BUS225_Project_One

1 Project One: Executive Summary Amanda Harrah Southern New Hampshire University BUS 225: Critical Business Skills for Success Robert Walker October 22, 2023

2 Project One: Executive Summary Problem In order for our company to remain profitable we have been looking into ways to diversify, which led us to moving into the airline manufacturing industry and building gas engines. With airlines unable to currently follow the movement of electric and hybrid models this transition may offer a more stable future for our company. The next step will be researching the market for profitability and competitors we may have along the new journey. Automotive Manufacturing Industry Even though it has been three years since the Covid-19 pandemic began we have still been working to recover from the substantial hit that was felt in all areas of or company. We will need to revise our forecast assumptions due to the sales decrease. In April of 2020 sales had a 47 percent drop, however the market has predicted to improve “As a result, automaker revenue contracted at an expected CAGR of 2.3% to $2.6 trillion through the current period, despite a 1.6% jump in 2023 as the economy heats up.” (IBIS, 2023). When It comes to fuel type in the United States as of 2019, electric vehicles were around 1% of all vehicles. In 2020 we saw a 76% increase in electric and hybrid care sales. The price of gasoline has risen quickly with recent production cuts coming from Saudi Arabia. There has been a rise in the Northeast of regular gas price by 6% / 22 cents a gallon. This has led to the electric and hybrid movement with consumers wanting a less expensive form of transportation. “High gasoline prices are boosting demand for more fuel-efficient vehicles. But some customers shopping for hybrids or electric cars are turned off by the rising sticker prices and limited selection.” (Horsley, 2022) New Industry The aircraft engine market is valued at USD 49.01 billion back in 2021 and has a projection to grow in 2022 to USD 54.70 billion with an expectation of 112.61 billion by 2029. “Aircraft engine with higher fuel efficiency, compact size and lightweight are in demand today.” (Fortune, 2022) Over the next five years with the industry expected to expand, there is an estimated revenue annualized rate of 3.7%. With having three large companies such as GE Aviation. Boeing and Airbus Group the profit expectancy is 22.1 billion dollars. The increase in demand for air travel has moved airline companies to increase their aircraft fleet. “According to the International Air Transport Association (IATA), the number of passengers traveling by air is expected to double to 8.2 billion by 2037. (Fortune, 2022) Porter’s Five Forces Analysis of the New and Automotive Industry

4 automotive engine industry has already seen a large change when it comes to electric or hybrid engines which is not the case at this time with aircraft engines. Bargaining power of suppliers With the aircraft industry being regulated with strict safety regulation this would cause a higher startup cost in order to break into the new industry of aircraft engines. As the automotive car engine industry has some similarities to the aircraft industry, we may have the ability to continue our relationships with some of our existing suppliers, which in turn can assist in their future sales and growth as well. The bargaining power of suppliers in the automotive industry is weak since most of the key players are large. The raw material needed does not require a large number of resources which are easy enough to obtain. This makes it easy for companies to maneuver between suppliers without restrataints. Threat of substitute products Due to the concern of reducing a carbon footprint this is leading to aircraft engines looking to decrease their weight and reducing parts. GE Aviation has begun 3D printing components and have been able to lower their parts from 855 down to 12. This can be a threat if we are unable to move in this direction. The threat of substitute products in the automotive industry is high due to the amount of existing competitors already in the industry. There is also a new supply of 3D printed supplies that are being used which are less expensive and faster to develop. Bargaining power of buyers The increase in demand for air travel has moved airline companies to increase their aircraft fleet. “According to the International Air Transport Association (IATA), the number of passengers traveling by air is expected to double to 8.2 billion by 2037. (Fortune, 2022) Diversifying into aircraft engines does hold many similarities such as having already existing large competitors, suppliers and buyers, In the automotive manufacturing industry there are multiple competitors which lessons the bargaining power if we stay in this field alone and do not diversify. With the buyers moving towards a gas friendly and carbon reduced footprint this shows more and more buying hybrid or electric.

5 holds a medium risk for a new company entering the field, and always looking to ways to streamline and reduce the fuel consumption. Comparison of the Industries Diversifying into aircraft engines does hold many similarities such as having already existing large competitors, suppliers and buyers, holds a medium risk for a new company entering the field, and always looking to ways to streamline and reduce the fuel consumption. The aircraft industry does have less key competitors than the automotive industry which provides less of a risk with having more potential for sales specially with production within the existing companies already experiencing a backlog due to the aircraft engine market growth. The automotive engine industry has already seen a large change when it comes to electric or hybrid engines which is not the case at this time with aircraft engines. Summary of Findings The Porter's Five analysis provides the understanding of a competitive environment within the automotive industry. There is no real threat of new players entering the industry due to the large investment that would be required along with name brand needing to be created. There is a high level of existing competition along with the low bargaining power of suppliers. This shows for reason to begin our diversification now to stay a head of the key players and remain profitable.

7 Porter’s Five Forces Analysis Chart—Automotive Manufacturing Industry Rivalry among existing competitors high due to the amount of existing competitors Threat of new entrants low - already over saturated Threat of substitute products Low already established market Bargaining power of buyers high already established and owns the market Bargaining power of suppliers Low not many choices to bargain

8 References Global Car & Automobile Manufacturing - market size, industry analysis, trends and forecasts (2023-2028): IBISWorld . IBISWorld Industry Reports. (2023, August). https://www.ibisworld.com/global/market-research-reports/global-car-automobile- manufacturing-industry/ Aircraft engine market size, share & growth: Forecast [2029] . Aircraft Engine Market Size, Share & Growth | Forecast [2029]. (2022, April). https://www.fortunebusinessinsights.com/industry-reports/aircraft-engine-market- 101766 Electric vehicles and hybrids surpass 10% of U.S. light-duty vehicle sales . Homepage - U.S. Energy Information Administration (EIA). (2022, February 9). https://www.eia.gov/todayinenergy/detail.php?id=51218 Horsley, S. (2022, March 23). More people are looking for hybrid or electric cars - but there aren’t many options . NPR. https://www.npr.org/2022/03/23/1088364857/more-people- are-looking-for-hybrid-or-electric-cars-but-there-arent-many-options Leather, A. (2019, July 11). Top 10 trends in Aviation. Smiths Detection. Retrieved from https://www.smithsdetection.com/insight/aviation/top-10-trends-aviation/ Research , G. V. (n.d.). Aerospace Parts Manufacturing Market Size Report, 2022-2030. Retrieved from https://www.grandviewresearch.com/industryanalysis/aerospace-parts- manufacturing-market