Bombardier Transportation and the Adtranz Acquisition

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Table of Contents

Introduction
The Best Business, Cultural and Legal Practices
Integration of the Organization into the Market
Diversification of Its Products
Creating and Maintaining A Competitive Edge Over Rivals
Conclusion
References List

Introduction

In 1921 at the age of 19 Joseph Armand Bombardier opened a garage in Val court Quebec where he earned his living as a mechanic. After observing the problems people were faced by (during the winter season) he wanted to find a way that would make movement easier.

For about a decade he used his garage to develop multiple prototypes of a vehicle that would solve his winter problems and it was until 1937, he submitted his B7 prototype for patent approval (Bartlett, Beamish, & Ghoshal, 2008).

After the submission he received an initial order of 20, whereby he assembled his friends and family to manufacture the B7s whose customers included doctors, veterinarians, telephones companies and foresters.

In 1942 Bombardier incorporated his business as L’auto-Neige Bombardier Limited (ANB) shortly thereafter the company received orders from the Canadian government for specialized tracks to be used by the army during the 2^nd world war though this expedition was not that profitable it allowed the company to refine his manufacturing process and develop competence in government relations.

1950s saw technological advances in lighter engines, improved tracking and high performance synthetic rubber and this was climaxed in 1959 when ANB achieved his long time dream by developing a one passenger snow mobile. Joseph Armand Bombardier died in 1964 leaving a Cdn$10 million to his son, Germain (Bartlett, Beamish, & Ghoshal, 2008).

In 1966 Germain passed the presidency to his 27-year-old brother-in-law, Laurent Beaudoin, and in 1967, the company name was changed to Bombardier Limited. In 1969, the company went public with the intention of utilizing the funds to vertically integrate and increase its manufacturing capability.

Under Beaudoin leadership, the company pushed into the lucrative U.S. market, unveiled new products and utilized aggressive marketing initiatives to drive the business.

The Best Business, Cultural and Legal Practices

Global expansion forces companies to develop at least three types of capabilities knowledge about foreign markets, skills at managing people in foreign locations, and skills at managing foreign subsidiaries. He notes that without these companies are likely to remain strangers in a strangers’ land posing a risk in global expansion (Gupta, Govindarajan & Wang, 2008).

The bombardiers used the culture of first identifying the strategic positions to invest in while incorporating new business ideas. The culture of acquisitions was applauded by many as in its diversification this meant jobs were always protected.

During acquisitions BBD never replaced the existing staff instead it used its personnel to teach successful approaches and manufacturing methods developed elsewhere in the organization (Bartlett, Beamish, & Ghoshal , 2008). Despite the similarities in operating strategy BBD’s businesses differed in important ways.

Bombardier’s rail was counter cyclical versus other businesses in the company. An event such as energy crisis would affect the rail industry differently than recreation or aerospace. Also different was technology and product development. The main imperative for bombardier transporters to globalize was to increase their market share as can be seen in the various acquisitions and product diversifications as evidenced below.

Integration of the Organization into the Market

In the process of integrating and establishing itself in the market the BBD used acquisitions as a way of penetrating to the markets as shown below:

In 1970, the company completed the acquisition of Austrian-based Lohnerwerke GmbH. Lohnerwerke’s subsidiary, Rotax, was a key supplier of engines for Bombardier Ski-Doo snowmobiles and also a tramway manufacturer. This provided BBD with its first entry, albeit involuntarily, into the rail business

Thus, in an effort to expand BT’s presence in the global rail equipment industry, executives at BBD completed successful negotiation for the acquisition of Adtranz from DaimlerChrysler for US$725 million. This not only increased its revenue but also geographical scope, its competencies in propulsion systems and train controls completed its product portfolio as note in (Bartlett, Beamish, & Ghoshal, 2008).

To improve the company standings the Chief Executive Officer held one on one meeting designed to measure strengths and weaknesses of his manager and also discussed operation and strategic priorities to further integrate themselves in the market the company opted for:

Diversification of Its Products

With the acquisition of Adtranz which was organized around product segments which made the structure and allocation responsibilities quite foreign to BT the CEO Laurent Beaudoin realized that in order to reduce cyclical risks and ensure its long time survival, the company needed to diversify into other products beyond snowmobiles.

He began to seek out opportunities for BBD within a more broadly defined transportation industry. In the following two decades BBD made several strategic acquisitions.

Diversification was in:

Transportation

In 1974 snowmobiles represented 90% earnings of BBD revenues by securing a contract with Montréal city to supply the local transit authority with 423 subways it made its first major move to diversify revenues from the snow mobile business. Working on the positive reviews of Montreal commuters, further contracts followed as evidenced.

With mid 1980s being a turbulent time in the rail transportation industry, BT capitalized on industry uncertainty by purchasing companies and growing its market share by these acquisitions.

Examples of the new acquisitions were Pullman technology in1987, Transit America in 1988, Concarill in early 1990s and Urban Transportation Development Corporation (UTDC) in Canada. This made BT establish itself as one of the leading supplier of rail cars and cemented its international reputation (Bartlett, Beamish, & Ghoshal, 2008).

Aerospace

In 1973 BBD entered into aerospace business with the acquisition of controlling interest in Heroux limited which designed aeronautical and industrial components at its two Canadian plants. In 1986 in a bidding contest BBD acquired struggling Canadair from the Canadian government.

By applying aggressive market tactics, cost cutting measures and tight controls BBD was able to turn operations around to increase its market share subsequent acquisitions of Short BrotherPLC an aircraft producer in Northern Ireland in 1990, controlling stake in Dehavilland in1992 and the remaining interest in 1997 entrenched BBD in the civil aircraft industry.

Many more acquisitions followed as noted in the book (Bartlett, Beamish, & Ghoshal, 2008).

Creating and Maintaining A Competitive Edge Over Rivals

The Bombardiers growth philosophy enabled them create and maintain a competitive edge over its competitors. As shown above the company sought acquisition opportunities that allowed it to add value to business through the application of its competencies.

These acquisitions were a way for BBD to compliment or strengthen its existing businesses (Bartlett, Beamish, & Ghoshal, 2008). As evidence shows BBD was never afraid of walking away from a deal if it meant overpaying for a business but once entered in a business it was always patient in the integration of the acquired company.

BBD had strengths in product costing, tendering and an extensive experience in product assembly. Whether aircraft, recreational products or rail products most products were assembled as opposed to manufacturing. BBD always sought ways to control product technology and design, assembly and distribution while outsourcing other non core functions (Bartlett, Beamish, & Ghoshal, 2008).

Thus with these practices BBD always had an upper hand over its rivals. As noted in 2004 when company seemed to be disjointed with its customers to restore consumer confidence they rationalized the parts supply chains, integrated operations focusing on core competencies, and outsourced other responsibilities(Anon, 2004).

Conclusion

We can conclude thus that diversification was a key to Bombardier’s success. It’s strategy to consistently look for markets where the growth potential was significant in order to balance other sectors, which were declining due to competition and life cycles. Diversification as a strategy was also supported by the introduction of new products, the company’s successful entry into new markets, and gains in market share (Aurora, 2004).

References List

Anonymous, (2004). Business Transformation at BOMBARDIER AEROSPACE. Web.

Aurora, S. (2004). Order boom lifts profit margins at Bombardier: Bombardier is stepping up production to fill its record backlog of orders. Web.

Bartlett, A. Beamish, W. & Ghoshal, S. (2008). Transnational management: Text, cases and Reaadings in cross Border Management, Fifth Edition. New York: McGraw-Hill.

Gupta, A., Govindarajan. V., Wang, H (2008). The Quest for Global Dominance. New York: John Wiley and Sons.

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