Bombardier CSeries Analysis by Elie Khalil Yachoui
1. Identification of the main Problem/Issue
Subsequent to Bombardier’s (BBD) successful restructuring from a snowmobile manufacturer in 1942, Bombardier Aerospace and Bombardier Transport maintained their titles as world leaders in their respective industries up until 1999. However, regular change in leadership since then had placed the company on the verge of an obscure vision and strategy. Coupled with BBD’s aging technology, drastic worldwide events, and rising attractive opportunities in the regional jets market, BBD has been subject to fierce worldwide competition and most aggressively from Brazil (Embraer). How can Bombardier gain back leadership in the globally competitive passenger aerospace industry? 2. Analysis
2.1 External Environment Analysis
Politically and legally, governments had always supported aeronautics by shielding national manufacturers against competition and subsidizing their research and development projects. To some extent, foreign competition called for the intervention of the World Trade Organization to control anti-dumping policies. Governments also got involved in establishing environmental regulations to control the damaging effects of air transportation on the environment. The deregulation of the aerospace industry in the mid-1990s led to a socio-cultural change in consumer's preference from high comfort level to lower prices. The latter pushed airline companies to seek low-cost-carriers to reduce costs. Economically, airline carriers adopted flexible financial models with manufacturers to meet fluctuating aircrafts demand and develop the business further. Technologically, airline manufacturers focused on innovating their core competencies through R&D and achieved economies of scale by outsourcing airplane segments to suppliers and developing strategic partnerships with subcontractors. *REFER TO TABLE 1 IN APPENDIX FOR PORTER’S 5 FORCES TABLE* As the table shows, rivalry amongst competitors has the highest effect on the passenger aerospace industry. The moderate effect would be the bargaining power of suppliers, Bargaining power of buyer, and threat of new entrants since the aerospace industry is extremely conservative in terms of manufacturer acceptability and moving towards being environment-friendly. As for threat of substitution, it has the least effect because air transport is faster and more efficient than rail, road, or water modes of transport. However, it is important to consider high-speed trains as a threat for regional connecting flights as customers could enjoy lower fares, convenience (versus the hassle of airports), and a different experience. In general, the passenger aerospace industry has high potential expect for the presence of rivalry amongst competitors that keep it extremely difficult to accomplish.
2.2 Internal organizational analysis
A) Tangible Resources
-Financial resources: BBD’s financing is based on lease financing that is supported by commitments from potential customers and suppliers. Exhibit 15 shows negative Revenue to Working Capital ratio in 2004 (CSeries announced) and 2006 (CSeries on hold after Ebraer 190-195 launch) => Current Liabilities > Current Asset => BBD collected revenues before CSeries delivery. In addition, BBD is able to generate internal funds through subsidies from the government of Canada, Quebec province, and the UK.
-Organizational resources: BBD’s head office took advantage of synergies generated from overlapping shared services (finance, legal, HR, PR) while maintaining a highly decentralized organizational structure between the aerospace and transportation division.
-Physical resources: BBD’s production and R&D activities are done in Bombardier’s Montreal-Mirabel site and Belfast (Ireland) by integrating subcontractors’ products (wings, engines, landing gears).
-Technological resources: BBD has been fine-tuning 1970s aircraft technologies to...
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