Introduction

Firstly, we have given a little background of France, in terms of its geographic,

Demographic, political and economic characteristics and a brief History of France from its old age
till the Modern times. Secondly, In order to find the absolute and comparative advantages of
France, in terms of its international trade and economic prosperity, we have categorized the imports
and exports of France into the following categories: Mineral products, Wood products, Metal
products, Stones and glass products, Paper goods, Agriculture products, Animal products, Food
stuffs, Weapons, Footwear and headwear, Animal hides, Textiles, Transportations, Machineries,
Arts and antiques, Precious metals, Chemical products, instruments, plastics and rubbers. We have
kept the imports/exports data of the year 2013 and 2014 under observations and had a relative
comparison of Frances imports and exports commodities of these three years.
The relative comparison of which are listed in the appendix, in terms of monetary value,
percentage value of each categories and the overall imports and exports. Since, the imports and
exports were in large numbers, thus we have taken the top 5 imports and exports of each category,
as mentioned in the above paragraph, to find out the absolute and comparative advantages of
France. Furthermore, we have: revealed the best comparative advantage by applying porters
diamond model; determined the destination countries, where commodities are exported, by
selecting a single company with in the industry that has the best comparative advantage. And
finally, we determined the mode expansion using Foreign Direct Investment model.

Background

Geographically: France, with an Area of 643,801 Sq. Km and locality of Western Europe,
has boundaries of 2,751 km connected with the boarder countries as Andorra, Belgium, Germany,
Italy, Luxembourg, Monaco, Spain and Switzerland; it also connects with the Bay of Biscay and
the English Channel and Mediterranean Sea. The land covers 52.7% of Agriculture crops (arable
land 33.4%, permanent crops 1.8% and permanent pasture of 17.5%), 29.2% of forest and 18.1%
of others. The metropolitan France bears the reserves of Coal, Iron ore, bauxite, Zinc, uranium,
antimony, arsenic, potash, feldspar, fluorspar, gypsum, timber, arable land and fish.
Apart from the above mentioned metropolitan France, as mentioned above, it has several
overseas boundaries and territories. Because of which France is the second largest exclusive
economic zone in the world.
Demographically: France, comprises a population of 67 Million with a variant age structure
and growth rate of 0.43% (July 2015 est.); have an ethnic concentration of Celtic and Latin with
Teutonic, Slavic, North African, Indochinese, Basque minorities and overseas (black, white,
mulatto, East Indian, Chinese and Amerindian); while the official language of France is French
with the intensity of 100%, with a quick declination of Provencal, Breton, Alsatian. Corsican,

Catalan Basque and Flemish (regional dialects and languages). The population is religionized as
63-66% Christian (overwhelmingly Roman Catholic), 7-9 % of Muslims, 5-0.75 % of Jewish, 50.75% of Buddhist, 5-1.0% of minorities and 23-28% of the population has either no religion or is
unknown. In addition to the demographic characteristics, France has 79.5% of urban population
and changes by 0.84% rate chance annually. The life expectancy ratio ranges from 75 to 85-year.
People of France enjoys high standard of living.
Politically, France: with the capital Paris, is a sovereign state (derived from people) and
the statutory laws of Frenchs constitution state the country to be a secular and democratic country.
Economically, France has an owner of being a part of G-8 group: making him one of the
leading industrialized country. In terms of purchasing parity, France is 7th in world, and 2nd largest
economic giant in European Union. France had 39 companies: enlisted in the fortune 500, as per
2010 estimate. France is considered to have a mixed economy because it has both of private, state
owned enterprises and obvious government interventions. Apart from this, the French government
has a considerable influence on major key sectors of Frances infrastructure and most of the
infrastructures as Railway, Electricity, aircraft, nuclear power and telecommunication etc. are
owned by French government itself.
Furthermore, France is a large producer of agriculture product, by the use of latest
technologies. It is the center of attraction for tourist, as 84 million foreign tourist visit the country
in one year (with exclusion of tourists that visit for not more than 24 hours); the country bears the
capability of producing large electricity, has the a considerable infrastructure of transport i.e. 2nd
most extensive network of transport after Germany, and has also honor of being: major contributor
of sciences achievements (67 French people have been honored noble prizes, and 12 people have
been awarded Fields medal).

History

During the Iron Age, what is now Metropolitan France was inhabited by the Gauls:
Celtic people; The Gauls were conquered in 51 BC by the Roman Empire, which held Gaul until
486. The Gallo-Romans faced raids and migration from the Germanic Franks, who dominated the
region for hundreds of years, eventually creating the medieval Kingdom of France. France
emerged as a major European power in the Late Middle Ages, with its victory in the Hundred
Years' War (1337 to 1453) strengthening French state-building and paving the way for a future
centralized absolute monarchy. During the Renaissance, France experienced a vast cultural
development and established the beginning of a global colonial empire. The 16th century was
dominated by religious civil wars between Catholics and Protestants (Huguenots).France became
Europe's dominant cultural, political, and military power under Louis XIV. French philosophers
played a key role in the Age of Enlightenment during the 18th century. In 1778, France became
the first and the main ally of the new United States in the American Revolutionary War.
In the late 18th century, the absolute monarchy was overthrown in the French Revolution.
Among its legacies was the Declaration of the Rights of Man and of the Citizen, one of the earliest
documents on human rights, which expresses the nation's ideals to this day. France became one of
modern history's earliest republics until Napoleon took power and launched the First French

Empire in 1804. Fighting against a complex set of coalitions during the Napoleonic Wars, he
dominated European affairs for over a decade and had a long-lasting impact on Western culture.
Following the collapse of the Empire, France endured a tumultuous succession of governments:
the monarchy was restored, it was replaced in 1830 by a constitutional monarchy, then briefly by
a Second Republic, and then by a Second Empire, until a more lasting French Third Republic was
established in 1870. By the 1905 law, France adopted a strict form of secularism. Which has
become an important federative principle in the modern French society.
France reached its territorial height during the 19th and early 20th centuries, when it
ultimately possessed the second-largest colonial empire in the world. In World War I, France was
one of the main winners as part of the Triple Entente alliance fighting against the Central Powers.
France was also one of the Allied Powers in World War II, but came under occupation by the Axis
Powers in 1940. Following liberation in 1944, a Fourth Republic was established and later
dissolved in the course of the Algerian War. The Fifth Republic, led by Charles de Gaulle, was
formed in 1958 and remains to this day. Following World War II, most of the
empire became decolonized.
In the context of the Cold War, de Gaulle pursued a policy of "national independence"
towards the Western and Eastern blocs. To this end, he withdrew from NATO's military integrated
command, he launched a nuclear development program and made France the fourth nuclear power.
He restored cordial Franco-German relations in order to create a European counterweight between
the American and Soviet spheres of influence. However, he opposed any development of
a supranational Europe, favoring a Europe of sovereign Nations. In the wake of the series of
worldwide protests of 1968, the revolt of May 1968 had an enormous social impact. In France, it
is considered to be the watershed moment when a conservative moral ideal (religion, patriotism,
respect for authority) shifted towards a more liberal moral ideal (secularism, individualism, sexual
revolution). Although the revolt was a political failure (as the Gaullist party emerged even stronger
than before) it announced a split between the French people and de Gaulle who resigned shortly
after.
In the post-Gaullist era, France remained one of the most developed economies in the
World, but faced several economic crises that resulted in high unemployment rates and increasing
public debt. In the late 20th and early 21st centuries France has been at the forefront of the
development of a supranational European Union, notably by signing the Maastricht Treaty (which
created the European Union) in 1992, establishing the Eurozone in 1999, and signing the Lisbon
Treaty in 2007. France has also gradually but fully reintegrated into NATO and has since
participated in most NATO sponsored wars. Since the 19th century France has received
many immigrants. These have been mostly male foreign workers from European Catholic
countries who generally returned home when not employed. During the 1970s France faced
economic crisis and allowed new immigrants (mostly from the Maghreb) to permanently settle in
France with their families and to acquire French citizenship. It resulted in hundreds of thousands
of Muslims (especially in the larger cities) living in subsidized public housing and suffering from
very high unemployment rates. Simultaneously France renounced the assimilation of immigrants,
where they were expected to adhere to French traditional values and cultural norms. They were
encouraged to retain their distinctive cultures and traditions and required merely to integrate.

Countrys Absolute Advantage

To find out the about advantage of the country, we have gone through a thorough study of
countrys natural resources. Since, we have found, the country has natural reserves of coal, iron
ore, bauxite, zinc, uranium, antimony, arsenic, potash, feldspar, fluorspar, gypsum, timber; and it
has 52.7% of agriculture land and 17.5 % of Pasteur Areas. Secondly, after the analysis of relative
comparison between the countrys imports and exports data of the year: 2013 and 2014, we have
come to the following data.
As of 2013, we have found that the country had higher value, than imports, in the export
of Coal tar (Total:722 million), rough wood (Total: 418 million), wheat (Total: 6.4 Billion), corn
(Total: 2.67 billion), barley (Total: 1.8 billion), rapeseed (Total: 890 million), potatoes (Total:858
million), cheese (Total: 4.06 billion), bovine (Total: 1.62 billion), poultry meat (Total: 1.45
billion), trunk and cases (Total: 5.28 billion), Gold (Total: 1.15 billion) and blood fractions (Total:
7.33 billion). As of 2014, country had had higher value, than imports, in the export of wheat (Total:
5.4 Billion), blood fractions (Total: 7.1 billion), and some advantage in the export of cereals
(Exports- Imports: 7.8 billion), dairy egg and honey (Exports- Imports: 4.2 billion) and live animal
(Exports- Imports: 2.1 billion).
Bases on the above data and comparative analysis of imports/exports data, we have come
to the conclusion that the country has an absolute advantage in the production of Cereals (type of
grass, that produce grains, and can be eaten and be used to produce flour or bread), which is
calculated to be worth 7.8 billion of exports. Furthermore, the country has some advantage in the
export of wine which calculates to be around 10 billion, but is a finished good: that has gone
through certain process of alteration. In the production of iron and steel, the country has no absolute
advantage, because the imports of iron and steel are relatively higher in value than the export value
of country and the exports of iron and steel are not in raw form but are in processed forms i.e.
transformed products.
Countrys comparative advantage

After comparative analysis of the imports/exports data of France, for the period 2013 and
2014, we have come to the following that:
As of the year 2013, we have found that the country has higher export value , than its
imports value, in cements (Total: 286 million), practical boards (Total: 431 million), wood barrels
(Total: 415 million), hot rolled iron (Total: 3.17 billion), scrap iron(Total: 2.53 billion), coated flat
rolled iron( 2.51 billion), iron pipes (Total: 1.75billion), aluminum plantings (Total: 1.64 billion),
interior decorative glass wear (Total:821 million), seed oil (Total: 622 million), rapeseed oil
(Total:374 million), bovine sheep and goat fat (Total: 104 million), glycerol (Total: 990 million),
kaolin coated paper (Total: 1.68 billion), wine (Total: 10.9 billion), hard liquor ( 5.18 billion), malt
extracts (Total: 1.83 billion), explosive ammunition (Total:187 million), military weapons (Total:
9.13 million), planes , helicopter, spacecraft (Total: 49.9 billion), vehicle parts (Total: 16.5 billion),
gas turbines (Total: 12.75 billion), integrated circuits (Total: 5.94 billion), low voltage protection

equipment (Total: 4.8 billion), combustion engine (Total: 3.55 billion), arts and antiques (Total:
3.9 billion), jewelry (Total: 5.8 billion), precious metal scraps (Total: 841 million), packaged
medicaments (Total: 27.8 billion), beauty products (Total: 7.46 billion), perfumes (Total: 5.72
billion), pesticides (Total: 3.88 billion), thermostat (Total: 1.61 billion), x-ray equipment (Total:
1.36 billion), ethylene polymer (Total: 2.61 billion), propylene polymers (Total: 1.89 billion).
While, as of year 2014, the country has supply advantage in the following industries:
Aircraft, space craft (exports-imports: 28.1 billion, and is 30.7% of the total export), beverages,
spirits and vinegars (exports-imports: 13.9 billion, and is 15.2 % of the total exports), perfumes
and cosmetics(exports-imports: 11.6 billion, and is 12.7% of the total exports), pharmaceuticals
(exports-imports: 7.3 billion, and is 8% of the total exports), iron and steel (exports-imports: 3.1
billion, and is 3.3% of the total exports), and leather and animal gut articles (exports-imports: 2.2
billion, and is 2.3% of the total exports).
In the these findings, we have come to the conclusion that country has comparative
advantages in Aircraft, space craft, beverages spirits and vinegars, perfumes and cosmetics,
pharmaceuticals, iron and steel, leather and animal gut articles, in the respective manner. While
the best comparative advantage: as far as the exports data, and the application of porters Diamond
Model is concerned, we have come to the conclusion that country has the best comparative
advantage in the Aircraft, spacecraft industry i.e. which covers 30% of the total country export.
Furthermore, the best comparative advantage of Frances is determined by applying
porters diamond model, which is discussed below:

Porters Diamond Model

After the critical analysis of countrys diamond, we have come across different information
and fact, which reveal certain factor conditions, demand conditions, related and supporting
industries, firm strategy structures and rivalries, and role of government and European unions in
the context of France industries in general and emphasized context of aerospace industrys
diamond in particular. We came to the conclusion that Frances different initiatives has resulted in
some negative impacts in certain industries and some plus point in others, especially in aerospace
industry. Precisely, the diamond model reveals that France conditions are favorable for aerospace
industry, making it the comparative cluster internationally and the shining star, in terms of exports,
growth and share.
Below is a detailed determination of Frances different conditions, considering the porters
diamond model. Each interlinked aspect of diamond models are explained below:

Factors Condition
We have reviewed the industry in terms of its factor conditions i.e. Land, labor, capital,
organizations, and infrastructure.
Land:
Firstly, the geographic location of France is strategic i.e. it access the northern Europe
through English bay, and the Middle East, south Asia, Suez canal, Atlantic ocean through
Mediterranean Sea, which enable France to connect with different countries through Sea routes, in
addition to its boarder countries i.e. Andorra, Belgium, Germany, Italy, Luxembourg, Monaco,
Spain, and Switzerland.

Secondly, location of aerospace industry, it is between midi pyrenes and Aquitaine, so

called city of Toulouse or aerospace valley. The aerospace valley has useful characteristics in terms
of its lands i.e. the valley has rivers in the flat lands (coastal), flat terrain and mountains, which
enable the transportation of large aerospace parts, through rivers (via barge from ports) and
establishment or construction of industry building, with a very low cost, and the flat mountains (of
pyrenes and alps) are useful for training pilots. And the location is also, far away from the German
fronts, and the atmospheric condition of this area is favorable.
Positive point is that: the aerospace valley is a place, where numbers of aerospace: core,
related and supporting industries, no of OEMs and SMEs are located, either dependent or
independent; different research labs, management and aerospace related schools, institutes and
universities are established. And most importantly: the head-quarter of the aerospace is also
developed by the Government in the same regions. And due to number of industries and
enterprises, the supply chains and transportation routes are widely available.
Labor
Generally, France is a capital intensive country and the intensity of labor is poor in it, the
country has higher labor cost in market and the labor intensive workflow is less than 42% of
Frances total population.
Apart from the fact that country has a comparative advantage in the capital intensive
products, there still exist: a little utilization of labor. The workflows labor of Toulouse region,
because of governments contribution: in the establishment of top class educational and research
institutes, regarding aerospace and engineering fields, the workforce of aerospace industry is filled
with skilled, trained and productive scientist and engineers.
Furthermore, different universities, research institutes, research labs, management schools
are still producing skilled labors. The only limitation is that: the country focuses in aerospace,
engineering and management schools, which although contributes in aerospace industry but lack
production in others.
Capital
France has static policies for monetary, fiscal and social aspects. But in terms of capital
generation, the country has a negative point, because there exist very limited credit excess and
most of the companies lack self-finance capabilities, so they end up in establishing venture
capitals. But since, aerospace industry has a comparative advantage in it, thus government and
European unions has provided incentives and subsidies to the aerospace giant i.e. Airbus (the giant
in the aerospace valley, which contributes 80% of the total exports of aerospace products), which
although limits the capital generation of other horizontal enterprises, but keeping in view the
greatest contribution of Airbus, we can consider that capital generation for aerospace industry is
not a problem.
Furthermore, the shares of Airbus are owned by French government (15 % shares), and
additional shares are owned by Germany, United States and Spain. Which gives the Airbus a robust
force in the generation and operation of its capital. The aerospace industry was strengthened after
the foundation of Airbus, by association of several European countries. The aerospace industry
has access to the use of advance technology.

Organizations
In term of entrepreneurship, the country has both public and private organizations, and the
governments hold ownership in private organizations too i.e. 14 % of shares of top 10 biggest
companies of France; while, in case of Aerospace giant i.e. Airbus, government enjoys 15% shares
with some additional shares owned by Germany, United states and Spain.
Furthermore, the aerospace valley has 100 large companies, 400 small and medium
enterprises, 80 research industries. The main original equipment manufacturers are:

Airbus, Dassault-Aviation
Sogerma, Thales Alenia Space
EADS-Astrium,
SAFRAN,
Turbomeca etc

Other active industries are:

Alstom
Freescale
Continental Automotive
Thales Avionics
Goodrich
Rockwell-Collis etc.

The suppliers of aerospace industries are:

Alema,
EADS Composites Aquitaine
Creuzet,
EADS Sogerma
Exameca
Labinal
Latcore
Liebherr Aerospace
Messier-Bugatti-Dowty
Potez Aeronautique
Ratier Figeac
SAFT etc.

Some of research centers are:

ONERA
INRIA
CNES
CEA
CERFACS etc.

Some of the aerospace universities and schools are:

ISAE (merge of Suparo and ENSICA)

ENAC
EMAC
Universities of Toulouse
Bordeaux and Pau
INPT
ENSAM
ENSEIRB
Ecole des Mines Albi-Carmaux
Engineering school Tarbes etc.

The aerospace valley has 8500 researchers and scientist working, and there is evidence of being
45% research and development potentials, concerning aerospace industry; 480 R&D projects
are initiated concerning the aerospace, which show that there exist large scope of improvement
and innovativeness in this industry and thus: sequel in the higher competitive advantage of
aerospace products.
Infrastructure
France enjoys highly developed communication, transport, energy, educational
infrastructures. By communication, the country has highly developed telephone system: fixed
telephone lines (with total subscription of 38.81 million subscription), cellular mobile phones (with
total subscription of 64.9 million); mix of both privately and public owned broadcast media:
includes number of radio and television stations (advanced with multi-channel satellites); high
penetration of Internet (with total subscription of 58.8 million).
By transportation, the country shares the honor of 2nd largest transport network in terms of
Airports: having 464 ports with paved runways (2013), 294 ports with unpaved runways; heliports,
having one port (2013); railway networks, of 29,640 km, with greater percent of standard gauge
than narrow; roadways, with 1,028,446 km paved roads; waterways, of 8,501 km ( of which, 1,621
km can bear the navigation of crafts, with weight of 3000 metric tons; marine merchants, by types
of bulk carrier, cargo, chemical tankers, container, liquefied gas, passenger cargos, petroleum
tankers, refrigerated cargos, 50 foreign owned marine merchants, and 151 marine merchants are
registered in different countries; port ways and terminals, with major seaports, river ports,
container ports, cruise/ferry ports and LNG terminal (for import purposes).
By energy, country has 59 nuclear plant, from which 75% of total countrys electricity is
generated, bears EDF (largest producer of electricity, in terms of generation and distribution), and
has 15,322 km of gas pipelines, 2,939 km of oil pipelines and 5.084 km of refined products (2013).
By educational infrastructure, countrys interest in investing in the aerospace related
universities, research institutes and different organizations like IFC (collaborative institution that
boost R&D and ties in aerospace industry).
Keeping in view the countrys infrastructure, we can draw a conclusion that countrys
infrastructure has a positive impact to the aerospace industry: as the technological advances in
communication infrastructure, the greater development of transportation structures (including
roadways, airports, marine merchants, sea ports), sufficient power sources and highly developed

institutions provide sufficient opportunities to aerospace, in terms of its resource utilization,

transportation, innovations, testing of materials and logistics. Etc.

Demand Conditions
The demand conditions is categorized into two: domestic demand and international
demands. In terms of Frances domestic demand of aerospace industry, there is some demands by
sophisticated customers, government procurements of developed technologies, a bit military
demand but overall: there seems to be a little decline in the domestic demand, since few years.
While, by international demands, there is high demand of aerospace products by European
countries (European space agency is a large buyer of satellites, high demand of aerospace products:
there is a demands by Germany, Belgium, united kingdom, Italy, Spain, united states, Netherlands,
Russia , Switzerland etc. by variant percentages. There also exist some sophisticated demands for
technological advancements.
Furthermore, there is an anticipant annual growth rate of 4.8%: for the demand of aerospace
and aeronautic products, which shows that there is scope for the aerospace industry to increase its
supply. To make sure its competitiveness in global market. There exist strong worldwide demand
anticipation.

Firm strategy, structure and rivalry

In terms of firms strategy, structure and rivalry, the country has positive, limited and
negative impact on the aerospace industry but overall, we can consider that the firm/industry shall
enjoy the comparative advantage in term of strategy, structure and rivalry.
After reviewing the strategic review/application of aerospace industry, we come to the
finding that aerospace industry seek for growth, expansion, innovativeness, global leadership,
visualization of activities, platform and operation. We have also gone through the deep study of
industrys top competitors i.e. Boeing and Airbus and we found that Airbus follows the long term
strategy: production of best and safest airlines and management of the need of airlines and its
operation while Boeing follow the long term strategy of gaining aerospace leadership.
Furthermore, the Airbus and Boeing dont have strategic alliance up to some extent i.e. they share
their jobs to partners and both focus on low cost and high/skilled labors to increase productivity
and reduce cost incursion. Overall strategy of aerospace can be drawn as: they seek leverage in
competition and visibility within the aerospace industry.
Secondly, in terms of structure, the aerospace industry has both private and public owned
companies. And the industry follows the horizontal structure i.e. the industry had different smaller
units and division with a headquarters located in Toulouse city.
Thirdly, in terms of rivalry or competition, the industry had some drawbacks i.e. due to the
government subsides, large entry barriers, strong contract enforcement and large sized companies
the constructive competition is limited.
The top 2 companies enjoys development in terms of production of aerospace products and
due to large sized, the other small companies cannot compete so it is a limitation. Furthermore, the
development between Airbus and Boeing has been constructive and lead to innovative alliance but
due to the government subsides and consideration to the airbus. In terms of low interest rates, the
competition is becoming more of a monopoly.

Because of the monopolistic approach, economy does not lead to innovativeness and
competitiveness but the government had some initiation by investing in R&D, Research
Institutions which lead the industry to innovativeness and technological advancement.

Related and Supporting industries

After a comprehensive review of relating and supporting industries of aerospace valley, we
come to know that it has a positive impact of RSI on concerned industry, and there is a positive
contribution to the industry. The aerospace valley is a home to 1500 companies, and the aerospace
valley has 570 members (which includes 70 primes, 260 SMEs, 80 research institutes and number
of engineering, aerospace, training institutions too). Furthermore, there is a governments
initiation: in the establishment of IFC (for the collaboration of players and other European clusters,
development in the R&D). There exist some facilities for the integration, testing of aerospace
products and enhancement of research capabilities.
In terms of relating industries: the aerospace industry enjoys the pool of contractor and
suppliers (which are highly specialized), and the aerospace industry is dependent, overly, on few
OMEs, which present a negative feedback and threat to loss of competiveness in its suppliers.
In terms of supporting industries: the industry enjoys the support of educational institutions
(home to several prominent universities regarding aerospace and aeronautics and engineering,
which train engineers and do conduct research, extensively advance, concerned with aerospace);
Banks (the bank provide average credit systems with high interest, but government has provided
subsidies to the leading industry i.e. Airbus, which makes it a favorable point) ; Financial markets
( reports conducted on French financial markets, under which conclusions are drawn that other
industries are losing their market shares but the aerospace industries shares are observed:
growing) ; Research Institutions (80 research institutions are established, that are conducting
development researches regarding aerospace technological advancements); logistics (the
transportation system is well developed, different ports and terminals are established, existence of
well-established supply chains and distribution channel because of already established mature
industries, makes the transportation of logistics from origin to the destination possible and easier,
and contributes positively to the aerospace industry); ICT ( highly developed Internet and
communication technology do contributes to the aerospace industry, especially in spacecraft and
astronautics) and IFC ( the institution for collaboration has indirect positive effect on aerospace
industry, because of its robustness in the R&D i.e. 480 R&D projects are under process; and the
collaboration of ties between aerospace industry players and clusters).
Application of Krugmans Theory

The Airbus (leading Aerospace company, being the Headquarter in France), has both
internal (In terms of cost reduction and production) and external economies of scale (when scope
of operations expands).
The Airbus has attained the internal economies of scale and is already developing its factors
that further grows the economies of scale: because of the companys bulk purchasing of raw
materials (has a network of suppliers of about 1500, from more than 30 countries) ; IFCs initiation

of 480 R&D projects; the concerned aerospace related universities, institutions, research labs,
which trains engineer and scientist, build and develop their workforces potential skills, do
innovative researches; companys large scale of production due to increased demands of aerospace
products from potential customers; and in addition to all these, company has been established since
1960, and it is producing, selling, distributing aerospace products since last 4 decades, which
makes the company to be quite efficient because of its constant practices of operations. All the
above mentioned factors makes the organization to be cost effective and thus gain internal
economies of scale. In addition: due to companys large size, growth volume and establishment
of new factories, it has cost comparative advantage and is getting better by the time.
It has also attained the external economies of scale because of the aerospace valley: as all
the aerospace related industries, OEMs, SMEs, Air buss divisions are clustered in the same region.
And because of the strategic goal of aerospace valley i.e. leverage in competitiveness of all
members of aerospace valley; the sharing of skilled workforce, advance technology among each
other makes the airbus gain the external economies of scale: as it has a greater impact on the whole
industry, because of its giantess and competitiveness.

Destination countries of Airbus companys products

Airbus exports aerospace products to the following countries, categorized by continents:

Europe
UNITED KINGDOM
CZECH REPUBLIC
UKRAINE
SWITZERLAND
NETHERLAND

RUSSIA
HUNGARY
ITALY
GREECE
IRELAND

SPAIN
AUSTRIA
MOLDOVA
SWEDEN
DENMARK

BELGUIM
NORWAY
ALBANIA
FINLAND

MALAYSIA
JAPAN
TURKEY
KUWAIT
VIETNAM
PAKISTAN

THAILNAD
HONG KONG
INDIA
OMAN
AZERBAIJAN
GEORGIA

SOUTH KOREA
INDONESIA
SAUDI ARABIA
MALDIVES
MALDIVES
BURMA

Asia
CHINA
PHILIPHINES
UAE
QATAR
KAZAKHSTAN
LEBANON

North America
UNITED STATES

CANADA

MEXICO

South America
CHILE
BOLIVIA

COLOMBIA
PERU

ARGENTINA

BRAZIL

Australia
AUSTRALIA

FIJI

NEWZLAND

FRENCH POLYNESIA

Africa
LIBYA
FASO
MAURITANIA

SOUTH AFRICA
MOZAMBIQUE
SOUTH SUDAN

TUNISIA
GABON

MOROCCO
MAURITIUS

BURKINA
SOUTH SUDAN

Mode of expansion

Airbus, follows different modes of expansion among which FDI is also practiced by the
Airbus. The country we have chosen: where Airbus has expanded his business operations,
manufacturing plants and facilities, is the United States: where Airbus has exploited the advantage
of in the country, in rivalry action against the biggest competitor Boeing. The reason, Airbus has
chosen the United States, as their destined mode of expansion, is because the US is a large market
for aerospace products, and to be close enough to Airbuss potential customers and its supplier the
Airbus has established its manufacturing plants and facilities.
Currently, the Airbus has several Airbuss engineering offices, training centers and
facilities in: Alabama, Kansas, Florida, Mississippi, Texas, Georgia, and Virginia; while
headquarters in Herndon and Miami. And the reason Airbus expanded its operations to US is
because of its appetite of seeking advantage.

Seekers of Advantage
The Airbus seeks for the Markets, Security, knowledge and factors that are most favorable:
in conducting its operations i.e. in United States, ant the countrys markets, security, knowledge
and factors are discusses below in detailed:
Market
In terms of market advantage, United States has large availability of markets, potential
customers. As it share the honor of having global leadership in aerospace industry; and is the
worlds largest single aisle aircraft markets. Exploiting marketing advantage is profitable because:

The airbus company will be closer to its potential customers, 800 suppliers (out of 1500),
and it end up in cost reduction.

Airbus visibility will be increased

Market shares of Airbus are increasing by a favorable rates.
There is an anticipation of: increase in demand for 500 new planes by 20-year. Etc.

Security
Due to the US strong regulations, there is security of both physical and financial. The law
and order problem does not exist. Investments are secure. There are some hindrance to investments
and operations. But are not a big issue at all.
Factors
The United States has labor: cheaper than that of Europe, skilled workforce of machinist,
engineers and trained workers; lands availability, strong distribution channel; policy and
promotional strategies are strong, availability of both related and supporting industries; developed
infrastructure. And the Airbus industry wants to exploit the factor conditions.
Knowledge
In terms of knowledge, United States have top class educational institutions, the level of
modernized education, innovativeness, creativeness is unmatched up to some extents. Different
research and developments programs, concerned with the advancement in aerospace technology.
And as we see, NASAs utilization and discovery of advance technology also contributes in
innovativeness. At last, the Airbus: can also exploits the US aerospace knowledge for its
comparative advantage.
Conclusion
On conclusion, we would like to say: that the aerospace industry in France may enjoys,
being the comparative advantage; but their do exist some negative points in the countrys
competitive strategy i.e. governments provision of subsidies to Airbus limits competition,
encouraging Airbuss monopoly results to destructive competition, higher taxes, outsourcing may
end up in less leverage to aerospace valley, less credit access by banks etc. which can be
ameliorated, if the weak points of Frances aerospace industry are turned into its strengths and
France may enjoy the greater comparative advantage of this industry.

References:
https://www.cia.gov/library/publications/resources/the-world-factbook/geos/fr.html
https://en.wikipedia.org
http://www.tradingeconomics.com/
http://atlas.media.mit.edu/
http://www.export.gov/france/doingbusinessinfrance/index.asp
http://www.economywatch.com/world_economy/france/export-import.html
http://www.worldstopexports.com/
http://www.nationsencyclopedia.com/economies/Europe/France-INFRASTRUCTUREPOWER-AND-COMMUNICATIONS.html
http://www.diplomatie.gouv.fr/en/french-foreign-policy/economic-diplomacy-foreigntrade/facts-about-france/facts-about-french-economy/article/fact-1-world-class-french
https://en.wikipedia.org/wiki/Aerospace_Valley
http://www.investineu.com/content/aerospace-sector-eu
http://www.eacp-aero.eu/index.php?id=26
http://www.conferenceboard.ca/hcp/details/innovation/export-market-shareaerospace.aspx
http://www.britannica.com/topic/aerospace-industry
http://www.reuters.com/article/france-aerospace-idUSL6N0KI24020140108
http://www.ainonline.com/aviation-news/aerospace/2014-07-14/french-aerospaceindustry-predicts-another-good-year
http://www.intltradesummit.com/france.html
http://www.youbuyfrance.com/uk/Posts-10258-french-aeronautical-industry-set-for-newheights-as-global-demand-skyrockets
https://en.wikipedia.org/wiki/France
http://atlas.media.mit.edu/en/profile/country/fra/
http://www.airbus.com/
https://en.wikipedia.org/wiki/Airbus
http://www.grin.com/en/e-book/87814/airbus-versus-boeing-strategic-management-report
http://www.bizcoachinfo.com/archives/1326
http://www.slideshare.net/taposhdr/airline-industry-analysis-boeing-airbus
https://etd.ohiolink.edu/!etd.send_file?accession=muhonors1210008575&disposition=inli
ne
www.researchandmarkets.com
http://strategyatheinz.blogspot.com/2012/06/boeing-and-airbus-rivalry-strategy.html
http://www.focus-economics.com/countries/france
https://www.b2match.eu/air-days2014/participants/51
http://www.eacp-aero.eu/index.php?id=26
http://www.fdiintelligence.com/Sectors/Aerospace/Aerospace-Airbus-and-Boeing-s-FDIstrategy?ct=true
http://welkerswikinomics.com/blog/2010/11/22/from-short-to-long-economies-of-scaleand-the-long-run-average-total-cost-curve/
www.airliners.net
http://astro.temple.edu/~pippin/Scl&Scp.htm
http://www.ofii.org/news/airbus-announces-foreign-direct-investment-fdi

http://www.ft.com/cms/s/0/f2bfe83e-3f47-11e4-a5f500144feabdc0.html#axzz3tkQOSuog
http://www.airbus.com/presscentre/pressreleases/press-release-detail/detail/airbusofficially-opens-us-manufacturing-facility/
http://www.export.gov/industry/aerospace/
http://www.export.gov/industry/aerospace/
http://nces.ed.gov/?src=ft
https://www.fas.org/sgp/crs/misc/R40967.pdf

Appendix

Data: 2013
Products

Exports

Imports

Mineral products
Wood products
Metals
Stone & Glass
Animal & vegetable biproduct
Paper Goods
Vegetable products
Animal
Food stuff
Weapons
Footwear & headwear
Animal hides
Textiles
Transportation
Machines
Arts & antiques
Precious metals
Chemical products
Instruments industry
Plastics & rubbers
Others

$21.4B
$2.75B
$39.8B
$5.53B
$2.12B

$105B
$4.68B
$44.9B
$7.81B
$3B

$10.6B
$21.2B
$17.4B
$39.2B
$254M
$2.26B
$7.25B
$12.9B
$112B
$107B
$3.9B
$8.59B
$94.9B
$19.2B
$30B
$6.52B

$13.8B
$15.7B
$16.3B
$27.1B
$286M
$7.81B
$4.86B
$30.5B
$91.9B
$132B
$644M
$6B
$76.6B
$22.6B
$32.9B
15.7B

Mineral Products
Exports
Percentage

Dollars

Refined petroleum

69

14.7B

Petroleum gas
Coal tar
Non-Iron & steel slag, ash &
residue
Cement

17
3.4
1.3

3.64B
722M
275M

1.3

286M

Imports
Percentage

Dollars

Crude petroleum

38

39.8B

Refined petroleum
Petroleum gas
Coal briquettes
Iron ore

31
25
1.8
1.5

32.2B
25.9B
1.92B
1.63B

Wood Products
Exports
Percentage
Practical board
Rough wood
Wood barrels
Swan wood
Wood fiberboard

16
15
15
12
10

Dollars
431M
418M
415M
321M
277M

Imports
Percentage
Swan wood
Wood carpentry
Wood fiberwood
Other wood articles
Plywood

22
13
11
7.8
7

Dollars
1.01B
605M
493M
363M
327M

Metals
Exports
Percentage
Hot-rolled iron
Scrap iron
Coated flat rolled iron
Iron pipes
Aluminum plating

7.9
6.3
6.3
4.4
4.1

Dollars
3.17B
2.53B
2.51B
1.75B
1.64B

Imports
Percentage
Other iron products
Hot-rolled iron
Refined copper
Iron structure
Large flat rolled stainless
steel

5.2
4.4
3.9
3.8
3.7

Dollars
2.32B
1.97B
1.73B
1.71B
1.67B

Stones & Glass

Exports
Percentage
Interior decorative
glassware
Glass bottles
Glass fibers
Other stone articles
Safety glass

Dollars

15

821M

14
8.8
7.5
7

763M
489M
417M
389M

Imports
Percentage
Glass bottles
Glazed ceramic
Safety glass
Glass fibers
Cement articles

14
12
8.5
7.6
4.6

Dollars
1.12B
913M
662M
593M
359M

Animal & Vegetable Bi-product

Exports
Percentage
Seed oils
Rapeseed oil
Other pure vegetable oils
Bovine, sheep & goat fat
Glycerol

31
19
7.7
5.1
4.9

Dollars
622M
374M
155M
104M
99M

Imports
Percentage
Palm oil
Pure olive oil
Margarine
Rapeseed oil
Other pure vegetable oil

16
16
15
11
9.3

Dollars
480M
474M
442M
329M
278M

Paper Goods
Exports

Percentage
Kaolin coated papers
Toilet papers
Brochures
Uncoated papers
Paper container

10
8.4
7.7
7.6
6.1

Dollars
1.68B
887M
810M
807M
646M

Imports
Percentage
Paper container
Kaolin coated paper
Toilet paper
Uncoated paper
Chemical wood pulp

13
12
11
9.4
8.2

Dollars
1.77B
1.67B
1.55B
1.3B
1.13B

Vegetable Products
Exports
Percentage
Wheat
Corn
Barley
Rapeseed
potatoes

30
13
8.5
4.5
4

Dollars
6.4B
2.67B
1.81B
890M
858M

Imports
Percentage
Coffee
Citrus
Other vegetable
Other live plants
Rapeseed

11
7
5.9
4.8
4

Dollars
1.77B
1.11B
923M
751M
629M

Animal Product
Exports
Percentage
Cheese
Bovine
Poultry meat
Pig meat
Bovine meat

23
9.3
8.3
7
7

Dollars
4.06B
1.62B
1.45B
1.22B
1.21B

Imports
Percentage
Cheese
Bovine meat
Fish fillets
Non-fillet fresh fish
Pig meat

10
9.4
9.2
8.8
7.7

Dollars
1.65B
1.54B
1.5B
1.43B
1.26B

Food Stuff
Exports
Percentage
Wine
Hard liquor
Animal food
Baked goods
Malt extract

28
13
6.4
5.4
4.7

Dollars
10.9B
5.18B
2.51B
2.12B
1.83B

Imports
Percentage
Baked goods
Rolled tobacco
Chocolate
Soya bean meal
Hard liquor

8.1
7.4
7.2
5.6
5.1

Dollars
2.2B
2B
1.95B
1.51B
1.39B

Weapons
Exports
Percentage
Explosive ammunition
Weapon parts & accessories
Spring, air & gas guns
Military weapons
Other fire arms

74
11
7.3
3.6
2.8

Dollars
187M
26.8M
18.6M
9.13M
7.2M

Imports
Percentage
Explosive ammunition
Other fire arms
Spring, air & gas gun
Weapon parts & accessories
handguns

51
23
13
9.5
1.7

Dollars
146M
65.3M
38.1M
27.3M
4.96M

Footwear & Headwear

Exports
Percentage
Leather footwear
Textile footwear
Rubber footwear
Other headwear
Other footwear

52
15
11
5.2
4.9

Dollars
1.18B
342M
252M
117M
111M

Imports
Percentage
Leather footwear
Textile footwear
Rubber footwear
Other headwear
Footwear parts

50
18
17
2.7
2.6

Dollars
3.91B
1.4B
1.31B
214sM
203M

Animal Hides
Exports
Percentage
Trunk & cases
Leather apparel
Tamed equine & bovine
hides
Other leather articles
Equine & bovine hides

Dollars

73
6.4
4

5.28B
464M
289M

3
6.1

130M
445M

Imports
Percentage
Trunk & cases
Leather apparel
Tamed equine & bovine
hides
Skin apparel
Other hides & skins

Dollars

63
13
7

3.05B
652M
342M

2.6
2.1

125M
103M

Textiles
Exports
Percentage
Non-knot women suits
Knit sweater
Knit t-shirts
Non-women textiles
Non-not active wear

9.3
6.6
4.9
4.4
3.9

Dollars
1.21B
772M
628M
564M
509M

Imports
Percentage
Non-knit women suits
Knit sweaters
Non-knit mens suits
Knit t-shirts
Knit womens suits

11
10
7.7
7.4
4.3

Dollars
3.27B
3.07B
2.36B
2.27B
1.32B

Transportation
Exports
Percentage
Planes, helicopters,
spacecraft
Cars
Vehicle parts
Aircraft parts
Delivery trucks

Dollars

45

49.9B

20
15
6.7
-

22.1B
16.5B
7.53B
5.32B

Imports
Percentage
Cars
Aircraft parts
Planes, helicopters,
spacecraft
Vehicle parts
Delivery trucks

Dollars

34
17
17

31.2B
15.4B
15.3B

14
6.3

12.6B
5.8B

Machines
Exports
Percentage
Gas turbines
Integrated circuits
Low-voltage pro-equipment
Combustion engine
Telephones

12
5.6
4.5
3.3
3.2

Dollars
12.7B
5.94B
4.8B
3.55B
3.45B

Imports
Percentage
Computers
Gas turbines
Broadcasting equipment
Integrated circuits
Telephones

9.4
6.9
5
4.4
3.8

Dollars
12.4B
9.12B
6.57B
5.78B
5.05B

Arts & Antiques

Exports
Percentage
Paintings
Sculptures
Antiques
Collectors item
Prints

74
12
10
2.8
1

Dollars
2.88B
476M
399M
108M
39.8M

Imports
Percentage
Paintings
Sculptures
Collectors item
Antiques
Prints

53
21
15
9.5
1

Dollars
343M
132M
97.7M
61M
7.17M

Precious Metals
Exports
Percentage
Jewelry
Gold
Precious metal scraps
Imitation jewelry
Diamonds

60
13
11
4.9
3.3

Dollars
5.11B
1.15B
941M
424M
280M

Imports
Percentage
Jewelry
Diamond
Gold
Silver
Imitation jewelry

46
15
13
7.3
6.4

Dollars
2.75B
872M
776M
438M
386M

Chemical Products
Exports
Percentage
Packaged medicament
Beauty product
Human or animal blood
Perfumes
Pesticides

29
7.9
7.7
6
4.1

Dollars
27.8B
7.46B
7.33B
5.72B
3.88B

Imports
Percentage
Packaged medicaments
Human or animal blood
Nitrogen heterocyclic
compounds
Radioactive chemicals
Hormones

Dollars

23
7.2
5

17.9B
5.49B
3.8B

4
3.4

3.03B
2.63B

Instruments
Exports
Percentage
Medical instruments
Orthopedic instruments
Thermostats
x-ray equipment
Chemical analysis
instruments

16
14
8.4
7.2
6.1

Dollars
3.08B
2.77B
1.61B
1.38B
1.17B

Imports
Percentage
Medical instruments
Orthopedic instruments
Base metal watches
Chemical analysis
instruments
thermostats

Dollars

20
16
6.3
6

4.59B
3.54B
1.42B
1.36B

5.9

1.33B

Plastics & Rubbers

Exports
Percentage
Rubber tires
Ethylene polymers
Other plastic products
Plastic lids
Propylene polymers

12
8.7
7.8
7.8
6.3

Dollars
3.53B
2.61B
2.35B
2.33B
1.89B

Imports
Percentage
Rubber tires
Other plastic products
Plastics lids
Raw plastic sheeting
Ethylene polymers

13
9.8
8.5
7.7
7.3

Dollars
4.18B
3.23B
2.81B
2.53B
2.39B

Others
Exports
Percentage
Seats
Other furniture
Liquid fixtures
Sports equipment
Model & stuffed animal

21
19
12
8.5
7.1

Dollars
1.34B
1.24B
784M
557M
462M

Imports
Percentage
Other furniture
Seats
Light fixtures
Video & card games
Model & stuffed animals

27
21
11
8
7.8

Dollars
4.29B
3.84B
1.79B
1.26B
1.22B

Data: 2014
Fastest-Growing French Export Products
Percentage

Dollars

Vegetable products

Up 115.3

0.22B

Coffee, tea and spices

Up 111.5

1.01B

Clocks and watches

Up 94.1

2.86B

Gems, precious metals

Up 66.8

7.30B

Silk

Up 57.0

0.12B

Footwear

Up 55.2

3.22b

Other base metals

Up 54.5

0.83B

Paper yarn, woven fabric

Up 54.4

0.51B

Collector items, art,

antiques

Up 51.1

1.46B

Tobacco

Up 46.1

1.12B

With fastest pace in terms of Growth

Percentage
Cereal and milk
preparations
Paper yarn, woven fabric
Modified starches, enzymes
Iron and steel
Soaps, lubricants, candles
Leather, animal gut articles
Other chemical goods
Aircraft, spacecraft
Raw hides, skins not fur
skins, leather
Perfumes and cosmetics

Dollars

Up 92.2

862.3M

Up 75.3
Up 59.6
Up 41.7
Up 38.3
Up 33.3
Up 27.8
Up27.8
Up 27.4

303.5M
1B
3.1B
339.8M
2.2B
3.6B
28.1B
212.9M

Up 21.5

11.6B

France top 10 exports

Percentage

Dollars

Machines, engines, pumps

11.7

66.3B

Aircraft, spacecraft

10.2

57.7B

Vehicles

8.4

47.6B

Electronic equipment

7.8

44B

Pharmaceuticals

6.2

35.2B

Plastics

4.1

23B

Oil

3.9

22B

Beverages

3.2

18.1B

Medical, technical
equipment

3.2

17.9B

Perfumes, cosmetics

3.1

17.3B

France top 10 imports

Percentage

Dollars

Oil

14.6

96.2B

Machines, engines, pumps

11.3

74.6B

Vehicles

8.8

58.3B

Electronic equipment

8.4

55.5B

Aircraft, spacecraft

4.5

29.6B

Pharmaceuticals

4.2

27.9B

Plastics

3.8

25.2B

Medical, technical

2.9

19.2B

Organic chemicals

2.7

17.7B

Iron and steel

13.3B

equipment

France top 10 exports in terms of Advantages

Percentage

Dollars

Aircraft, spacecraft

Up 27.8

28.1B

Beverages

Up 20.2

13.9B

Perfumes, cosmetics

Up 21.5

11.6B

Cereals

Up 15.6

7.8B

Pharmaceuticals

Down -14.3

7.3B

Dairy, eggs, honey

Up 17.7

4.2B

Other chemical goods

Up 27.8

3.6B

Iron and steel

Up 41.7

3.1B

Leather, animal gut articles

Up 33.3

2.2B

Live animals

Up 7.3

2.1B

Highest value French exports product

Dollars
Aircraft, spacecraft
Medication mixtures in dosage
Cars
Automobile parts/accessories
Processed petroleum oils
Turbo-jets
Wine
Aircraft parts
Beauty/makeup/skin care preparations
Electronic integrated circuits/micro
assemblies
Blood fractions
Cases, handbags and wallets
Wheat
Phone system devices
Trucks

49.7B
25.7B
19.1B
16.7B
13.6B
12.4B
10.2B
7.8B
7.78B
7.29B
7.16B
5.98B
5.4B
5.31B
5.30B

Perfumes, toilet waters

Electrical switches, protectors and
connectors
Electrical switches, protectors and
connectors
Engines (diesel)
Alcohol (including spirits, liqueurs)
Jewelry

5.23B
5.09B
4.98B
4.84B
4.62B
4.53B

Highest value French imports product

Dollars
Crude oil
Processed petroleum oils
Cars
Petroleum gases
Medication mixtures in dosage
Aircraft parts
Automobile parts/accessories
Aircraft, spacecraft
Phone system devices
Computers, optical readers
Turbo-jets
Blood fractions
Trucks
Electronic integrated circuits/micro
assemblies
Electro-medical equipment
Miscellaneous furniture
Rubber tires
Footwear (leather)
Jewelry
Orthopedic appliances

38.8B
32.4B
30.9B
20.8B
18.2B
16.5B
13.1B
12.9B
11.6B
9.7B
9.1B
6.9B
5.7B
4.8B
4.5B
4.1B
4.0B
3.97B
3.95B
3.8B

Project Title: Application of Trade Theories

Country Name: France
Subject Name: International Business & WTO
Submitted To:
Mr. Imran Qureshi
Submitted by:
Dilawar khan
3570-BBA/FMS/F12
Arif Hussain
3689-FMS/BBA/F12
Dated: Wednesday, December 9, 2015