s Innovations

Introduction

Luecke and Katz (2003) describe innovation as the process of introducing a new method or thing. They explain that innovation embodies synthesis or combining knowledge in relevant, original and new valued products, services or processes. Creativity is usually considered the basis for being innovative. Innovation needs the availability of creative ideas for it to occur. It also needs a tangible change in business processes, services, and products which an organisation provides. All innovation starts with creative ideas. For this reason, Amabile et al. (1996) describe innovation as a successful implementation by an organisation of creative ideas. In this notion, creativity by teams and individuals acts as a starting point for the process of innovation. The risk of a company not embracing innovation completely can usually be higher when a firm lose its market share and competitiveness (Talukder, 2014).

Innovation management, on the other hand, entails the process of managing innovation where ideas are managed through various stages in an innovation cycle (Kuratko, Morris and Covin, 2001). This innovation cycle defines the actions taken to take an innovative service or product to the market. The innovation cycle comprise of first creating an innovative service or product and then building a business which can market the service or product (Tidd and Bessant, 2013). This report is going to analyse Airbus Company by providing some information about it accompanied by quantitative data. Additionally, this work will focus on the process of innovation by providing the key innovations which Airbus has achieved. Further, a SWOT analysis of Airbus Company will be done while making connections between its success and innovation. Lastly, this piece of writing will provide the firm’s profits and loss to justify the success that has come to the firm due to its innovativeness.

About Airbus Company

Airbus is a European manufacturing consortium of aircraft that was started in 1970 to take over the high-capacity, medium-range and short-range jetliners market niche (Juvé et al., 2016). This company is currently among the leading firms besides Boeing (An American Company). These two firms compete directly and have dominated the market of jetliners frequently particularly in deliveries, orders and annual revenue. Full members to the company are France, Spain, German, Europe, Defence Aeronautic and Space firm, also known as EADS. EADS owns 80% of its interest while the BAE Britain Systems owns 20% of the interest. Italy’s Alenia and Belgium’s Belairbus are both associate members who share risks in chosen programs of the firm. Airbus is headquartered close to Toulouse in France (Petrescu et al., 2017).

The Relationship between Airbus Innovation and Management Strategies

Airbus has successfully created value in their company through innovation by examining customer insights, untapped markets and exploring new platforms in the aircraft business. In these activities, they have linked ttheir innovation and management strategies to work together logically thus establishing a positive relationship between the two strategies allowing them to achieve their goals. Using a strategy that is based on the latest cutting-edge technologies, a forward-looking strategy also based on scientific and digital excellence, they have become better connected with customers and produce safer items for a prosperous world (Petit, 2018).

Airbus Investment in Innovation (Research and Development)

Figure 1 shows the development and research costs incurred by Airbus between 210 and 2017 where it incurred at least 3.37 billion USD or 2.81 billion euros in their 2017 fiscal year in development and research. Additionally, in 2014, Airbus Group reorganised the Aeronautic European Space and Defence Company. These statistics show that Airbus has invested hugely in innovation which can be achieved through research which allows new products to be developed (Brintrup, Wang and Tiwari, 2017).

Airbus Global deliveries of Aircraft

Figure 2 depicts a timeline in which the company division’s global delivery of aircraft from 2010 through 2017 saw the organisation deliver several 718 aircraft to clients across the world in 2017. This number represents the company’s highest delivery since its inception. This information shows that the company’s sale is increasing and it’s gradually taking over the global aircraft market despite the presence of competitors (Schmid, and Altfeld, 2017).

The company’s 2017 global revenue in million euros by region

Figure 3 shows that in 2017, the company produced more than 16.9 billion euros in Europe activities alone. This is also partly from the reorganisation of the Aeronautic European Space and Defence Company that took place in 2014. Asia led with 24.8 million euros. The company also made revenue in North America (12.6), The Middle East (8.4), Latin America (990 million euros) and other countries (2.97 million euros). Therefore, it can be argued that the company has a market all over the world. This report will try and analyse the reason behind this success with an emphasis on innovation (KLAAS, 2017).

Internal Factors that can impact Airbus

There are individual factors which are likely to affect the firms operation. These include personal behaviour and attitudes. These consist of cognitions and thoughts towards the organisation. The employees to the organisation sometimes appear unmotivated to meet the objectives of the firm due to a lot of suspicion and tensions (Dosi and Teece, 1998). It is thus important for the firm to find the factors resulting in job dissatisfaction within the company. Another issue is that of cultural difference between its employees due to their unique cultural uprbringing. The high level of diversity in the firms employees cause a challenge because their individual emotions and temperament are not easy to understand. Furthermore, the dufferent salaries for the firms employees are usually considered negative and unequal. Kotter and Schlesinger (1979) says that one of the major reasons for resistance from humans comes when they focus on their best interest and not of their company. There are also workgroup issues where even though team diversity within Airbus can result in positive synergy, it sometimes develops different challenges such as tension and conflict which are social integration issues (Jehn, Northcraft and Neale, 1999). In the company, the German and French leaders have led to different dispositions and attitudes to the firm causing nationalistic tension between the employees. The nationalistic difference can eventually lead to team rivalry which can affect their management model (Drucker, 1986).

Additionally, there are organisational factors such as culture and structure, policies and systems that can affect its operation. Other organisational factors are its goals and objectives which are likely to influence its team and employee behaviours. For instance, the merging of Airbus and EADs led to its restructuring with intention of making it more competitive. However, its employees were dominated by tension and uncertainties especially between the working groups (Kotter and Schlesinger, 1979). There are also external environment factors that affect the firm. For instance, Airbus has been analysing the global and national context to understand how these influence their operation, present opportunities and threats to the firm. Among these factors include political pressures as well as pressures from public opinion and unions. Competition in the world market is another external factor particularly from Boeing. State shareholders make the firm vulnerable to government rules and political interests thus having effect on their processes of decision-making and operation management (Kotter, 1995).

Airbus Innovation Ideas

The process of innovation defines the path of converting or translating new or existing knowledge into marketable solutions (Cagan and Volgelm, 2012). As a global leader in the industry of air transportation, the company pushes its boundaries for better and new methods which enable it to use very advanced techs to innovate its services, businesses and products continuously (Owen et al., 2008).

Airbus digitalisation

This digitalisation is meant to help them sett up new organisation modes as well as establish new production means. They have kick-started digitalisation with the intention of completing their aircraft life cycle. One of such digitalisation initiatives is BoostAerospace which is a partnership between Thales, Safran, Dassault and Airbus. It offers a common tool of collaboration for the industry stakeholders to manage different Air supply systems. The main focus of BoostAerospace is to improve the performance of suppliers and create a connected ecosystem within the chain of supply (TOMorrow, 2017).

Airbus SWOT Analysis -Connection between Success and Innovation

Airbus is among the largest aerospace producer in the world. The firm has a subsidiary which deals in commercial airlines. This subsidiary is known as Airbus SAS. Airbus is mostly involved in the production of several product lines such as supersonic jets and military aircraft. The main competitor of this company is Boeing, a company that is also loved and known for its aerospace engineering prowess. Airbus has production sites in several states and is continuously growing with time (Chandra, Raghavendra, and Shekar, 2016).

Airbus Strengths (S-WOT analysis)

In 2015, Airbus enjoyed a market share totalling to about 57% which increased from 50.5% in 2014. With this market share size, it outstood its rival. Additionally, Airbus owns A320, A380, and A330 in the following categories, Single-Aisle, Very Large and Widebody Aircraft respectively. The competition between these two rivals concerning the share market and order numbers is demonstrated in the figure below (Chandra, Raghavendra, and Shekar, 2016).

Its major strength is in innovation. Airbus Company usually focuses on technological design and innovation. For instance, its A350 acts as a major example of the company’s approach towards progressive innovation. Through innovation, the organisation has convinced its suppliers and partners from Europe to develop components of aircraft as well as engage in jetliner assembly especially on single line assembly thus causing a revolution in this industry. The company is also focusing on eco-efficiency due to its vision of wanting to become recognised as a world leader in sustainable aviation from its eco-efficient solutions (Bodily et al., 2017). For instance, it developed its Blue 5 aircraft which saves water and energy as well as reduces VOC, CO2 and waste production. Another one of its innovative ideas is the production of A380, which can carry the highest number of passengers. Lastly, the company has a robust parent company with over 64.45 billion Euros thus having strong patronage and allowing the company to do well even amid stiff competition (Chahat, 2017).

Airbus Weaknesses

The company has been accumulating Backlogs through delivering fewer aircraft numbers as compared to its main competitor Boeing (Schuetz and Schrefl, 2017). As compared to Airbus, Boeing has fewer Backlogs and has a higher ratio of delivery. The firm also experiences operation inefficiencies as compared to its main rival. Unfortunately, the company has a record of delayed launches like its A380 and A350. Airbus also experiences high costs of production as compared to its main rival (Vieira and Loures, 2016). For example, its A38 was delayed for more than one year thus increasing its overall cost of production as well as affecting the company’s share price by 26% (Zahari and Romli, 2018).

Opportunities for Airbus

There is currently an increasing demand for aircraft. Therefore, it has been projected that there will be high demand for aircraft 33070 which has a value of 5.3 trillion USD in the coming 20 years (Bieler, 2017). This demand presents the company an opportunity to gain a competitive edge against any competitor. There is also increasing passenger traffic because of the growing number of middle-class individuals in developing economies. For this reason, the company has a chance to tap this new market as well as gain a large portion of the market share. Another opportunity is presented by the advancing technology which has seen aircraft undergo numerous technology breakthroughs in the previous years. With advanced technology, the company can improve on its areas of weaknesses as well as adopt faster delivery (Bieler, 2017).

Threats to Airbus

The current aircraft market is filled with tough competitions especially the presence of its main rival (Boeing) who is also competitive and always coming up with new ideas that challenge Airbus (Tuomisaari, 2017). Therefore, with the emergence of new markets, the company is guaranteed of tougher competition for the market share. Another threat faced by Airbus is losing its important markets. For instance, China and Russia have plans for developing their commercial Aircraft. These plans pose a threat to the market of Airbus and other existing competitors. China, in particular, is poised to be a world leader regarding air passenger transport. Missing out in such a state will affect Airbus tremendously (Tuomisaari, 2017).

Airbus Company Profit and Loss

Due to high innovation in production, by 2018, Airbus had 74.86 billion USD in revenue which came from the sale of services and goods. This amount of produced revenue attracts investors as they mostly invest in companies with revenue which increase steadily. Their latest income statement indicates that the company had a revenue decrease from 75.47 to about 74.86 billion USD. The impact on their stock was mainly from non-operating and operating activities (Freimuth, 2016).

Airbus Financial Statement (2014 to 2018) (Freimuth, 2016)

The future of innovation for Airbus

Airbus is likely to continue focusing on developing a supply chain that is digital as well as complementing it with the creation of ‘the Factory of the future’ which integrates fully management of engineering resources, enterprise planning and factory floor techniques. It is also likely to implement virtual reality tools to improve the operation of its employees. Airbus will also continue using the internet for logistics in their assembly lines and the application of collaborative robots to enhance the efficiency of its employees (TOMorrow, 2017).

Conclusion

Despite the presence of stiff competition between Airbus and Boeing, there are some signs which indicate an overall insufficiency which can also be termed as a lack of significant innovation concerning the development of commercial aircraft. For instance, Boeing’s 787 Dreamliner was primarily manufactured using composite materials and weighed less as compared to the conventional metallic aircraft by 20% (Jelača-Strugar and Boljević, 2016). However, this bitter rival to Airbus still loses 25 million US dollars on every Dreamliner it builds. Additionally, Boeing quickly responds and is still active regarding acquisition talks with other partners such as a jet manufacturer, Embraer from Brazil. With such directions, it is apparent that both Airbus and Boeing are willing to have more than merely building excellent aircraft so that they can preserve their top spots in the sector (Jelača-Strugar and Boljević, 2016). Moreover, innovation usually wins regardless of who is the boss in the aircraft sector. Despite the various oligopolies that enter the sector, sometimes they are not often preferred by the customers because they might stifle innovation thus producing inferior products (Davila, Epstein and Shelton, 2012). Therefore, the best innovator will surely win the hearts of customers in this sector. Moreover, the problem in commercial aviation is maintaining competitiveness as this has several complexity layers because the bar for security standards has been raised higher and the time needed to meet these standards successfully is limited.

Airbus and its main rival have reached their high revenue sizes and status through several decades of experience and have managed to build some of the best commercial aircraft of all time (Kuratko, D., Hornsby, J., Goldsby, M., 2011).

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