...Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc 1. How do the retailing strategies of Sears and Wal-Mart differ? Walmart’s strategy is more of a cost leadership strategy and Sears has more of a product differentiation strategy. This fact can be derived from their income statements , as is observed that Sears in 1997 spent 23% ( percentage of its sales) on Selling and administrative costs yet Walmart spent only 16% ( as a percentage of it’s sales ) on the same income statement line. o Sears – differentiates by Geography: • Located in shopping malls Market Segmenting: • Selling Specialties: home furnishings, hardware, auto parts • New strategy to target middle class women Financing: • Proprietary credit card – to provide flexibility of payment o Walmart – Focuses on ▪ Low price strategy ▪ Large product mix ▪ Lowering Operating expenses 2. Wal-Mart’s average return on equity for the 1997 fiscal year was 19.7% [$3,525/($18,503+17,143)/2] while Sears’ average return on equity over roughly the same period was 22.0% [$1,188/($5,862+$4,945)/2]. Don Edwards was puzzled by these numbers because of Wal-Mart’s reputation as a premierretailer and Sears’ financial difficulties not long ago. What is driving the performance of these two companies during fiscal 1997? • Both...
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...FINANCIAL MANAGEMENT (BA 385T) FALL 2011 PROF. CLEMENS SIALM Case 1: Airbus A3XX Due: August 31, 2011 On August 31st we will discuss the HBS case “Airbus A3XX: Developing the World’s Largest Commercial Jet (A)” (9-201-028, Revised April 26, 2004). The case is available in the course packet or from the website of the Harvard Business School Press. To prepare for the class discussion, you need to submit a written analysis. The assignment is done in your study groups and part of the class contribution grade will be determined by peer evaluation of each member’s contribution to the assignments. Copies of the written reports are due at the beginning of class on the day the case will be discussed in class according to the class schedule. No late written reports will be accepted. Each group will hand in only one typed assignment. The assignments should be between four and eight pages in standard formatting. For the cases, you should try to put yourself in the shoes of the case participants at the time of the case and you must take a position regarding the problem in the case and make a specific recommendation on how to solve it. Support your recommendation as succinctly and as effectively as you can. The case questions given below are designed to help you streamline the issues to be addressed. If you believe that these questions do not effectively address the problems in the case, feel free to go outside the parameters of the questions. You may not look at or use case materials...
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...Organizing for the Airbus A3XX The market for commercial aircraft larger than the Boeing 747-400 is driven by the growth of the airline market generally, flight congestion at major airports, increased cost pressure on airlines, and demand for more environmentally-friendly aircraft. Many of these factors presuppose improved technology, superior design, new manufacturing processes and better supplier collaboration. To minimize weight and fuel costs, for example, the A3XX will incorporate a range of advanced materials such as carbon fiber reinforced plastics and a new aluminum and fiberglass laminate called "Glare." The design and implementation of such advanced materials necessitates close coordination with a wider range of suppliers. It also means that some elements will have to be outsourced to suppliers that possess deep expertise in particular areas and requires creative thinking on the part of such suppliers about how the expertise of secondary suppliers might be exploited to meet specifications and requirements. The wiring of the new aircraft will also be quite complex, consisting of nearly 100,000 wires bundled into 530km of cables held by 40,000 connectors. The design of the aircraft necessitates a switch from copper to aluminum wiring, the latter requiring a larger bend radius that could make it more difficult to maneuver around corners within an aircraft and could entail rerouting of some harnesses. Manufacturing and design of the A3XX will be spread across 85 countries...
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...shares fell 1.7% on the same day, giving signals to the company that it would not be accepted by its shareholders. But if Boeing uses it, it would not be worth for Airbus to launch the A3XX, because it could not raise the price and still have to divide the market. Then the NPV would be U.S. $ 650 million to a negative value close to selling $ 225 million per unit, assuming sale of 34 units (30% loss of market), with operating margin of 20%, preventing the launch. Lower the Value of 747 Aircraft If Boeing had lower the value of 747, it would have a reduction in their profit margin, and could not compete in technology, comfort and operational efficiency with the A3XX. With this decision Boeing required Airbus to reduce the value of the aircraft arriving at a price of U.S. $ 180 million per aircraft on condition of selling 48 units, with an operating margin of 20%, obtaining an NPV of U.S. $ 61 million. Accordingly the Airbus could enter the market without a high profit. Developing an Airplane Super Jumbo to compete with the A3XX Boeing brings a negative past experience, which almost led to bankruptcy. The estimated investment would be U.S. $ 13 billion for this development, and that cause the fugue of its shareholders. Even with this high risk, if Boeing develops a super jumbo, Airbus would not launch the A3XX, because it could not raise the price and would have to divide the market. In this case the NPV U.S. $ 2268 million to a negative value close to selling U.S. $ 225...
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...Term Paper on Airbus INTRODUCTION In December 2000, Airbus formally committed to develop and launch a super jumbo plane known as the A380 at a launch cost of $13 billion. Prior to and after Airbus’ commitment, Boeing started and canceled several initiatives aimed at developing a “stretch jumbo” with capacity in between its existing jumbo (the 747) and Airbus’ planned super jumbo. In addition to making the super jumbo one of the largest product launch decisions in corporate history, this figure represented 26% of total industry revenues in 2000 ($45.6 billion) and more than 70% of Airbus’ total revenues in 2000. The inherent risk associated with this major strategic commitment is magnified by the fact that Airbus must spend the entire amount before it delivers the first plane. History has shown that many firms including General Dynamics, and, more recently, Lockheed, have failed as a result of attempting such bet-the-company product development efforts. If, however, the launch effort does succeed, Airbus is expected to dislodge Boeing as the market leader in commercial aircraft after more than 50 years of market dominance by the latter. We can write a custom term paper on Airbus for you! This term paper presents an analysis of this new product commitment and, more generally, of competition in very large aircraft (VLA is defined as planes capable of seating more than 400 passengers). CASE BACKGROUND In the early 1990s, Airbus and Boeing independently began to study...
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...9-201-028 REV: APRIL 26, 2004 BENJAMIN ESTY Airbus A3XX: Developing the World's Largest Commercial Jet (A) Aviation is a great business to be in, provided you have limitless money at your disposal, limitless confidence in your ability to get everything right the 1 first time, and limitless resolve and iron nerve. EADS (Airbus) is betting the company on this aircraft. 2 On June 23, 2000, Airbus Industrie’s Supervisory Board approved an Authorization to Offer (ATO) the A3XX, a proposed super jumbo jet that would seat from 550 to 990 passengers, have a list price of $216 million, and cost $13 billion to develop. Before the Board would commit to industrial launch, the point at which significant expenditures would begin, it hoped to secure orders for 50 jets from as many as five major airlines. While Airbus had been courting potential customers for many years—in fact, development had been underway since 1990—the ATO gave the sales force permission to begin taking firm orders for the plane with delivery starting in 2006. Airbus management announced the first orders for the A3XX at the bi-annual Air Show in Farnborough, England, in July 2000. Noël Forgeard, Airbus’ CEO, reported that Air France, Emirates Airlines, and International Lease Finance Corporation had agreed to order ten, seven, and five jets, 3 respectively, and that there were another 30 orders lined up. The initial orders were a positive, though not unexpected, sign. The real question, however...
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...1. Why is Airbus interested in building the A3XX? What are its objectives? Airbus wants to expand its business. Airbus major competitor Boeing had successfully produced 747 in VLA category. Airbus now wants expand its horizon and enter the VLA segment. There seems to be a promising future in the VLA market category. Analyst predicted that airplanes travelling long distance with higher capacity was more cost effective. The operating cost would be only 12% more than the Boeing 747 but would provide 35% more capacity. Research has shown that the demand for VLA will increase due to the increase in number of air travel and growing traffic at major airport worldwide. To meet future demand there is a need for a large aircraft and also large capacity will in-turn increase the number of passengers and cargo. There is also a strong prediction that economy of Asia will increase further increasing in air traffic. Airbus rejected the theory of hub-spoke model, stating that would only lead to congestion and hence it is not the solution of the problem. Passengers would prefer to travel long distance with no stop overs and better leg room. Over time majority of the airlines will find a need to have it. The airplane will be designed better as it will have four engines instead of two which also contributes to the safety factor. The objectives: Airbus wants to know the demand of the product. As the company is investing a lot in the airplane, they need to be sure as what is the demand and...
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...Essay Theme: Airplanes Airplanes, the fastest vehicle to connect countries! They were designed due to the necessity of people to travel abroad and fast. The first successful airplane was made by the Wright Brothers! On December 17, 1903 Wright Brothers made four brief flights at Kitty Hawk with their first powered aircraft. Since airplanes have evolved, the Airbus A380 is the world's largest passenger airliner; many airports have upgraded their facilities to accommodate it because of its size. Initially named Airbus A3XX, Airbus designed the aircraft to challenge Boeing's monopoly in the large-aircraft market; the A380 made its first flight on 27 April 2005 and began commercial service in October 2007 with Singapore Airlines. The A380's upper deck extends along the entire length of the fuselage, with a width equivalent to a wide-body aircraft. This gives the A380-800's cabin 478 square meters of floor space, which is 40% more than the next-largest airliner, the Boeing and provides seating for 525 people in a typical three class configuration or up to 853 people in all economy class configurations. The A380-800 has a design range of 15,700 kilometers (8,500 mi; 9,800 mi), sufficient to fly from New York to Hong Kong, and a cruising speed of Mach 0.85 (about 900 km/h or 560 mph; 490 km at cruising altitude). The A380 was used to...
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...REV: SEPTEMBER 18, 2007 ERICH ALEXANDER VOIGT JORDAN MITCHELL Airbus vs. Boeing (A) Should Airbus go ahead and develop its own version of a super jumbo (the A3XX)? Should Boeing develop a larger version of the 747? What would Boeing and Airbus gain by teaming up? What could they lose? The answers to these questions would determine the future of both companies for many years to come. The Commercial Airline Industry Do The global aviation industry was sized at approximately $100 billion as of 1992. The single largest segment was the manufacture and sale of large commercial aircraft, which totaled $38.5 billion in 1991.1 The sale of large commercial aircraft was expected to grow to $40 billion by the end of 1992. The worldwide commercial aircraft fleet was made up of nearly 8,000 passenger and 1,200 cargo planes spread out over 450 airlines and operators. Large commercial aircraft were defined as airplanes with 100 or more seats. Large aircraft made up 90% of the fleet, while smaller airplanes accounted for the remaining 10%.2 The VLCT was defined as a plane over 400 seats or with the ____________________________________________________________ ____________________________________________________ Professor Ramon Casadesus-Masanell, Erich Alexander Voigt (Tiggeman Associates), and Research Associate Jordan Mitchell prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are...
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...A1. Airbus is interested in building the A3XX because it did not have any large aircraft to compete with 747-XXX airplanes of Boing. Boing with its 747-xxx aircraft had the monopoly position in very large aircraft market; therefore, Airbus with the building of A3XX wanted to enter the very karge aircraft market. From the other side Airbus was of the beleif that very growing economies would play major role in creating high demand for the VLA in future. One of the other reason of Airbus interest in building A3XX was the effective revenue which could be acheived through A3XX. VLA had a better operating economy over long distanations. The operating cost for the VLA was only 12% higher in compare to 747-xxx airplane but it provided 35% more space. A3XX new design and its 4 engines provides saver flights over long distances. Q2. How many aircraft does Airbus need to sell in order to break even on the investment? Hint: consider all capital providers as a single entity and calculate the break even return to them collectively. To calculate the break-even number of planes calculate the present value of a growing perpetuity if cash flows from plane sales beginning in 2008. Please assume an equity risk premium of 6% in your analysis. A2. Q3. What is the total demand for VLA aircraft. Analyze the sensitivity of demand to small changes in assumptions regarding growth, conversion rates and market share. A3. Q4. How should Boeing respond to...
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...Boeing and its Management Planning Christopher Bayles MGT/330 October 2, 2011 Bill Escue Boeing is one of the biggest aviation companies in the world with relations to a number of different countries. They produce products for commercial and government use as well as have contracts with National Aeronautics and Space Administration (NASA). Management planning is one of the primary key focuses to Boeing because of the size of its massive corporation. They create some of the top high-end equipment for medical, commercial, and government use. The primary workings of the company includes goods that aid in the carrying of cargo, people, and other equipment used by the government. The Federal Aviation Administration (FAA) oversees the operation of aircrafts for safety concerns. Because of the safety concerns, Boeing conducts very extensive planning to operate a well-organized and successful business. Planning includes precautionary needs for the future, figuring out the departments’ objectives, activities that could be of some concern to a company, and a company's techniques they will need to accomplish a successful result (Boeing, 2010). During plans making Boeing has to consider the unpredicted problems so that there can be no possible mishaps that could happen. By setting obtainable goals in marketing, sales, mechanical markets and engineering, and updating and training employees to be more effective will ensure that the products exceed high expectations and...
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...Business Case Analysis Wael M. Zaoud MGT 521 May 28, 2012 Clance Doelling MBA, BSME Business Case Analysis Executive Summary The third week assignment examines The Boeing Company (BA) strategic initiatives taken in relative to the organization and operation adaptation to the developing competitive environment. Boeing operates as a global company and facing tough competition recently from Airbus, Lockheed Martin, EADS, Northrop Grumman, etc. Politics, finance, economy, and resources (to name a few) impact the global market in which Boeing operates. As a result, Boeing needs to constantly evaluate its global strategy and the tactics it uses to capture the market and maintain growth. Economic Trends Recent global events, including regional political turmoil, natural disasters, and debt crises, have affected global economic growth. While global growth is expected to recover, the risk of persistent high oil prices and debt contagion could have lasting effects on the economy (The Boeing Company, n.d.). Economic growth also could be affected by slowing trade liberalization in some regions. Reduced liberalization could prolong the recovery period, affecting the demand for air travel and new airplanes. Though recent data indicates that the global economy continues to recover, the pace of the recovery in 2011 has moderated compared to 2010. High oil prices, natural disasters (Japan earthquake) and resulting consequences in a politically unrest Middle East area pose as primary...
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...The Airbus Everything about this airplane is enormous, the numbers of truly main Baugleen, its overalling is 73 meters, that´s about the slowest of the greats things in a jet, the jaim to the fuselage were tipically have 5 hundred and 60 feet to have the potential to carry up to 8 hundred passengers, the tail at 21 meters of the ground is as high as a seven story building, the 8 hundred and 45 square meter of and wind area is big enough to park 70 cars. The 8380 can fly staggering 15000 kilometers without gree fueling and in order to do that, it needs to carry 3 hundred and 10000 liters of fuel, making the plains take of weith of 5 hundred and sixty tons. Incredibly thought, the 8380 will actually be more fuel efficient than others similizise jumbo jets, air bus claim that the plane will buy 3 liters of fuel per passenger for one hundred kilometers, making it as economical to run as a family car. The building of the 8380 is a remarkable example of a transnational cooperation, the finally assembled is in Tolous in France, but this is only the end of an impressible complicated process, the construction of each aircraft is the result of collaboration between France, Germany, Britain and Spain. The wings for example are built in England as wells, the main section of the fuselage are constructed in Humburg- Germany; Parts of the nose and tail are in fact made in Spain and only assembled in Germany. Everything is then shiped to France to be put together. The 8380...
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...Finding the Right Location: Four Dimensions of Successful Foreign Direct Investment. Airbus Assembly Line – Mobile, Alabama Overview With the announcement earlier this year by Airbus that it plans to invest $600 million to build jetliners in Mobile, Alabama, the Southeast U.S is well positioned to attract foreign direct investment and U.S suppliers to the region. Central to the supply chain discussion are location strategies that optimize the value chain, drive innovation through the involvement of education and academia in proximity/joint working relationships and provide flexibility for adapting to business change. Location decisions such as these are special events that require careful attention to many conflicting strategic, operational, financial and intangible factors that can set the stage for either great success or fantastic failures. these issues will be one of the biggest challenges facing the industry in the coming years. This whitepaper explores the key drivers impacting the aerospace industry, the process for developing a comprehensive location strategy in response to industry expansion, and these critical locations factors that lead to location strategy success in the Southeast U.S.: Global commercial aircraft orders have increased six percent in 2011, with accelerating demand for new, more fuel efficient and technologically advanced aircraft. According to a number of studies, the industry will have to increase production by 45 percent to meet demand in...
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...Ethics At Airbus 1) In each of the cases described above who benefits and who suffers from the alleged ethical and legal lapses of Airbus? Ans – When we observe across cases, its mostly the state and the airline company who is at loss due to these legal and ethical lapses Airbus – Sabena Case: As long as Van Espen’s case does not prove anything against any party, Airbus has gained significantly from the deal as it would have earned around $5bn order from the deal. The party which suffered significant loss should be the state as the Belgian government had 50.5% stake KAC – Airbus: Airbus gained a much needed order bill of around $1.1bn and possible order of $0.9bn, the employees of KAC Mr Al Mishari and its subsidiary ALAFCO, Dr. Mallalah & Mr El Fekih possibly would have earned (only a possibility) whereas the state of Kuwait higher costs, lost cash, earned higher depreciation costs and probably had to write-off it off India Inc. & Airbus: Airbus like all other cases earned the order book despite Boeing offered a deal to the Indian government $140mn cheaper. The state and eventually the airline paid $140mn more, raising its depreciation costs, debt service costs and got hold of carriers which were not properly tested thus risking the life of passengers Across cases observed, Airbus has been smart enough to save itself a persecution almost anywhere and has got large order books worth billions of dollars acquiring half of the market share but if Airbus is found...
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