Airbus case study

Introduction (Facts).

• Airbus is the company that deals with the manufacturing of aircrafts in the market. It was formally established in 1970 as a European consortium.
• It has a head office in Toulouse; France operates out of over 160 international locations. It include 16 main development and manufacturing sites in France, UK, Germany & Spain and three wholly owned subsidiaries in China, Japan and North America.
• The Airbus benefits from a unique workforce that integrates more than 80 nationalities and speaks over 20 different languages.
• At the heart of the airbus lies a core of human talent, vision and hard work the keeps them as a leading company in the market.
• There are over 55,000 workforces of more than 80 different nationalities working at the Airbus. Such cultural diversity is the key to Airbus success.
• The main problems in the case study is what is the cause of delay in bringing Airbus A380 in market for two years and a loss of euro 2 billion.
• The delay was basically due to the cultural differences and technical problems such as wiring problems.
• An autumn report 2006 highlights an intercultural survey at EADS, which portrays the different perception that each culture at Airbus has for others.
• The remarkable thing about these perceptions is that they are highly stereotypes.

Problems Faced by Airbus

Socio-cultural & technical problems.

• The workforce at the aircraft manufacturer is geographically distributed in proportion to national ownership stakes. In an instance of economic nationalism, government distort private transactions among economic actors by discriminating against foreigners in the name of national interest. This lead to the decrease in the productive efficiency. It is because of the various differences of management styles and way of communication. For e.g.: comparing with the French people, the Germans prefer collective decision making, whereas the French prefer centralised decision. At the same time the Spanish are flexible but have inferiority complex, so they have tendency to be vague and unreliable due to which they respond very less. (Ian Stokes, 2006).
• The main problem is when EADS company of Airbus was created, two chief executives German and French headed it. It was maintained even due to knowing the fact of the crisis caused by problems in development in A380 began. Looking from the Hofstedes cultural dimensions the French likes high power distance whereas the Germans prefer low power distance. So while making decisions Germans tend to interfere in the conversations while it is being dislike by France people. So this unintentionally hurt the ego’s of the French people and creates a conflict between them. (Hofstede. G, 1991) 1
• Due to the government involvement respective countries, cost cutting measures were delayed as state aid comes to rescue their respective partner first. From this situation it seems that power id distributed unequally. The government is being self centred and looking after its own motives. Even no action id being undertaken by the group members of the company in order to tackle this issue. It is in this area that a culture shows the extent to which it ‘tolerates and fosters pecking orders, and how actively members try to reduce them’. (Mead, 1994; 66) 1
• One of the main causes in delay of the launch of Airbus A380 for two years was owing to the fact of having a complex wiring design system for it.
• There were 1,200 functions to control the plane that takes 98,000 wires & 40,000 connectors. The system has 500,000 models, which needs to be kept in sync from different countries. It was complicated and very much time consuming due the fact of the engineers being at different locations.
• Even the aircraft parts were built at different locations. For example: nose sections are built in France, fuselages in Germany, wings in Great Britain and tails in Spain. And the final assembly were done in Toulouse (France). It unnecessarily increased the transportation cost, communication problems and foremost aspect time consumption.
• There was a problem with regards to software and knowledge as well. The engineers in Germany and Spain used the older version V4 of the CAD program in order to design the wiring system, while the engineers in France and England used the newer version V5. This created trouble and delay while transferring the data because the some data was lost while transferring files from one system to another.
• With regards to knowledge, French were familiar with the software while the Germans were not inexperienced compared to French. According to Hofstedes1 it seem that the French are more of individualistic in nature because they were least concerned about the training of its partner company’s. Due to the lack of integration in engineering it resulted failure in execution.
• When the HRM team was most needed to train the employees & communicate between them regarding the software problems, they were very busy with responding to the new legislation- such as those concerned with labour working hours and the French directive on rights of individuals to choose their own training. As the French are more type of individualism because of the preference towards centralised executive, they tend to first sort out their problems that made them busy in doing things which was not important compared to training problem. (Ian Stokes, 2006) 1; (Trompenaars, 1993; 8-11) 1
• The top managers were busy struggling for the senior position in the consortium and lobbying for influence. These lead political goals get in the way of project goals. From this it seems that that the top managers were very much individualistic in nature. They were more interested in getting the name an enjoy being superior in the organization. They seemed to be self-achievement oriented and least concerned about the problems going on in the company. This dispersed the decision making power which was most needed in problems like this. (Hofstede, 1991) 1

All this problems lead to the delay in launch of Airbus A380 for two years that was scheduled to launch in 2006. Delay in delivery forced some airlines to cancel their orders. This gave them loss of euro 2 billion due that they had to make drastic cuts in the size of its workforce and closure of some plants, which in turn dented their image in the market.

Efforts taken by Airbus to tackle the issues.

• In order to tackle the design of the wiring system and the software problems, Airbus made special investment to train its employees with the help of the software supplier.
• They even tried to set up intercultural sessions to inspire a warm feeling of mutual understanding, but it failed to address adequately the fundamentals of co-operation.
• The EADS managers most of the times tried to draw attention to the common areas and similarities, rather than differences in order to tackle the cross-cultural differences with regards to perceptions and doing things.
• They have distributed their workforce in proportion to the ownership stakes geographically because they thought that this would increase their productive efficiency.

Economic Patriotism:

Many organisations are forced to develop and expand themselves into new markets overseas due to the increasing maturation of domestic markets and foreign competitors. In order to gain a competitive advantage over their competitors they are recognising their identity that can help them to sustain. The main motive behind this step is that by enlightening the only one of its kind personality or character of an organisation or group, all the way through symbols, communications and behaviours, it will help them to create favourable corporate image in the minds of these groups. Such differentiation will help them to create an image based on the uniqueness of its own identity, as well as creating a tendency in the minds of the people or groups as a basis for developing long-term profitable relationships. (Van, 1992) 2.

Economic patriotism is most of similarly related on these theories. Economic patriotism means, “supporting one’s country”. Economic patriotism is the coordinated and the promoted behaviour of consumers or companies (both private and public) that consists of favouring the good or services produced in their country or in their group of countries (wikipedia) 3.

According to me economic patriotism means favouring the people and practices done in ones own country, right or wrong. The main motive of the people living in their own country is to promote its thoughts, beliefs, way of doing business, etc. this is automatically done because they had been under the influence of such practices since their childhood. It’s like expressing that they love their country and ready to sacrifice for it.

Economics patriotism can be done with the help of many activities for e.g.: imposing tariffs on imports, quota system, or encouraging consumers to purchase own domestic services and products. Now a days a new type of economic patriotism has came up that does not allows foreign investors to develop or acquire companies in one’s country. For e.g.: Arcelor acquired by Mittal (Largest steel industry).

Government and political bodies are playing the main role to promote economic patriotism. Even in the Airbus case study economic patriotism has played a significant role in problems created by government of different countries. The workforce at the company is geographically distributed in proportion to national ownership stakes. So this makes the workforce far from each other. According to the company it may help them to increase productive efficiency. But in an instance of economic nationalism (whereby the people support their respective rights and countries), the government of respective countries changed private transactions according to their thoughts and practices in order to protect the local economic interests.

They discriminated foreigners in the name of national interest. So political bodies came into role in order to support the local people. Their economic motives include the preservation of employment or attraction of economic activity to a certain area. And the company’s strategic motives were to include national security in order to capture rents abroad in monopolistic market. But the patriotic approach of the company proved ineffective because it conflicts with the economic efficiency, which derives from the protection of the interests of the local lobbies.

The company tried to integrate all its employees and create a sense of togetherness but the “economic patriotism” practiced by the people and government in respective countries failed the company’s objectives. The politicians want to win the votes from people by supporting their interest. The damaged caused by economic nationalism indirectly created inefficiency and poor performance of corporate governance.

Due to this damage Airbus reputation was dented. The government did not supported because it conflicted with the ideas and thoughts of the government. The cost cutting measures were delayed because the state aid first comes to rescue the government-supported company. The competition increased because government supported companies had privileged access to infrastructure and procurement contracts. This delayed all the process in the company and unnecessarily increased the loss and the cost of production. Indirectly the Airbus suffered from takeover threats from the more efficient organisations. Finally, the national efforts to support one’s interest proved to be self-defeating as other countries react in kind, neutralising the initial attempt to gain competitive advantage.

Reflection of the way the company was organised.

One of the causes of the delay was the complex wiring system and the software compatibility. The digital system has 500,000 models that need to be kept in sync. Despite of the fact that even a single mistake can create problems the company operated from different regions further complicating the wiring system.

The seems to be communication gap between the employees because engineers in Germany and Spain used the older V4 version of the CAD program to design the wiring whereas engineers in France and England used the newer V5 version. Although it has been said by the software developer that both the version were compatible but the company should not have taken risks of going with different versions. Although there was claim by developer regarding compatibility the data was lost while transferring files from one system to another. The suppliers were also not involved in a collaborative effort to anticipate problems.

There was lack of training and communication among the engineers as well. It can be seen because the engineers in France were familiar with the software while the Germans did not have much experience with it. This shows that there is centralised decision in the company that made other engineers lack of knowledge.

They built the different parts in different region, which further complicated the assembling system due to the lack of communication related to knowledge and software problems. Author Hellemans notes that ‘what happened in Germany was not just technical problems related to software but it was an execution failure due to lack of efficient knowledge’. (Davis, 2007) 1

From the problems that Airbus faced, the company was not properly organised because it seems that relied mostly on the software developer regarding the solutions. There was even lack of training, communication and transparency within the organisation. It seems that mostly the decision were made in headquarters only, not with the consent of other people. The merger of the national components in 2001 only integrated themselves officially but mentally they were far away from each other. It even seems to be inequality from lack of technological development equally because when France & England upgraded themselves to V5 version, the German and Spain were still on the V4 versions.

Lessons Learned.

In the real world there is not any specific best way to integrate diverse cultures within an international joint venture. It solely depends upon the situation and the kind of cultures involves. But I am trying to be closer to individual’s perception and actions that may lead to a common ground where everyone accept each other.

Research: Proper research needs to done before setting up such a culturally diversified company. Research should be on the basis of the cultural dimension of Hofstedes1 i.e. power distance, uncertainty avoidance, masculine vs. feminine, short-term vs. long-term orientation, what they like and what they don’t. It helps them to integrate all their activities on the common grounds and come up with a solution that maybe acceptable to everyone.

Collectivist’s approach: As we don’t have any idea about what people’s want and desires are, a collectivists approach will explore the ideas and perceptions about each other. It will gradually help to know each other’s ideas and beliefs that can be helpful to achieve the desired goals and objectives. Initially it may create problems but at the later stage when everybody has been known to each other it help people or employees to understand regarding what to do and what not to do.

Diffuse relationships: The company employees need to be considered as members of a group or an organization. They should be involved decision-making process. It helps the employees to build rapport between themselves that in turn explore each other’s ideas and beliefs. Their relationships with each other helps us to find how efficient the organization is and what steps need to be taken in order to tackle the cross-cultural issues. Teambuilding session should be conducted in order to create a feeling of oneness, which can increase the efficiency of a company. (Trompenaars, 1993; 8-11) 1.

Equality: If we integrate diverse cultures within international joint venture equality should be always there in term development, technological advancement, knowledge, etc. in the Airbus it failed because Germany & Spain had V4 version of the Cad programme whereas France & England had the latest V5 version. So always proper standardisation should be adopted within the whole organization at a specific time.

Global knowledge, local understanding: the approach should be to indulge diverse cultures but the process should be local. It means any activity done should be on the basis of the activity carries out in the home country of any organisation. Proper training should be given to its employees from the engineers at headquarters because they know it better than anyone else. This helps them to consume less time and achieve perfection, stabilisation, which is considered to be vital in any industry in order to achieve goals and objectives. Training can even be of language, way of doing things, actions, etc. Due to lack of proper training the Germans were not familiar with the software, it more delayed the project while executing the fuselages.

Time focus (polychromic): Initially the top managers need to be polychromic in time i.e. the top managers need to focus on several tasks & should be less dependent on detailed information while doing these tasks. Their main focus should be on involvement with people. This helps the employees or the partners in business to be much more expressive and approach the management whenever they feel to do so. (Hall & hall, 1990).

References.

1. Marie-Joelle Browaeys and Roger Price – Understanding Cross-Cultural Management, 2008.
2. Marlo Thomas; Helene Hill, International Marketing Review, Vol16, Number: 4/5, Year: 1999, pp: 376-390.
3. http://en.wikipedia.org/wiki/Economic_nationalism.