Critical Assessment Of Internal And External Environments Of Boeing Business

The Boeing Company was established in 1916 in Washington. As one of the world’s leading and largest manufacturer of military and commercial aircrafts, the company has strategically been involved in the acquisition of global firms and formulation of strategic associations with fundamental aerospace pioneers over the past decades. Currently, the company has 22,000 distributors, 170,000 innovative, diverse and skilled workforces in aerospace engineering working in 70 countries (Armanios, 2006). The main purpose of this case study is to identify and evaluate strategies adopted by the Boeing Company to pursue an international growth opportunity related to emerging economies. The paper provides a critical assessment of both internal and external environments of the Boeing business to identify the extent of strategic fitness in the market. In the end, the paper evaluates the growth strategy recommendable for Boeing to manage its supply chains in the international market.

The major purpose of Boeing’s leadership is to envision of execution of current and future strategic goals and objectives of the company (D’Intino et al., 2008). The fundamental aim targets at addressing the mission and vision of the company, which draws its workforce to work as an international firm that leads the aerospace industry. Characteristically, the goal of the company is future-oriented which focusses on become a global leader in terms of profitability, premium quality delivery and growth. In the commercial segment of the airplane sector, Boeing considers to develop, produce and market its commercial aircrafts and delivering customer support for consumers globally.

While McDonnell was popular in the manufacturing of commercial airplanes, the Boeing Company strategized in the production and exportation viable jetliners.  The merger between the two firms, in 1997, enhances a leadership heritage of seventy years in commercial aviation industry. The company’s most regarded products are the 777,767,747 and the 737 airplanes and commercial jets (Armanios, 2006). The strategic analysis of Boeing is further enumerated under the frameworks below:

According to Castillo and Salem (2012), the analysis on the value chain of a company illustrated from both the primary and secondary business activities leading to its competitive advantage. Moreover, the value chain is utilized to define the strategic resources that a firm consumes. For Boeing to facilitate and create value to its consumers, the manufacturing team should strategize on producing and setting valuable activities to achieve customer satisfaction (Eacott, 2011). The company’s capital business is designed to deliver facilities to clients to fund business aircrafts. Under the advanced performance and aviation program, the company is also able to create a value chain by availing full-time customer support to local and global customers. The main obligation of this program is to enhance novel technical assistance to customers and aiding in the delivering of spare equipment and part whenever required (Wehinger, 2012).

The Alteon training on aviation system is also another form of value chain that Boeing Company provides its consumers. This system allows potential clients to receive computerized trainings that refer to all products’ characteristics. In addition to this system, the Company has a portal named ‘The MyBoeingFleet’ that includes fundamental information about the facility. Data include on this site enable distance customers to sustain fleets without the necessity of contacting the customer support team. The online presence also strategically enables potential clients to track and manage inventories to enhance their supply chains and management approaches (Fabozzi and Mann, 2013). Over the past decades, the company influenced its distributers using effective procedures of controls. However, the firm is currently facing strategic issues in the management of its supply chains because of ineffective communication systems.

Boeing’s Strategic Analysis: Internal

Despite the increment in the prices of fuel daily, the company is still able to manager its growth and revenue successfully. As of 2007, the net revenue of the company totalled to $66, 387 that is a resultant increase of approximately 8% from 2006. However, because of financial problems in 2008, the net revenue decreased slightly to $60,909. The stipulated loses were recovered in the next two financial years. In 2011, Boeing realized total revenue of $68 billion whereby approximately 45% of the revenue came from commercial aircrafts. In reference to the quarter that ends on 31^st December 2017, the company reported a doubling of its revenue in a quarter to $3 billion from the $1.63 revenue during the 4^th quarter in 2016 (Armanios, 2006).

PESTEL Analysis

The PESTEL analysis framework is fundamental when examining the external and macro-environmental factors. These factors include political, economic, social, technological, environmental and legal. This framework is significant for the company since it has a considerable impact on the produce in the airline industry. The PESTLE analysis of the company includes:

• Political Factors: In a business, regulations, laws and policies set by the government have a fundamental impact on daily activities(Kapstein and Busby, 2010). The Boeing Company has an extensive agreement and relationship with the USA’s government and the federal aviation administration. This implies that policies set by the government entirely drive the activities of the company such as ordering of airplanes. Moreover, the government interference might also substantially affect Boeing’s sales of equipment to selected countries such as Iraq, Iran, Pakistan and Afghanistan.
• Economic Factors: Considering the airline firm, prices of fuel and subsidy is fundamental to evaluate daily activities and transaction the company makes in relation to capital costs. In 2010, a debate rose between the company and its competitor (Airbus) which resulted to drawing more attention from potential clients and the WTO. Conforming to that, the increment in fuel prices, security equipment, costs on insurance and environmental restrictions are a fundamental consideration for the Boeing Company in its strategic approach to international growth in future
• Social Factors: These factors principally contend with cultural factors, which are significant for the company to operate in international environments. The company requires evaluating social dynamics that affect the product’s sales and demands in future. This approach is applicable by changing the demands and needs for consumers because of the increased rate of growth.
• Technological Factors: Presently, the company is using the computerized effective initiative to design fast commercial aircrafts. Under R&D, the application of lightweight equipment and materials in the making of airplanes in operative utility of resources is recommended for the company. The Boeing Company has competitive advantage over the Airbus Company using light-weighted materials the enhancement of business aircrafts.
• Environmental Factors: Even thorough that are no obligatory rules on emissions of aircrafts, firms have placed individual targets to minimize emissions. The international authority on air travel has anticipated for an enhancement in fuel effectiveness in airline emissions. Hence, the company reduced its consumption of energy by 0.3% in 2009, which has been adjusted by 32% since 2002 on net revenues realized(Maxwell, 2009). . This implies that the demand for environmental-friendly and fuel-efficient aircrafts are forcing the firm to produce ecologically friendly products.
• Legal Factors: In reference to the debate with the Airbus Company over subsidies, the WTO has intervened in the issues. The rules are fundamental for the company to retrieve its original position in the airline industry. Resultantly, a new US and EU intercontinental marketplace has emerged to enhance flexibility for both airlines hence enabling consumers to travel at affordable rate.

Porter’s Five Analysis

This framework is mainly concerned with the ideology that growth strategies of a company should be focusses on fulfilling threats and opportunities in the exterior environment. The forces include:

• Threat of New Market Entry: Market entry to the aircraft business is never easy which is considerably lower on a scale of one to five due to extensive resources and costs required. Moreover, it is not easy for a new commercial airline firm to be profitable and popular within a short timeframe since more time is needed to reach a break-even point(Duchêne and Serfes, 2012). However, the company might face this threat from China by 2020 since their government has sanctioned the launching commercial aircrafts.
• Threat of Substitution: Airline products has many recommendable substitutes like buses, cars, cruises and trains which are relatively cheaper compared to airplane charges. In reference to global travelling, delays observed from commercial aircraft at Boeing have led to the international leasing firm to prefer Airbus in the Asian market.
• Suppliers’ Bargaining Power: This power is very high in the aircraft business due to the company’s loss of control over distributers during delays over the product 787. In reference to past, the company blame its distributers for delivery delays. In this analysis, the company will improve its capacity to produce in future to retain the bargaining power.
• Consumers’ Bargaining Power: This power is relatively low since there are only two global competitors i.e. Airbus and Boeing. As for consumers, it not a simple step to transit over airlines since the two companies vary in their systems of control which might lead to consumers spending more in terms of trainings on piloting(Schmeiser and Ricaurte, 2012).
• Competitive Rivalry: The division of commercial airplane in authoritative for the company since is assumed an approximate of 65% of the overall revenue which means that losing the share of the market can lead to a negative impact on the company’s profitability. This means that, the company’s competition with Airbus is significant which is considered high and scaled four to five(Grebenshchikova and Yakushev, 2017). Over the past decades, the Airbus Company conducted a market search on product development, which indicates an approximate of 6% of revenue due to R&D in 1999 while Boeing realized 2.3%. However, Boeing decided to invest $860 million on R&D more compared to Airbus’s $490 million R&D capital.

SWOT Analysis

According to Seth (2015), an analysis of the SWOT assists firms to enhance strategic forecasting for future growth. This approach is fundamental to analyse the company’s key internal weaknesses and strength along with determining the external environment’s threats and opportunities. Therefore, the SWOT analysis of Boeing also includes strengths, weaknesses, opportunities and threats.

• Strength: One of the main advantages of the company is that there is a well-defined leadership mandate that strategically includes evaluating the company’s large-scale production, support actions, commercial defence, enhancement operations and evaluating replacement systems(George, 2017). Moreover, the company is also engagement in actions to globalize its services and products to more than 90 countries to enhance strategic associations with relative aircraft companies all over the globe. In addition to that, the company’s revenue doubles more that its competitor’s due to its collaboration with the FAA and the governments in defining competitive parameters.
• Weaknesses: The Boeing Company has failed to meet the stipulated delivery deadlines of commercial airplanes to potential clients. Over the past decade, the delays were believed to have been caused due to poor engineering competencies or the negligence of distributers. Due to this weakness, the market share of the company is considerably shifting to the Airbus Company. Additional, the financial performance on selective segments of the company has significantly been affect due to delays. For example, the revenue from commercial aircraft subdivision declined significantly from 6% in 2010, which led to a 13% decline in space systems in the same year. Moreover, the company is also facing significance issues of employment complains, environmental obligations, contract debates and property disputes(Sagini, 2007).
• Opportunities: The rising demand for commercial aircrafts is evident in Asian countries due to the transiting travelling trend. Moreover, the company’s surge to obtain modern equipment and defence systems has let to creation of more opportunities for the company to embrace new markets. The 2008’s financial crisis also opened more acquisition chances for Boeing in the niche area of logistics and supply chains. In addition, the international contract on inventory networking between the company and the British airline open more up more supply chain chances.
• Threats: In consideration to commercial aircrafts, the Airbus Company is the main Boeing’s competitor. Moreover, the company might face a new entrant threat from China since its government has plotted on the initiation commercial aircrafts by 2020(Hong, 2008). Another threat faced by the company is the strikes of workers as the firm’s 36% of the staff is union-centred which reflectively indicates why the company has faced minor delivery delays in the recent years. In addition, the 2011’s earthquake that happened in Eastern Japan led to a significant impact on the company’s airplanes 787 and 787 since approximately 35% of the company’s distributers operated from East Japan.

For Boeing to recover its market impact after the 9/11 attack and to effectively compete with the Airbus Company, it needs to strategize on launching new aircrafts (Crafton, 2015). Prior to its success in the airline industry, the company has started to lose its market share due to observable delays in the delivery of significant airline equipment to potential clients. Moreover, the delays are causing the company to lose more revenues and incurring extra costs in retaining a competitive advantage. To launching the new product, the company will require to evaluate the costs of the Boeing’s 787, which, according to 2008 estimate budget, totalled to more than 120% in reference to the original budget. The urgency to launch a strategic product is referenced from the observable delays recorded from 2008 in the scheduled delivery the 787 Dreamliner.

Another strategic concern is related to the competency of Boeing engineers. The company’s engineers lack the expected knowledge in the making of airplanes using composite material since the past products and commercial aircrafts were designed using aluminium materials. This concern appears due to the company’s prompt and collective exercise of change management in a short period. The change entailed introduction of a new technology, designing equipment and supply chain, which resulted to an overpass of management capabilities over a significant period.

It is apparent that the company is facing a significant strategic problem of delivery delays because of ineffectual information systems (the Supply Chain Information System- SCIS) for supply chains in both the internal and external environment. After experiencing an extensive delay in delivery a particular model of aircraft, it is fundamental for the company to consider a transforming the strategic measure on the management of supply chains (Jonker and Eskildsen, 2009). The following part includes a formulation and evaluation of a recommendable approach for the company to overcome any future delays in the enhancement of a new aircraft for future stability.

Value Chain Analysis

For technological implementation in the manufacturing and designing of a new aircraft model, the company should deal with experienced and competent equipment manufacturers around the globe. After choosing intellectual distributers, it is fundamental for the company to invest more effort in R&D and collaborate with suppliers. Large companies frequently face strategic concerns due to limitation and stoppage of communication systems with relevance distributers, departments and manufacturers (Vanitha, 2012). As a result, cutting and limiting communication may lead to delay in the future delivery processes or production activities. The instance of communication limitation is apparent in Boeing’s analysis when the firm decided to employ an external company to re-establish Boeing’s corporate culture for aircraft segment in 2010 to curb the delay concern. However, this effort failed due to external and internal barrier to communication (Ungerer and Herholdt, 2016). For the company to tackle current strategic issues on delays, it needs to develop its information systems concerning supply chain systems to enhance effective internal and external communication. Effective systems of communication automate the circulation of data from the company to its distributers to heighten sourcing, planning, delivery and manufacturing of products (Fearne, Garcia and Dent, 2012). The integration of an effective communication system is centred on the approach of processes, technology and the people.

Transformation in Boeing’s Organisation (The People’s Perception)

According to Cook, Macaulay and Coldicott (2004), the people have a fundamental obligation to enhance the implementation of a particular strategy. In order for Boeing to implement the SCIS communication strategy effectively, the company should transform its functionality and business level and structure. At a commercial level, the employees are obliged to implement SCIS by applying actions to enhance current systems of formation supply. For instance, the company may acquire the ERP licence or allow for the customization of existing packages of (Enterprise Resource Planner) ERP to achieve the expected criterion. At a functionality level, worker will be obliged to ensure that tasks are coordinated to one another to disclose strategic goals and objectives

Transformation in Management (Processes’ Perception)

In the implementation the international growth strategy, the scope and nature of transformation is adaptive (Guerra-Garcia et al., 2018). Moreover, the Gantt indicated in figure 1 below indicates fundamental activities that enhance change management (Ong, Wang and Zainon, 2016).

Table 1: Gantt chart

Conclusion

This case study analysis has evaluated both the internal and external commercial environments to recognize the extent of strategic compatibility in reference to current the current Boeing environments. Resultantly, the international growth strategic measure shows that Boeing is facing a delay concern in following the enhancement of model 787 (the Dreamliner). The delay on delivering of aircrafts resulted from lack of proper management of the company’s supply chains and outsourcing the manufacture and design of the model. Moreover, the company has may prompt transition on use of the composite equipment initiative and aircraft redesigning tools within a short period. For the company to eliminate or minimize delivery delays in future, the SCIS developmental strategies is effective considering the process, people and technological initiatives and  relevant control systems (Wu, 2013).These approaches enhance the relationship of suppliers to avoid causing any delays in future.

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