Financial Analysis And Comparison Of Boeing With Closest Competitor – Airbus

Change in Financials and Comparison with the Closest Competitor

Boeing is considered as one of the largest aerospace organization and leader in terms of manufacturing of commercial jetliners for defense, security systems and space. The company is further identified as one of the top exporters in US for supporting airline and allied government customers across 150 countries. The products of the airline company are seen to be tailored for services including “military aircraft, satellites, weapons, electronic appliances, defense systems, launch systems, advanced information and communication systems. The operations of the company are based on performance-based logistics and training”.

The report has aimed to discuss the financial analysis, which includes the variations in the financials and comparison of the same with the closest competitor. The discourse of the study has identified the financial health of the firm and compared the same with the closest competitor. The external analysis of the study has been conducted with “Porter’s five forces model” and identification of the opportunities and threats using the “SWOT analysis”.  The “value chain analysis” of the firm is able to depict the areas of operations which adds to the value of the firm. This is done in terms of understanding the cost position and identification of the multiple means that might be used to facilitate implementation of a chosen business-level strategy. The important discussion in the value chain analysis has depicted the primary activities and support activities. The competitor company for Boeing is Airbus. Airbus is considered as a “European multinational corporation” which “designs, manufactures and sells civil and military aeronautical products worldwide”.

Change in Financials and comparison with the closest competitor

Comparison of Consolidated Income Statements
Particulars Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Boeing 2016	Boeing 2015	Boeing Percentage	Airbus 2016	Airbus 2015	Airbus Percentage
Revenues	94571	96114	98%	66581	64450	103%
Profit for the Period	5834	7443	78%	1000	2698	37%

Financial health of the firm and comparison with the closest competitor for 2016 and 2015

Comparison of Statement of Financial Position
Particulars	Boeing 2016	Boeing 2015	Boeing Percentage	Airbus 2016	Airbus 2015	Airbus Percentage
Total Assets	89997	94408	95%	111133	105782	105%
Capital Expenditure	2613	2450	107%	3060	2924	105%

Financial Ratios for Case firm and closest competitor for 2016 and 2015

Profitability Ratio Analysis: –
	Boeing	Airbus
Particulars	2016	2015	2016	2015
Revenue (A)	94571	96114	66581	64450
Net Profit/Loss after Tax (D)	5834	7443	1000	2698
Ordinary Equity(H)	8770	63970	3652	5973
Total Assets (G)	89997	94408	111133	105782
Gross Margin (I)	13781	14026	5264	8851
Net Profit Margin (D/A)	6.17%	7.74%	1.50%	4.19%
Return on  Equity (A/H))	66.52%	11.64%	27%	45%
Return on Assets (G/D)	6%	8%	1%	3%
Gross Profit Margin (I/A)	15%	15%	8%	14%

Efficiency Ratio Analysis
	Boeing	Airbus
Particulars	2016	2015	2016	2015
Cost of Goods Sold(A)	80790	82088	61317	55599
Inventory (H)	43199	47257	42800	7500
Revenue (A)	94571	96114	66581	64450
Total Assets (G)	89997	94408	111133	105782
Inventory Turnover Ratio (A/H))	1.87	1.74	1.43	7.41
Total Asset Turnover Ratio (A/G)	1.05	1.02	0.60	0.61

Short-Term Liquidity Ratio Analysis: –
	Boeing	Airbus
	2016	2015	2016	2015
Total Current Assets (A)	62488	68234	54948	50565
Receivables (D)	8832	8713	8101	7877
Cash and equivalents (B)	8801	11302	10143	6590
Total Current Liabilities (F)	50134	50412	55701	52878
Current Ratio (A/F)	1.25	1.35	0.99	0.96
Quick Ratio [(B+D)/F)	0.35	0.40	0.33	0.27

Debt Equity Ratio
	Boeing	Airbus
	2016	2015	2016	2015
Total Liabilities (A)	89120	88011	107481	99809
Total Assets (B)	89997	94408	111133	105782
Total Equity ©	87700	639700	36520	59730
Debt-to-total Assets Ratio  (A/B)	0.99	0.93	0.97	0.94
Debt to Equity Ratio (A/C)	1.02	0.14	2.94	1.67

The analysis of Boeing with the Michael Porter’s 5 Forces is identified below as follows:

Threat of New Entrants: Low

It is discerned that threat of new entrants for Boeing is considerably low due to the factors such as huge capital investment required at an extensive level such as Research & Development along with massive level of technologies and budget constraint. Due to the presence of the high entrance barriers there is a low threat of the new entrants. The companies operating in the regional level to produce the Boeing parts are facing considerably low threat of entrance.

Threat of Substitute: Mild

The substitute of Boeing is discerned to be considerably low, as people prefer the airline carrier largely with the time factor. The advancement in the bullet trains will be be having an effect on the manufacturing of Boeing parts in future.

Financial Health of the firm and Comparison with the Closest Competitor for 2016 and 2015

Bargaining power of Buyers: Mild

The overall determination of the bargaining power of the buyers is seen to be mild. In terms of the buyers purchasing power the buyers are seen to be facing high bargaining power. The high capital investment for the buyers is depicted for purchasing of the aircraft. The buyers are seen to be involving in the long-term contract with the seller.

Bargaining power of Suppliers: Low

The depiction of the case for aircraft manufacturing has stated that the company is involved in the outsourcing operations throughout the globe. This is evident with more than 100 firms supplying the parts of aircraft. Boeing is seen to be having the power to negotiate for the price with the suppliers for the presence of economies of scale.

Competitive Rivalry: High

The sluggish industry growth is not seen to be clear with the market leader and undifferentiated strategies, high bargaining power and existence of barrier to exit. The sluggish growth is further able to drive for the “competitive rivalry among the existing players of the industry”. In addition to this, the market is largely discerned to be duopoly which has resulted in a low profit margin in the airline industry.

Identification of opportunities and threats faced by the firm using SWOT analysis:

Opportunities

Boeing is identified to be having an increased opportunity in defense. Some of the other areas of opportunities for the company are discerned with demand for satellites and weapon systems in the space and security markets. The company may further decide to ramp up the commercial airplanes production.

Threats

Some of the prominent threats of the company is determined with increased competitive pressures. The other threats for Boeing is identified with factors such as regulatory pressures, Risks associated to directing business in additional countries and commercial interruption. In addition to this, the situation of Boeing operates with full of unique risks and threats. Some of the more prominent threat is seen with the increase in the competitive pressure by other airline operators such as Airbus. Moreover, the international competitors desire to increase the market share can create a significant pressure on the company.

The determination of the internal analysis is conducted with strength and weakness analysis by showing SWOT:

Strength

The main strength of the company is considered with “global presence, large market share, financial performance and having Airplane models with strong fuel efficiency”. Some of the wide variety of the availability of Commercial aircrafts to military aircrafts is seen as one of the major strength of the company.

Financial Ratios for Case firm and closest competitor for 2016 and 2015

Weakness

High amount of expenditure on research and development is considered as one of the main weakness of the company. The high expenditure on the post-retirement benefits and expenditures on pension is also considered as weakening factors for the company. The operational issues are further seen to be some of the other factors responsible for slow growth of the company.

The revolutionary logistics characteristics for Boeing is observed to be revolutionized with the use of “Cribmaster inventory management system”. The inventory system allows the company to track the employees for which purchase order need to be issued as per certain material. In addition to this, the company is involved in a long-term relationship with most of the suppliers. This is evident with the presence of suppliers such as “Goodrich Corporation” which has working experience with Boeing for the past 50 years. The airline company is further seen to operate as per just-in-time strategy and other Lean principles to keep costs down. In the recent times, Boeing has jointly developed their products to lead a more efficient inbound logistics system. Boeing simply helps the suppliers to create these inputs for providing greater value for the company.

Operations

The Boeing Company is seen to take several input materials to create a commercial aircraft. Some of the innovations of the company is discerned from the long line of value creating activities which makes Boeing operations to be vital in nature. The main operations are based on moving assembly line approach.

Outbound Logistics

The strategy for outbound logistics will be able to show how the planes will be delivered to the companies. Boeing is seen to be capable enough to ship it products on its own. Post purchase, the airline is provided with the keys to fly the plane in the desired destination.

Marketing & Sales

The different marketing activities of the airline company has focused more on marketing and sales more than any other company. Boeing serves a specific clientele of mostly commercial airlines and postal services. The marketing strategy is not based on a mass advertisement to the public, it is more based on trying to procure new contracts with specific customers. At times, the airlines approach for negotiation related to contracts which may take years due to the future economic conditions which must be based on forecast, manufacturing and backlogging.

Service

Boeing has collaborated with British Airways to initiate the service of Global Airline Inventory Network. This network is seen to be conducive for managing the supply chain of the spare parts of Boeing’s fleet. Due of this, British Airways was forced to take care of the own spare parts inventory. This has allowed the company to maintain better relationship with the airline to take care of the plane in the first place.

Analysis using Porter’s Five Forces Model

Boeing is seen to govern the purchase of resources of the right quality, in the “right quantity and at the right time”. The emphasis of the competitive bidding is considered to be a good business practice. This is considered with the factors such as “ability, capacity, integrity, financial status, geographical locations, performance, reliability, quality of product, delivery and overall customer-supplier relations”. This is important in assessing a possible supplier from beforehand and during a purchase contract.

The technological innovations will ensure that the companies utilise the resources in a more efficient manner. The Airplane manufacturers has used robots to achieve the same. The company has achieved several successes in winning “head-to-head competition with Airbus”. The total research and development is considered for making the planes faster.

The HRM is considered with the combating of “skills, training, communications, environment, and leadership”. Boeing believes in employees needing the gains in productivity and quality to meet the goals. The employment of the technical and HRM policies are considered with optimum efficiency which is done by carefully achieving of the long-term goals.

The main ability of the company is able to determine the segment’s demand pattern. For instance, the established economies like “North America and Europe” can predict the increase in demand for regional jets as air travellers in these regions are seen to request non-stop flights on thinner routes.

The company has faced several problems such as overheating batteries for the 787s— which is depicted to be operating on lithium ion batteries. Even with the use of proven technology the outsourcing of the parts often doesn’t fit together when the plane is being assembled. In some cases, it is discerned that the prime contractor to provide on-site quality, “supplier-management” is not able to provide technical support. There is no evidence found which can support that Boeing planned for such on-site support to the suppliers. The innovation risk for 787 was always involved with the aircraft carrier. This is considered with the outsourcing of the known technology. The risk was implied in a greater way by Boeing in the development and manufacturing process of the aircraft. There have been several instances where the airline carrier is seen to depict a relatively lesser amount of the expertise for the products. This is main seen in the areas of engines and avionics.

Boeing has aggravated the risk factors with the outsourcing model with the increasing cost and timeliness. Toyota works closely with the suppliers and responds with the appropriate concern with the integrity and mutual respect for Boeing.

SWOT Analysis

The buying decisions made by the company needs to be taken into consideration with the complete assessment of all the costs. This is considered with the fact that “make-buy decisions should not be made until after the product has been defined and the relative costs established.” The outsourcing decisions of the company should be considered with the up-front effort in planning to evade additional situation to include the major sub-assemblies which is considered with the saving the increasing cost by orders of magnitude. The supply chain implemented by the company needs to be based on the outsourcing model which was not implemented at Boeing in the traditional approach. The company needs to take the better approach towards the   labour relations, which will be able to increase the quality of the operations of Boeing.

Conclusion

The financial interpretations of the company have depicted that Boeing is in a better position in terms of the “Profitability Ratio Analysis, Efficiency Ratio Analysis, Short-Term Liquidity Ratio Analysis and Solvency ratio analysis”. There is several evidences which shows that threat of new entrants for Boeing is considerably low due to the factors such as huge capital investment required at an extensive level such as Research & Development, massive level of technologies and budget constraint. Due to the presence of the high entrance barriers there is a low threat of the new entrants. The overall determination of the bargaining power of the buyers is seen to be mild. In terms of the buyers purchasing power the buyers are seen to be facing high negotiating power. In addition to this, the company is involved in a long-term relationship with most of the suppliers. This is evident with the presence of suppliers such as “Goodrich Corporation” which has working experience with Boeing for the past 50 years. Boeing is seen to govern the purchase of materials of the right quality, in the right quantity and at the right time. The emphasis of the competitive bidding is considered to be a good business practice. The HRM is considered with the combating the “skills, training, communications, environment, and leadership”. Boeing have faith in in employees needing the gains in productivity and quality to meet the goals.

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