The French aerospace sector

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The French aerospace sector

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Abstract

Each country tries to realize a comparative advantage in a sector and also to have the benefit of producing goods.

In the past, at the earliest of capitalism, Ricardo explained this comparative advantage with two main factors, the natural resources and the labor force.
Nowadays, in a world economy, other factors are also needed to get a comparative advantage.

Also, Porter (1990) developed a new model of this comparative advantage called ‘Porter's diamond' which describes an interconnected system of four major determinants: Factor conditions, Demand conditions, Related and Supported industries and Firms strategy, structure and rivalry.

Two other factors are the government and the chance.
We are now adapting this model for the aerospace sector in France to determinate the French comparative advantage in this sector.

As the aerospace industry is a very large sector, it is appropriate to restrict our research on civil aircrafts because this market is the most dynamic and the military sector depends on the government, a secondary factor in Porter's theory.

The french aerospace sector
Porter analysis
1. Factor conditions
2. Demand Conditions
3. Related and supporting industries
4. Firm strategy, structures and rivalry
5. Chance
6. Government

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[...] We can speak about a real regionalism in France for the aerospace industry because 5 regions concentrate on 80% of employment. Demand Conditions We are considering here just the civil market because the military market is a specialized market with only a public demand. In this sector we have a double composition of this demand. In fact, the main important demand is also dependant on air traffic. This traffic is not only the french air-traffic but is a world traffic. [...]

[...] With the deregulation of this traffic since the end of the 20th century, the public demand has been decreasing but the French government is interested in aircrafts for the police force or firefighters, with helicopters for example. Related and supporting industries This sector needs a large production channel with a lot of different practices in order to complete a plane or a helicopter. We can tell about the aerospace industry that includes all the companies of this industry. The first comparative advantage is with supplier industries. [...]

[...] In the aerospace industry, given factors have limited importance because it is a high-technological industry. Raw materials for this industry are not directly natural resources but are modified products. However, this sector includes a large production process and also needs human resources. In France, total employment for the aerospace industry reaches 200,000 people and 60% of this employment is qualified such as engineers for example. A high-technological sector can not exist without a qualified employment; it is also a comparative advantage for France. [...]

[...] Firm strategy, structures and rivalry In France, the aerospace sector is diversified with a lot of suppliers and with big manufacturers who are leading in their own markets (Airbus, Dassault Aviation, Eurocopter etc.) So, these big groups are not in rivalry because they are in different markets. But these brands are in competition with foreign companies often in an oligopolistic market like Airbus/Boeing. The rivalry in France is also between the suppliers because there exist a large number of suppliers in France and this rivalry, with Porter's analysis, allows the dynamism of this industry. [...]

[...] After this description of the French aerospace sector and its specificities we are developing the reasons for this competitiveness. Firstly, in a big world competition context, Export level is a main factor to consider the competitiveness of a country. France is the second country for exports just behind the United-States and this level of exports was in its biggest point in 2007 with a turnover of 18.7 billion Euros. To finish, France has a positive balance of Trade. Country Market shares United-States 35% France Germany United Kingdom Canada Brasil Italy Japan In another point of view, France has others strengths in this sector too: 60% of total employees are qualified people and has a high-reputation for schools (ENAC, Supaero ) France has also a thorough knowledge about this industry. [...]

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