Introduction
Strategic management is increasingly becoming an efficient ongoing process in developing and revising a future-oriented strategy that allows firms to attain their goals and considers their potential challenges and the environments to which they operate (Fred, 2003). This approach is particularly crucial in the aircraft companies where the demand for new aircraft and aerostructure components is booming in the global market. Thus, aircraft companies need to undertake a strategy formulation as an integral aspect of their strategic process in management. In our research, we focus on Spirit Aerosytems Inc, one of the leading aerospace manufacturer and designer of aircraft structures. Essentially, the paper analyzes some of the essential firm strategies that have been applied by the Company to sustain global demand for new aircraft products and to withstand the price competition in the domestic and global market.
Body
Spirit AeroSystems' Current functional-level strategies
Functional strategies are approaches that companies undertake in implementing their long-term business strategies. Every functional aspect encompasses various interacting strategy choices, which must be in line with the overall firm strategies. Some of the functional strategies that the Spirit Company has incorporated include marketing, finance, production, human resource management, and research and development.
• Marketing Strategy
Developing a marketing strategy is vital for Spirit Aerosystems as an efficient way to boost its aerospace operations. To create an efficient market strategy, the company strives to create a flexible approach that can respond effectively to the dynamics of the aerospace market and demand. It maintains a clear and comprehensive client information databases to capitalize on its cooperation with the existing as well as potential clients. Also, it has created a positive recognition for its brand image especially through trade shows, advertising, and spirit customer events. This approach allows the company to identify new markets that it can target successfully and also establishes a cutting edge of the aerostructure technology.
Production/ Operations Functional Strategies
As a firm operates, it establishes efficient production or operations functional strategies that would boost its productions process. Some of the crucial production strategies operated by the Spirit Company can be categorized into 3 sections: Propulsion systems, Fuselage Systems, and wing systems (Romero et al., n. d). With such strategies, the company designs, manufactures, and tests its aerospace products based on the specific needs of the market.
Financial Strategies
A financial strategy is integral to the strategic plan of Spirit Aerosystems. In essence, the company has diversified its production portfolio into the three crucial segments. This diversification avoids reliance on one particular production for the entirety of their financial investment. Also, it has developed a transparent and a balanced revenue mix, which has boosted its net sales significantly. To increase its financial returns, the company has integrated with the Boeing and Airbus, which contributed to up to 94 percent of its revenue gain in the year 2013 (Romero et al., n. d).
Research and Development Strategy
R & D is essential in conducting marketing research, cost management, and influences other forms of business strategy (Lacoma, 2016). R&D has been a crucial strategy for Spirit Aero Systems since it works on new products and technology subjects. In essence, the company has quality suppliers in various global aerospace logistics. Northrop Grumman, a well-established aerospace and defense technology firm has become an efficient research and development supplier for Spirit Aero Systems Company. The technology firm has helped in creating new products and also instrumental in adding value to the old Aero system products.
Human Resources Functional Strategy
Spirit AeroSystems' Current Corporate Strategies
Corporate strategy involves the approach of a company to achieve a competitive advantage by creating operation in various businesses simultaneously. The approach of achieving a corporate strategy entails establishing a clear purpose for the company as well as promoting plans and actions to accomplish the purpose. To create an efficient corporate strategy, Spirit Aerosystem has modified its strategy considerations into a framework that encompasses the following strategy components: growth, stability, and portfolio.
Growth Strategy
Growth strategy involves approaches that a company seeks to establish in promoting market share and profitability in the market. Some of the specific growth strategies adopted by Spirit Aerosystem include concentration, integration, and mergers and acquisition. Concentration is a strategy where a company can direct all its production factors to a specific product line using a single market structure. Based on the Ansoff,s models, Spirit Aerosystems operates on the concentrated growth aspects (Romero et al., n. d). Since the market is fairly saturated with aero components and suppliers, the company focuses on penetrating the market with their existing aerostructures while striving to develop new products. Concentration helps the company to achieve a competitive advantage over its more diversified competitors, as well as promoting market knowledge and customer taste in the market.
Through integration, Spirit continues to create a strong products relationship which allows it to gain a greater influence over its line of business. This approach has increased profits through better marketing efforts and greater efficiency. Through merging and acquisitions, Spirit Company has integrated its operations with its major aerostructure suppliers, the Boeing and the Airbus Companies, the two largest aircraft manufacturing companies (Romero et al., n. d). This merger helps to boost its operations and at the same enhance diversification as a way of spreading its risks across similar aerospace companies.
Stability Strategies
A firm adopts a stabilization strategy to maintain its line of production. It may focus on its stability rather than growth to create a higher level of sustainability as a way of reinforcing more competencies in a specific line and to maintain the status quo in cases where further growth become more costly. Some of the circumstances under which Spirit Company has opted to stabilize its operations have been due to the potential social threats as a result of the reduction in passenger air travel. Also, its operations are subject to intensive regulations by the safety and health regulations. Notably, the company major operations entail the use of regulated materials and hazardous substances, which has reduced its growth and operations networks prospects.
Portfolio Strategy
A business portfolio is an efficient approach to formulating clearly a consistent mechanism that regulates diversification and complexity that may exist as the firm expands its operations (Hedley, 1977). Spirit Aerosystems may be obliged to coordinate its different level strategies to achieve its objectives more efficiently. Normally, the portfolio strategy is composed of BCG Growth-share matrix model and GE Business Screen. Spirit Aerosystems exists in the BCG Growth-share matrix model. Though it has a well established industrial operation, recent statistics have indicated that the Company possesses about 16 percent of the overall market share globally (Romero et al., n. d).
Spirit AeroSystems' Current Competitive (Business Level) Strategy
Companies strive to focus on policies and approaches that will ensure they compete successfully on a specific line of production. The main objective is to perform differently and in a unique way than their competitors. They create a competitive advantage as a way of ensuring its sustainability and at the same time attract more customers. Lets us consider some of the approaches that Spirit Aerosystems has adopted in creating a competitive strategy.
Differentiation
As one of the crucial non-OEM aircraft components designers, Spirit Company has differentiated its Aerostructures and structural components for both commercial and military operations. The differentiation system falls in its three principal segments: Fuselage Systems, that consist of the forward, mid and rear fuselage components; Propulsion Systems, comprising of pylons, nacelles, engine components and Wing Systems that consist of flight regulating parts and other wing system components. Each manufacturing segments considers various designs that take into account the varying taste, needs, and preferences of the market.
Price (cost) Focus
Through a price focus, Spirit Company has established a consistent market strategy with Boeing Company and Airbus Company. The strategy is geared towards creating of price agreements with its major contracts. In such contracts, the prices can be adjusted for abnormal inflation or when subject to other changes such as production, and specific schedules including any design change. Also, the company conducts price adjustment after every three months and reviews any contracts made with other suppliers periodically. Furthermore, the Spirits Company aims to concentrate on a particular segment of the consumer and offering lowest prices on the aero products and services to ensure competition.
Overall Price Cost Leadership
Spirit AeroSystems' Current Global Strategies
Firms aim to expand their markets to create more opportunities for their products and services. As a way of competing more efficiently in the global markets and boost their profitability, Spirit Company engages more proactively in the global market strategy and expand its market in the foreign markets (Zou & Cavusgil, 2002). Some of the global strategies that Spirit Aerosystems has adopted include
Localization Strategy
A localization strategy aims to customize the products and services of a firm to boost profitability and create a well-organized match on the taste and preferences in various markets (Singh, 2012). The company has invested significantly in a localization strategy as a way of maximizing local responsiveness using a multi-domestic strategy. In essence, the company establishes close relationships with the local customers and supports an efficient market base within the country.
Global Standardization Strategy
Global standardization strategy is used to provide standardized products in a reduced-cost marketing strategy on global markets. It aims to create an increase in profit accumulation from benefits that result from the reduction in costs emanating from location economies and large economies of scales. Spirit Aerosystem has diversified its global opportunities and operations by creating new contracts with foreign aircraft companies such the Air Europe’s fleet of Boeing (Romero et al., n. d). Much of the global investments involve boosting the aerostructures volume, its current aircraft contracts and manufacturing new products for their aircraft projects.
International Strategy
References
Fred, R. D. (2003). Strategic Management: Concepts and Cases. Pearson Education: New Delhi.
Hedley, B. (1977). Strategy and the business portfolio. Long Range Planning, 10(1), 9–15.
Lacoma, T. (2016). The advantages of research & development business strategies. Small Business Chron. Retrieved from http://smallbusiness.chron.com/advantages-research-development-business-strategies-21246.html
Romero, J., Williams, B., Buschmann, A., Convery, S., & Yin, C. (n. d). A comprehensive strategic analysis: Spirit Aerosystems. Retrieved from http://shaneconvery.weebly.com/uploads/2/5/9/5/25950932/final_copy.pdf
Singh, N. (2012). Localization Strategies for Global Business. Cambridge: University Press
Zou, S., & Cavusgil, S. T. (2002). The GMS: A broad conceptualization of global marketing strategy and its effect on firm performance. Journal of Marketing, 66(4), 40–56.
