Report: Canadian Aerospace industry adapting to global marketplace
Concordia study says future of aircraft manufacturing rests on increased attention to market development.
A new report, commissioned by Industry Canada and conducted by Isabelle Dostaler, a professor in the Department of Management at Concordia’s John Molson School of Business, suggests Canada’s aerospace industry can keep up with the global pace and business environment by adopting a “smaller is better” attitude.
To conduct her study, Dostaler interviewed executives from several Canadian aerospace companies about best practices for winning contracts in this new business environment. She asked them about their particular business strategies and assessed the fit between their capabilities and the key success factors to win contracts in the industry. Respondents emphasized the increased pressure to keep costs low and added that dependability and quality were also critical concerns.
Dostaler’s research reveals that successful aerospace companies pursue what is known as an “integrated low-cost differentiation strategy” which means that they provide a higher-quality product at a price that is still reasonable. In the new competitive landscape, buyers are no longer willing to pay a premium to buy differentiated products. By using the integrated business strategy, seven of the 13 companies studied created a good fit between their capabilities and the changing market; four more achieved an average fit.
While the findings are encouraging, interview questions about the firms’ weaknesses suggested room for further growth. Many companies saw their relatively small size as a weakness in the current industry structure. That’s because the large manufacturers prefer to work with partners who can share the risks in new business ventures. The smaller the company’s size, the more risk-averse it’s likely to be.
The combat this situation, Dostaler suggests that “it might be time for smaller Canadian aerospace companies to focus more on market development.” She also believes they should develop a marketing plan to convince large global companies that “small is beautiful.” This may be the piece of the puzzle that is missing from some firms’ efforts to adapt to changes in the industry.
Dostaler says that government policies should be used to encourage the aerospace industry to recognize the competitive threat of emerging economies. Says Dostaler, “If Canadian aerospace companies could form a cohesive group, their collective strength would be greater than the sum of their individual talents – meaning a great outcome for the industry.”