About the company
Spirit AeroSystems designs and builds aerostructures for both commercial and defense customers. The headquarters of the company is in Wichita, Kansas, Spirit and the main markets are North America, Europe and Asia. It was founded in 1927 by aviation pioneer Lloyd Stearman. Two years later the company was bought by Boeing. The current name company received in 2005 Major products of AeroSystems are fuselages, pylons, nacelles and wing components. The company focuses on innovative composite and aluminum manufacturing solutions to support its customers in each part of the world, where it is presented. The company has more than 16,000 employees and it Revenue in 2014 financial year was nearly $ 6,8 Billion. As for the last few years, the largest customers of the company are Boeing (nearly 85% of Total sales) and Airbus (11% of sales).
Internal Factor Analysis Statement (IFAS)
Strengths
Products. Spirit AeroSystems is famous for its technological and innovative solutions in aerospace industry. It works with highly-technological process in defense sphere, so it has ability to produce very special products (for example, Sikorsky CH-53K, Bell Helicopter V-280 tiltrotor and the new Northrop Grumman B-21) for US Army. These products can’t be replaced in short time so that it gives to the company stable demand for its products. High technological products and innovative processes in manufacturing let Spirit AeroSystems to be one of the leader on the market.
Relationship with customers. As it was mentioned before, there are two major customers for Spirit AeroSystems’ products – Boeing with average annual sales share of 85%, and Airbus company with annual share of nearly 10% in sales. Another important customer for Spirit AeroSystems is US Army. Strong and stable relationships between Spirit AeroSystems and its main customers are based on long-term contracts – sometimes, they could be signed for nearly 10 years. All in all, strong relationships provide ability for Spirit AeroSystems to feel comfortable on the market and look optimistic in the future.
Financial stability. Financial stability is one of the most important factors for any company that performs on any market. But in such a hard industry as aerospace, financial indicators play even more important role. Huge and long contracts need a possibility to be 100% confident in financial support of business performance. Almost $ 7 Billion revenue in 2014 shows that Spirit AeroSystems has huge financial background for its operational activity. As for last few quarters, according to the latest Quarterly Earnings Releases, the financial situation looks optimistic: in the First Quarter the company earned nearly $ 1,7 Billion (the same figures were for the first quarter of 2015). Such a stability plays an extremely important role in such long-term projects’ industry.
Weaknesses
As well as strengths, each company has its own weaknesses. Moreover, mostly they are just another side of its strengths. The similar situation is for Spirit AeroSystems – what could be indicated as a strengths, from the other point of view could be seen as weaknesses. For example, orientation for two big customers (Boeing and Airbus) could be a weakness because of too high dependence level of their demand and contracts. Moreover, high technological and innovative products also could be indicated as a weakness because of too narrow product specialization. Let’s look more closely on these two major weaknesses.
Customer dependence. Of course, there are no doubts that strong and long-term relationship with your major clients is one of the most important strengths of your company. But when two clients’ share are more than 95% of your sales (as it is in situation with Spirit AeroSystems) it could be a really dangerous situation. High level of dependency let your customers to dictate the rules of your cooperation. Moreover, if you somehow lost your major client, your business performance will immediately collapse.
Narrow products’ specialization. Almost the same situation is when your products’ specialization is too narrow. On the one hand, it lets you feel comfortable on the market, because it is very hard to substitute you. But on the other hand, if your products will be no longer needed due to technological changes, your company will face the very difficult situation. In case of Spirit AeroSystems, this issue is relevant as well. Having a branch of high-technological, but narrow-spezializated, products it is strong player on nowadays market. Nevertheless, Spirit AeroSystems could lose all its positions if it will not pay appropriate attention to the innovation and technological development.
External Factors Analysis Statement (EFAS)
Opportunities
As for external factors analysis, it could be started with opportunities. Aerospace industry provides plenty of interesting opportunities for any company that works on its market. The most common are increasing of sales of existing products by integrating new clients in companies’ sale process, and developing new products due to market’s needs.
New clients. The market of airlines transportation is growing from year to year all over the world. And this trend gives a huge opportunity to work not only with planes producers (like Boeing or Airbus), but direct with airlines companies that have their own repair services and bases (so, they need parts for their fleets). Direct cooperation with airlines could provide stable demand for some Spirit AeroSystems’ products. Also, new clients could be found on small aviation (private planes) as this market grows as well.
New markets. Despite the new clients on old markets, the Spirit AeroSystem could find a great opportunity in integrating new markets. Nowadays, the main markets for the company are North America and Europe. But rapid development of Asia could not be missed. Asia market is very attractive in the perspective of further industry development and presence on it for now will bring huge benefits in future.New products. As well as looking for opportunities in new clients and markets, developing new products could be successful too. According to latest trends, it could be a great opportunity for Spirit AeroSystems to start producing drones. The company has appropriate technologies and innovative background, so it should not be too hard to start this king of production. Moreover, such products could be interesting for new clients as well, as for the old ones. For example, US Army will totally be interested in these products.
All in all, aerospace industry allows to indicate plenty of interesting opportunities for Spirit AeroSystems and the question is whether it will use them successfully.
Threats
Nevertheless, despite great opportunities in aerospace industry, Spirit AeroSystems could face with some threats. And the most dangerous of them are decreasing in demand for aerospace parts and other products due to increasing competition between suppliers; developing of new technologies that could ruin the standard way of producing aerospace facilities. Let’s look more closely on each of these threats.
Decreasing in demand. As the aerospace industry is very profitable, it leads to increasing competition between producers and suppliers. Moreover, parts suppliers from Asia more often win the competition via lower prices and better contracts conditions. It is the rule of development of any industry – more profitable it is, the more companies try to enter it. As a result, the operational margins are falling and it starts to be very hard to keep profit indicators on the same level. So, the situation of decreasing demand for Spirit AeroSystems’ products is more than realistic and should be indicated as one of the most important threat.
New technologies. In addition to decreasing demand and increasing competition in the industry, the Spirit AeroSystems could face with problems due to technological development. 3D-printing could substitute some manufacture processes even in such complicated industry as the aerospace production is. And this is just the question of time – when automatize technologies will replace the standard way of production. After this substitution, planes’ producers will be able to produce all the parts they are needed without any suppliers. There is no doubt, that progress and new technologies are very important for further world development, but if Spirit Aerosystems won’t be ready for them in time, it will start to lose its positions very rapidly.
REFERENCES
Quarterly Earnings Releases of Spirit AeroSystems (2014-2016). Retrieved from: http://www.spiritaero.com/investors/quarterly-earnings-releases/
Official web-page of Spirit AeroSystems. Retrieved from: http://www.spiritaero.com/
Ostrower, J. (2016) Boeing Pursues Fresh Deal With Spirit AeroSystems. The Wall Street Journal. Retrieved from: http://www.wsj.com/articles/boeing-pursues-fresh-deal-with-spirit-aerosystems-1430779586
Shalal, A. (2016) Exclusive: Spirit Aero looks for COO as part of succession plan – sources. The Reuters. Retrieved from: http://www.reuters.com/article/us-spirit-aerosystems-coo-exclusive-idUSKCN0V52C0
