Evaluating Environmental Opportunities

Cessna has a fair number of environmental opportunities that the company is already taking advantage of.  In a relatively mature domestic industry, Cessna has focused on service, integrating itself into flight schools across the nation.  The company also has conducted vertical integration to decrease costs, integrating with McCauley Propeller Systems to supply both their own aircraft lines as well as others.

With a growing demand for airframes abroad, Cessna has established itself in the global marketplace already.  Between 2011 and 2012, the company saw a 50% increase in sales of its aircraft in China.  The opportunities abound for the aircraft industry, and Cessna is certainly taking advantage of many of them.

The External Environment of Cessna

The aircraft market is rife with competition, and along with that comes threats and potential opportunities.  The largest threats to Cessna's business are from other companies focusing on the same product lines Cessna produces.  For example, Cirrus has entered the market as a new competitor for the general aviation market, with stunning success.  Their entry-level aircraft is priced similarly to a new Cessna 172S ($359,900 vs $307,500) but comes with a longer range, faster cruise speed, and an emergency parachute.  This is quite an enticing offer over a base 172.  Cessna still resonates as the primary dealer in the flight school market, which makes up a good portion of new aircraft customers.

Another potential threat that could be an opportunity on the horizon for Cessna and other aircraft manufacturers are the long-anticipated changes to Part 23, the regulations that govern certification of new aircraft.  The aviation industry has long prided itself in the safety and reliability of its machines, and many planes built several decades ago are still flying.  Heck, the majority of my flight training was done in a plane that rolled off the assembly line in 1967.  However, with the industry reeling from lower sales and basic aircraft that cost over a quarter million, many are challenging the amount of regulation required to bring a new or amended design to market.  Even small changes to an aircraft have to be thoroughly tested before they are given a pass rating, and going through all this red tape brings the costs up significantly.  The proposed changes to Part 23 encourage faster development cycles while ultimately lowering the cost for pilots to purchase a new aircraft, and at the same time maintaining a high level of safety in the industry.  While this will decrease barriers for new competitors to enter the market, and result in stiffer competition among established brands, the powerhouse that is Cessna can capitalize on this new change and potentially offer an entry-level plane at a reasonable price.

Competitive Advantage of Cessna

Cessna aviation has been producing aircraft for various uses since 1926 and has become a hugely competitive force in the aviation manufacturing market. They have achieved competitive advantage by significant horizontal integration to several different markets.  Many pilots start their training in a Cessna aircraft, and their 172 Skyhawk model is the most produced general aviation aircraft in history.  However, the company also produces Citation business jets in various sizes as well as turboprop aircraft, which are in use by various commercial operations, from skydiving centers to humanitarian organizations, all the way to worldwide delivery services.  In the 2013 General Aviation Statistics Databook, Cessna is one of two manufacturers with products in every fixed-wing aircraft category listed, and it has by far the highest production numbers from year to year.  In addition to offering several product lines, Cessna also has made partnerships with flight schools, many of which potentially draw in extra business by being a Cessna Pilot Center.  The flight school gets a pre-built curriculum and students get taught in a standardized manner.