Quite an extensive look on Bombardier including the analysis of key performance ratios over the last 5 years and also a look at CSR within Bombardier. Achieved a first on this piece of work. Module- Corporate Analysis year 2.

1. Industry analysis
Commercial Passenger aircraft
Manufactures
Bombardier
Corporate Analysis
Jerome Healey
Group G

2. Contents
Introduction.................................................................................................................................3
Strategies.....................................................................................................................................3
Bombardier growth strategies.......................................................................................................4
Portersfive forces..................................................................................................................... 5
Corporate social responsibility (CSR)............................................................................................ 13

3. Introduction
Bombardier is the world’s only manufacturer of both trains and planes. Offering a diversified
choice of products, these include: trains, rail equipment, business jets and commercial
aircraft. The world’s first aircraft manufacturer (Short Brothers) was acquired by Bombardier
and it has gone on to becoming the world’s third largest manufacturer of passenger
aircrafts. Bombardier is the world’s leading provider of business aircrafts but it also owns
the most diversified portfolio in terms of its holdings of commercial aircraft. It currently
owns 34% of the market share of business aircraft deliveries (2013) with its closes rival
Gulfstream achieving a 25% market share. However, Gulfstream is ahead by 1% in terms of
the revenue it achieves from sales. It appears as though the industry is very competitive.
Worldwide Bombardier employs around 38,000 people in 70 different countries.
Bombardier is the world’s largest manufacturer of small jets that seat 25-90 passengers and
the firm’s headquarters are based in Canada. Bombardier is traded on the Toronto stock
exchange under the name BBDb.TO and currently sits at $2.40 per share (20th February
2015) (Reuters, 2015).
Strategies
The previous Bombardier Aerospace has been divided into three reporting segments:
Bombardier Business Aircraft, Bombardier Commercial Aircraft and Bombardier
Aerostructure and Engineering Services effective as of 1st of January 2015. Splitting the firm
up into these three parts will give the management the opportunity to assess what parts of
the firm are performing well in terms of the profits that they are generating and which parts
of the firm need restructuring.

4. Bombardier growthstrategies
To develop industry leading projects
- Involves significant expansion of customer services is continuing to better meet
customer needs
- Three aircraft models are in development which will help to strengthen product
leadership
- Broadest portfolio of business aircraft providing customers with specific
performance advantage
Grow local roots in key markets
- International expansion
- Continue to provide customer services worldwide
Achieve flawless execution
- The new organizational structure will enable Bombardier to be more agile in fulfilling
customer needs and enable the ability to capture growth opportunities
- Dedicated to improving customer satisfaction by continuing improvements on
product reliability and on time delivery service and performance support
- Focused on driving down costs and optimising capacity
The competitive foundation of the firm is based around strong recruitment of individual’s
worldwide as well as achieving financial discipline and efficient risk management.

5. SWOT Analysis
A SWOT analysis is a useful technique for understanding your strengths and weaknesses, it also
helps to give an insight into the potential opportunities that may arise in the market and the
potential threats that the company may face in the future.
Strengths
 Diversified portfolio of products
 Manufacture planes and trains
 Leading manufacturer of small jets
 Customer loyalty
 Use of sustainable products
 Recyclability of materials
Weaknesses
 High levels of debt
 10th
January 2015 profit warning issued
 25% decrease in share price
 Postponement in Learjet 85 program
 Lack of immediate cash reserves to
finance new projects
Opportunities
 Opportunity to successfully undercut
Boeing and Airbus and enter the large
passenger aircraft market
 To expand market share in the small
aircraft market
 New energy saving techniques could
make Bombardiers planes more fuel
efficientandcouldlead to an increase in
the demand for products
Threats
 Very difficult to enter the large
passengeraircraftmarketbecause of the
high start-up costs
 High barriers to entry in large passenger
aircraft market
 Inability to be able to challenge Boeing
and Airbus
 2008 recession has caused low demand
for small jets as they are a luxury good
withan elasticprice elasticityof demand
 Fears that Bombardier may default
because they are not selling enough
products
Porters five forces
Threat of newentrants
- The threat of potential entrantsinthe large passengeraircraftmarketislow because of the
sheersize of economiesof scale neededtoreachthe minimumefficientscale enablingBombardier
to be able to compete withBoeingandAirbus.The threatof potential entrantsinthe small jet
manufacturingindustryislowerhowever.
- Highstart-up/researchcosts
- Highlevel of experience andexpertiseneededtomanufacture aircraft
-
Buyerpower
- There are fewsuppliersof bothlarge passengeraircraftandsmall businessjets
- It couldbe arguedthat there islow buyerpowerinthe aircraft manufacturingindustryas
there isa concentratednumberof buyersandfew supplierswhichsell the product
- It alsocouldbe argued thatbuyerpowerislow because the unique elementof flyingathigh
speedissodesirable
- BoeingandAirbus’large passengeraircraftcouldbe arguedtobe more price inelasticthan
highcost small jetsthatBombardierproduces

6. Supplierpower
- There are fewsuppliersof bothlarge passenger aircraftandsmall businessjets
- BoeingandAirbusdominate marketshare of large passengeraircraft
- BombardierandGulfstreamdominate the marketshare of businessjetsaccountingto2/3 of
the market
- Weakbuyerpowerbecause of few suppliersinthe marketdominate the marketshare
- Oligopolisticsupply
- May be an elementof co-operationwithinpricingstrategies
- Strongdemandfor large passengeraircraftaspeople alwayswanttotravel onlow-cost
flightswhichconsume farlesstime incomparisontoacar or a boat
- Co-operationbetweenthe firmscanmake the industrylesscompetitive
- Decreasingconsumersurplus
Threat of substitution
- Airplane travel veryunique intermsof the speedof travel andalsothe low cost of travel
- Luxuryjettravel has sufferedbecause of the economicdownturn
- Consumerswouldprefertosave moneyandtravel onlargerpassengeraircraftsuchas the
Boeing757
- Substitutioncanalsocome aboutthroughswitchingto:Boats,Trains andCars to travel
Competitive rivalry
- It could be arguedthat the passengeraircraftmanufacturingindustryisacompetitiveone
because of the highfixedcostsassociatedwithdesigningandproducingthe aircraft
- Withinthe small jetindustrythere isfierce competitionformarketshare mainlybetween
BombardierandGulfstream.However,there are othersmall jetproducerssuchas:Boeing,
Embraerand Comac alsocompetingformarketshare
- The similarmarketshare of BombardierandGulfstreamcreatesacompetitive marketwhere
each firmcoulduse aggressive pricingtechniquesinordertoattract more sales
- Thisis the same inthe large passengeraircraftmarketwhere AirbusandBoeingare highly
competitivewiththeirpricesinordertodraw sales
- However,couldbe arguedtobe a lesscompetitive marketasthere are few firmsdominating
the marketshare.Co-operationbetweenfirmscouldreduce competitionandrivalryandthis
wouldcreate negative consequencesforconsumers
Financials
Performance Ratios (emphasis on growth of the firm)
Gross profit margin – Formula = (Gross profit/sales)*100
2010=16% 2011=15.82% 2012=14.38% 2013 =14% 2014= 13%
These figures illustrate that Bombardier’s performance has worsened in relation to their
ability to pay for additional expenses and future savings from 2010 to 2014. There has been
a decline in this margin by 3% over the period. For investors this is worrying because this

7. margin should be stable and not fluctuating. It is also a sign that the overall profitability of
the company is declining.
ROCE – Formula =EBIT/Capital employed
2010=2% 2011=2% 2012=2% 2013 =6% 2014 =-4%
This ratio shows that the profitability of Bombardier has been stable since 2012 and with an
increase of 4% in 2013 which then led to a drastic fall in 2014 with a difference between the
two figures of -10%. This implies that Bombardier is not employing its capital effectively and
is not generating shareholder value. This is a very worrying indicator for shareholders and
stakeholders of Bombardier as it shows that the company underperformed massively in
2014 with such a large fall in the profitability of the company.
Net profit margin – Formula =EBIT (earnings before interest and tax)/sales revenue
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2009.5 2010 2010.5 2011 2011.5 2012 2012.5
Gross profit
margin
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
2009 2010 2011 2012 2013 2014 2015
ROCE

8. 2010=7% 2011=7% 2012=2% 2013 =5% 2014 =-3%
This is a very concerning ratio for Bombardier as it shows a large decline of -8% from 2013
to 2014. The net profit margin is now -3%. Just like the ROCE figures it showed that from
2010 to 2011 the figures were stable, and then in 2012 there was a 5% fall. In 2013 there
was a slight recovery and then in 2014 the figures plummeted. This indicates that
Bombardier is not translating the revenue earned into profits and this ratio shows that the
company are now losing money. This means that Bombardier is going to struggle to pay
their short term obligations and fixed costs. The money used to pay for their fixed costs will
have to come from profit reserves from previous years or an increase in debt. This will mean
money is being derived away from potential investment projects which could enhance the
outward growth of the firm and a potential higher income stream in the future. The
postponement of projects such as the Learjet 85 illustrates that Bombardier are not making
enough profit in order to fund new developments.
Gearing ratios
Interest coverage ratio- Formula used= EBIT/interest paid
2010=2.43times 2011=2.06times 2012=1.05times 2013= 3.04times 2014= -1.59times
This ratio shows how many times a company can cover its interest payments in relation to
how much earnings the company is generating. This ratio shows that Bombardiers ability to
cover its debt payments in 2014 has significantly worsened in comparison with its interest
coverage ratio in 2013. The ratio shows that in 2013 Bombardier could cover its interest
payments over 3times. However, in 2014 the company cannot even afford to cover its debt
payments 1 time. This illustrates that the firm is not generating enough cash to pay its short-
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
2009 2010 2011 2012 2013 2014 2015
Netprofit
margin

9. term debt obligations and this is a very precarious position as it means the firm can easily be
forced into bankruptcy by defaulting on its debt.
Efficiency ratios
Sales revenue per employee- Formula used= Revenue/number of employees
2010=$501346 2011=$494585 2012=$455944 2013=$471454 2014=$506574
This ratio shows that Bombardier is not performing badly in terms of how much revenue it
produces per employee. This shows that the management of Bombardier have been
efficient in being able to sustain high revenues with a high number of employees. This ratio
would indicate positivity to an investor as it shows that Bombardier are producing high
revenues for the number of people working there.
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
2009 2010 2011 2012 2013 2014 2015
Interest
coverage
ratio
$450,000.00
$460,000.00
$470,000.00
$480,000.00
$490,000.00
$500,000.00
$510,000.00
2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5 2014 2014.5
Sales
revenue
per
employee

10. Investor Ratios (emphasis on equity capital and market prices)
Dividend payout ratio- Formula used =(Dividends announced for the year/Earnings available
for the year available for dividends)*100
2010=2.9% 2011=2.1% 2012=5.2% 2013=3.3% 2014=-1.4%
A stable dividend policy is looked favourably among investors especially a dividend which is
increasing every year. Bombardier’s showing of dividend policy has been far from consistent
fluctuating from year to year. The dividend payout ratio has deteriorated during the period
2010-2014 illustrating a fall of 4.4% in relation to the dividends paid derived from earnings.
This is a very poor performance from Bombardier this would be a very worrying concern for
the shareholders and stakeholders of the company.
EPS- Formula used=Earnings available to ordinary shareholders/number of ordinary shares
in issue
2010=0.38 2011=0.42 2012=0.26 2013=0.32 2014=-0.74
EPS is one of the most crucial ratios used by investors to determine how profitable a
company is. It shows how much earnings are available in relation to the number of shares
that are issued, the higher the ratio the better. Bombardier’s showings of EPS seem to be
very inconsistent much like many of the other ratio’s assessed. The findings illustrate that
Bombardier’s EPS over the period are very poor representing a low figure. The 2014 figure is
especially worrying for potential investors as the figures are negative illustrating that
shareholders are getting no earnings back from holding the share. This is another ratio
showing poor performance from Bombardier.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2009.5 2010 2010.5 2011 2011.5 2012 2012.5
Dividend
payoutratio

11. P/E ratio formula used= market value of share/earnings per share
2010=15 2011=9.49 2012=14.40 2013=14.18 2014=-5.70
This another worrying ratio for Bombardier as this ratio illustrates a distinct downward
trend in the period, despite the rebound in 2012. This ratio shows how much investors are
willing to pay for $1 (Canadian dollars) of earnings. A high P/E ratio would illustrate that
investors think that the company has high growth potential. However, in this case judging by
the 2014 figures, investors believe that Bombardier does not have a very positive outlook in
terms of outward growth.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2009.5 2010 2010.5 2011 2011.5 2012 2012.5
EPS
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
2009 2010 2011 2012 2013 2014 2015
P/E

12. Liquidity Ratios (showing the ability for the firm to be able to pay current liabilities)
Current ratio – Formula= Current assets/Current liabilities
2010=1% 2011=1% 2012=0.98% 2013 =1.04% 2014=0.98%
This ratio shows that the ability for Bombardier to pay its short-term debt obligations as
they fall due has worsened indicating that Bombardier has a higher risk of default now in
comparison with its standings between 2010 and 2014. Any company with a current ratio
below 1 suggests that they will not able to pay their short terms debts off at that point in
time. This is a worrying indicator for current shareholders/stakeholders of Bombardier.
Acid test ratio – (Current assets-inventories)/current liabilities
2010=0.52 2011= 2012= 2013 – 0.44 2014 – 0.38
Companies with an Acid test ratio of below 1 will struggle to pay their current liabilities and
as the figures show the liquidity of Bombardier has worsened between 2013 and 2014. In
comparison with the Current ratio it also shows that current assets are highly dependent on
levels of inventory. The liquidity of Bombardier of in 2013 was worrying for investors and
stakeholders and the position of the company seems to of become more severe in 2014.
This signals a high chance of bankruptcy.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2009.5 2010 2010.5 2011 2011.5 2012 2012.5
Currentratio

13. Corporate social responsibility (CSR)
Bombardier enforces a strategy known as the Evolution of Mobility in order to be a socially and
ethically responsible business.
The Evolution of Mobility consists of three interrelated growth strategies:
Invest in leading mobility solutions- Bombardier innovates as a responsible business to create
industry-leading products that bring people together, address societal needs, focus on safety and
respect the planet.
Grow local roots in key markets– Bombardier partners as a responsible business with our
stakeholders to create shared value by turning societal needs into business opportunities in the
markets in which we operate around the world.
Achieve flawless execution every step of the way- Bombardier operates as a responsible business
by upholdingthe highestethical standards,communicating transparently about our operations and
actively engaging with our stakeholders.
These strategiesare supportedby Bombardier’scompetitive foundations, active risk management,
strong financial discipline and commitment to CSR.
Corporate Governance
Bombardier has a board of directors which consists of 15 directors. The corporate governance and
nominating committee (CNGC) has determined that 9 of the 15 directors are independent. The
CNGC are also involved in selecting possible candidates that meet the criteria in which candidates
can be voted as directors by shareholders of Bombardier. It is also responsible for judging the
performance of currentdirectorsandthe re-election of directors to remain on the board. The CNGC
isresponsible forelectingthe chairmanof the boardof directors.Atpresentthe current chairman of
Bombardier is Mr Lauren Beaudoin.
Orientation programs for new directors
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2009.5 2010 2010.5 2011 2011.5 2012 2012.5
Acidtestratio

14. Bombardier has a orientation program for new directors which provides crucial information about
the financial situation of Bombardier and also the strategic planning of the company. Once new
directorsare electedtheyare providedwithappropriate documentationswhich includes a directors
manual including key information required for the Board. Senior executives permit that new
directors familiarise themselves rapidly with Bombardiers operations.
Continuing Education programs for directors
Bombardierencouragesitscurrentdirectors to pursue further education programs and activities in
order to gain information which could help to provide them with the best information in order to
improve their practices relating to the board and the committee.
References