Make-or-Buy Decisions in Aerospace Organizations: Essays on Strategic Efficiency Improvements

131 Pages·2009·29.33 MB·English

by  Robert A. Goehlich (auth.)

Robert A. Goehlich
Make-or-Buv Oecisions in Aerospace Organizalions
GABLER EDITION WISSENSCHAFT
Robert A. Goehlieh
Make-or-Buy Decisions in
Aerospace Organizations
Essays on Strategie Effieieney Improvements
With aforeword by
Prof. Dominique Demougin. Ph.D.
GABLER EDITION WISSENSCHAFT
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Dissertation EuropeanBusinessSchool,InternationalUniversity
SchlossReichartshausen.Oestrich-Winkel,2008
01540
1stEdition2009
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Forcword
RobenA.Gochlich'sdoctorallhcsisanalyzesIhc incfficiencies in today'sorganillllions
and Ihe polenlial explanalions for them. Aeeording 10 the thesis. Ihese ineOicieneics
may bc rooted in corporalegOllcmanec. at leaSI panly as arcsult ofpolilieal considcra
tions. as lI'ell as for reasons rclattd 10 the individuals involved and 10 globali7..ation.
Spccifieal1y. thethcsis focuscs on Ihe make-or-buydccision lI'ithin aerospaeeorganiza
tions.
ThesceondehapterolTersaneXlensiveoverviewol"theeurrcnlaerospaeescelorlrum
an cconomic point 01"vie\\', The chaplcr has bencfited from Ihc background 01"lhc au
thoT. whohasanexlensive1I'0rkexpcrieneelI'ilhJAXA. NASAand EADS.
Tlte lltird ehapter presents the outsourcing strategies that hallC been employed by
spacc organiwlions in Europc. tltc US and Japan. Tltc cltaptcr includcs valuable infor
mation with respcet 10existingthcorieson lhe makc-or-buy dccision and its interaelion
lI'ith rcspcct toIhcacrospaceinduSll)' inIhc"biglltrec" rcgionsoftltcworld.Tltelilera
ture used is weil explained and ils rclationsltip todccisions oforgani7..alions in lhcspc
ci/ieconlcxtanalyzcd iswell dcscribed.
Thc fourth chapler dcscribes UIltcory-bascd dL'Cision process and suggcsts a \'cT)'
useful 1001 for guiding managemenl in ils makeoQr-buy dL'Cision process. The tool is
designcd to induce Iransparency in a modular fashion, MClhodologically, lhe chapter
presenls scquenlially each ofthe arguments related 10 makc vcrsus buy: Ihe pros and
eons ofIIcnical integration and outsourcing. Eaeh ofIhe tool's dimensions Itas a Ihor
ouglt tltL'ürclieal foundalion with II solid underpinning in Ilte exisling lilCnllurc. The
eomprehcnsillc method cmploycd by Ihis 1001 guarantces Ihat management will bc
forccd10 lhinkIhrougheachofthepossiblcprosandL'ünsofolilsoureingIICrsUS intcgra
tion. Ineludingargumenls fororagainsloutsourcing in llte1001 issimplifiL'dbccauselhe
tool is SlruClurcd in modulcs, Although dcve10pcd for Ihc acrospace induSII)'. uscofthc
1001 isbynomeansreslrieled10tllat illdustT)'.
Overall. the thesis is weil written and prollides a very lIseful management tool for
guidingIltcnmke-or-buydccisionproeesscs inorganiwlions.
Prof. DominiqucDcmougin. Ph.D.
1·leadofDepanmentofLall'.Govemanee& Economics
Emopcan BusinessSchool
Acknowlcdgements
Iwould likc to thank my doctoral supcrvisor, Prof. Dominiquc Demougin ofthc Euro
pcan Business School, DcpanmcntofLaw,Govcmanec& Economics, forthechanceto
pursue my doctoral studies under his supervision. His advice and guidance for finding
the"path tobccomingan cconomist"'over thelast years,starting from ourfirst mccting
in summer2004, combined with the freedolll todevelop creativlty in these studies, has
been a very stimulating combination to me. My acknowledgement gocs to Prof. Andre
Schmidt, fieldofinternational cconomicpolicyat theEuropcan Business School, forhis
ideas, timeand efron asasccond advisor. Hisviewofeconomicpolicy inourmeetings
hasgiven meauniquechancetoincorporatethemwithin mythesis. Iamappreciative to
the chairman ofmy doctoral eommil1ce, Prof. Hartmut Kreikcbaum, fic1d ofbusiness
ethics and the membcrs, Prof. Stefan Wallerand Prof. Michael Hcnkcl, field ofsupply
chain management at the European Business School for accepling my thesis and the
timespentonevaluations.
Iwish to thank Prof. Rose Rubin, University ofMemphis, for helpful comments to
the charactcristicsehapter. Manythanksgo to Dr. Vcikko Thicle, University ofBritish
Colmnbia, for reviewingthe case studychapter. Prof. RalfBebenroth ofKobe Univer·
sity is theco-all1horofthis slUdy. Iam verygrateful for the opponunity toconduct re
search on this topicwith him and for many fruitful discussions as a good friend. Valu
able comments from Prof. Benjamin Bental ofthe University ofHaifa on the make-or
buydecisionchapterarehighlyappreciated.
Iwould like to express my sincere thanks to my colleagues Dr. Sabine Altiparmak,
Gudrun Fehler, Petra Ernst and Clemens Buchen ofthe Europcan Business School for
their valuable comments on my thesis and research col1oquiutn regarding content and
language, for being so supportive, and for providing a friendly working climate in the
dcpartment.
I would also like thank the panicipants at the 4th International Conference on
{O
EconomicsandGlobalizalion(EcoTrend)2007 held inTarguJiu,the InternationalCon
ference on Applied Business Research (lCABR) 200S held in Accra and the ISth Inter
national Conference ofInternational Trade & Finance Associalion (IT&FA) 2008 held
in Lisbon forIheircommentsandsuggestions.
viii Aeknowledgements
Mythanksto my fonnercolleagues, Prof. Anja Sehöttner, Dr. Ria Steiger, Dr, Jcnny
Kragl and Dorothee Schneider of the 2007 disbanded Walther Rathenau Institute for
OrganizmionTheol)'at Humboldt Universityat Berlin for the nieeworkingelimate and
answeringevel)'sillyquestion aneweeonomisteouldhave.
Last, and most importantly, Iwould like to thank my parents, Rosemarie and Lothar
Goehlieh, withOllt whom I would never have been able to aehieve so mlleh and who
taught me to stay the course even when it is vel)' challenging. In panicular, Iwant to
thank my girlfriend Naoko Ogawa, my parcnts and my sisterAnja Wollenberg, for be
ing so patient; the leisure time we spent together was definilely too Iillie in the last
years.
Thisresearchhasbeen supported bytheAlcxandervon Humboldt Foundation,which
isgratefullyacknowlcdgcd, The viewsreported in thisthesis are thoseofmealone, and
not those ofany institution. All eITors and omissions, whieh may unwittingly rcmain,
arethesolercsponsibilityofmc.
RobenA.Gochlich
Abstract
Today'sorganizmions sufTer from ineffieiencies that may oceur for any numberofrea
sons. lnemeieneies may: bc rootcd in the eorporate govemance ofan organization, re
sult from politieal reasons,bedueto individual reasons,and result from globalizationas
weIl.
This study focuses on the strategie aspeets ofdeeision-making within aerospace or
ganizations,eoneentratingon themake-or-buydeeision in anatlempttoexamine organ
izational efficiencies. The present study ineludes an understanding ofthe existing or·
ganizational structures of aerospace enterprises, and whi1c searehing for emeieneies,
diseusses strategiestoavoid inefficiencies and investigates the potential for implement
ingreeommendationsintopraetiee.
The main rcsultofthestudyisthefonnation ofa process, in the fonn ofaeomputer
izcd tool, that handles approximalely 50 propositions of make-or-buy decisions, sys
temmieally eonneeted to strategie objeetives, and organizational, produet and environ
mental ehar3eteristies. The strength ofthis process lies in its ability to eover the entire
spcetrumofmake-or-buy(thecontinuIIm from in-hollsetoblly-ofT-thc-shelf)inorderto
suppon deeision-makers with holistie recommcndations. This proeess allows one to
detennine the kindoforgani7.ational arehiteeture that isbest suited10a speeified activ
ity.
The resuhing tool is applicdtO foureasestudiestaken from theaerospaeeseetor: (A)
Copymaehine usage(as areferenee), (B) Aireraft final assembly produetion,(C) Satel
lite rocket launeh operation and(0) Spaee tourism rocket development. In three ofthe
four eases, the make-or-buy deeision [hat is reeommended by the tool mirrors instinc
tual,expcrienee-basedeonclusions. lt isalsoshown that awell eonsidercd make-or-buy
deeision approach is paramollnt to overcoming opcrational ineffieiencies for aerospaee
organi7.ations.
Keywords: Aerospaee Organization, Aviation, Corporate Govemanee,
Game Theory, Make-or-Buy Decision, Outsoureing, Strategy,
Spaee, Venieallntegration
JELClassifieation: L25, 023, L93,C72, M55
Statisties: 136 pages, 23 figures, 15tables, 182 rcferenees
Contaet: E-mail: [email protected]
Table ofContents
Foreword v
AcknowledgemcnIs \'ii
Abstract ix
TablcofConlents xi
listufFiguresandTables xiii
listorAbbrevialions X\'
Definitions...•.........•........................•.........................••......•..................................•......•x\,ii
Inlroduclion 1
1.1 Motivation 1
1.2 StructureandAnalylieal ProceduTC 2
1.3 ThcNeed for Effieiency,Organizmionsand Multinational Acting ..3
2 EconomicCharacleristicsorAerospaceOrganizalions 7
2.1 lntroduction 7
2.2 Characleristics . , , ,.. , , , ,.. ..., , , ,.. , ,8
2.2.1 General.... . 8
2.2.2 Markel Struclllrc 9
2.2.3 Products....... .., , ,.. ., , 9
2.2.4 ContractorClassilicalion , , ,.... ..10
2.2.5 lndustry Sizc 11
2.2.6 Organizational Arehiteeture 13
2.2.7 Pcrfonnanec 20
2.3 Diseussion... .. ....21
2.4 Rcsults....... ...23
3 OulsourcingStralegies in Europe,USAandJapan: ACaseorSpace
Organizations .,.........••.•..25
3.1 lnlroduction , , , , , , , , , ,.. . , , , , , 25
3.2 Theorctical Approaches forOutsourcing....... .. 27
3.2.1 General 27
3.2.2 TransaetionCostTheory 27
3.2.3 Principal.AgentThcory... ...28
3.2.4 TheHuman ResouTCc-bascdView ...29