Aerospace manufacturing industry




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2.Scope of Competitive Rivalry


With a decreasing market size in the industry, aerospace manufacturers are competing more than ever to gain new business. Buyers are looking to spend less money and get the best products possible. These factors create an enormous challenge for aerospace manufacturers to manufacture products with high labor costs and fierce competition. As technology is always changing, companies in the industry are also looking for new ways to improve their products or services to outperform their competitors.

Outsourcing is a major trend which aerospace manufacturers are using to gain competitive advantages. One of the main reasons for outsourcing is to save money which is crucial for an industry which is struggling to make profits. Another reason is to save valuable time and resources. Take for example Boeing, which is outsourcing as much as 70% of manufacturing on their new 787 Dreamliner. Not only is outsourcing saving them millions, but would cut production times in half.



3.Number of Companies in the Industry


There are thousands of aerospace manufacturers which exist in the U.S. However, the majority remain small organizations because of entry barriers. Barriers prevent companies from entering the industry primarily due to the high capital requirements which require the need to invest large amounts of financial resources.
Every year Aviation Week puts out its Top Performing Companies list which compares various aerospace manufacturing companies. The top six companies in the industry rank as follows:

  1. Lockheed Martin Corp

  2. Precision Castparts Corp

  3. Boeing

  4. General Dynamics Corp

  5. Thales

  6. Raytheon

Below is a table highlighting various aspects of a few major competitors:





Lockheed Martin

Boeing

Northrop Grumman

Raytheon

Fortune 500 Rating

54th

34th

69th place

108th

Employees

146,000

162,000

123,000

72,800

Year Founded

1995

1916

1994

1922

Headquarters

Bethesda, MD

Chicago, IL

Los Angeles, CA

Waltham, MA

4.Customers


The two largest consumers of aerospace products and technology in the United States are the Department of Defense and NASA. The U.S. Department of Defense (DOD) is in charge of national security and the military. With an expected budget of over $600 billion for 2010 the DOD has the financial capability to continuously seek the newest and best technologies to protect homeland security.
Although companies such as Boeing have large integrated defense systems and receive nearly half of their sales from the U.S. Government, the target market for commercial jet manufacturers are primarily commercial airline companies. With a relatively limited client base for airplane manufacturers this creates fierce competition. Often time’s organizations must share customers and work together to create products to satisfy customer needs. Because of the limited amount of customers, airplane manufacturers such as Boeing must do business worldwide.
Certain aerospace manufacturers, such as Boeing, also have a customer base which consists of personal and corporate sales and leasing. Commercial jets and airplanes account for most of the industries private sales. With multi-million dollar price tags, individuals or corporations must have the financial ability to purchase and maintain these expensive aircrafts. Although a more popular option for customers are to lease aircraft to help alleviate some of the costs.

5.Ease of Entry/Exit


Ease of entry to the aerospace manufacturing industry can vary depending on what products or services are offered. Overall, to become a major aerospace manufacturer, one of the largest entry barriers is having capital requirements which require the need to invest large amounts of financial resources. In order to become a prime contractor for the government, a company must convince them that their ideas and proposals are the best. Attaining contracts can prove to be difficult for newcomers because you are competing against more established, reputable and financially capable organizations. In addition, facilities must be large enough to accommodate the project with a skilled staff.

6.Technology/Innovation


With the need for continuously improving products, technology is a key factor in creating the future of the aerospace industry. Major manufacturing firms invest hundreds of millions of dollars in research and development in order to provide and improve strategic capabilities of their organizations. These capabilities include, but are not limited to: energy efficiency, reducing emissions, noise, and hazardous materials as well as increasing material recycling.
By implementing these changes it not only benefits the environment, but customers are also able to save money in running costs. Aerospace manufacturers are constantly looking for new ways to improve the flow of aerodynamics, materials, propulsion and systems by synthesizing them all together. Most of the industries focuses are to improve fuel efficiency in aircraft. With the U.S. Military being the world’s largest consumer of oil, they are looking for alternatives to help suppress their impact on the environment. One of those plans is to certify its aircraft fleet to use a 50-50 mix of biofuel and jet fuel.
With commercial airlines struggling to stay in business, they rely heavily in the technological improvements of aircraft to keep them running. The core of the solution also lies in efficiency of the aircraft. One of the leading manufacturers of commercial airplanes, Boeing, is developing their 787 Dreamliner as a showcase to what they can accomplish with technology. Everything from the design to construction materials were extensively researched to create maximum efficiency. As a result the midrange airplane will consume 20% less fuel and be 10% less expensive to operate than its major competitor.

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