The Airbus A380: “Product Failure” in Foreign Market

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Table of Contents

Market Strategy
Failure of the Entry Strategy
General Causes of Failure
Recommendations
Conclusion
Works Cited

The Airbus A380 is considered to be the largest passenger aircraft to date. However, it is seen by many as a failure in certain countries. The latter is especially true in the case of the Chinese market. Despite the initial enthusiasm, Airbus A380 was not a success in the Chinese air operators market.

Market Strategy

Airbus is a European manufacturer of this controversial double-deck jet airliner. A380 export market includes the UAE, Qatar, Malaysia, with Emirates being the most frequent buyer. The point of international delivery was set in Hamburg (“Airbus Names A380” Delivery Centre in Hamburg” par. 1). All customers from Europe and the Middle East received their Airbuses in Hamburg. Toulouse Delivery Centre is another delivery point for customers who fly in from Malaysia or other countries that find the location convenient. According to the statistical data valid as of 31 of October 2016, there were 13 operators of Airbus A380 passenger aircraft (“Orders & Deliveries” par. 1).

Licensing process of the company involves a method that is called an “approach and engagement process” (“Licensing Process” par. 2). It is a complex method that allows for analyzing the customer’s financial situation, conducting feasibility studies, and developing an individual licensing plan. The licensing process comprises several stages, from processing the initial contacts from the customer to the preparation of the licensing agreement and the transfer of technology to the customer (“Licensing Process” par. 2). The stages are as follows: Meeting and presentation and qualification process, technology partnership, approval of the customer, commercial terms and conditions, technology cases, feasibility analysis, and customer approval (“Licensing Process” par. 6). In the end, a licensing agreement is drafted.

Failure of the Entry Strategy

It is safe to assume that the entry strategy for the Chinese market was not successful. The management exhibited a rather naive approach and did not conduct a sufficiently thorough analysis of the various entry options. According to the South China Morning Post, Airbus 380 did not turn out the way it had planned, having received only three hundred and seventeen orders, while thrice as many were predicted initially (par. 1). According to some flight operators, especially China Southern and Air France, Airbus A380 commercial aircraft model is too large for certain types of markets (“China Southern’s A380 problems” par. 2). Market entry failure, in this case, occurred partially due to the adaptability issue regarding the very product, A380 commercial passenger aircraft.

An approach should have been adjusted to fit the necessary market segment and meet the requirements and exact expectations of the customers in that particular segment. Airbus product line had accumulated losses over ten million dollars caused by certain legal issues concerning flight routes in China (“China Southern’s A380 problems” par. 4). Korean Airlines and Lufthansa also used A380 with a varied degree of success. This model is the world’s largest passenger jet that was not properly adjusted to meet the demands of the market, to satisfy the expectations of the customer. Overall, the Airbus Company admitted that it would not manage to recoup the twenty-five billion dollars of investment in the project. Admittedly, A380 is popular with the flight operators from Emirates (UAE) and Malaysia. Neild claims that in a few years things might change and the destiny of the A380 will be radically different (par. 1).

General Causes of Failure

The Airbus A380 example provides an interesting opportunity for marketing experts to study the complex processes of market entry strategy. Based on Airbus’ example, it is possible to establish whether there were any risk factors involved. Truth be told, marketing research expert should be asked to do it. Otherwise the marketing research is invalid and unreliable. It is necessary to stress this aspect of the process, as a properly conducted analysis of the market always leads to profitable conclusions. There could have been a misunderstanding between the marketing research and the managers. In this case, it is recommended to look into the internal communication structure of the company, as well as verify the efficiency of the communication. There could have been a misunderstanding of the marketing research results and an inaccurate interpretation could have been made that did not take into consideration the parameters and features of the market segment in question.

The intensity of the competition should have been considered, as well as the most suitable parameters of product positioning coupled with adaptability issues in terms of pricing, distribution, and promotion. Therefore, based on an inaccurate interpretation of the research findings, unjustified assumptions were made by the company, which led to a failure of the entry strategy. Cultural aspects of China were significant as well, as they influence the law and various customs that might also stand in the way. Route restrictions mentioned in the article led to considerable losses incurred by the company (“China Southern’s A380 problems” par. 2). All things considered, despite the fact that the discussed aircraft model is often called the largest passenger plane in the world, it was not easy to create it, introduce, and launch it. In spite of its size, high comfort level, etc., A380 remains an economic disaster in China.

Recommendations

It would be more beneficial for Airbus to develop passenger aircraft models in a more realistic manner. Conducting a proper market analysis and adjusting the model to meet the requirements of the market segment would prove useful. The impressive size that A380 is famous for is not that important. In fact, the company could have gained a competitive advantage by equipping the model with devices that would increase the clients’ comfort on board or design an additional detail or a safety device. The marketing of the discussed aircraft was deeply unrealistic, based on dubious assumptions, thereby leading to huge losses. Moreover, several incidents occurred with the aircrafts, when there were serious problems with the engines during the flight. Thus, the largest passenger jet in the world turned out to be untrustworthy and outright life threatening. The engines that are manufactured by Rolls-Royce for the A380 posed problems several times already.

Conclusion

While the largest commercial passenger aircraft A380 was promising, it did not succeed in the Chinese market. Flight operators from Emirates, Malaysia, Korea, and France are loyal to this manufacturer. However, its market entry strategy regarding the Chinese market sector did not prove successful. The company incurred huge losses and experienced plenty of difficulties concerning the legal issues. Due to the inconsistency of the marketing analysis, as well as the unjustified assumptions regarding the market segment and the brand loyalty, Airbus A380 failed in the Chinese market. It would be better for Airbus to reconsider its basic marketing principles, promotion, and advertising strategies, as well as design and manufacturing.