Spirit Aero systems Company is best known as the largest aerostructures manufacturer across the globe. The company is the leading distributor of structural aircraft equipment such as the wing system, propulsion system, and fuselages. Lloyd Stearman established it in 1927 and the headquarters are based in Wichita, Kansas (Jonathan et.al, 2013). The company is the main distributor of aerostructures to Airbus and Boeing, which are considered as the largest aircraft across the globe. The company’s high-quality products are made from composite and metallic materials, which help it to earn some competitive advantage in the aerospace market. The company’s leading customer bases include Israel aerospace industries, U.S. airlines, Gulfstream, Roll-Royce, Sikorsky, Bell helicopter, and Bombardier among others. Its main manufacturing plants are in Kansa, Kinston, France, Northern Carolina, Tulsa, Scotland, and Oklahoma. In 2014, it had more than 16,000 employees (Research and markets, 2016).
Potential strategies
Based on the SWOT analysis, Spirit AeroSystems needs to use the following four main strategies to add on to the competitive advantage. The strategies include; diversifying the customer base, retrenching of business segments, partnering with the foreign markets and diversification with the military sector.
Diversifying the customer base
Two main customers, which are Boeing and Airbus, dominate Spirit Aero Systems. The company has established a long-term relationship and sustainability. However, continued contracts and relationship with Airbus and Boeing place the company under much pressure to reduce the cost and increase innovation. The rationale for this strategy is that there should be competition between customers to reduce the much pressure and increased cost from the two main customers. The two companies contribute to 94% of total revenues for Spirit, which implies that, if they reduce the purchasing power due to economic and other factors, the company will be affected adversely. Therefore, it should form contracts with other companies and partner with military sectors. Towards the end of 2016, the company should start focusing on new partnerships and contracts to pave the way for the product cycle to begin in 2017, which could help in the diversification of its consumer base.
Partnering with the foreign markets
Currently, Spirit’s cooperation dominates the domestic market in the United States. Its facilities are established close to the two main customers and are the only global networks that the company has. The rationale for this strategy is that there is a great opportunity for Spirit to diversify into the foreign market through partnering with innovative and affluence countries such as China and Japan. It should place and create global networks for their products. Partnering with foreign markets gives the company a chance to expand its market share with international military sectors. Foreign partners are affluent and can create a good market for Spirit. They can give technological aid, grants, ideas and other support that will help to increase profits and in return, Spirit will settle its debts.
Diversification with the military sector
Spirit Company has an opportunity to redesign and reorganize its products, both domestically and internationally, to suit the requirements of military planes. However, the current designs have some military applications but the company needs to capitalize on making helicopters, planes, and other military gadgets, which is the rationale for this particular strategy. It will allow to make new contracts with private and defense departments, which will earn more revenues for the company. Rebranding its current products will create a good transition and rebalance the portfolio. The advantage of the strategy is that profits will emanate from the new market in the defense sector. The transition will need minimal resources, since Spirit has some military applications in the current designs. Governments invest in defense and therefore, there is a likelihood of a continuous and good market for Spirit’s products for military use.
Retrenching of business segments
The wing system segment is the least revenue-generating segment in the company. It provides about 25% of total income and is highly dominant in the U.S. market (Data insights, 2016). It is produced in the Oklahoma facility that produces the most expensive products of Spirit Company. Therefore, retrenchment can be achieved through the liquidation of the four business segments of the company’s operations. It will preserve the existing relationships among the management, increase profits and earn more income per segment, which forms the base for the rationale for this strategy. It will help the company to reduce the overall overhead expenses and redirect resources to more income-generating segments. The new allocation of resources will help to increase technological advancements to other segments such as engineering departments. Therefore, it will ensure that the company manages its segments and primary assets productively to increase profits. The CEO and president will need to involve the all parties in decision making in the growth strategy. The executive decision-making time could be engaged in collaborative platforms with new defense programs. This strategy is important because more emphasis and focus will be invested in those segments that have a high-profit margin for the benefit of the company.
The four strategies are to ensure that the company builds its weaknesses and improves its strengths. However, the best strategy to follow among the four is the establishment of partnerships with foreign markets. The company will get a chance to form ties with affluent and innovative countries such as China, which can expand its business and market. Such partners can give the company grants to settle its debt, ideas and technological aid in the long run. Foreign markets will also help to make the products and the brand’s name known globally, thereby increasing customers and solving the problem of overdependence on Airbus and Boeing.
References
Jonathan Romero, Brooke William, Alex Buschmann, Shane Conver, Chendong Yin (2013). Spirit aero systems. A Comprehensive Strategic Analysis. http://shaneconvery.weebly.com/uploads/2/5/9/5/25950932/final_copy.pdf
Data insights (2016). Spirit Aero Systems Holdings, Inc. : Aerospace and Defense-Company Profile, SWOT & Financial Analysis Spirit Aero Systems. http://www.idatainsights.com/reports-landing-page.php?id=288597/spirit-aerosystems-holdings-inc-aerospace-and-defense-company-profile-swot-and-financial-analysis
Research and markets. (2016). Spirit Aero Systems Holdings, Inc. : Aerospace and Defense - Company Profile, SWOT and Financial Analysis. http://www.researchandmarkets.com/reports/2832354/spirit-aerosystems-holdings-inc-aerospace-and.pdf
