Good strategy sometimes involves being selective about the opportunities that you pursue, and being aware that the best opportunities may require a change in course.
In 2000, both Airbus and Boeing were planning the production of their new aircraft models. The Airbus A380 is the new monster aircraft that can carry over 600 passengers on two decks. Meanwhile Boeing has developed the new 7E7 – not a larger a larger aircraft, but a significantly more efficient medium range aircraft (hence the “E”).
At the time all the Boeing planes had landing gear made by Goodrich, and all the Airbus planes had Messier-Dowty landing gear. Goodrich was keen to break into the Airbus market as was Messier-Dowty keen to enter the Boeing market. When bids went out for the landing gear for the new 7E7’s as usual, Messier-Dowty (the Airbus supplier) was asked to bid for the Boeing job.
Analysis of the situation by Messier-Dowty revealed that the A380 job was going to be a challenge. The main landing gear was huge, and would require substantial changes to their manufacturing and testing facilities. The number of A380-sized planes to be built seemed to be limited, since the trend is toward smaller planes flying point-to-point rather than larger planes flying hub to hub. Further, the A380 was so large that it would require changes to terminals before it could pull up to the gate.
Messier-Dowty determined that their competitor would see the A380 as an opportunity to enter their Airbus market – an opportunity they were willing to concede given the potential low returns on the job. On the Boeing front, Messier-Dowty was getting fed up with being used as cannon fodder – bidding on many jobs but never being chosen as the supplier.
Messier-Dowty is reported to have taken the following approach. They decided to bid on the Airbus A380 nose landing gear contract only. The nose landing gear was much more manageable in size, and it presented technological challenges that fit well with Messier-Dowty’s strengths. In short, it was a better fit with their capabilities and strategic intent. The main undercarriage landing gear was a low tech and low margin chunk of metal and wheels – they chose not to bid on this thus defaulting the contract to Goodrich.
To Boeing, Messier-Dowty is said to have taken what they thought was a solid and competitive bid for the 7E7 landing gear and delivered it with a message: they were not prepared to continue bidding solely for the purpose of providing Boeing with leverage to squeeze Goodrich. Accept the bid, or they would not bid again.
The result of this strategy was exactly what Messier-Dowty wanted. Messier-Dowty won the bid for the Boeing 7E7 and gained a much desired beachhead in the Boeing market. They also won the job for the A380 nose gear with their top client, Airbus. Meanwhile, Goodrich got their desired beachhead at Airbus with the main landing gear for the A380 – a low tech low margin contract Messier-Dowty was glad to let them win.
In business strategy, the goal isn’t to always beat your competition but sometimes to manage them. Messier-Dowty did a careful analysis of the market opportunities and the competitive situation. Then, being strategically selective and through some solid negotiating, they were able to clear the way for a smooth landing in new territory, and leave what may prove to be a bumpy runway for their competitor.
Messier-Dowty should serve to remind one to ask:
- What business segments do we bring the most value to?
- How well does our business today fit with our capabilities?
- What is our strategy for the future?
- What business do you want your competitor to have?
Remember – implementing a good strategy means being selective. Manage your business – manage your competition.
(For more info on Airbus and Boeing aircraft please see http://www.airbus.com/product/a380_backgrounder.asp andhttp://www.boeing.com/commercial/7e7/ )