Airbus v. Boeing Unit 8 Case Study MT330-01 International Marketing Kaplan University Christina Olson November 14, 2011 Airline manufacturers must compete with one another to be successful, and have the most birds in the sky. Boeing and Airbus are the two largest manufacturers for commercial aircraft, especially those used for long flights. Iberia Airlines wanted to purchase up to 12 brand new jumbo jets from one of these manufacturers. Enrique Dupuy, Iberia’s CFO, set a price that he wanted the company to pay for the aircraft and then started a bidding war between the two super jumbo jet manufacturers.
Negotiation between two major companies like Airbus and Boeing can make a marketing strategy very strong or the complete opposite, it can cause a strategy to crumble to pieces in an instant. Airbus and Boeing both have dedicated sales representatives, Bight of Boeing and Leahy to their jobs very serious and developed a marketing plan like none other. These two gentlemen understood one important thing when it comes to marketing, plans must be able to adapt to change at any given moment. Prior to the beginning of the negotiation Airbus had an advantage of Boeing.
Iberia Airline were currently using the manufacturers largest plane (Michaels, 2003). Airbus had already established a solid reputation with the airline company. Dupuy was familiar with Airbus’s resale guarantee, which was hard to beat by any other company (Michaels, 2003). Although Airbus had previous history with the airline company, Dupuy wanted to look at other manufacturers to get the best competitive price. Bright was personally contacted by Iberia Airlines to begin a negotiation process in hopes that he would be able to meet the predetermined price set by Dupuy (Michaels, 2003).
Bright’s marketing strategy was geared to the fact that these planes could save more money in the long run while earning more revenue. He not only explained to Dupuy Boeing 777 could hold 24 more seats than Airbus which generated more revenue per flight (Michael, 2003). These aircrafts also used less fuel, allowing for expense to be dispersed to areas other than fuel (Michaels, 2003). Leahy did not let the extra seats and lower fuel usage discourage him during negotiations.
During the meeting with Dupuy, Leahy reminded Dupuy that Airbus guarantees resale value of all aircraft plus the lower initial cost of purchasing the aircraft (Michaels, 2003). He provided numbers of how much the company would save by keeping Airbus, the price of extra parts and pilot training (Michaels, 2003). All of these costs were expense that would save the airline company millions of dollars upfront. Despite the good marketing and negotiation strategies by both manufacturing companies, Dupuy was not happy.
Dupuy set a price that he wanted the two corporations to meet, or he would look into purchasing used aircraft (Michaels, 2003). This made both men return to their home company and refigure the marketing strategies. Each company offered perks such as financing, maintenance discounts, and sufficient amount of parts. Negotiation between the aircraft manufacturer and the airline company was not an easy task. Each time Bright or Dupuy offered a new contract; Dupuy rejected it asking for more discounts in price.
He would also contact the other manufacturer, causing uproar to try to beat the prior suggested contract. The negotiation between Iberia Airlines and the manufacturing companies went on for over a year. Bright and Leahy were constantly adjusting their marketing strategy to fit the need of the airline company. These two men had to not only negotiate with the airline company but with the finance company and the company that makes the parts and engines (Michaels, 2003). It was a never ending task until Dupuy finally decided on which company enter into contract with.
During the end of the negotiations, Dupuy stood firm in his set price; he refused to settle. Boeing and Airbus had very strong marketing strategies that had to change constantly in order to not only meet the expectations of the buyer but to overcome the bid of the competitor. Even though Boeing had strong factors, such as the decreased fuel expense and increased income from more passengers, Airbus won the negotiation. Leahy was able to meet all of the expectations set by Dupuy, better financing, decreased price but most of all the guarantee return on sale of the aircraft for 20 years (Michaels, 2003).
During the negotiation process both aircraft manufacturers were focused mainly on numbers. Another aspect of a marketing strategy should have been safety and consumer choice. Airbus was noted to have a system that not all pilots trust “Fly-by-the-wire,” causing planes to malfunction and plunge 100s of feet in seconds (Bland, 2009). Both of these factors can play a major role in how many passengers choose to fly with one airline company over another because of the aircraft used.
Had either of the manufacturers used these two simple areas in their marketing strategy the negotiation outcome could have been different. Reference Bland, A. (July 1, 2009). The Big Question: Why was another Airbus crashed, and is flying Becoming more risky?. The Independent, Retrieved from http://www. independent. co. uk/news/world/africa/ the-big-question-why-has-another -airbus-crashed-and-is-flying-becoming-more-risky-1726056. html Michaels, D. (March 10, 2003). Boeing and Airbus in the Dogfight to Meet Stringent Terms of Iberia’s Executives. The Wall Street Journal Europe, Dow Jones & Co. –
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