Case study on Airbus

Introduction

The problems at Airbus are associated to economic patriotism which is entrenched in its structure. The company runs its operations from different countries and it tends to come at the cost of operational efficiency.  This study explores the concept of economic patriotism and its impact on companies in addition to operational problems faced at Airbus. The study also explores the concept of cultural diversity and its role in organisational success.

Economic patriotism and its contribution to Airbus’ problems

Economic patriotism is the promotion of local businesses in countries to shield them from external competition. Governments that view their companies as being at a strategic disadvantage engage in this practice to maintain their local companies for both economic and political reasons (Clift, 2013). Local companies to have a strong backing from local lobby groups that the political leaders may want to appease from time to time. This is besides the national pride that countries tend to have when their own companies are thriving. The economic motivations at the country level are related to the provision of employment opportunities. 

Local companies tend to employ more locals than foreign companies and promotion of local businesses is perceived as a good step to reduce unemployment levels in countries (Grant, 2012). In spite of the positive reasons for this intervention, economic patriotism can be said to be counterproductive. It gives local companies the leeway to avoid the strain needed to become more competitive in the market and by so doing; it interferes with the efficiency in distribution of resources. Besides, it forces international companies to go for a localization strategy even where the benefits of the same may be lower than the costs.

At Airbus, the organisational structure appears to have been based on the need to maintain a substantial presence in the major markets tapped into. The initial problems at the company that pitted the German and French directors and the problems were glossed over in the interest of maintaining a presence in both countries. The company also distributes its workforce across the different countries in accordance with the ownership structure irrespective of the level of productivity in the different countries. The application of economic patriotism also leads to problems with the manufacturing process. Distribution of component supply to different countries to adhere to economic patriotism in each of the markets served could be disadvantageous to the company as it may lead to inefficiencies such as those witnessed with a delay in production by over 2 years due to failure in the wiring processes. The company appears to have ignored the benefits of centralization of manufacturing processes such as efficiency and cost-effectiveness in production and instead embraces an operation model that does not give them a competitive edge in the market. In the end, the support enjoyed from the different governments appeared not to have yielded much fruit as the company’s performance was surpassed by that of its rival Boeing.

Reflection on the wiring problems with the A380

Despite the efforts to improve efficiency by in production by merging independent operators into plane making assets in 2001, Airbus still experience crippling delays caused by its wiring problems. This led to massive losses of over 2billion and this in turn made it necessary for them to undertake massive workforce size cuts. This was beside the drastic impact on its image. The problems at the company can mostly be attributed to the fact that production of the aircrafts was still disjointed despite the merger of manufacturing branches in 2001. The plants in different countries were yet to be fully merged through the introduction of similar operating systems across the different branches. The main cause of the delay appears to be the loss of important engineering data when being transferred between systems that were different from each other. The other problem was the relative inexperience of the German engineers making it difficult for them to complete their part in engineering within the required time.

Where production is shared between different branches, it is very important that the systems used and the level of knowledge by employees be the same. Where the branches are spread across different countries, an effective approach to intercultural communication should be encouraged for the employees to understand each other and be able to fully comprehend the systems in place (Lasserre, 2007). Differences between employees in different countries can easily lead to inefficiencies such as those experienced at Airbus. It is clear from this case that the efforts to synchronise production were not truly complete and that the level of interaction between engineers in the different countries was minimal. Had they been more frequent, the deficiency in training would have been detected and resolved before they become harmful to the company. Besides, the implementation process could have been done in a manner that does not place the entire data at risk. The fact that the backup was either not available or not called for was a sign that there was a communication breakdown between engineers in the different countries. Besides, sabotage in the interest of economic patriotism where engineers in one country would want to be the exclusive designers could have contributed to German engineers not being equipped with the required level of knowledge.

Why intercultural team-building sessions were not successful

The reason why the intercultural team building sessions have not helped Airbus much can be attributed to a number of factors. Firstly, the problem with Airbus is more about the implementation of the designs and not necessarily on the extent to which members of the different cultures understand each other. The problem with the wiring that led to the enormous loss had little to do with cultural differences: it was all about poor execution of a strategy and failure to diagnose and resolve problems before they can cripple the organisation. Failure to ensure that the engineering systems were truly compatible was an operational issue. So is the failure to ensure that the French engineers were as capable of doing the job as well as the engineering teams in other countries. Without the structural backing, no amount of intercultural understanding would have been sufficient to avoid the problems experienced at Airbus.

Intercultural management ensures that understanding is fostered among people from diverse cultures. It can be a source of a competitive advantage especially where it results in the formation of cohesive teams working in perfect synergy between the members (Jackson, 2002). Team building sessions help in the building of such teams. However, good understanding between team members from different cultures is not a guarantee to success. Other aspects of the organisation must also be worked on to assure organisational success. Systems for the implementation of programs and controls established to guide working teams. Elements such as frequency of communication and effective information sharing are elements that go beyond intercultural understanding (Lasserre, 2007). For companies whose functions are shared across national boundaries, meaningful communication should be facilitated. The problems at Airbus occurred despite the establishment of intercultural team-building sessions.

Reaction on the statement “The Airbus Way”

Cultural diversity is important for an international organisation and can be a source of competitive advantage if well exploited. There is a correlation between cultural diversity and organisational success: the diversity enables organisations to serve culturally diverse customers effectively. The creation of a culturally diverse company enables the average employee to understand the market and this understanding is crucial in providing high quality services (Jacob, 2007). In the service industry, customers are satisfied when they are understood and when they are served in accordance with their expectations. Meeting their expectations is what contributes to their level of satisfaction (Albrecht, 2001). The cultural element plays an important role since culture plays an important role in shaping such expectations. It is the understanding of such cultural factors that enables organisations to deliver to expectations. With a culturally diverse workforce, Airbus could be having a competitive advantage in the market. However, this presence alone is not enough. It must be accompanied by a deliberate effort to promote understanding of diverse cultures within the organisation.

An organisation could have a culturally diverse workforce but fail to meet the thresholds for intercultural understanding. This occurs where members of the different cultures are with time forced to adapt to the dominant cultures. Organisations must therefore come up with measures to discourage cultural ethnocentricism where other cultures are forced to conform to the dominant cultures. At Airbus, efforts are made to create a culturally diverse workforce and they view it as a source of competitive advantage. Their view on this may be correct. Cultural diversity does generate a competitive advantage if good strategies are implemented. They must also be accompanied by proper structures to promote efficiency of production and service delivery. As can be seen from the articles in the case, the problems at Airbus were more about implementation than they were about intercultural understanding. It’s therefore possible for an organisation with a culturally diverse workforce to fail to gain a competitive advantage.

Elements reflected in the culture clusters

Managing an organisation across national cultures can be complicated. Different countries can have different cultures and this also affects how people interact and communicate with each other. The main elements of culture are described by Hofstede as power distance, collectivism/individualism, uncertainty avoidance and long term orientation (Hofstede, 2013). The countries mentioned in the case in relation to the wiring fault were Germany and France. The fact that the engineers from different countries had varying levels of knowledge and the fact that difference was not detectable in time is an indication of cultural differences with the cluster below being a description of the national cultures of the two countries.

 From the figure above, the level of uncertainty avoidance is higher among the French than it is among the Germans. High uncertainty avoidance means that that the people prefer predictability and avoiding the risk of not knowing the future. Applying this to knowledge, a society with a high uncertainty index would be keen to research and ensure that they know all they need to know about a certain subject. This implies need for thorough research. The German culture would in comparison to the French be less keen to avoid uncertainties. Failure to appreciate the cultural difference could be responsible for the failure to appreciate that the German engineers were not yet well versed with the engineering systems being used at Airbus.

Conclusion 

Economic patriotism can be a source of problems to a company where emphasis is laid on the need to maintain operations in different countries at the expense of efficiency. International companies also have to promote cultural diversity as has been done by Airbus. This is because cultural diversity can be a source of competitive advantage if well used. This also requires the organisation to understand characteristics of national cultures and exploit such knowledge to their advantage. In addition to this, it is important to appreciate the need to maintain structures and system that can promote effectiveness. Understanding different cultures alone is not enough.

References

Albrecht, M.H., 2001. International HRM : managing diversity in the workplace. Oxford: Blackwell

Clift, B., 2013. Economic Patriotism, the Clash of Capitalisms, and State Aid in the European Union. Journal of Industry, Competition & Trade, 13 (1), pp. 101-117

Grant, W., 2012. Economic patriotism in European agriculture. Journal of European Public Policy, 19(3), pp. 420-434

Hofstede, G., 2013. National culture: Germany v France. (Online) Available at: http://geert-hofstede.com/germany.html (Accessed 20 June 2013)

Jackson, T., 2002. International HRM : a cross-cultural approach, London: SAGE

Jacob, N.V., 2007. Organizational Structure and Crosscultural Management: The Case of Credit Suisse's Project Copernicus in Singapore. The Journal for Decision Makers, 32(4), pp. 63-73

Lasserre, P., 2007. Global strategic management. 2^nd Ed. Basingstoke: Palgrave Macmillan

Additional reference notes:

All direct references to Airbus are drawn from the case study under analysis.