Free Essay

Bombardier Case

In: Business and Management

Submitted By GabriellaWan
Words 13062
Pages 53
HOGESCHOOL ZUYD
IBMS BLOCK4.1
INTEGRATIVE CASE
Table of content

Preface 4 Summary 4 Company Description 5 Definition of the problem 5 Description of the procedure 7 Research 7 Suppliers and delivery problems 8 Lower demand 9 New customers – BRIC and Eastern Europe countries 9 Environment protection 11 Chapter 1 12 SWOT Analysis 12 Porter’s 5-forces Analysis 14 Value Chain Analysis 16 Strategic Logic 18 Chapter 2 22 Strategic Map 22 Chapter 3 23 Value Based Management Philosophy 23 Chapter 4 25 Risk Management Process 25 Chapter 5 27 Financial Analysis 27 Ratio Analysis 28 What is the position of the company in this situation of a financial crisis related to its main competitors? 32 Chapter 6 33 Budgeting Process in Management Control System 33 Chapter 7 34 Internal Control System 34 The alignment of the Internal Control System into the day-to-day management of performance 35 Conclusions and Recommendations 36 Bibliography 37 Closing statement 38

Preface
Background
We are appointed to finish the Bombardier case to give a primary analysis on the Bombardier Transportation, emphasis on the risk management of the company. Combining the subjects we have learnt about risk management and strategy management.

Acknowledgement
We would like to express our gratitude to all those who gave me the possibility to complete this report. We are heartily thankful to our professor, Mr. Chretien Straetmans, whose encouragement, guidance and support from the initial to the final level enabled us to develop the understanding and complement of the report.

Report direction
We are presenting the report to assist Bombardier Transportation to have a better development on the whole management system.
Summary
Albert Einstein once said: “Imagination is more important than knowledge”. This statement is also true for Josef Armand Bombardier. He did not have any university degree and yet he managed to implement his visions and developed a company which is known and considered worldwide. Today, we measure the man on its academic degrees. Almost everybody can study today and we should try to look behind this facade. In the end, what really counts are the ideas and creativity we can expose. The studies are mostly the ticket to the real world that Josef Armand Bombardier not needed. The first successes can be so inspiring, that a great development began and inventions for eternity can be created.
Knowledge is limited to all the humanity now knows, but imagination breaks through boundaries. Technical inventions like the first snow mobile from Josef Armand Bombardier mostly began with an idea and a dream. The belief in something is more important than the correct expertise. Faith can move mountains! Josef Armand Bombardier believed in his idea of helping the others with is technical inventions.
In the following Case Study the authors really hope, that a bit of this passion can be read from it. Now Bombardier is market leader in its area, but once upon a time it all starts with one single person, having a dream of. Josef Armand Bombardier had to be a very persuasive and ambitious man to achieve that many goals in his lifetime. In the following we analyze his company from strategic and financial site to make strengths and weaknesses as well as aims and possibilities clear. We also dealt with the markets Bombardier is active and the markets that could be future possibilities. The development from being a one man company for snow mobiles to a company dividing into transportation and airplane divisions runs like a red tread through the whole case with focusing the Bombardier Transportation Division.

Company Description
The slogan “We move people” stands for helping people and goods to get to the place where they are needed. The advertisement slogan of Bombardier Inc. is not only an empty slogan, but rather a leading principle that always makes the company move on.
The today’s Bombardier grew out of a young mechanic’s inventive genius and entrepreneurial spirit. Joseph- Armand Bombardier, born in 1907, builds his first snow vehicle at the age of 15 only to help the people travel across the snow-covered roads of Quebec, Canada. The mechanic’s genius grew up and kept the dream of inventing the perfect personal snowmobile. He experimented a lot and actually he launched the world-famous Ski-Doo in 1959. After died of Joseph- Armand Bombardier the oil crisis forced the company to halve its production. Only with a lot of change in manufacturing and management Bombardier acquired mass transit technologies and applied the company ´s manufacturing know-how to build rolling stock.
Bombardier as a global transportation company consists of 69 production and engineering sites in more than 20 countries. Therefore a worldwide network of service centres is necessary. About 65 400 employees design, sell, support, manufacture and operate in the two industry-leading businesses Aerospace and Rail Transportation.
In the Year 2004 Bombardier was restructured. The economic outlook improved for the aerospace and during the wake of recession in rail vehicle the Executive Committee decided to reduce the division Transportation. The Downsizing happened mainly in Europe and includes the closure of seven production sites in five different countries as well as a worldwide reduction of 6600 employees.
Bombardier posted revenues of 17, 7 billion US $ in the fiscal year ended January 31, 2011. The company is based in Montreal, Canada.
Definition of the problem
Bombardier Transportation is the global leader in the rail equipment manufacturing and servicing industry. Its wide range of products includes passenger rail vehicles and total transit systems. It also manufactures locomotives, bogies, propulsion and controls and provides rail control solutions.
Bombardier in its activity, as each company faces numerous problems. These are not only financial problems but the problems associated with the production, with stakeholders, with suppliers, as well as brand image in global markets etc.
Bombardier transportation was and still is seriously affected by the economic crisis of 2008. It is far from the financial troubles of the company as such. Bombardier's main concern is cessation of production lines. The company claims that the suppliers, especially small ones are seriously affected by financial crisis and they are finding themselves financially squeezed and unable to source credit from banks required leading to a number entering administration.
Bombardier, a rapidly growing business, still needs a new, increased supply of materials. But, again, suppliers are unable to secure the credit necessary to increase staff numbers or buy equipment. Interruptions in the supply of materials are extremely difficult for Bombardier. They cause not only a significant delay in the completion of orders, and sometimes even prevent them, which leads to significant financial losses, as well as a lack of confidence in the company by the buyers. This is not an uncommon problem and one that is certainly not just confined to the rail industry, but that will likely come as small consolation to passengers or Bombardier themselves. Significant delays in deliveries could mean big financial losses caused by penalties for delays, and loss of customers. Moreover, such delays, force the Bombardier to lay off employees due to the lack of available work.
Reduced demand for modern railway rolling stock caused the decrease in production, and thus the surplus labor force. Bombardier currently is facing the redundancies not only the temporary contract stuff, but also the permanent staff. Bombardier claims that present contracts don’t secure workload at this site, which means that it is inevitable that Bombardier must adjust capacity in line with economic reality.
Bombardier, as every company bases its decisions on the opinion of many advisers. However, according to the research, only two out of ten people to advise on projects have engineering education. Many projects revealed that more accountants than engineers were involved in decision-making process. Of course the composition of the advisors has reasons, but when it comes to a company typically dependent on the technology, decisions should be guided by not only financial aspects but also the technical mind. Otherwise it may lead to the failure of projects. An ideal example of this problem is the Thameslink project.
Another problem faced by the Bombardier is modern requirements and standards for environmental protection. Environmental protection as a modern trend is very expensive proposition for any company. However Bombardier seems to deal with it quite well. In its fourth bi-annual Sustainability Report, in which the company showcases its 2009/2010 sustainability achievements, Bombardier shows that it reduced its environmental footprint during the year by 13% for water consumption, 7% for greenhouse gas emissions and 5% for energy consumption.
Bombardier Transportation has also stabilized its accident frequency to a world class level with only 0.4 lost-time accidents per 200,000 hours worked. Bombardier in previous year invested $147 million in research and development towards product innovation. Bombardier efforts and achievements continue to trend in a positive direction.
Despite a significant increase in business volume, Bombardier Transportation reduced energy usage, water usage, emitted less greenhouse gases and produced less waste. Company has set a new target of achieving a carbon-neutral manufacturing footprint by 2020. Such provisions, however legitimate, leading to significant cost increase, which, combined with reduced demand can significantly hamper the functioning of the company.
Bombardier, as international company should also focus on BRIC countries (Brazil, Russia, India, and China). Since they are raising economic powers Bombardier should gain maximum profit out of them. Especially Brazil, which hosts next Olympics, needs to develop infrastructure, hence there is great opportunity for Bombardier for new orders.

Description of the procedure
Each project begins with gathering information. Our group first conducted a so-called "white intelligence". During this project we agreed first on: * Market sector in which Bombardier currently operates and intends to operate. * Where the company locates its offer and its potential. * Group of companies (according to criteria of technical and technological, as well as the possibility of capital, and already possessed market power), which are today and in the foreseeable future will be the competitive environment of the company.
This approach (quantitative and a qualitative) helped us to understand Bombardier its economic activity, as well as environment in which it operates. After this we proceed to gathering appropriate data.
Frequently used tool was the Internet, as an extremely rich source of knowledge. During data collection we follow the official publications and statistics branch - the source usually was trade press. We decided to choose this source, because this latter source is a great way to familiarize with the latest actions of direct competition as well as company itself.
We tried to pull and analyze internal data - monitor the type, range, number and volume of commercial transactions, especially via the official Bombardier site (www.bombardier.com). We also analyzed official materials released by Bombardier, like annual reports, sustainability reports, financial sheets, press statements etc.
We also tried to analyze the type of procurement in terms of product profile - see where and in what time periods, specific range of products and services recorded increases, and when they accrue sales declines as well as customer profiles and which groups show a high degree of loyalty, and which benefit from Bombardier’s offer incidentally. We focused also on analyzing the type of services or products in terms of their impact on the entire turnover of the company.
What is more we tried to look through competent publications, report from conferences and symposia, descriptions of the patent claims. We tried to use every possible information, that would help us understand Bombardier company, its current situation as well as the environment it’s operate in.
After gathering the relevant information, we proceeded to a wide range of analysis, which was accompanied by numerous discussions between group members. Besides, during the project were held regular meetings to control progress and consult issues and uncertainties arising during the realization of the various parts.
Research
As it was stressed earlier Bombardier faces many problems due to economic crisis. We wanted to take a closer look at each of the problem, believing that this could help us understand better the economic situation that Bombardier currently is.

Suppliers and delivery problems
Due to economic crisis, many small and mid-suppliers companies had financial troubles. That of course negatively affected whole supply chain and in the end endangered Bombardier’s activity. Due to the credit crunch many of Bombardier's suppliers have faced issues getting credit to allow them to make parts to sell onwards. Some of them for example supplying company “Time 24”, which supplied control and panel wiring inside the units, were acquired by Bombardier just to ensure its supply lines were maintained. Other suppliers have been paid in advance to ensure that they produce the goods before going bankrupt.
To deal with this problems Bombardier implemented “Supplier Relationship Management”. Strategic priority of this program is to optimize supply chain performance and ensure compliance with Bombardier’s sourcing strategy. Now Bombardier as a part of its “Supplier Relationship Management “program introduced a rigorous selection process to ensure supplier quality and qualifications, including mandatory adherence to its Supplier Code of Conduct principles. And also Bombardier maintains a regular business reviews with top suppliers to discuss current projects, operational issues, R&D and future commercial target.
Especially Transportation Division this practice helps to supports the systematic measurement and management of supplier performance. The program incorporates case-driven, “deep dive” workshops. During the workshops TCO (total cost of ownership) approach is used to optimize supply chain as well as value chain. A supplier performance dashboard helps to evaluate suppliers’ quality, financial stability and most important on-time deliveries.

Source: http://www.csr.bombardier.com/pdf/report/section/en/6_4.pdf
These practices helped Bombardier built more transparent relationship with suppliers. Create strategic partnership as well as assure suppliers of a long-term business relationship with committed spend. But, at the same time Bombardier remained cost efficient in bids and projects.
Bombardier also faces one more problem, directly linked with supplier’s financial problems. Due to this situation, Bombardier must delay deliveries of its final products (due to lack of parts, and assembly lines cession). Lately serious problems have delayed or interrupted delivery of rolling stock as part of three major contracts in Germany, France and Sweden. This had a negative impact on $300 million cash flow.
Lower demand
Transportation manufacturing giant Bombardier says the European debt crisis is not stifling demand for its trains, despite these statements, as the graph below shows, Bombardier had huge decrease in new orders after 2008.

Lack of demand for new transportation is deepest in Western Europe, which was very affected by the financial crisis. But since it is well known fact that personal wealth in nations raises the demand for comfortable transportation increases, this is a great opportunity for Bombardier to enter not only new markets but also to get new orders. Bombardier seems to deal with this task well. Recently it won agreement for third transit complete signaling system in Brazil, deliver further 76 MOVIA metro cars to Delhi Metro, contract to design, build, operate and maintain an INNOVIA automated people mover system in Jeddah and many, many more. This shows that demand as well as economic potential moves from Europe to fast, developing countries, especially from BRIC.
New customers – BRIC and Eastern Europe countries
BRIC countries – Brazil, Russia, India, and China are known as the fastest growing economies in the world. They also show the great potential to be the next superpowers of the world. When countries are developing, becoming richer, they invest mostly in public services like education, health care, social funds etc. But also their priorities are new technologies, new public infrastructure, new means of transport. Development of those countries creates a great chance for Bombardier Transportation to gain new orders and new, reliable customers.
Huge opportunities present Brazil. It is a country with constantly rising GDP ($1,573 billion) and increased demand for transportation infrastructure. In Brazil in few next year’s two important sport events will take place: World Cup in 2014 and Olympics in 2016. To be well prepared to host those two, prestigious occasions Brazil has to be well prepared, hence to develop urban, airport and railway infrastructure. $11.3 billion (for the World Cup) and $14.4 billion (for the Olimpics) was released by government to realize this projects. For example Bombardier Transportation will design, supply and install a 24-km INNOVIA Monorail 300 system for the new Expresso Tiradentes line.
As it comes to Russia Vice-President of Russian Railways Salman Babayev stated that the country needs to invest over 2 trillion Rubles (about $70 billion) in rail infrastructure to handle projected increased traffic by 2020. One of those projects for example is extension of Trans-Siberian railway in order to be able to import and export goods form and to Far East countries. Russia, the same as Brazil will be host for two sports events: winter Olympic Games in 2014 and World Cup in 2018. Hosting these events require transportation investments, in order to be able to transport funs of sport for the events. Bombardier Transportation already signed some agreements especially concerning signaling and control systems. Bombardier Transportation also acquired a Russian company, stake in the signaling equipment manufacturer United Electrical Engineering Plants, known as Elteza. This partnership has worked in close cooperation with Elteza to equip over 100 Russian stations with BOMBARDIER EBI Lock 950 computer-based interlocking (CBI) technology.
India, even though it is in early stage of its development, has well developed net of transportation (thanks to British domination). But it’s rolling stocks, and whole infrastructure is old and in a bad shape. India has great population, estimated for 1,3-1,4 billion people. It is fast growing and has present huge demand for new means of transport. India also has lot of well-educated people, but still being one of the cheapest work forces in the world. Indian’s government announced five-years-modernization plan. Thrust of this plan is constructing Dedicated Freight Corridors between Mumbai-Delhi and Ludhiana-Kolkata, 10,300 km of new railway lines, gauge conversion of over 10,000 km and doubling. Also modernization and redevelopment of 21 railway stations, introduction of private entities in container trains for rapid addition of rolling stock and capacity, as well as developing urban transportation for example metro rails and world class stations. Bombardier already saw in India rising power, providing for them newest-high technology metro in Delhi as well as rail control solutions.
China is known as new superpower in the world. It leads in population as well as in economic growth and GDP. China has vast demand for transportation infrastructure, not only public transport, but mainly cargo transportation. Every year government announce new projects for example this year investment will reach 745.5 billion RMB (about $115 billion), with 600 billion RMB going toward infrastructure construction. For now Bombardier is already present in China’s transportation market providing especially metro systems for cities like: Guangzhou, Shenzhen, Shanghai and also some intercity as well as high-speed trains, and transportation systems in Beijing and Guangzhou. It also provides safety control systems across the country. China as rapidly developing country, with still rising population will need new and more advanced technologies in transportation, which of course is great opportunity for Bombardier. Also what is worth stressing is environmental issues. China as much polluted country pays more and more attention to eco-friendly technologies. This is great bargaining opportunity for Bombardier, since it has one of the most efficient technologies, which pollute environment less.
And again countries in Eastern Europe (not superpowers!) that show constant economic growth might be new customers for Bombardier. Old technologies, not friendly to environment and not providing sufficient comfort for passengers, are still present in Eastern Europe. In order to meet expectation of customers as well as European Union criteria, these countries must constantly modernize its railway systems. This is the opportunity that Bombardier has to take, since Western Europe (its greatest market) is in deep crisis, reducing orders and investments.
Environment protection
One of main concerns of each company today is meeting environment standards. Bombardier is company well known of its care about our planet. Bombardier carefully selects materials to minimize the environmental impacts during the entire lifecycle of the material. Bombardier tries also to reduce energy consumption, so important not only for environment but also because of economic reasons. Minimizing energy consumption is achieved by lowering weight, decreasing aerodynamic drag, recovering brake energy and reducing losses for all propulsion components. In addition, power meters can be installed in vehicles to control consumption, which is very modern approach.
What is more Bombardier Transportation became the first company in railway industry to produce Environmental Product Declaration. EPD presents quantified information on a product’s environmental life cycle, based on the ISO 14020 series of standards
Bombardier in its manufacturing process tries to reduce energy consumption, standard on prohibited and restricted substances, reduce (not onlyCO2) emissions, share responsibilities with suppliers and partners.
Bombardier set also environmental targets
Energy consumption
Target: Reducing specific energy consumption by 3% annually, starting in 2004
Achieved: Specific annual energy reduction of 3.5% (2004 to 2006 period)
Water consumption
Target: Reducing specific water consumption by 3% annually, starting in 2004
Achieved: Annual reduction of 1.5% (2004 to 2006 period)
Hazardous waste
Target: Reducing hazardous waste by 5% annually, starting in 2004
Achieved: Annual reduction of 16% (2004 to 2006 period)
General waste
Target: Reducing general waste by 3% annually, starting in 2004
Achieved: Annual reduction of 9% (2004 to 2006 period)
Recycled materials
Target: There was no specific corporate target
Achieved: Annual reduction of 31.5% (2004 to 2006 period)
Greenhouse gas emissions
Target: Reducing greenhouse gas emission by 3% annually, starting in 2004
Achieved: Annual reduction of 3.5% (2004 to 2006 period)

Chapter 1
SWOT Analysis * For Bombardier Company

Strength- Internationality- Strong market position- Social Responsibility- Employees’ benefit | Weakness- Negative effect of employees’ benefit- Fnancial crisis- Lay-off | Opportunity- Better management- Innovation and development- Sustainability | Threat- Low employee productivity- Environmental issue |
Strength
Internationality: Bombardier’s products are widely accepted through Australia, Austria, Brazil, Canada, Finland, France, Germany, the Netherlands, Ireland, New Zealand, Spain, Sweden, UK, Japan, China and the US which is the company’s largest market and accounted for 27.6% of the total revenue in 2009.
Strong market position: Bombardier holds a strong market position among its all product categories of the company which enhances its brand awareness and increase the bargaining power of the company.
Social responsibility: Bombardier is deeply committed to meeting its responsibilities as a public company, employer, neighbor and partner. It is a signatory to the United Nations Global Compact, the world’s largest corporate citizenship initiative, supporting 10 principles in the areas of human rights, labor standards, environment and anti-corruption.
Employees’ benefit: Bombardier provides benefit packages to its employees. Integrating and supporting its employees in this way can reinforce their loyalty and passion to work which lead to a better performance and high efficiency and effectiveness for the organization.
Weakness
Negative effect of employees’ benefit: The benefit packages to its employees have a negative effect on Bombardier’s performance. The employee benefits obligations overfunded by an estimated $1,180 million.
Financial crisis: Due to the current economic situation, Bombardier is suffering from major finance damage. Its Aerospace and Transportation department is still recovering from the deepest downturn in recent history.
Lay-off: Large lay-off costs as a result of 550 white collar jobs were eliminated in 2010 and laid off 370 blue collar employees in 2008. Bombardier was in the process of cutting 715 employees, which are part of the 4,700 jobs cutting around the world since early 2009.
Opportunity
Better management: Being committed to providing superior value and service to customers and sustained profitability to shareholders by investing in people and product is the mission for Bombardier Company. To achieve this goal, Bombardier needs to have a better management system within the company itself. Only when the employees are satisfied with working in Bombardier, they can produce better quality of products and services to its customers and profitability to its shareholder.
Innovation and development: The development of new aircraft programs is evolving as planned. The innovation is one of the competiveness that Bombardier Organization possesses, keeping developing new products is always a good opportunity to generate more profit.
Sustainability: Sustainable and environmental friendly, rail plays an unrivalled role in tacking the challenges poses by climate changing, urbanization and population growth. This strategy is very customer’s health and safety oriented, which can attract more and more customers.
Threat
Low employee productivity: Compared with other major transportation companies such as Boeing, Textron or General Dynamics, Bombardier has relatively low employee productivity. The company’s average revenue per employee was $294,783.2 which is significantly lower than the other competitors.
Environmental issue: Environmental problem is one of the major deals that every transportation manufacturer will have to take serious concern with. The company’s operations are subject to strict environmental regulations relating to air and water pollution. This will also increase the energy cost for the company directly.

* For Bombardier Transportation Division

Strength- Research and development- Innovation and technology- High Quality of Products | Weakness- High cost structure- Over-numbered facilities | Opportunity- High-Technique- Innovation | Threat- Man-made Risk- Environmental concern |
Strength
Research and development: Bombardier has a strong emphasis on research development. Bombardier Transportation not only keeps improving its capabilities of the existing products, bus also developing new products, processes and services.
Innovation and technology: In Bombardier Transportation Division the technology is unbeatable. Bombardier continues to drive innovation in reliability and passengers’ comfort. Energy efficiency, profitability and total train performance are also major priorities for the customer.
High quality of products: Bombardier Transportation provides products with being profitable, while delivering safe and competitive products to its customers. It is the global leader in the rail equipment manufacturing and servicing industry. Its wide range of products includes passenger rail vehicles and total transit system. It also manufactures locomotives, bogies, propulsion and controls and provides rail control solutions.

Weakness
High cost structure: High cost structure of Bombardier Transportation Division is opposite to the objective of offering the low-cost products with high quality. The whole industry requires more standardization and consistency. Shareholders would certainly benefit from this, and it would also help both operators and manufacturers and make the whole rail transportation industry more cost-effective.
Over-numbered facilities: Bombardier Transportation Division has too many facilities around the globe. Reducing inventory levels and production overhead properly would improve the project management and increasing work performance from employee.
Opportunity
High-technique: Innovation is the core value of Bombardier Transportation. With the increasing of demand, people always want to take a faster transportation with better quality. However there is also the need of increasing of safety for the products. Transportation products are controlled by people; therefore there are always the risks of accidents that happened. Applying high-technique into safety system is very important.
Innovation: Bombardier Transportation continued drive innovation related to reliability, energy efficiency and total train performance for its customers worldwide.
Threat
Man-made risk: Computer system cannot always take everything under control. When there is a boy suddenly fell off the track, the driver must be very aware of the current situation and hit the break as soon as possible. However, sometimes people only think about how to make the train go faster and ignore the possibility of the following risks like traffic accident. Since the machines are controlled by people, and there is always a chance that people can make mistakes.
Environmental concern: Bombardier Transportation also suffers from the environmental concerns as its strategy is one of continues development that provides the most effective and cost-efficient rail solutions today and in the future.
Porter’s 5-forces Analysis
Porter’s Five Forces is a framework for industry analysis and business strategy development formed by Michael E.Porter of Harvard Business School in 1979. It draws upon Industry Organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.

Competitive rivalry within an industry
The most competitive companies in this industry would be Boeing Company.
Boeing has been the premier manufacturer of commercial jetliners for more than 40 years. With the merger of Boeing and McDonnell Douglas in 1997, Boeing’s leadership in commercial jet, joined with lineage of Douglas airplanes, gives the combined company a 70-year heritage of leadership in commercial aviation. Today, the main commercial products are the 737, 747, 767 and 777 families of airplanes and the Boeing Business.
However, Bombardier Transportation is quite established in the market, even though they are facing such strong competition from other industry. Bombardier is not only producing high-tech railcars, tramways, and more traditional locomotives, but also has a large market share in the recreational vehicle market-Ski-Doo and Lynx are well established snowmobile brands as the Sea-Doo name in personal watercraft.
Though Bombardier had awards in Environment, health & safety, Innovation and technology, customer relations, reliability, communication, ethics, design and manufacturing, Bombardier was able to stay as a global leader in this business. However the competition in this market is quite high as Bombardier is no doing well in recent years therefore the degree is considered to be high as well.
Bargaining power of suppliers
Suppliers’ expertise plays a critical role in designing and manufacturing advanced components for Bombardier products. This makes the suppliers key partners in the success of Bombardier Transportation. Along with this changing dynamic, the global economic recession created significant supply chain challenges. It is more crucial than ever to work closely with the suppliers and manage supply chain responsibly.
However the bargaining power of suppliers is considered to be low.
Bombardier is a large corporation company which helps the suppliers expands in their ever-growing market. The suppliers have to maintain consistent safety regulations in order to have a good reputation in the business.
These suppliers are heavily depended on Bombardier and other manufacturers to keep their orders of production. Therefore Bombardier has quite an influence on these suppliers.
Bargaining power of customers
Bombardier has marked itself as the world leading transportation manufacturer within the international market. However there are more providers than needed in both local and international markets. All these transportation companies are competing for the same group of customers, which raises the power of customers.
Threat of new entrants
Firstly, the entry cost is quite high due to the fact that this is a high-technique industry and it requires large amount of investment in technology.
Secondly, Bombardier is quite an established brand within the market and has a certain amount of market share compare with other competitors. For heavy industry like this, it needs some time to build up a good reputation and innovative high-technique products to take over the market share, and that does happen overnight. Therefore the degree of threat of new entrants is considered to be low.
Threat of substitute products
The treat of substitute products for Bombardier Transportation is coming from the regional transportation industry. However the regional aircraft may substitute for Bombardier’s trains, with the increasing cost of the air travel continue to rise with the constant flux of the market, Bombardier still has its advantage within the market. Furthermore, due to the fact the fuel price is rising continuously, people are still prefer to take trains rather than cars in long-distance travelling.
There are other substitutes like people who choose walking or riding bikes instead of taking public transportations. For example, I would like to go out for a walk whenever the weather is fine. It is not just about going somewhere, but a healthier way of live. It is more and more important that people are taking a serious opinion about living healthily. Therefore taking exercises is becoming much more important for people than just taking buses or trains to going elsewhere. People sometimes are going out for a purpose of exercising instead of visiting friends. However the degree of this threat is considered to be very low.
Value Chain Analysis

Value chain is the main tool for identifying ways to create more customer value. Every industry consists of a collection of activities performed to design, produce, market, deliver and support the industry’s products. The value chain breaks the industry into 9 value-creating activities in an effort to understand the behavior of costs in the specific business and the potential sources of competitive differentiation.
Primary activities
The primary activities involve the sequence of bring materials into the business (inbound logistics), operating on them (operation), sending them out (outbound logistics), marketing them (marketing and sales) and servicing them (service). For a long time, industries have focused on the products as the primary means of adding value, but customer satisfaction also depends upon the other stages of the value chain. The support activities occur within each of these primary activities. * Inbound logistics
The key for Bombardier Transportation is from the initial product strategy through the end of the product life cycle. Suppliers contribute a substantial portion to Bombardier Transportation products and services, which means that they have a major impact on both the value chain and the environmental burdens and social aspects. The Bombardier Procurement System is designed to make sure that suppliers are working and fulfilling their job as part of the whole team. Bombardier places ambitious demands on selecting its suppliers which includes a catalogue of technical and business-oriented criteria relating to quality guarantees, internal learning processes, pricing systems and the ability to deliver the goods. * Operations
Bombardier has an outstanding operational efficiency with the highest levels of reliability, availability, maintenance and safety during the manufacturing and assembling process. For example, Bombardier is very concerning about reducing the energy consumption during manufacturing. This is not only because their goals of environmental impact, but also for its effect on cost and availability. Therefore they can create more value when the similar project is performing. * Outbound logistics
Bombardier pays highly attention on global sourcing and just-in-time inventory control. Intermodal transport is an important aspect of logistics to reduce cost and create more value into the global market. * Marketing and sales
This is the stage where the organization prepares the offering to meet the needs of its target group. Bombardier promotes a customer-centered company culture that emphasizes outstanding service and meets their requirements. * Services
Service is a very important stage for any organization. This includes all kinds of services such as installation, after-sales service, customer’s service, customer’s feedback, complaint, training and etc.
Support activities
There are 4 support activities in the value chain which are Procurement, Technology Development, Human Resource Management and Firm Infrastructure. Procurement is responsible for all goods purchasing, services and materials. The goal is to purchase the highest quality of goods in the lowest possible price. Technology is an important source of competitive advantage. Organization needs to be innovative and reduce any possible costs and to protect its own competitive advantage. This includes production of technology, internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and some other technological developments. One of the latest technology investments of Bombardier is the development and improvement of advanced software tools. This software allows Bombardier to calculate the energy consumption of vehicles with a high degree of accuracy. Firm infrastructure is driven by corporate or strategic planning. It includes the Management Information System (MIS) and other mechanisms for planning and control such as the accounting department. The mission and objectives of an organization would be driving force behind the Human Resource Management (HRM) strategy. The success of Bombardier is driven by the integrity, motivation and enthusiasm of their employees. Bombardier Transportation devotes considerable effort to its Human Resource such as providing healthy and safe workplace for their employees. In these support activities within an organization like Bombardier Transportation, there are creations of value in every single process.
Strategic Logic * For bombardier Company

Business Concept
Every day, around the globe, Bombardier manufactures state-of-the-art planes and trains that help people and goods get where they need to go. As a worldwide transportation company, Bombardier with its 69 productions and engineering sites in 23 countries, and a global network of service centers provides high-level of products and services to people all over the world.
Bombardier is committed to providing superior value and service to its customers and sustained profitability to its shareholders by investing in its people and products. Bombardier is very concern about its products’ innovation and outstanding product safety, efficiency and performance. By doing so, Bombardier has continuously provided high-quality products and services to its customers for over 80 years.
Organization Concept
To provide a series of high-quality products to its customers, Bombardier requires good quality of materials and services from its suppliers.
Bombardier relied heavily on its suppliers all over the world for designing and manufacturing help. At one point, about 250 team members from Bombardier and 250 from outside suppliers worked together in Montreal to make sure the design was going to be good for everyone.
Bombardier introduced its Corporate Social Responsibility (CSR) committee for its organizational structure to support core values in production, services and customer demand. There are committed to corporate responsible in three pillars which are excellence, people and environment. To achieve excellence, Bombardier works on the interaction with its employees, shareholders, customers, suppliers and communities. There is an open communication between Bombardier and its workforce to create an environment that employees satisfy through their health and safety and labor standards.
Core Process * Product Creation:
Bombardier operates 2 industry-leading businesses which are Aerospace and Rail Transportation. Its 65,400 employees design, manufacture, sell and support the widest range of world-class products in these 2 sectors, this includes commercial and business jets, as well as rail transportation equipment, systems and services. * Production Realization:
In Bombardier, managers seek the tangible resources from the suppliers to guarantee the good quality of material and meanwhile keep the cost as lower as possible, and extract intangible resources from the employee inside the organization to sustain its value-creating activities. * Stakeholder Development:
Nurturing good relations and dialogue with key stakeholders is more vital to Bombardier’s success than ever. At Bombardier, there are certain ways to engage with its stakeholders.

EMPLOYEESEmployee engagement surveys, union-management forums and work council consultations | CUSTOMERSCustomer-led advisory committees, focus groups and customers satisfaction surveys | SHAREHOLDERS, INVESTORS AND FINANCIAL ANALYSISAnnual meeting of shareholders, quarterly conference calls and one-on-one meeting | SUPPLIERSSupplier forums and joint design work | COMMUNITIESCommunity investments and employee volunteering | ACADEMIC PRATNERSHIPS AND COLLABORATIVE RESEARCHJoint research projects | INDUSTRY PARTNERSHIPS AND ASSOCIATIONSAssociation memberships, participation in committees and working groups, technical support on regulatory and policy issues | NON-GOVERNMENT ORGANIZATIONSOne-on-one meetings and conference calls | GOVERNMENTS AND REGULATORY AUTHORITIESOfficial meetings and briefings to government official, regulatory filings, technical support on regulatory and policy issues |

* Transformative Processes:
Bombardier is continuing to deepen its commitment to moving forward responsibly. Ever since last year, Bombardier is providing details of its corporate social responsibility (CSR) activities exclusively online. As for this year, Bombardier is doing things differently. Moving forward responsibly involves a nature momentum. And that means as Bombardier moves forward and evolve, it is constantly examining its way of doing things and how it can improve. Part of this process involved taking a look at Bombardier’s CSR reporting to ensure that its stakeholders receive the most up-to-date and reliable CSR information.

* For Bombardier Transportation Division

Business Concept
Bombardier Transportation’s rail vehicles provide sustainable mobility throughout their lifecycle. Combining attractive design and technical innovation, Bombardier Transportation enables optimal operational performance with the highest level of reliability, availability, maintainability, safety, environmental performance and cost-efficiency. As the rail is the most sustainable mode of transit, for every passenger-km shifted from road to rail transport, 70% of the emitted CO2 would be avoided. As the global leader in rail technology, Bombardier views it as its corporate responsibility to maximize the environmental benefits of rail travel. That’s why Bombardier Transportation has put sustainable mobility at the heart of its design, engineering and operating philosophy. Its key business goals for sustainability include: * Being profitable, while delivering safe and competitive products to customers * Optimizing the environmental performance of vehicles * Leaving to the next generations and environment unspoiled by our industry activities and products, to the best of our ability * Being a preferred employer by providing interesting, healthy and safe working places * Transferring best practices and knowledge, especially in less industrialized countries where we have a presence
Organization Concept
Below is an organizational chart of Bombardier Transportation Division.
Bombardier Transportation has always put its customers in the first place. Therefore value added for customers is very important for the organization. The mission is to be the first choice for customers, the best performer in the industry and the most exciting place to be. To achieve such mission, Bombardier Transportation provides superior value and service to its customers through first rate total systems integration and project management, creating profitable growth by investing their people and products, optimizing safety, efficiency and environmental performance of products and setting high standards and delivering as promised.

Core Process * Product Creation:
Bombardier Transportation is the global leader in the rail industry with 59 productions and engineering sites in 23 countries and more than 40 service centers at customer premises across the world. Its 34,900 employees continue a proud tradition of delivering ingenious rail transportation solutions, including rail vehicles, propulsion and controls, bogies, services, transportation system, and rail control solutions. * Product Realization:
Being as a world leading transportation manufacturer, environmental protection is very important yet hard to achieve. Bombardier’s commitment to discovering new and better ways of saving energy means that it has a wide variety of inspirational ideas in the4 pipeline at any given time. The strategy is one of continuous development with the aim of establishing solutions that have the most positive impact on energy efficiency now and in the future. * Stakeholder Development:
In Bombardier Transportation, they achieve sustainability by working together with their stakeholders and learn from each other. Bombardier Transportation fosters cooperation with their stakeholders, including their employees, customers, suppliers, neighbors and communities where they have operations. * Transformative Process:
Bombardier believes that a strong commitment and a strategic approach to corporate responsibility are essential for managing the challenges and opportunities of a rapidly changing global environment. Therefore Bombardier has deployed a Corporate Responsibility Roadmap that enhances Bombardier’s strategy for managing its business in a sustainable manner.

Chapter 2
Strategic Map
Bombardier Transportation defined its goals and missions on the sustainability report this year. The greatest mission is to become the world’s leading manufacturer of planes and trains. For this they need to prevail in its two main competitors. They also define the goal of providing superior value and service to their customers and sustained profitability to their shareholders by investing in their people and products. Bombardier pursued the strategy of leading through innovation and outstanding product safety, efficiency and performance.

FinancialFast Processing, Commitment of Excellence | Improve Returns, becoming world’s leading manufacturer
Improve service offers, customer-centered culture
Price-performance
Competition with Siemens, ALSTOM
Increase Quality, avoiding lack of functions in rail | Customer | | Internal |
Shorten the throughput time, more made in Europe (Germany)

Develop new products, faster rail systems

Increase Employee Productivity | Learning | Align personal goals, converting personal goals to organizational goals: annual report BT
Develop strategy, new management methods since restructure in 2004

|

*Everything written in cursive is expressly applied to Bombardier Transportation.

Chapter 3
Value Based Management Philosophy
Value Based Management is an approach to Management where the increase in Enterprise value is central. Strategy development, organization and processes as well as the employee payment were consequently adapted to the shareholder values.
With prioritizing certain tasks the Value Based Management supports Bombardier Transportation´s as well as every other company´s decision making. To know the company´s goals is the most important factor. The CEO Bombardier Pierre Beaudoin said in March 2011 during an interview to McKinsey: “For any team to pull in the same direction, it has to know what you're looking for and feel a connection“.
The illustration above shows the steps which are important for Value Based Management to achieve a company´s goals.

Value Based Management is difficult to influence directly by the managers. Therefore it is usually broken down in components, the so called value drivers. A widely used model comprises 7 drivers of shareholder value:

* Revenue, * Operating Margin, * Cash Tax Rate, * Incremental Capital Expenditure, * Investment in Working Capital, * Cost of Capital and the * Competitive Advantage Period.

These financial factors of Bombardier are giving some guidance to managers. But that is only the financial perspective. For achieving company´s goals Bombardier Transportation has to keep in mind the guidelines of their strategies map. In Value Based Management, the decision making is up to the stakeholders. Therefore, joint-ventures and acquisitions are quite complicated to manage. With every acquisition or joint-venture the decision making is up to more people and making compromises also becomes more difficult. Bombardier Transportation took a lot of other more little companies all over Europe over. That should not be a problem, because the former Company no longer exists.

Bombardier Transportation developed four core values to reach its goals:

Integrity:
They want to behave with integrity and in an ethical manner in everything they do and say, thereby earning and maintaining the trust and respect of customers, shareholders, suppliers, colleagues, partners and communities.

Commitment to Excellence:
Bombardier Transportations commitment is to demonstrate excellence in all spheres of their work and in interactions with customers, shareholders, suppliers, colleagues, partners and communities. In addition, they commit to exercising judgment, professionalism, rigour, self-discipline, perseverance and team spirit.

Customer Orientation:
Bombardier Transportation promotes a customer-centered culture that emphasizes outstanding service and meets their commitments at every level of the organization.

Shareholder Focus:
Bombardier Transportation is focused on creating sustainable shareholder value through developing profitable products and projects, and soundly managing the business for the benefit of customers, shareholders, suppliers, colleagues, partners and communities.

All these points are matters of the Bombardiers Value Based Management. That are the facts, Bombardier pays the most attention on. That is the process we call: Creating Value. After finding the ways to increase or generate maximum future value, Bombardier managed for those future values. The process of creating value, managing for value and valuating in the end is the main purpose of Value Based Management.

Chapter 4
Risk Management Process
4.1 The risk management process of Bombardier Transportation * 4.1.1 Risk Identification
As Bombardier has already developed into a successful running company in the worldwide, but still, risks may occur to the company at anytime of the day. To be mutual in management perspective, Bombardier should reinforce the risk management. Only when risks are identified clearly, corresponding managing strategies can be carried out as quickly as possible. Bombardier identifies its sources of risks under a common framework, which can monitor and mitigate the risks when they arise.
There are three main risks identified:
Risks from the economic crisis
Long-term strategic risk * 4.1.2 Risk assessment
We will explain and assess the two mains for Bombardier listed above.
Risks from the economic crisis
Since the beginning of the economic crisis in the year of 2009, almost all the industries have suffered a lot from it; there are still many industries and companies seeking for solutions to recover from the disaster. For Bombardier, the company must take measures to adjust the market capacity which has already changed. Due to the price fluctuation of fuel, the risk for Bombardier is how to satisfy the customers with economical airplanes and rail vehicles to justify the new economic condition.
Long-term strategic risks
When a company is making their future strategies, especially the long-term strategies, the strategies are fairly important to a company, because they are related to the company’s future development, whether they can win more market margin, or having a loss. Having good communications and connections with the partners and clients will definitely lower the risks brought by long-term strategies. * 4.1.3 Respond to risks
When Bombardier was facing the risks they predicted, they will have to respond the risks, what kind of measures should be taken to reduce or eliminate the risk.
The situation about the economic crisis, the world has to swallow the bad results. Although the world economy is recovering, the uncertainly of price fluctuation on petrol is still threatening Bombardier. Bombardier needs to monitor the impact of the economic crisis brought to them and improve their management and marketing strategies to adapt the new condition.
As Bombardier may face the failure of making the wrong long-term strategies, due to the economic and market situation may change at any time. Bombardier needs to reengineer the solutions to mitigate the risks, the solution should be developing a crisis contingency plan, ensure the company is well prepared for the further changes in the changing economic environment. * 4.1.4 Financial role in risk management process
As we can see from the official website of Bombardier, the annual report and the financial report of the last quarter indicated that EBIT of 2011 increased 6.2%, it was a financial success for Bombardier. Healthy and prospering financial situation is what Bombardier purses, strategies made is to achieve the pursuit.
Finance plays a very important role in the risk management process, it can governance and secure the integrity of the risk management. By informing the financial information to the stakeholders and public, risks caused by uncertainty of the economic environment and incorrect information can be reduced. The responsibilities of finance in the risk management process are delivering reliable, accurate and timely financial information for the stakeholders and the public; presenting the financial status of the company at the certain period of time.
After the whole world was affected by the economic crisis, finance seems to play even more important role in risk management process. The finance department in Bombardier needs to consider the account strategic plans, how will be the budget, and what degree of loss will occur due to the financial risks. Finance plays a role of being strategic partner for the whole business operation and management. * 4.1.5 Strengths and Weakness of risk management process
Although Bombardier Transportation is the best transportation corporation in the world, the acquired success since periods ago, it still has some weakness in the risk to improve in the risk management process. * Strengths
Bombardier has already sought two aspects of risks which are most likely to occur, as the risks are identified, it is much easier be traced and find out better solutions.
The employees are well trained and educated how to face the risks, including analyzing the risks, reacting the risks with sufficient solutions.
Bombardier Transportation is always making close monitoring and consistent review on the risks; even with each single step is undertaken. Risks and problems can be detected in early stages and relevant solutions are able to emerge. * Weakness
The close monitor for monitoring risks will cost too much time and money to implement, the stakeholders and the whole world wide may need much more faster delivery of information of the current risks.
The range of risks that Bombardier had already reached is still too limited, Bombardier Transportation needs to expand their view to the whole business environment in order to manage the whole company better and seek more opportunities. * Proactive risk management process
In our opinion, Bombardier is acting proactively to the risk. As the risk management is an integrate part of management, it is about how to plan the monitor the risks from business strategies and results. In the daily operation of Bombardier Transportation, they put risk management at a very important status in the management process; it is a part of their governance, organizational and accountability structure. Bombardier Transportation is trying to adopt a broad and strategic approach to risk management, considering both internal and external risks.
The goal of Bombardier on the risk management is shown in the annual report on their official website. “Raise our risk management capabilities to a new level by using a common framework to identify sources of risk, by establishing company-wide effective monitoring and by mitigating risks as they arise.”
The goal of managing risks showed that Bombardier is actively managing their exposure to key business risks within each function of the organization. It is clear defined in its goal that it has completed a common framework, bringing the company to a higher level to identify risks better. Bombardier is adopting a company-effective monitoring process instead of remedy after the risks occurred. Even the risks occurred, Bombardier are prepared to solve the problems and mitigate the loss.
Chapter 5
Financial Analysis
Bombardier Transportation is a world leader in rail technology. It recorded a $ 9.1 billion in revenues compared to $10 billion last fiscal year and record backlog of $ 33.5 billion as of January 31 2011. In addition, new orders for Bombardier Transportation increased by $ 4.7 billion ($ 14.3 billion Financial Year 2011 Compared to $ 9.6 billion in Financial Year 2010).
What is more EBIT was recorded on the level of $ 602 million, or 6.6% of revenues, compared to $ 625 million, or 6.2%, last fiscal year. BT also established strong free cash flow of $ 744 million, where last year it was $ 293 million.
Like most sectors of the economy, the rail transportation industry experienced difficulties because of the crisis in 2008 and years that followed. Based on data contained in the Annual Report can be noted that the company is growing, despite the ongoing financial crisis since 2008. Despite the crisis Bombardier Transportation continues to raise its revenue, which confirms the company's stable situation on the international market. Also, the company remains on non-threaten position of one of the biggest transportation concern because of its significant increase in new orders compared to previous years. Source: Bombardier Fact Sheet v4
This graph indicates that Bombardier presents quite stable financial environment, but we can also see the link between its financial results and global economy. After financial crisis in 2008, Bombardier experienced some financial downfalls, but the recovery process was rather short. Great help in this recovery brought government’s financial support for Research and Development.
Ratio Analysis
Basic information

In million dollars | | 2011 | 2010 | 2009 | 2008 | Sales | | 17712 | 19366 | 19721 | 17506 | Net income | | 769 | 707 | 1026 | 325 | Total cost | | 16662 | 18268 | 18292 | 16758 | Account receivable | | 2022 | 682 | 777 | 1295 | Inventory | | 5515 | 5268 | 5522 | 5092 | Total assets | | 23430 | 21273 | 21306 | 22120 |

As we can see above Bombardier during last four years of its activity noticed first increase of its sales (years 2008-2009), than it sustained it for next two years, and in 2011 (according to the data issued by Bombardier for third quarter) it noticed downfall in sales. It might be concerning, but at the same time Bombardier’s net income raised in comparison with 2010 ($769 million vs. $707 million).
Total cost of course shows the same trend as sales, because they are strictly linked with each other. Inventory on the other hand remain stable ranging from the $5092 to $5522 million through these four years. Total assets after a downfall in 2009, are constantly rising, which suggests good and stable financial situation of Bombardier.
Probability ratios

| 2011 | 2010 | 2009 | 2008 | Gross Margin (in million dollars) | 917.00 | 1,847.00 | 1,304.00 | 1,107.00 | ROE | 17,67% | 18,76% | 39,31% | 10,21% | ROA | 3,28% | 3,32% | 4,82% | 1,47% |

Gross margin as we all know represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company. We can clearly see that Bombardier’s financial situation improved in comparison to the 2010. Company retained less money on each dollar of sales to service costs and obligations.
As it comes to ROE (Return on Equity) ratio it is said to be the most important ratio of all profitability ratios, because it indicates how effective the capital “works”. Profitability of capital involved is affected by many factors: operational efficiency expressed by the profitability of sales, asset efficiency and leverage, i.e. the involvement of foreign capital in order to increase earnings per unit of capital. It may be interpreted that every hundred dollars of equity bring for the company $17,67 of net profit. According to the research, 2008 was very weak year as it comes to ROE ratio. This situation was strongly linked with global economic situation. But in 2009 Bombardier notices $39,31 for every $100, which is very good score. Unfortunately in 2010 and 2011 it again was only 18,76% and 17,67.
ROA – which is ratio indicating how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Of course he higher the ROA number, the better, because the company is earning more money on less investment. If we take a look at Bombardier’s return on assets, we can notice that since 2009 it constantly decreases, from 4,82% in 2009 to 3,28% this year. But if we also compare the ROA from 2008, when only $1,47 of income was achieved per every $100 of assets invested, we can see, how great progress was made.
Liquidity

| 2011 | 2010 | 2009 | 2008 | EBIT(in million dollars) | 602 | 625 | 533 | 324 | EBIT margin | 6,6% | 6,2% | 5,5% | 4,5% | Total assets turnover | 0,75595 | 0,9104 | 0,9256 | 0,7914 | Current ratio | 1,5009 | 1,5106 | 1,6974 | 1,7492 | Cash ratio | 0,1935 | 0,2554 | 0,2862 | 0,2916 |

EBIT in financial and business accounting is a measure of a firm's profitability that excludes interest and income tax expenses. Its use in financial analysis makes easier to compare performance of different companies, regardless of the degree and cost of use of leverage, the taxation, or the size of extraordinary gains and losses. As we can see EBIT ratio of Bombardier is only slightly worse than in year 2010, but it is almost doubled if we compare it with 2008. It means that company is a really profitable and well developed company, with good opportunities in future.
The EBIT Margin shows you the percentage of each dollar of sales revenue that is left after all expenses have been removed, excluding net interest and income tax expenses. Continuously raising EBIT margin in years 2008-2011, indicates that Bombardier is financially heathy.
Total asset turnover determines the amount of sales that are generated from each dollar of assets. Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. Bombardier’s asset turnover seems to be relatively low, which means that it makes a high profit margin on its products.
Current ratio is a test of short-term liquidity, determined by dividing current assets by current liabilities. Number of CR should be between 1-2. If it exceeds 2 it is a sign of over liquidity. The higher the current ratio is, the more capable the company is to pay its obligations. Current ratio gives an idea of company's operating efficiency. A high ratio indicates "safe" liquidity, but also it can be a signal that the company has problems getting paid on its receivable or have long inventory turnover, both symptoms that the company may not be efficiently using its current assets. As we cans see Bombardier has quite high CR, which indicates easily pay off its short-term liabilities. But what we can notice, is that number of CR from 2008 dropped of about 0.2. Managers should take a look at this ratio and seek for the reason, because if future it might bring troubles for the company.
Cash Ratio is an indicator of company's short-term liquidity. It measures the ability to use its cash and cash equivalents to pay its current financial obligations. Cash ratio is the most conservative look at a company's liquidity since is taking in the consideration only the cash and cash equivalents.
Cash ratio is used by creditors when deciding how much credit, if any, they would be willing to extend to the company. The higher Cash ratio is, the better. We can see that Bombardier has excellent cash ratio, which means that the company has enough money to pay its current financial obligations. But, as we noticed cash ratio falls down every year and this indicates that Bombardier might have some financial problems.

Capital structure

| 2011 | 2010 | 2009 | 2008 | Debt to equity ratio | 1,0650 | 1,1043 | 1,5142 | 1,3797 | Interest coverage ratio | 2,6520 | 2,8027 | 1,5958 | 0,7642 | Debt to total assets | 0,1978 | 0,1956 | 0,1855 | 0,1986 | Capital structure ratio | 0,5203 | 0,5293 | 0,6084 | 0,5848 |

The Debt-Equity ratio indicates the relative contribution of total debt and owner’s equity in the capital structure of the company; the relative contribution of each to finance the company’s assets. In general, the lower the debt to equity ratio is, the higher the degree of protection felt by the lenders. A high debt to equity ratio means that the company has been aggressively using debt to finance its assets. As we can see Bombardier has quite low number, so we can assume that the company doesn’t use debt to finance its assets.
Interest Coverage ratio is one of the measures of a firm’s ability to handle financial burdens. It is also referred to as times interest coverage ratio. The ratio tells us how many times the firm can cover or meet the interest payments associated with debt. It also indicates the firm’s ability to meet or honor interest obligations on debt. The higher the coverage ratio, the greater is the ability of the firm to meet its interest obligations. An interest coverage ratio in years 2010-2011 is very good indicates that the company is able to generate earning 2,8 and 2,65 times greater than its interest payments. In 2008 coverage is less than one, which was not well, because it indicates that the firm is not generating enough income to service its debt obligations.
The Debt to total assets ratio indicates the proportion of debt used in financing the total assets of a firm. A ratio under 1 means a majority of assets are financed through equity. So looking at this ratio we can assume that Bombardier is not highly debt leveraged firm. Financing assets in this company has almost the same proportion of debt used in financing the assets through four last years.
The capital structure ratio shows the percent of long term financing represented by long term debt. A capital structure ratio over 0,5 indicates that a company may be near their borrowing limit (often 0,65). As we can see Bombardier is dangerously close to the its borrowing limit, especially it was in 2009. Now the numbers are decreasing, which suggests that Bombardier’s finance are improving.
Asset management

| 2011 | 2010 | 2009 | 2008 | Receivables turnover | 7,8017 | 9,2283 | 9,0338 | 7,7698 | Inventory turnover | 3,0601 | 3,3269 | 3,2409 | 3,0487 | Fixed asset turnover | 8,9276 | 10,3341 | 10,0822 | 10,0155 | Total assets turnover | 0,75595 | 0,9104 | 0,9256 | 0,7914 |

Receivables turnover is an accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm. Bombardier has definitely high ratios, so we know by this that it operates on a cash basis and that collection of accounts is efficient in this company.
Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall.
The fixed asset turnover ratio looks at how efficiently the company uses its fixed assets, for example plant and equipment, to generate sales. Usually if the number of ratio is high it means that company uses its resources properly, however if the ratio is too high, it might mean that equipment is operating over capacity and it might break down.
Total asset turnover determines the amount of sales that are generated from each dollar of assets. Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. Bombardier’s asset turnover seems to be relatively low, which means that it makes a high profit margin on its products.
What is the position of the company in this situation of a financial crisis related to its main competitors?
Alstom, Thales, Invensys, Ansaldo Signal, Siemens are leading, mostly European, companies, which provided complex design and produce equipment necessary for the implementation of modern railway network, as well as traction vehicles. They are also the biggest competitors on railway market for Bombardier. They are dominant companies, hegemons of the market, they often uses the services of local subcontractors or enter into consortia involved in the preparation, installation, service and support. Rapid transfer of technology, input to multilateral cooperation and participation in the rail forward stroke is a guarantee of a stable business for the years for local partners of international companies.
World financial crisis from 2008 has not had a major impact on Bombardier Transportation. It delivers good financial results, despite difficult economic environment. Major clients of Bombardier in Europe: France, Germany, United Kingdom had not changed their intentions in making new projects and exercise of options. Since trains and other transport is used every day by millions there is a great pressure on equipment and there is still great need to replace aging one for new one, with new technologies - more efficient, more reliable, more eco-friendly. Even Italy, financially challenged by crisis, customers for high-speed trains and locomotives have confirmed their orders and said the economic conditions won’t influence deliveries.
Bombardier, during financial crisis, when every company struggles with problems, invest up to $200 million in a manufacturing facility in Morocco, hence it illustrates its commitment to continue developing “a global competitive manufacturing footprint”. Due to financial crisis Bombardier noticed fall down in aerospace business, hence it looks up to its transportation division to offset it. CEO of Bombardier recently said: “We have always said that transportation business can succeed during recessions because of government investments in infrastructure.” Bombardier of course expected that the current economic conditions will slow down the orders, but since it has a strong backlog in all of its product lines, Bombardier feels secured and in good position to face the current market turmoil.
Bombardier believes that current economic crisis might be transformed into an opportunity. Crisis brings an opportunity to shift societies towards sustainable transportation. Investing in rail stimulates economies while reducing CO2 emissions and urban congestion. Governments, local authorities, operators and manufacturers must collaborate to make sustainable transportation more attractive. It is done constantly by teams of engineers, designers, manufacturers. Their work and ideas provides ultra-modern light rail systems, metros and commuter trains, which help cities “breathe”. Bombardier offers the rail industry’s broadest product and service portfolio. Bombardier competes with road and air in speed, comfort and reliability without the dramatic environmental impact.
Bombardier claims that between its main competitors and company itself there is no competition in habitual sense of this word, because modern hi-tech manufacture is based on other principles. It is know that there is no European hi-tech railway project which was carried out by one company only. Bombardier Transportation and other big companies (Alstom, Siemens) participate in a lot of joint projects. And the company is not only a competitor, but also a partner.

Chapter 6
Budgeting Process in Management Control System
The importance of the budgeting process in the management control system of Bombardier Transportation.
The budget process of Bombardier Transportation refers to the process by which Bombardier governments create and approve the management control, which is as follows:
The Financial Service Department of Bombardier prepares worksheets to assist the Bombardier Transportation with preparation of department budget estimates.
The Administrator of Bombardier calls a meeting of managers and they present and discuss plans for the following year’s projected level of activity of Bombardier Transportation.
The managers of Bombardier Transportation can work with the Financial Services Agency, or work alone inside the department to prepare an estimate for the Bombardier Transportation of the coming year.
The completed budgets are presented by the managers from Bombardier Transportation to the Executive Officers of Bombardier for review and approval.
Justification of the budget request may be required in writing. In most cases, the manager talks with their administrative officers about budget requirements. Adjustments to the budget submission may be required as a result of this phase in the process.
According to Bombardier Transportation, the budget process performed to a clear way that the company financial situation is changing affected by the economic environment. How to operate the company under the balanced budget and make more profit is the target of the budget process. The budgets are presented by the financial department to the upper management department for review and approval.
The sub-aspects of the budget process in the management control system of Bombardier Transportation are as followings:

1. Revenue estimation. It tells is performed in the executive branch by the finance director, clerk’s office, budget director, manager, or a team. Bombardier is able to measure the anticipation of the tax revenue under the existing tax law. 2. Budget call. It is issued to outline of Bombardier presentation form, it also recommend certain goals. This step is telling Bombardier that surplus and shortage in budgeting. It also gives the direction to specific the budget in details. 3. Budget Formulation. It reflects on the past, set goals for the future and reconcile the difference. Formulation is the foundation of the budget, the primary step for Bombardier. 4. Budget Hearings. It can also be included in the departments, sections, the executive, and the public to discuss changes in the budget. Bombardier is doing adaption on budgeting due to the changing economic environment, more sensitive since the economic crisis. 5. Budget Adoption. It is final approval by the legislative body. As Bombardier had made their budgeting for the coming year, the head of the company should examine whether the budget fit for the situation of coming years, approve the budget and implement in the financial operation. 6. Budget Execution. It is amending the budget as the fiscal year progresses. This final step of budget reminds Bombardier how to implement the financial operation regarding the real financial situation in short periods and next few years in practice.
Chapter 7
Internal Control System
The owner roles of financial department within Bombardier Transportation are as followings. 1. Governance role: Secure and improve the quality of financial information flow to internal and external stakeholders. By delivering reliable, timely and accurate financial information flow, presenting a full and fair disclosure of the firm at a point in time, and ensuring accurate reflections on underlying business transactions. 2. Affecting role: Support or object to the business decisions based on financial analysis. Planning in financial terms consequences of what the business is planning performance monitoring, challenging activities and action plans, contributing to the company with analyzed and structured knowledge control firm activities in accordance to the decision making. The activities mentioned above are done for the internal controls in the financial reports, the internal control activities are concluded be effective, aligning these activities within the day-to-day management is very essential to Bombardier Transportation, as it is a sufficient and modern management method.

The alignment of the Internal Control System into the day-to-day management of performance The graph shows how Bombardier uses their Internal Control System in their day-to-day processes; they are listed in five steps: * Step 1 Define objectives
During the process of day-to-day management, the management department will have to define their objectives due to different business challenges and situations. According to the real situation in and out of the department, defining the objectives in the right positions is very important for Bombardier. * Step 2 Implement system
After define the targets and decisions were made, the practical implementation will take into process. The Internal Control System is taking care of the implementation. * Step 3 Monitor Procedures.
Monitoring are being processed when the implementation of decisions by the Internal Control System of Bombardier, supervising the steps and strategies in good orders or not. * Step 4 Evaluate performance
After the mission or the target has been completed, evaluations afterwards, the Internal Control System will help Bombardier to examine the accuracy of their decision making. * Step 5 Review objectives
The Internal Control System will review the objectives and results of the whole management process, Bombardier will able to gain more experience on next management target, the improvement of the Internal Control System will also the assistance of the improvement of the day-to-day management.

Conclusions and Recommendations
Every company struggles with problems during its activities. Bombardier is an international company, with strong market position based on many loyal customers, variety of products and its social responsibility. But for Bombardier Company, especially Transportation Division the main threat is lack of orders and rising power of its competitors, Simens in particular. Lately Simens beat Bombardier in competition for a big investment – Thameslink. Due to this situation, Bombardier stopped manufacturing process in Derby, hence many people lost their work and Bombardier gained a bad reputation and also customer’s trust. Of course not all auctions can be won, but if it comes to such vital for the Division, they should be treated like a priority; otherwise it may lead to severe consequences.
Great opportunities for Bombardier to develop are new markets especially in Eastern Europe and BRIC countries. Those countries are new, developing economies, dealing well with economic crisis. They need to technology and transportation infrastructure, so this might be an opportunity for company to become more active in these markets as well as gain a dominant position and become a leader in new technologies. It will help also to grow overall profitability and turnover. Bombardier is on the best way to achieving those goals by providing world’s largest monorail in São Paulo (Brazil), INNOVIA monorail in Saudi Arabia. BT also signed a contract to build the Delhi Metro Rail Corporation Ltd. in India.
Great opportunity for developing Transportation Division of Bombardier is raising environmental awareness. In times of high oil prices and an unstable economy, rail as transportation combine energy efficiency with economic and environmental performance. It transport high volumes of passengers, it represents not only leading technology, but is additionally a prime mover in economic growth. It is also the most comprehensive solution to the challenges of sustainable mobility, combating urban congestion and benefiting societies environmentally as well as economically.
Great risk for Bombardier seems to be financial crisis. For now, company situation is reported to be good. Especially Transportation division brings every quarter better financial results than expected, but still there is a huge chance of sudden downfall in economy, subsequently in new orders and this may lead to many financial loses, redundancies, even a disruption of company’s activities. Good financial results should not be taken as granted, due to very unstable and unpredictable economic situation in the world and constant fluctuation of oil prices, such vital for this type of business. Financial results developed by Bombardier of course might indicate some positive movements in the market, but still should be monitored with high attention; otherwise it might be dangerous for the company. Bombardier needs to monitor the impact of the economic crisis and improve management and marketing strategies to adapt the new condition.
Bombardier also should take into account fluctuations in currency exchange. It is always a great problem for companies operating in different markets with different currencies. In the future it might cause problems and financial loses, taking into consideration position of Dollar, Euro and RMB.
Transportation fuels the world’s economy – driving global productivity, creating jobs, connecting people and facilitating social and economic development. Let’s hope that world economy will recover soon and new orders for Bombardier Transportation will help to develop and sustain new technologies in transportation, so that travels were cheap, fast, comfortable and environmental friendly.
Bibliography
http://www.bombardier.com/en/corporate/about-us http://www.flexjet.com/flexjet_advantages/expertise http://www2.bombardier.com/de/1_0/1_17/flash/success_stories.swf?choixMovie=14 http://www.economist.com/node/8670320 http://origin.mckinsey.com/clientservice/organizationleadership/Voices_4_Full_book.pdf http://ir.bombardier.com/en/press-releases/press-releases/27801-bombardier-announces-financial-results-for-the-second-quarter-ended-july-31-2011 http://www.bombardier.com/ http://www.bombardier.com/en/transportation http://csr.bombardier.com/en http://www.bombardier.com/en/transportation/sustainability/environment/environmental-performance?docID=0901260d80008eb5 Closing statement Student names | | Shu | Zi | Anna | Franziska | 1.1 Cover | Coordinator | | √ | | | | Participant | √ | √ | | | 1.2 Title page | Coordinator | | √ | | | | Participant | | √ | | | 1.3 Preface | Coordinator | | √ | | | | Participant | √ | | | | 1.4 Summary | Coordinator | | | | √ | | Participant | | | | √ | 1.5 Company description | Coordinator | | | | √ | | Participant | | | | √ | 1.6 Definition of the problem | Coordinator | | | √ | | | Participant | | | √ | | 1.7 Description of the procedure | Coordinator | | | √ | | | Participant | | | √ | | 1.8 Research | Coordinator | | | √ | | | Participant | | | √ | | 2.1 Chapter 1 | Coordinator | | √ | | | | Participant | | √ | | | 2.2 Chapter 2 | Coordinator | | | | √ | | Participant | | | | √ | 2.3 Chapter 3 | Coordinator | | | | √ | | Participant | | | | √ | 2.4 Chapter 4 | Coordinator | √ | | | | | Participant | √ | | | | 2.5 Chapter 5 | Coordinator | | | √ | | | Participant | | | √ | | 2.6 Chapter 6 | Coordinator | √ | | | | | Participant | √ | | | | 2.7 Chapter 7 | Coordinator | √ | | | | | Participant | √ | | | | 3.1 Conclusions and Recommendations | Coordinator | | | √ | | | Participant | | | √ | | 3.2 Closing Statement | Coordinator | | √ | | | | Participant | | √ | | |

This table is to extend by the students to include all sections of the report.…...

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