1. A brief synopsis describing the business and capitalisation of the two companies, Boeing and Airb

1.
A brief
synopsis describing the business and capitalisation of the two companies,
Boeing and Airbus
Boeing and Airbus not just lead the airline industry in terms
of numbers. They are also the chief inventers and formulators of trade models and
business strategy for aircraft within China and other countries as well. The
majority of the others tag along the leaders by following a ‘me too’ approach.
Within their home marketplaces, Airbus and Boeing already have differentcapitalisation,
business and product strategies. It would be quite hard to even imagine two
more diverserivals. First of all, for a number of years, Boeing sustained
competitive benefitby technical performance of superior aerospace services and products.
Over the period of around past 5 years, business approach has movedgraduallytowards
financial outcome through decreasing cost, assets shedding and augmentingdependence
on worldwide suppliers. The new objectives of the company are lesser unit costs
for workers and capacity, resulting ingreater short-term margins. Thus, the
company experiences a fragmenting manufacturing and technical society; weakened
information flow; loss of collected knowledge, experience and skills and lastly,
diffusion of authority and control required for managingpresent and future initiatives.
The technical community of Boeing recognizes a severe risk which cost-cutting as
well as pursuit of short-term financial outcomewould compromise itscapability of
competing efficientlyduring the long-term.
Secondly,Airbus has executed a
new manufacturing organisation for dealing with the steady and steep ramp-up of
industrial practices for meetingpersistentpowerful demand, whereas also accomplishinggreater
levels of performance across the firm’s series and growthinitiatives. This
new company that became efficientduringthe beginning stages of 2013 – intends
to achieve the objectivesvia further incorporation, complete cross-functional arrangement
and also teamwork within Airbus’ manufacturingpractices. Moreover, on a structural
level, Airbus empowers its plants accountable for delivering aircraft elements
to each Airbus ultimate assembly lines, and offers the essential leverage and
resources. Additionally, higherassistancewould be offered to engineering as
well as the supply chain for managingeveryday challenges.
2.
A brief
analysis contrasting the two different product strategies of the two companies
and an appraisal of how well each might fit the Chinese socio-economic system
Airbus had been established with anapparent mission
statement i.e. challenge the conventional American stalwarts Douglas, Boeing and
to a lowerlevel Lockheed, within the United States Airliner segment. This was
the biggest marketplacewithin commercial aviation. The company had carried out
their research and developed aneffective product strategy for grabbingthe marketplace
share(Benkard, 2000). As Airbus could not get at their chiefsector (the US
marketplace), they switched towards their secondary segments i.e. Korea, South
Africa and India.In the beginning, the Koreans were not interested towards the present
A300s. They desired for a plane, which had longer range. Enthusiastic of making
the sales, Airbus made a decision to provide them a higher range version for
meeting their wants. Their readinessof being flexible resulted in great sales.The commercial success of Airbus has been grounded in
huge fraction upon its innovation in technology and products, with a chief
focus persisting on this chief aspect in the upcoming times(Benkard,
2000). A significant development in the company
has been the development of competence and excellence. They are supported
through an extremely competent research and technology framework that benefits
from the firm’s augmented incorporation of its operations and function.
The
product line of Boeing is shaped through two guiding principles i.e. developing
the correct airplane for the marketplace and generating sound investment values
for the owners of aircraft, leasing corporations and financiers (Boeing Capital, 2005).Developing the correct airplane for the marketplace implies
towards understanding the way how airplane operators make use of airplanes for
earning revenue. Generating sound investment values for the aircrafts owner
begins with understanding that a commercial airplane might have variousowners
and operators during its productive and long service life (Boeing
Capital, 2005). For appealing to the widestpopulace of prospective
operators, Boeing airplane products are developed for offering an orderly growth
of seating abilities from around 100-450 seats (Boeing Capital, 2005). Every family of airplanes sharegeneral performance capabilities
and characteristics, and systems, parts and training needs, making it easy.
Moving ahead, taking into consideration the present
situation of both the companies it can be stated that they would very
effectively fitChinese
socio-economic system. Both the companies have the needed skills and abilities
required for serving the Chinese market. Airbus extended their Joint Venture
with their Chinese partners for an additional 10 years (Airbus, 2015).

References:
Benkard, C.
L. (2000) Learning and Forgetting: The Dynamics of Airplane Production,American Economic Reviews, Vol. 90, 4,
pp. 1034 – 1054.
Boeing
Capital (2005) Boeing Product Strategy:The Right Airplanes for the Market and Solid Investment
Value, Financial Trends in Commercial Aviation, Vol. 1, No. 1
Airbus. Available at http://www.airbus.com/company/worldwide-presence/airbus-in-china/
Contents
.docx#_Toc412068499″>Introduction.3
.docx#_Toc412068500″>Background of Boeing and Airbus in China.3
.docx#_Toc412068501″>Analysis.5
.docx#_Toc412068502″>References.9

Introduction
China became a member of
World Trade Organization in December 11, 2001and is currently the world’s
largest trader (excluding intra-EU trade) with exports and imports totalling
US$2.21 trillion and US$ 1.95 trillion respectively in 2013 (WTO). Additionally, the country is an observer to
the Plurilateral Agreement on Government Procurement (GPA) and also an observer
to the Plurilateral Agreement on Trade in Civil Aircraft (WTO, 2014).
According toWang H., Li S., and Wang Q.
(2013),China opened its doors to
Foreign Direct Investments in the late 1970s and has recorded significant
economic growth. The Foreign Direct
Investors (FDI’s) took advantage of China’s comparative advantages which
included but not limited to skilled and unskilled labor force, the human
capital-intensive as well as technology intensive products which is
attributable to the accumulation of physical and human capital policies which
are geared towards adoption of advanced technologies.The authors state that most
specifically, the Chinese Government set up the China’s Free Trade Zone (FTZ)
which is a specialized economic area for bonded operations and international
trade. The Shangai Waigaoqiao FTZ was
established in June 1990 through granting exemptions from customs duties on
both imported and exported goods; value added taxes and relaxed customs and
control of foreign exchange (Liu, 2004).

Background of Boeing and Airbus in China

Boeing and Airbus are
established companies in China. Boeing
introduced its aircrafts into the Chinese Market in 1972 when the then
President of the US Richard Nixon made a historic visit to China. Boeing specializes in the 737, 747, 767, 777
and 787 Dreamliner commercial aircrafts (Boeing, 2015). The assembly plant of Airbus which is located
in Tianjin, China for the production of the A320 series airliners was opened in
2009. Airbus specializes in manufacture
of A320, A330, A340 and A350 airliner series (Airbus, 2015). Both of these
companies are big names in aircraft industry and the aircrafts manufactured by these
companies’ flies into international borders.Boeing is the world’s largest aerospace company; it
is also the leading manufacturer of commercial jetliners and defense, space and
security systems (Boeing, 2015). On the
other hand, Airbus is the world’s leading commercial aircraft manufacturer
(Airbus, 2015).
The airline industry in
China is a growing industry with an increasing demand for passenger commercial aircrafts.
There has been an increase in the domestic traffic as well as international air
traffic in China. Both Boeing and Airbus have realized that Chinese market is
an important market in terms of volume and value.Over the past
two decades, The People’s Republic of China has invested billions of RMB in
domestic and international air travel capability. Today, almost every major
city in China has a new airport. Currently, there are an estimated 1,400
commercial planes in China, of them approximately 800 Boeing, 470 Airbus, and
130 other (Embraer, Bombardier, CRJ, etc.). It explains that Boeing and Airbus
are competitors in Chinese market. At China’s current economic growth rate,
land area and population size, the Chinese Government’s latest 5 Year Strategic
Plan expresses the Government’s commitment to grow the commercial airspace
sector and plans to invest an excess of US$ 9 billion. Boeing predicts that
China will become the world’s largest manufacturing center within the next two decadesand
the country will spend approximately US$ 870 billion to purchase a total of 6,020
new passenger planes to meet the passenger traffic demand which is estimated to
increase by 6.9% and air cargo traffic also increasing by 6.7% annually, 65% of
this increase is projected to be within Chinawith passenger traffic increasing 6.9 percent and
air cargo traffic increasing 6.7 percent annually. The majority of the growth,
approximately 65 percent, will be within China(Boeing, n.d.).
BothBoeing and
Airbus realize this fact and the focus of both the companies is to increase the
market share in the Chinese market. The objective of this paper is to perform an
in-depth
analysis of the specific components of Boeing’s and Airbus’ strategies in
China, making clear comparisons, and detailing which components are similar and
which ones are divergent.
Analysisof an in-depth analysis
of the specific components of Boeing’s and Airbus strategies in China.
Both Boeing and Airbus have been able to get a good hold
of Chinese market. One of the advantages with these companies is that the local
manufacturer of China is not certified to sell aircrafts in International
market. Therefore both these companies have been able to generate a good market
share in China. As far as the market in terms of volume is considered, Boeing
has a larger volume that Airbus. However the difference between Boeing and
Airbus is reducing as Airbus is making progress in Chinese market (Ricart, 2011). The similarities and dissimilarities in the
business model of Boeing and Airbus in China can be discussed under the following
parameters:
Timeline: Airbus took
a major decision to open its final assembly line in Europe. The company decided
that it would open its assembly line in Tianjin. This decision had a great
impact on the market of Airbus in China. The company was able increase its
market share after this decision. As per the website of Airbus (www.airbus.com):
“Airbus has seen tremendous growth in
the nation, with over 1,100 of the company’s aircraft in operation with Chinese
airlines as of January 2015â€.
Global trading models:
As far as the trading models are concerned, both the
companies have somewhat the same trading model to handle their operations in
China. According to Braddon (2014), Competition
amongst these two companies has been very stiff and they have competed in various
aspects including technologies by introducing various product ranges geared
towards outperforming the rival and also through outsourcing of their aircraft
components of the aircraft production in countries which are of strategic
importance to each company that enables them to expand their competitive
advantage. These companies have always focused to increase their growth rate
with mergers and acquisitions. As a result, these two companies have been able
to establish a duopoly in international market in aircraft business. China is
considered as an important foreign market for both the firms. Both the
companies have focused to create China a hub that would be used to cater for
the Asian market (Carbaugh, 2011). It can be said that the global trading
models of these two companies are on similar lines.
Local
government and legal system interactions:The management of both the companies
realizes that they would not be able to develop and grow unless and until they
have the support of local government. Both the companies shave focused to
develop good relationship with Chinese countries. Airbus also has a tie up with
Chinese government to create employment opportunities in China. With respect to
local government and legal system interactions, it can be said that Airbus is
slightly better placed than Boeing.
Local
incentives: Both Boeing and Airbus have been able to take the
benefits of government policies in order have a better grip of Chinese market. In
the last decade or so, Chinese government has developed a lot of good policies
for foreign companies to come and establish their manufacturing base in China.
It can be said that both the companies are on similar lines to take advantage
of local incentives.
Management
of cultural differences: There exists a fundamental cultural difference in
the culture of Airbus, Boeing and Chinese manufacturers. The culture of Airbus
and Boeing also differs to some extent as there exists’ a difference between
European way of working (Airbus) and American way of working (Boeing). In terms
of cultural differences, it can be said that Boeing has been able to manage its
cultural differences well in China.
Partnering,
duties and taxes and Trade agreements: One thing that is fundamental to the success of
both the companies is the way they have partnered with other firms and the way
they have focused on mergers and acquisitions. With respect to partnering both
the firms are on similar lines and both rely heavily on partnering. Both Boeing
and Airbus are large firms and these companies have been able to manage their
taxes in a way that benefits could be realized. Both the companies are
determined to have the required trade agreement with government of China.
Airbus has an effective trade agreement with government of China that provides
certain tax benefits to the company (Ibsen, 2009). Both the companies have been
able to establish good trade agreements with Chinese counterparts.
Currency,
finance and negotiations with Chinese air carriers:
The success in this sector in China is mainly
attributable to China’s capacity to maintain low production costs which has attracted
FDI. By investing in the manufacturing
market in China, the Foreign Direct Investor must factor in potentially higher
transportation costs, supply chain management complexities and a possible disruption
risks. However, in spite of these risks
and cost elements, the actual manufacturing cost of aircraft structures is
approximately 20-25% lower compared to the West which is attributable to labor
costs which are 3-5 times lower (Braddon 2014).When Boeing and Airbus started
their operations in China, they were considered as a threat to local carriers. The
emergence of Comac, Chinese state owned air carrier manufacturing passenger
commercial aircraft poses a big threat to both Boeing and Airbus for market
share due to its capacity to compete on the same level with the two
manufacturers as far as quality is concerned. Comac plans to make its first
customer delivery of the C919 single-aisle 168 seater commercial jets in 2018
and the C919 competes directly with Boeing’s 737 series (Braddon 2014). With respect to negotiation, it can be said
that both the companies have been able to develop good negotiation strategies
that have helped these companies to have better relationship with Chinese
counterparts, government and society.

References
Airbus
(2015). Welcome to the world of
Airbus. [Online]. Available at: http://www.airbus.com/company/. (Accessed: February 17, 2015)
Boeing
(2015).Boeing in brief.[Online].
Available at: http://www.boeing.com/boeing/companyoffices/aboutus/brief.page
(Accessed: February 17. 2015).
Boeing
(n.d.).Boeing in China Backgrounder.[Online].
Available at: http://www.boeing.com/assets/pdf/aboutus/international/docs/backgrounders/chinabackgrounder.pdf
(Accessed: February 17. 2015).

Braddon, D. (2014)“China sets its sights on breaking
the Boeing-Airbus duopoly†[Online]. Available at:
http://theconversation.com/china-sets-its-sights-on-breaking-the-boeing-airbus-duopoly-34181.(Accessed:
February 18, 2015).

Casadesus-Masanell, R. &Ricart, J. E. (2011).
How to design a winning business model. Harvard Business Review, 89(1/2),
100-107.
Ibsen, A. Z. (2009). The politics of airplane
production: The emergence of two technological frames in the competition
between Boeing and Airbus.Technology in Society, 31(4),
342-349.
Liu,
W. (2004), ‘China’s free trade zones: A study of their economic effects’, China
Report, 40, 4, p. 431-444, Scopus®, EBSCOhost. (Viewed: February 18, 2015).
Olienyk, J. & Carbaugh, R. J. (2011). Boeing and
Airbus: Duopoly in Jeopardy?. Global Economy Journal, 11(1).
Wang,
H.,Li, S.&Wang, Q. (2013) “China’s ten years in the WTO: review and
perspectives”, Journal of Chinese
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WTO
(2014) Trade Policy Review: China [Online].
Available at: http://www.wto.org/english/tratop_e/tpr_e/tp400_e.htm.
(Accessed: February 18, 2015).Bottom of Form