It is widely known that Boeing presently has become largest aerospace company as well as leading manufacturer of aerospace and security system. As US’s biggest manufacturing exporter, Boeing provides airline services to US and allied government customers in more than 150 nations. On the other side, Boeing Global Services provides a complete, cost competitive services for commercial defense as well as space customers (Boeing.com 2018). With the help of engineering, digital analytics, training support spanning and supply chain across both government and commercial service deals, Boeing is exclusively positioned to deliver world class services to customers. Furthermore, the service offering of Boeing is not limited here, as in the field of Boeing Defense, Space and Security, Boeing remains as the only aerospace manufacturer that provides products, which enabling its customers to achieve mission requirements with the inclusion of sea bed and outer space. There is no doubt that organization serves a diverse customer base but the portfolio is particularly focused in major six market areas such as commercial Derivatives, Military Rotocraft, Human Space Exploration and Autonomous System and Services (Boeing.com 2018). Thus, it is worth stating that when it comes to expanding the services and markets, Boeing is never standing behind. So, China’s emerging economy is a significant market opportunity for Boeing as the part of global expansion.
It has been identified that the world market is widely influenced by emerging economy of China which is particularly luring the aerospace airplane manufacturers, as Chinese government who looks after the business jet management, had imposed stiff provisions for business jets with respect to allowance, is now welcoming business air jets both domestic and international (Fu et al. 2015). As the economy is flourishing, many global and existing aerospace manufacturers are gearing themselves up for the growing demands of business jet services. Presently, Beech Hawker, Cessna and Gulfstream of United States are the major and traditional competitions who are trying to deal with this growing demands business air jets. Nonetheless, the demand is rapidly growing demands.
Even though the demands are high, acquiring China’s aerospace and business jet market will not be an easy task, the existing competitor Gulfstream has a strong position in the market. According to the case study, Gulfstream has tremendous record of acquiring every order and it tends to apply market-oriented approach. Although acquiring Chinese market seems to be difficult, observing the demand the local Chinese aerospace take the advantages of leniency Chinese government with respect to the allowance of business air jet (Fu, Zhang and Lei 2012). Nevertheless, it is worth stating that the demands business airline in the Chinese market will further grow and on the basis of the scenario, Boeing should enter the market by avoiding the possible the challenges and threats from the existing competitors. Hence, the major market barriers for Boeing is that entering China market which is already acquired by large global competitors and dealing with excessive tax and provisions from Chinese government on global businesses.
According to the study conducted by Zhang, YangWang and Zhang (2014), it is certain that for quantifying resources and capability as strategic, the business has to be organized to utilize or exploit those resources and capabilities. It is observed that starting and running an effective airline is effective as it needs extensive resources, capabilities and core competencies. When it comes to Boeing strategic capability, it is identified that Boeing commercial airplane segment is strategically fit as well as developed division in terms of enhancing and managing existing resources that guide the business to design distinctive capabilities and core competencies. The concept of boundary of business makes complete sense with respect to last dimension as it deals with the questions of whether the business is supposed to design and manufacture resource itself or it commend it to a partner (Lin and Wu 2014).
Particularly, it has been identified that with a series of consideration to the newly developed architecture for the electronic system which could affect the flight control. Till date, aircraft delivered by Boeing has been designed by instilling federated architecture, where computers have been allocated to a single function (Lawrence and Thornton 2017). The recently developed architecture by Boeing called “Modular” and “Distributed” leads to the distribution of computer technologies throughout the entire aircraft as well as support the involvement of many functions in single computer technology (Al-Najjar et al. 2017). When it comes to capability, the influence of architectural changes made by Boeing can call for a strong and comprehensive implications of architect-integrators in their design. Therefore, existing capabilities and resources indicate that Boeing has enhanced technology background.
It is certain that economy fluctuation is a permanent scenario in each market but globalization plays a great role in changing the market scenario. It has been particularly identified that China’s socialist economy remains as world’s second largest economy by the nominal growth and GDP as well as world largest economy with respect to purchasing power parity. Tuschke, Sanders and Hernandez, (2014) has mentioned that China is a global hub for manufacturing as well as is the largest manufacturing economy in the world. Specifically, China has become the second biggest domestic aviation market in the globe, apart from being the fastest developing market with 9.5% passenger traffic growth rate in the consecutive year (Ang, Benischke and Doh 2015). Moreover, as per Lawrence and Thornton (2017), Boeing market analysis has forecasted that China presently should add an additional 6800 aircraft to business commercial fleet to deal with the growing demands.
Among the vast categories of options for entering and developing business in China, there are four significant market opportunities in the aviation sector such as General aviation, commercial aviation, joint programs and technology providers. Particularly, in general aviation, presently 364 GA firms in China are running their operation and almost 2185 registered GA aircrafts are there in the market along with projected 77000 GA flying hours in 2017 (De Beule, Elia and Piscitello 2014). In addition to this, there is limited barriers to General Aviation for market entrance. It is also identified that by 2020, China plans to have more than 500 GA aircraft as well as 500 GA airports, which is certainly a significant opportunity for Boeing. Albu, Albu and Alexander (2014), commented that air resources might face challenges and there is an extensive use of airspace by the military. The author of this article has also mentioned that about 50% of registered GA pilots find business in domestic environment, while less than 100 new GA pilots demanded annually (Jiang and Zhang 2016). However, there is a still demand for high-skilled pilots in some particular sector. The following figure shows the market structure and key players of commercial business aviation in China.
In spite of some significant concerns, China will still remain an extremely attractive market several US aerospace businesses. Lei et al. (2016) mentioned that almost 90% of U.S China Business Council member organizations respond to a USCBC survey which indicates that their operation in China is profitable. FDI into China experienced a moderate growth in 2015, increasing 5.3% annual rate compared to the decrease of 3% in 2012 (Gaur, Kumar and Singh 2014). According to Tuschke, Sanders and Hernandez (2014), additional inbound capacity is rapidly growing into Chinese market which suggests that the 2022 milestone, may actually arrive in 2021. This could trump all expectations. The article (Li and Liu 2014), also reveal the fact that US based airlines could receive 342 new aircraft in the coming year compared to 327 in China, which means aviation markets cold add one aircraft per day. Thus, any new aircraft manufacturer with adequate capabilities could lead to change and plans to provide more than twice as many aircraft as a large competitor like Gulfstream does.
Beside Chinese market, a market trend can be observed in other Asian countries like India. At present, India has no less than 250 jets owned by business tycoons of first rows. As per the market prediction, India will be the owner of 1000+ private jets and aircrafts in total in coming decades. Comparing with the developed countries India has a low growth rate as far as this industry is concerned. The difference with the Chinese market is that in spite of the economical imbalance China has a demand of private jets within industry. On the other hand, being a developing country, India has overshadowed both China and Japan as far as number of owned Private jets are concerned. However, as a market threat Boeing can face Indians changing attitude towards buying private jets as they feel post purchase maintenance charges of infrastructure is not convenient for them. Currently, as of now the market trend is in favour of aircraft manufacturing companies like Boeing.
Strategy adopted by Boeing to pursue the emerging economy in China
Being one of the biggest aircraft manufacturing company of American origin; it has mastered the operations of defence and aerospace. The company has a positive global image as well. Acknowledging the favourable business environment in China Boeing has decided to expand its territory to china’s private or business jet market. China is known as the land of second largest billionaire after US (Fu et al. 2015). Therefore, buying power of the market in terms of selling business jets or private jets is powerful enough. As compared to the buying power, the number of business jets are 400, which are currently flying across virgin sky of China. In order to explore this opportunity Boeing has decided to enter into the China’s virgin skies. Boeing has considered a strategic approach while planning to enter into the Chinese market as well as they have decided to handle corporate social responsibility with highest priority as it will assist them to sustain in the market and enhance competitive edge.
There are three major consideration, which must be taken while going global. Boeing has its positive global reputation of delivering quality service. As per the description of De Beule, Elia and Piscitello (2014), while entering into Chinese market the company will consider Chinese political, economic, social, technological and legal orientation. According to the current market condition, Chinese market has immense potential for jet makers especially who deals with manufacturing of business or private jets. Before entering into market, it is essential to look into the country’s resources. According to the provided case study. In order to enter into the market, as described in Ang, Benischke and Doh, (2015), Boeing has adapted 737 to offer ‘Boeing Business Jet’, which can carry up to 60 passengers. Moreover, before establishing its individual unit the firm can consider exporting and joint venture to avoid the extreme initial competition. Exportation of parts and collaborating with other existing aircraft manufacturers Boeing can think of preparing a strong customer base first to receive a warm welcome after its individual establishment. Besides, several strategies regarding outsourcing, by performing acquisitions will be helpful too. Strategies are as follows.
As described in this framework, it has been explained that which strategies must be adopted according to the nature of the market and product or services.
Although, there are several disadvantages of the strategic approach yet with right research and application the company can learn the whereabouts of new business environment of China and reduce the initial risk factors.
Companies who comply with corporate social responsibility norms are likely to create a positive impact on the targeted customer base. Apart from the quality of the product and services customers tend to examine how far the company is considering ethics while practicing business. As argued by (Hofman and Newman 2014), a successful CSR strategy works as one of the growth manipulating factors in terms of entering into new market. CSR Strategy demands to focus on core organizational goals, investment in native manufacturing units to overcome obstacles of market acceptation and access to the extensive market information to adapt it as a business strategy. CSR deals with compliance of social and environmental sustainability norms, which must be under ethical consideration of every business organisation. Market position automatically goes higher as this strategy provides huge commitment towards society by executing both the short and long-term projects. However, if Boeing considers integrating their organisational goal and decides to serve community issues of China the firm will receive a prosperous entry undoubtedly.
China has been detected as promising market for Jet makers. However, without learning the necessary details about the emerging market it would be foolishness to establish individual manufacturing unit. Therefore, Boeing needs to consider exportation, joint venture and contract manufacturing first in order to enter into the Chinese market.
Exportation of aircraft manufacturing parts, is wise until the company realises there is no opportunity of attracting the customers attention in the first place. The core company will be highlighted in the market with highest priority. Secondly, as far as the joint venture is concerned the control of the business will be on hands of the native company mostly. Differences of opinion is a common point of dissatisfaction while working on a venture like this. Although, both the strategies are good with mitigating risk factors and handling the competitors. Contract manufacturing reduces the authorization over the produced material and quality of the product is differing from the original American Boeing.
Although, according to the current condition of the Chinese market, there is an increasing demand of business or private Jets yet market threat can be raised in no time if the Government consider improving railway facilities more. Acknowledging the slow economic condition of China Government has shifted its focus on commercial jets. However, issues will raise if railways receive more importance. Besides, a threat of competition from Gulfstream is present anyway. Gulfstream has achieved highest market share already by selling about 100 private jets across China. Boeing is going to face immense competition from this company as both the companies are quality conscious and carry equal potential to generate revenue from the Chinese market. On the contrary, as described in Jiang and Zhang (2016), Boeing is yet to establish a trustworthy relationship with their targeted customers. Therefore, above-mentioned marketing strategies can be considered in order to enter in the emerging market of China.
References
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Al-Najjar, N., Aoyagi, I., Goldstein, G., Korupp, T., Liu, B. and Singh, S., 2017. Boeing and Airbus: Competitive Strategy in the Very-Large-Aircraft Market. Kellogg School of Management Cases, pp.1-16.
Ang, S.H., Benischke, M.H. and Doh, J.P., 2015. The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), pp.1536-1553.
Boeing.com. 2018. Boeing: Our Company. [online] Available at: https://www.boeing.com/company/#/bgs [Accessed 15 Oct. 2018].
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Lei, Z., Yu, M., Chen, R. and O’Connell, J.F., 2016. Liberalization of China–US air transport market: Assessing the impacts of the 2004 and 2007 protocols. Journal of Transport Geography, 50, pp.24-32.
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