Strategic Management: Boeing - Essay Example

Strategic Management: Boeing Theres a fundamental distinction between strategy and operational effectiveness. Operational effectiveness is marked bythe returns on investments and other financial details, but Strategy is about taking a long term perspective, making strategic moves, and trade-offs. Organizations prepare strategies for long term survival. Strategic management function becomes all the more important in case of large organizations. Other functional management areas like Human Resources, Finance etc. deal with only a part of the organization or its activity. At times two or more such areas may need to take assistance from each other. But strategic management relates to the management of the organization as a whole. Different set of persons may contribute in different proportions towards making strategic moves. Strategic decisions are concerned with the issue of setting a direction for the organization to move or the course the organization will follow. It is not counted merely in terms of the financial results but other factors like brand equity, market standing, media publicity, customer loyalty etc are the yardsticks which measure the strategic moves. Boeing (2007) states1 that it is the worlds leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined, with capabilities in rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced information and communication systems. Boeing is indeed in an enviable business with Airbus as the only major competitor in the global aircraft industry. The reach of Boeings extends to customers in around 145 countries around the world, and the company is the number one U.S. exporter in terms of sales. But the industry requires huge investments in setting up facilities, arranging the specializations and very high operation costs. Performance of the company has been outstanding in the recent past. Strategic management can be described as what Bernard (1962) called ‘maintaining the organization in operation’2. For any organization to function effectively; three main aspects are critical; Eliciting the contribution from all concerned Organizing the workforce by assigning them the responsibilities, and Developing an information system for monitoring and coordination activities. Boeing has shown to the world that it has a long tradition of aerospace leadership and innovation. With regular inputs to Research and Development activities, Boeing has been continuing to expand its product line and services to meet emerging customer needs. Taking fullest advantage of the opportunities presented by the IT sector, Boeing launched Exostar3 an e-business web-portal in March 2000 together with BAE Systems, Lockheed Martin, and Raytheon with Rolls-Royce joining in June of the following year. Exostar is a global exchange for the aerospace and defense industry allowing suppliers, manufacturers, service providers, government organizations, and airlines to trade in an e-commerce environment. Boeing makes a sale of more than $2 million over the Internet in every 24 hours. In the recent past Boeings outsourcing strategy4 has been widely debated the worldover. Boeing has started taking the services of Russian aircraft engineers and Indian software experts because of their high technical skills and cheap wages. Business online (2006) reports that Jim Morris, Boeings vice-president for engineering & manufacturing and the architect of the companys outsourcing strategy, has stated that, “We look all around the world for the best technology, the best intellectual capability, and for the best manufacturing capability in a serious effort to improve our competitiveness”. Outsourcing labor intensive jobs has helped Boeing to concentrate on the expert areas where it has a competitive edge, for example its capabilities include5 creating new, more efficient members of the commercial airplane family; integrating military platforms, defense systems and the war-fighter through network-centric operations; creating advanced technology solutions that reach across business units; e-enabling airplanes and providing connectivity on moving platforms; and arranging financing solutions for our customers. Internal Factors Analysis Summary (IFAS) Strengths and Weakness are the internal factors that affect Boeing in making strategic moves. Some such factors are as listed. Strengths i. Worlds leading aerospace company with over 75 percent of the market ii. Even after the availability of a range of new and modern aircrafts, several mature, but still popular, models that are generating high cash flow (737 & 747) iii. Highly skilled engineering culture iv. Employs more than 155,000 people in some 67 countries v. Strong financials and operating performances with reported net earnings for the third quarter of 2006 totaling $694 million. Growth in revenue stands at 19% totaling about $14.7 billion vi. Broad product line that covers most major market niches. vii. Boeing has been the premier manufacturer of commercial jetliners for more than 50 years viii. With the merger of Boeing and McDonnell Douglas in 1997, Boeings strength has further increased ix. Worlds second-largest defense company. Boeing Integrated Defense Systems provides end-to-end services for large-scale systems that combine sophisticated communication networks with air-, land-, sea- and space-based platforms for global military, government and commercial customers x. Boeing exports $53 million of goods and services to customers worldwide in every 24 hrs with 3 million passengers boarding 42,300 flights on Boeing jetliners carrying them to nearly every country on earth Weaknesses i. Management at Boeing is a product of its military heritage, which is a hierarchical, ridged, and semi-autocratic style. While modern management principles call for much more flexibility. ii. As the final product requires high precision and skilled work, Boeing has maintained a an overly secretive and security - conscious image iii. At times poor vertical and horizontal communications within the company shop floor results in employees feeling alienated from management iv. Loss of technological leadership to Airbus - fly by wire avionics v. Highly investment intensive and labor intensive business. External Factors Analysis Summary (EFAS) Opportunities and Threats are the main components of the external factors affecting an organisation. For Boeing these factors can be listed as below. Opportunities i. FAA (US) Aerospace forecast for the period 2006-2017 states that By 2017, U.S. commercial air carriers are projected to fly 1.6 trillion ASMs and transport 1.07 billion enplaned passengers a total of 1.256 trillion passenger miles. Passenger trip length is also forecast to increase by more than 120 miles over the forecast to 1,171.9 miles (up 10.2 miles annually). ii. New technological breakthroughs in IT, computers and electronics industries, providing opportunity to serve the customer in a better way. iii. New product development efforts are focused on the Boeing 787 Dreamliner, a super-efficient airplane that is expected to be in service in 2008. Threats i. Global slowdown (decelerating growth) in airlines business, particularly after the 9/11 incident ii. Shrinking profit margins for airlines industry, resulting in closing down of many airlines iii. Fluctuating oil prices and turbulent political scene in the middle-east region iv. New entrants in the business particularly from India, China and Japan. These countries are trying very hard to tap the market with state owned companies getting full support from respective governments v. Widespread opposition of the outsourcing moves my the unions at Boeing as well as from other unions in the country, fearing widespread retrenchments. References: 1. Boeing , Retrieved January 11, 2007 from Boeing website: http://www.boeing.com/companyoffices/aboutus/ 2. Bernard, C.I. (1962), Functions of Executives, Cambridge, Mass, Harvard University Press. 3. M. Theodore Farris II, C. Michael Wittmann and Ron Hasty (2004), Aftermarket support and the supply chain, International Journal of Physical Distribution & Logistics Management Vol. 35 No. 1, 2005 pp. 6-19 4. Boeings Global Strategy Takes Off’ (January 30, 2006). Retrieved January 11, 2007 from Businessweek online edition at: http://www.businessweek.com/magazine/content/06_05/b3969417.htm 5. FAA Aerospace Forecasts for fiscal years 2006–2017. Retrieved January 11, 2007 from FAA (Fedeeral Aviation Administration) website: http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2006-2017/ Read More