1. The plan to enter into a business which is completely different from a traditional industry has always been a risky venture but Adams Aircraft has been a testimony to intelligent venture recognizing the market and consumers need. The need for the market is recognized as flawlessly performing aircraft, in the small and mid size aircraft sector, which combines the single engines features and runs on twin engine. The average age of an aircraft has been more than 30 years and the demand to procure a new aircraft unless cheaper was minimal in the market.
Among the likes of big players like Beechcraft, Boeing to name a few it is very difficult for a new player to enter into the already established market. As per the Porter’s five forces analysis, the threat of new entrant is very weak and market forces are strong. The market is skeptical to accept new aircrafts due to high prices, and the entry into the market was sufficed by Adams Aircraft offering new and technological advanced aircraft which was low on cost to consumers. The demand for new aircraft in the market is huge and the need for new product is evident.
Government laws such as General Aviation Revitalization Act were aimed at discouraging aircrafts more than 18 years old in the market and this created potential for new entrant in the market. The company had divided the market into two segments of customers namely, owner –flown (owner is the pilot) and professional flown (pilot is not the owner). The profile and requirements for both the types of customers are different. The former preferred a high performance, ease of handling and electronics systems while the latter preferred client’s preference.
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They mainly concentrated on inviting ambiance, comfortable seats, and look and feel of the aircraft. Adams wanted to establish themselves with the unique value proposition as a one stop shop for all aircraft needs. They positioned themselves as a total aircraft solution including aircraft parts provider, training and maintenance. The value proposition helped Adams to establish itself as a top service aircraft. The power of buyers is the highest in the industry. Buyers have stuck to old aircrafts than purchasing newer ones in the market.
New products are in demand and the need to understand the market trend has to be defined by the companies in the industry, the market for new product remain unexploited and command huge profit for the new and existing entrant. The aircraft manufactured by Adams has been extremely new concept in the market and met with customers demand. The market was filled with aircrafts with an average age of more than thirty years and is more preferred choice for customers. Any new product had to be competitive which suits the new age needs of aircraft for the customers.
The market was designed such that major players like Beechcraft, Boeing, and Scaled Corporation etc. has superior technology and developed better aircrafts which was advanced than Adams Corporation. However, Adams developed an aircraft which not only was a market requirement but also helped to meet the needs of the market. Adam’s strength lies in new technologies and prototype developed using computing machines which could propel revolution in the designing of an aircraft.
Customer service and ease of use of the aircraft is the main ingredient of Adam’s business proposition and it has competed well against the well established players in the market. The product on offer was competitive as they combined the features of existing product coupled with innovative features in a cost effective manner. Indeed, there is an opportunity for the stakeholders in the business and they have exploited that with the launch of their third in a row aircraft. The best brains in the industry combined to develop Adam’s business.
Innovation in design and technological advancement driven by cost efficient manufacturing process made it a lucrative business for Adam. Adam’s quick reaction to demand and work procedure makes it an opportunistic proposition for the company to surprise customers with delight. Adam aircrafts has focused on providing high performance aircrafts to make the customers delightful which eventually has helped company to a greater height providing benefits to the stakeholders. 2. Adam aircrafts entry into the market was marred by low capital and lack of technology to support the business.
Presence of heavy weights in the industry had a huge impact and it was not expected for Adam to get into the business and survive it. Adam’s owner waited for a long time before entering into the business with a design competed against the likes of the big players such as Boeing, McDonnell Douglas and others who were well equipped with technology and sophistication in aircraft development. Computer age provided Adam’s with similar technology at a cost efficient rates. However, Adams never tried to compete directly with the big players instead created a new product and a new category for the customers.
It always provided the company with first mover’s advantage. Adam’s analysis of the strength and threats helped it to maintain its standard in the market and add innovation at consistent rate. The research and development in the designing of Adam aircraft helped to position itself in the market and perform better among the competitors in a cost effective manner. The team at Adam’s was the best in the industry and mostly comprised of veterans from the aviation industry. They had the best designers and researchers who could design innovative products at cost effective technology.
The company had a dedicated team whose sole aim is dedicated to aviation industry. The team was innovative and diligent to carry out tasks. Cash crunch beginning of Adam’s led to innovation in the aviation industry that revolutionized the market. The team helped Adam to deliver products that suited needs of the consumers and also helped the team to design the best in the industry. Political regulations had direct impact on the launch of products. Rules framed by FAA for aircrafts posed threat in the initial days but overall the product was able to meet consumers’ standards and proved value for money to customers.
The company also required technological advancements like the big players. The lack of resources for Adam acted as blessing in disguise for the company and helped it to devise processes that would work wonders in design, technology and resources. The company has crunch of cash engineering capabilities and design resources which were the basic tenets for aircraft manufacturing. With the advent of computing age, and owners adeptness in Information technology Adam was able to develop computing techniques which matched the bets in the industry.
This not only helped the dedicated team at Adam’s to launch the best in the industry but also develop in house capabilities at a cheaper cost. Economically, aviation industry is the best industry to provide with lucrative returns for successful projects. Adam’s initiative to create a new segment of aircrafts which combined the best features of single engine and was powered by twin engine, with major changes in design was launched after immense research and data collection at various air shows and consumer feedbacks. Adam has successfully adapted its engineering process to redesign the entire development stage to suit to the likes of market.
This helped Adam to create economically viable and cheaper aircraft which was in much demand in the market. The market responded to Adams creation as most innovative in the aviation industry in small and mid size sector. 3. Overall the business has a higher potential and that has been identified by the owners of the company. Based on PEST analysis of the, a few political issues exists in the business such as FAA regulations which decide upon the safety of the aircrafts. Moreover, technological advancement and availability of cost efficient technologies affects the overall business structure.
Threat of entry of the new player in the industry is weak as major established players command enough market dominance. Power of the suppliers is low and they are cooperative enough to provide with the parts and tools. However, power of buyers in the industry has been very strong and their purchase behavior influences a lot on the business pattern. As Porter’s five forces Model evaluates the external analysis of the environment competitive rivalry is strong in the industry and the threat of substitute is minimal. As Timmons quick screen applies to the venture to evaluate the basis of entry into the business.
The need to evaluate the business on parameters such as Market and margin related issues, Competitive advantage, value creation and realization issues, and evaluation of overall potential becomes imminent. The identification of the business makes it a suitable business opportunity. The market size is more than $ 100 million and there is enough scope to make margins provided one keeps the costs low. Adam Aircraft has developed cost efficient tools to develop its aircrafts which makes it suitable for maintenance of margins in the industry.
Adams has related its products with the needs of the customers and made available the products which are of value to the customers. The venture gains enough competitive advantage by educing the operating costs and fixed costs. The in house development of resources and technology which is available at almost less than 70% of the cost makes it most viable for Adam to get into the business. The company gains significantly from its lead time advantage of team which is the best in the industry, technology that is the mostly developed in house and competes with the big players in the industry.
The time to launch the products in the market is very appropriate as the demand for a hybrid of comfort and reliability in terms of products is the market need. The venture is able to create value in the market, capital requirements can be realized from venture funds which in case of Adams have been low due to the unconventional nature of the market. However, Adam equitably fulfills for the capital requirements by developing technology which is cost efficient and generates good return on investments. 4. The return on investment in the aviation industry has always been good and I would definitely invest in the business.
The risks involved are high in the industry which is unconventional and venture capital flow is minimal, this however can be minimized by developing technology which is superior and cost efficient as in the case by Adam. Creation of a commercially viable product which suits the requirements of the customers makes Adam a favorites in the industry. The three launches see good market and response and huge potential for Adam to grow. Adam launched its aircraft after analyzing the market trends and understanding the needs of consumers.
It redesigned the entire aircraft to suit to the market. This helped the company to launch a product which had superior performance than the competitors. Being the owner of the business, I would have tried to make it more viable for the customers and provided them with appropriate market mix for the products. I would work on the distribution of the product and made its presence at places apart from air shows. I would also concentrate on promotions which is very necessary once the product generates enough interest and is sustainable in the market.
Advertisements in magazines and journals related to aviation industry would position the product as a safe and reliable aircraft should be my priority to gain further market access. This would further make the company to reach to customers and also help to build brand value which in turn would drive venture funds into the business. Venture funds have been difficult in the industry as it being an unconventional industry with no surety on returns, once the company starts making profits, the business can drive funds for further growth.
The team has been efficiently been able to design and develop aircrafts which are highly admired by the customers. The team has been able to create market for the products identifying the needs for the customers. However, as the team has always tried to be innovation and the profits earned should be ploughed back into the business and develop technologies which keep the company competitive in the market and help it to grow its product portfolio into a sizeable number.
The team should also try to achieve consistent visibility for the products which would help customers to learn about the product and make a purchase. The team comprises of the best minds of the industry and they need to exploit their contacts in the industry to increase the distribution level and look for more channels to distribute the products.
List of References
Kotler, P (2005) Marketing Management 12th Edition New Jersey; Prentice Hall Inc. Porter M (1979) ‘Five forces that shape strategy’ Harvard Business Review [January 2008]Youngleson J (2009) Screening of New Venture Opportunities, University of Pretoria Timmons J, Zacharakis A, Spinelli S (2004) Business Plans that work: A guide for small work. [online]http://books. google. co. in/books? id=XyqMwPj8NhsC&pg=PA29&dq=Timmons+quick+screen&cd=1#v=onepage&q&f=false(5 May 2010) Timmons J (2008) New Venture Creation 7E [online] http://books. google. co. in/books? id=9GwdTutSUoC&pg=PA170&dq=Timmons+quick+screen&cd=2#v=onepage&q=Timmons%20quick%20screen&f=false (5 May 2010)
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