Sunday, January 19, 2020

The Global Transportation Industry: Bombardier Essay -- Case Study

Political Factors Being a major player in the global transportation industry, governments are both partners and customers to Bombardier. The transportation industry is seen as a quintessential strategic industry due to its highly profitable nature and contribution to a country's economic growth and prosperity, attracting significant support from their governments. The Government of Canada provides Bombardier with various subsidies such as tax breaks, financing, loan guarantees, and R&D support. The federal government, through EDC (Export Development Canada) administer these subsidies, even providing loans to international airlines enabling them to buy regional aircrafts from Bombardier . Such initiatives are necessary to allow Bombardier to thrive in an industry dominated by state backed international rivals. However, the issue of unfair subsidizing to undercut completion has been subject to legal cases and numerous allegations among the major rivals. The impact of this attention is being seen in the form of more conservative subsidy measures. In the light of such scrutiny, this trend is set to continue, forcing Bombardier to evolve into a more independent self sustained company. Economic Factors Along with the rest of the world, Bombardier has suffered the ill effects of the recession. However, there is an upward trend in the transportation industry led by growing demand and impressive economic growth forecasts in developing nations such as China and India. For the next 20 years, a return to sustained growth in business aviation is predicted, with a estimated demand for 24,000 business jets in all segments in which Bombardier competes. This represents total revenues of approximately $626 billion for the industry. These fac... ...any that is able to sell at a higher rate than cost has a greater chance of being more successful. Overall, Bombardier has been able manage a gross profit in the range of 15-16%. Given the nature of their operations being mostly on a contract basis, meaning that their product prices differ by customer, this shows that Bombardier is able to successfully sell their products at a consistently profitable manner. Additionally, it represents their ability to negotiate with customers. Of great notice is that they were able to maintain their margin levels throughout the recession of 2008-2009. Sources: Wiedman, 2002: Stanford & Eprile, 1999 SEC press release, 2004

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