The announcement of an outdated CRJ1000 instead of the highly anticipated CSeries came to a shock to analysts and shareholders. It has now become unclear to investors what Bombardier’s future strategy will be within the aerospace industry.
2. External analysis
Technological: Due to the competitive nature of the industry, it is important to stay ahead of the pact in term of technology; continuously improving energy efficiency of the carriers.
Economic: The industry’s performance is highly tied in with the economy. A weak economy will mean weak sales.
Industry analysis: Porter’s five forces model
Bombardier Aerospace’s industry would be most clearly defined as the airline industry. * Threat of new entrants: Low. Because of the capital and necessary expertise needed to enter the market, it is not easy for someone to enter. * Power to the suppliers: High. Because their subcontractors have mastered a very specific technologies and processes, it makes them very difficult to replace. * Power to the buyers: Medium. The airlines do not have a large selection of competitors to choose from. * Product substitutes: Low. Airlines do not have the luxury of switching products. * Intensity of rivalry: High. Has been increasingly intensified.
* Competitor analysis:
a) Who are our competitors?
b) What are their capabilities?
Manufacturing: Their ability to satisfy the demands in terms of quality & efficiency Assembly
A brief conclusion about the position of the firm against its competitors: Embraer is a huge threat because of its increasing power over the industry.
* The development directions of the industry
The industry is heading towards the mid-sized aircrafts with a capacity between 100-140 passengers and regional jets between 100-150 seats with turbo propulsion engines that required less maintenance and have economic advantages.
* The industry success factors
Governmental Grants in order to be able to conduct the necessary research to be able to innovate improved models
* A general conclusion for the external analysis includes the opportunities and threats in the external environment.
3. Internal analysis:
The return-on-equity ratios have been going down since 2001. In 2006 this ratio started to go up again. Furthermore, the pretax margins have been quite marginal since 2001. Finally, the net profit margins have also been significantly reduced since 2001. Overall, Bombardier is becoming less profitable.
The current ratio (assets to liability ratio) indicates that there are decreasingly liquid. This means that their liabilities are increasing while their assets are staying the same or decreasing.
The current liabilities/equity ratio has slowly been going up since 1998. This is a good indicator that Bombardier is in trouble because either their equity is decreasing or their liabilities are increasing either way it is bad news. Furthermore, their long-term debt to assets ratio increased shapely in 2000 and has stayed steady ever since.
This ratio can help uncover questionable management decisions such as relaxing credit requirements to potential customers to increase sales, increasing inventory levels to reduce order fulfillment cycle times, and slowing payment to vendors and suppliers in an effort to hold on to its cash. (SpireFrame.com, 2012). In this case, Bombardier was more or less stable till 2001 but after then some seriously questionable numbers have been coming up.
Financial resources summary:
Overall it is not looking very good for Bombardier since their ratios are increasingly weaker as time goes by. Since 9/11 in 2001 Bombardier has never fully recovered from this event. They...