Assessment and Strategic Planning Essay
Adam
Aircraft Industries Inc.: Company’s Assessment & Strategic Planning
In the attached report we provide you with an assessment of Adam Aircraft Incorporated (AAI). As was requested, full examining of the company was made (both of internal and external components), and appropriate strategies were considered.
In the report you will find strategies proposed by professional analysts, their implementation methods, the importance of each strategy, and the detailed description of their strengths and weaknesses. Following assessment was made in order to increase Adam Aircraft’s competitiveness, and to make changes, which will lead company to the better position in the market.
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We hope that this report will help your team to take required actions in order to prevent company from undesirable changes in its performance.
Introduction
Adam Aircraft is a designer, manufacturer, and supplier of the innovative twin-engine airplanes. With its appearance, company has brought many innovations and changes to the aviation industry. It has succeeded in the production and delivery of the twin-engine planes for owner-operators, where company’s many predecessors have failed. With the foundation of the company, the latest and best technologies were used in the manufacturing processes of the company. AAI used computer-based designing software, which helped company to save a lot of time and money. All the techniques used by Adam Aircraft helped it to make all its projects in-house and brought it a significant competitive advantage. However, company failed to protect itself from the lack of funding for its projects. The major issue was the way company handled its financing. The mistake was already made when the company was founded and is more difficult to eliminate at the current stage. The following report offers few strategic steps, which can help company to get back its position and return its ability to compete on the market.
Adam Aircraft’s Mission Analysis
Adam Aircraft Industries Inc. concentrates on manufacturing and distributing planes for a personal and governmental use at a high level. Since this company was the first in the industry to introduce twin-engine aircrafts for the private customers, its business was mainly aimed at creating a high-quality and innovative machines. Adam Aircrafts started its business with bringing together the best people in aviation business, computerized software, which helped them to speed up the manufacturing processes, highly professional mechanics, and management team with a great experience in aviation.
One of the most important components of Adam Aircraft’s mission was always aimed at bringing high-quality and innovative product to their customers. After the formation, company started developing a twin-engine aircraft for owner-operators. The innovation process was moving slowly, changing one detail in the plane at a time. For that reason Adam Aircraft Industry concentrated on the power and performance of its planes for a start. Its aircrafts were slightly redesigned, but no significant changes were made since development and manufacturing processes were supposed to move faster than competitors’. AAI made sure its customers were offered not only an innovative design but also higher performance of its aircrafts. Company realized how great the demand of new aircrafts was in the market, therefore, it has put all the effort on designing a plane, which would surprise and amaze its customers. This was Adam Aircraft’s priority and mission number one.
The idea of bringing to the market an innovative product that everyone was waiting for is definitely very adequate and accurate, however this is not an easy thing to do. AAI has handled its initial task well, bringing to the market aircrafts of the new design and quality. It has passed all the checking procedures of Federal Aviation Authority (FAA) faster than it has expected and was way ahead of its competitors in this matter. However, innovations do demand a lot of money for researches, developments, and manufacturing. Before adding something new to the plane’s system it should be carefully though through and examined before the implementation.
Another important idea behind Adam Aircraft Industries is an easy maintenance of its planes. AAI claims that an easy access to the machine’s system allows maintenance and repair processes to become less complicated and extended. This is crucial when selling a product to the customer, because it assures him or her of the excellent maintenance and repair services after the purchase and brings more customer satisfaction toward the product and company.
In addition to the high quality and comfortable services, Adam Aircraft tries to deliver its products at the lowest possible price. Since designing and manufacturing processes are based mainly on the computerized software, it allows AAI to save time and costs on complicated and exhausting processes of developing a certain detail. It also allows AAI to transfer all its documents and drafts to FAA, which makes product’s inspections easier, quicker and cheaper. All this provides Adam Aircraft with an opportunity to offer its customers comparably low prices for its aircrafts.
Overall Adam Aircraft Industries’ missions are adequate and achievable. Company is concentrated mainly on its customers and delivering even more satisfaction and excitement to them. AAI seems not to bother much about its shareholders and overall financial situation. It relies on the speed of its developments and production. The ability to make all the innovations in-house provides company’s management team with the confidence in the effectiveness of its elaborations and the superiority over its competitors in almost all the aspect of the business.
Company’s problems and its causes
In February, 2008 Adam Aircraft Industries Inc. announced its bankruptcy due to the lack of the capital required for its further functioning. AAI was almost at the end of the Federal Aviation Authority inspection process for its second airplane, A700, and could not finish its final flight testing. In addition to this, Adam Aircraft could not enter a full production of its second plane, A500. The company needed from $75 to $150 million in order to continue running the business.
The main problem of Adam Aircraft Industries was a great amount of loans, which company found impossible to pay off after a while and could not recover from in the year 2008. After the bankruptcy of AAI was reported, it became known that the company was financed through only $1- $10 million of assets and $50- $100 million of liabilities. It was also discovered that the company had up to 999 creditors by the time of the A700 certification period. Adam Aircraft business was completely under the financing of the creditors and depended tremendously on its ability to pay off the money. The ability to pay off the money, in turn, depended mainly on company’s designing and manufacturing speed and effectiveness.
When the company was founded by Rick Adams, it was financed only through assets. Company’s founder previously had created another business, which was concentrated on the software development, which was later acquired by Sybase Corporation. When Rick Adams started creating his new company, which was designing and producing airplanes, he used the assets from his previous company. All the researches and developments made by the new company were paid through the assets, and no loans were taken. This kind of financing was made because of two things. First reason was the reluctance of investors to finance a new and unknown company. By the time Adam Aircraft started emerging there were absolutely no companies producing twin-engine aircrafts, and all the planes produces by them had on average an almost 30-year-old design. Despite of that fact, investors did not believe in the success of the new company and were not willing to risk their money. Another reason for financing the company through the assets was Rick Adam’s confidence in the speed of his company’s growth in the industry. In designing and manufacturing processes Adam Aircraft was using computerized tools, which helped to speed above mentioned practices. The FAA inspections were made easier and less expensive than it used to before, and this added more competitive advantage to AAI, since it was way ahead of its competitors in this matter. At one point Adam Aircraft’s founder realized the company is running out of time and money. The management team has decided to cut company’s development costs by 75% and to start its production as soon as it was possible. Time became a crucial factor in the process of designing a new airplane. Slowly but surely the assets from the software development company became unable to help AAI continue functioning. Unfortunately, very soon the lack of additional funding played a crucial role in the future Adam Aircraft’s existence.
Adam Aircraft Industries did profit a lot from the intensive usage of the computer-based designing tools. It also profited from the newest technology used by the company in the manufacturing process. All these highly productive equipment helped company in gaining competitive advantage and making its production easier, faster and cheaper. It allowed AAI to enter a market, which was not touched by anyone before. With its twin-engine aircraft company has reached one of the highest positions in aviation industry. However, innovative technology and designing software could not prevent company from failing to finance itself and continue functioning. While being concentrated on the idea and process of creating a new and qualitative product, Adam Aircraft’s management failed to think through the financial part of the business more carefully. The company’s funding demanded a closer look and a more precise planning.
Apart from the financial issues, Adam Aircraft is faced with other difficulties on the market. Entering an aviation industry appeared to be more difficult than was expected. The reluctance of investors to finance AAI’s business was logical and explainable. First truly big barrier for the investors was the failures of the previous companies to run a business like Adam Aircraft was going to run. There were few big attempts to create an innovative aircrafts in the past. However, companies failed to understand that their ideas were way ahead of the industry they were trying to enter. There were no technology needed for designing and producing planned airplanes. By the time Adam Aircraft entered the market, its bigger and more experienced competitors have already developed a technology, which allowed companies to design and produce their products in-house. Adam Aircraft had an opportunity to use the same manufacturing tools that its competitors-giants were using. However, this did not add the confidence to the investors. AAI still was the new company on the market, and there was little trust in both its success and the success of the industry it was aiming at. This important issue played a crucial role in originating the problem with the lack of funding in the future.
Strategies and their implementations
One of the latest things that Adam Aircraft did was the development of the powerful customer support network. This new tool was designed in order to create a service, which would help the company to support their customers after the purchase of a certain product, and to build strong and long-lasting relationships with them. The network consists of many useful and comfortable tools that are aimed at helping AAI’s customers to feel secure before and after buying a new product. This is a very important strategy, which has to be implemented and maintained, since customers’ satisfaction is one of the most important factors that affect organization’s functioning. The customer support must come not only from the technical side of the purchasing deal, but also from all other aspects that company covers. All kinds of information should be communicated with the customer from engineering, purchasing, production, quality control, sales, and marketing departments. All these departments must ensure it can provide a customer with a help and assist him or her in any problem quickly and effectively. Adam Aircraft’s top management must provide all the company’s employees with the seminar, where they will be taught, how to serve customers and what kind of assistance to provide them with. There should be given clear guidelines of who should approach whom inside of the company in order to find a certain piece of information. Only in case company’s departments will work closely together, and the communication within the company will flow smoothly, the customers’ satisfaction will be guaranteed, and AAI’s competitive advantage will be growing.
In the issue with raising money for Adam Aircraft’s projects entering a partnership could help. Since AAI is a new company with no reputation on the market, it can gain some of the investors’ trust by starting collaboration with an older and more experienced company in the aviation or any other industry. This can be any company somehow connected to the aviation business; supplier, aircrafts designer or producer, marketing professionals, etc. The biggest advantage of this strategy is the support of the more influential company than Adam Aircraft is. However, the disadvantage is the higher involvement of the external forces in the company’s development. AAI’s management must decide which aspect is more important for the company. The 50/50 funding is the optimal option in the case of Adam Aircraft, therefore it should get rid of the unnecessary liabilities and add to the assets. In this case the involvement of other company is unavoidable.
In addition, Adam Aircraft must reconsider the development of its third aircraft model, A700, and, perhaps, to stop its certification process for a while. Company must concentrate on producing (A500) and earning profits at the moment. This will both increase the value of the company and add to its assets, helping financial situation to stabilize.
Conclusion
Adam Aircraft Industries has brought enormous changes to the aviation business. It has introduced to the market models, which did not exist before, and which few companies tried to develop previously, but have failed. Fully computerized designing and production processes helped Adam Aircraft Industries to gain significant competitive advantage. It also helped company to pass all the Federal Aviation Authority certification tests much faster and cheaper than it was done in the past, which brought AAI way ahead of its competitors. However, all the technologies and computerized tools did not help Adam Aircrafts to avoid the financial problems that have occurred in 2008. Company’s major oversight was the funding of its projects from the very beginning. AAI’s founder, Rick Adams, should have avoided funding the company with assets only at the time, when the company was forming. Finding either investors or partners in the very beginning would initially prevent company from going bankrupt. At the current company’s stage and position it is more difficult to change the course of events. Apart from the financial problems in the company, it also suffers from other important factors and is being constantly influenced by the external forces. Despite of the obvious superiority of Adam Aircrafts over its competitors, the company is still new to the public and has no required reputation for making investors and customers to reconsider their approach toward the aviation industry.
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