Boeing Internal Environment - Case Study Example

Name: University: Instructor Date: Strategic Management 1.0 Introduction A strategic plan can be defined as a document utilised for communicating with company about the goals of the organization, the actions required to realize those goals as well as all of the other vital elements created during the planning process.  For airlines, as it will be evidenced in the research paper, strategic planning is a recurrent process. Strategic plans have to consider the ever-changing and challenging competitive environment and how air travelers see that value. Deregulation has considerably impacted the airline strategies in the last few decades, and while commercial aviation regulations lighten up, airlines have gotten the freedom to change the charges in reaction to demand and competition (Boeing, 2013). Deregulation has as well made airlines develop network as well as schedule planning, and control other main features of airline business. Importantly, it has helped encourage network and traffic growth, and the ensuing competition offers improved alternative for travelers. Basically, business models for airline have continued changing so as to get used to the dynamic market. The purpose of the research paper is threefold: to describe apply different techniques to analyze Boeing external environment and assess its impact on strategy development; to analyze the Boeing internal environment, including resources, capabilities and core competencies that help in making strategic decisions; and finally to develop strategies for Boeing to achieve and maintain competitive advantage. 2.0 Boeing External Environment and Impact on Strategy Development Boeing external environment will be analyzed through PEST analysis approach, which is an important approach in analyzing the external macro environmental factors like political, economic, social-cultural, as well as technological. The aforementioned factors are crucial in the airline industry for the reason that they may well have strong effects on the business. Political factors that affect Boeing include government policies, regulations as well as laws. For almost a decade Boeing has had a strong agreements and profound relations with the Government of U.S. in addition to Federal Aviation Administration (FAA); therefore, the US government policies can be a key driving force in recognizing new aircrafts’ orders (Saeed, 2012). Correspondingly, the political involvement can as well have an effect on the company’s sales; for instance, restrictions of doing business in certain countries such as Pakistan, North Korea, and Iran may heavily impact Boeing business in such countries. The political policies, on the other hand, may boost the company productivity such as the 1979 tariff free policy of trading big commercial jetliners as well as government agreement such as U.S. ‘Open Skies’ (Drum, 2014). Economic factors: fuel prices and subsidy are extremely vital to Boeing for their every day transactions with regard to the capital cost. The 2010 dispute between Boeing and Airbus on unjust subsidies had to be settled through World Trade Organization agreement. Also, an increase in environmental restrictions, fuel costs, sophisticated weapons because of terrorism threat, as well as costs of insurance are turning out to be more fundamental for Boeing in the coming future. According to Milmo (2009), the 2008 global economic recession resulted in 20 percent decrease in aircraft prices and airlines lost $9bn (£5.7bn) because of the recession. Social factors: The social factors mainly handle the cultural factors, which are exceedingly vital to Boeing considering that the company is a multinational company and operates globally. In this case, Boeing have to take into account the social factors that may have an effect on the sale and demand of the aircrafts in the coming years; for instance, altering demands and needs of the customers because of a rise in the rate of population growth. In addition, the anti-US policy is as well having an effect on Boeing sales, particularly in West Asia which without a doubt is an extremely beneficial market for Boeing. Technological factor: at present, Boeing is using computer-based technology, which is beneficial in making commercial airplanes faster. Scores of scholars have verified the significance of making use of light weight material (specifically, composite) as well as equipment while constructing commercial airplanes. Currently, as compared to Airbus as well as other competitors, Boeing has successfully use composite light weight material in making their commercial airplanes (Cohan, 2011). 3.0 Internal Environment 3.1 Resources and Capabilities According to Sahaf (73), the competitive advantage is anchored in using the fortune of exceptional internal resources that result in developing distinguishing capabilities as well as core competencies. Basically, internal resources can be divided into two: tangible and intangible resources; whereby tangible resources consist of physical assets such as financial strength, machinery, and equipment, while intangible resources, on the other hand, consist of assets are not existing physically, but bring about improved shareholder and customer’s value like organizational culture, brand name, and reputation. Efficient integration of company’s internal resources as per Harrison and John (182) leads to competitive capabilities in achieving wide-ranging series of interconnected tasks. Generally, the company’s strategic capability connotes the capability to create as well as put strategies into practice so as to carry out the entire functions of the organization like manufacturing, human resource, finance, as well as marketing so as to accomplish continuous competitive advantages. Organizational resources as well as capabilities as per Saeed (2014) results in developed core competencies that are naturally different based on monetary, human, innovation, quality, marketing and technology resources. Without a doubt, bringing up a successful airline from scratch is exceedingly difficult since it needs wide-ranging resources, capabilities, as well as core competencies. The commercial airlines segment of Boeing is an enriched and strategically fit division with regard to creating novel as well as controlling available resources that assists the company in developing distinctive core competencies and capabilities. The Boeing commercial airline segment has a broad set of services and tools which are essential for running a successful airline. Boeing resources as well as capabilities entail Training and Flight Services, Fuel Conservation Services, Commercial Aviation Services, Boeing Capital Corporation, as well as Airport Technology (Boeing, 2013). Notably, the technology of the airport is distinguished based on engineering, planning, as well as examining services of the airport and the Capital Corporation is in charge for airplane financing. Commercial Aviation Services manage material management, maintenance services, fleet enhancement, flight operations, and customer support while Fuel Conservation Services assist Boeing in boosting the airplanes’ fuel efficiency (Boeing, 2013). Lastly, Boeing has managed to maintain the activities of flight crew training with the help of flight services and training. 3.2 Core Competencies Boeing core competencies may be divided into two groups: process innovation as well as product innovation. Through product innovation strategy, Boeing has managed to successfully forecast the market trends subsequent to getting a comprehensive and precise information of developing and implementing customer-based demands and needs (Mayer 7). Boeing process innovation strategy is rooted in the policy of Lean manufacturing that involves the resourceful utilisation of company’s supplier, inventory, and assets management in accomplishing low costs in transaction and high quality. The Boeing key competency is the capability of implementing integration of large-scale systems in developing highly developed as well as technology-based aircrafts. In addition, operational strength of Boeing is mainly anchored on different management and leadership level in achieving competitive advantage. According to Mayer (2008), organization can be perceived strategically fit if it is achieving and maintaining improved outcomes than its competitors. Differential strategy utilised by Boeing to achieve its competitive advantage is direct point-to-point traffic. This strategy was put into practice by Boeing while developing the Dreamliner (Boeing 787) which can carry passengers without stopping between secondary airports. Additionally, Boeing continually looks for opportunities, and the Global Airline Inventory Network agreement between the British Airways and Boeing is the most excellent opportunity case where Boeing was offered the chance to manage the spare parts supply chain of British Airways. The resource-based view as per Mayer (2008) is the suitable means of outlining company’s core competencies as well as unique resources. But still, as argued by Saeed (2012) between Boeing’s strategies and vision there is a competency gap considering that the company has for many times fail to meet deadlines, and delays resulting from this have resulted in losses amounting to millions of dollars (Mayer 4). Some of the reason o the delays were attributed to the Boeing outsourcing strategy over its worldwide suppliers. So as to lessen the effects of delays as well as to handle the supply chain, Boeing had to espouse a threefold strategy including quality control, on-site technical support, and acquisition. 4.0 Strategies to Achieve and Maintain Competitive Advantage 4.1 Strategic Issues So as to recover from the market shrink subsequent to 9/11 terror attacks and to rival Airbus, Boeing 787 Dreamliner was introduced by Boeing Company, which propelled it back to success. But the success did not last long; since Boeing started losing its market share once more by enduring setbacks in delivering certain products to its customers. These delays, have as a result led to enormous additional costs for Boeing, and since 2008 the cost of making Boeing’s 787 Dreamliner have risen by 120 percent in contrast to its primary budget (Cohan, 2011). Furthermore, the Dreamliner delivery schedule has been delayed seven times since 2008, and so it is obvious from a range of sources that numerous factors are resulting in the development delays of certain airplane model. The main setback as highlighted in Saeed (2012) study facing Boeing is supply chain problems given that the Boeing’s Dreamliner delivery to potential customer may be delayed by twelve months because of engine issues. Another problem identified si that Boeing lacks control over activities related to development for the reason that the company has outsourced both the manufacturing as well as design of Dreamliner (Cohan, 2011). An additional setback is that engineers of Boeing do not have the needed experience to make aircraft with composite material considering that the company has been developing its commercial airplanes through aluminum material, and not composite material. 4.2 Strategic Plan Boeing main strategic goal has been is to enhance organizational performance, profitability and quality of all products and services where quality and performance and determined by the satisfaction level of the customers, while the profitability is determined by reviewing the shareholder’s increased value as well as performance. So as to realize this strategic goals as well as manage vision and mission of the company, Boeing had to develop a standard objectives’ set, which includes constant upgrading, exceedingly motivated and skilled staff, focused and competent management, financial strength, technological excellence, in addition to dedication to future integrity. To utilize the novel technology for manufacturing and designing 787 Dreamliner, Boeing has to manage the top ultra-modern equipment architects across the globe. Subsequent to choosing highly-developed suppliers, it is as well important for Boeing to work hard to keep in contact with all the suppliers all at once. Big companies, as per Saeed (2012) often experience challenges because of poor communication patterns with various manufacturers, suppliers, or departments and so this inadequate communication leads to impediments in the processes of production. This is apparent in Boeing’s case when the company’s management hired an outside organization to redesign its organizational corporate culture early in 2010 to prevail over the delay factor. However, the effort failed as a result of external and internal communication problems. So as to handle present supply chain problems, Boeing have to improve its Supply Chain Information System (SCIS) so as to conquer the communication challenges. SCIS as per Coyle, Langley and Novack (195) is information systems, which computerize the information flow between a company and its suppliers in order to optimize the manufacturing, sourcing, planning, as well as delivery of services and products. The successful SCIS implementation is founded on well-integrated and strong approach of technology, processes, as well as people. In Boeing case, employees are crucial with regard to their competencies as well as skills in looking after multifaceted processes and making use of most modern technology. Boeing, on the other hand, must be cautious in utilising obsolete technologies that can result in processes delay. Nowadays, scores of SCIS software are accessible in the market, and the software can assist Boeing to arouse the processes of supply chain. For instance, the Enterprise Resource Planning (ERP) is versatile software with features such as supplier relationship management, and even if Boeing is updated about most modern technologies and already using ERP system for various suppliers, the company management must further improve the present ERP system considering the current supply chain crisis. Undeniably, SCIS strategy improvement is appropriate for Boeing owing to the latest feeble performance of the company, especially in the segment of commercial airplane; as well as the company is experiencing delays because of unproductive approach in supply chain management. Additionally, because of the profound effects of Japan earthquakes, Boeing must start establishing supplier relationships with other Asian countries such as China. The SCIS strategy improvement will as well be suitable for Boeing to create new relationships with Asian markets; suppliers. So as to apply SCIS strategy successfully, Boeing will have to change its functional as well as business level structures. In this case, at the business level, employees will put the strategy into practice by taking into account the pertinent measured that have to be taken so as to improve the present Supply Chain Information System. This for instance, may be achieved by acquiring more ERP licenses or tailoring the available ERP packages so as to meet the needed criteria. On the other hand, at the functional level, employees will have to make sure that all functions have coordinates with one another so as to concentrate on strategic objectives. In putting the improvement strategy into practice, the change scope as well as nature will be adaptive. Some of the core processes that should be included while managing the change are external and internal marketing research, strategy formulation, allocation of resources, process design, coordination departmental strategies, external and internal communication, incessant feedback and research, and review of control systems. Boeing should use the balanced scorecard approach in reviewing the progress of the implemented strategy subsequent to certain duration. Conclusion In conclusion, the research paper reviewed Boeing’s external and internal business environments so as to make out the level to which the company is strategically consistent with its present business environments. So as to eliminate or to minimize the delay factor, the research paper recommended an improvement strategy to Boeing. As mentioned in the study, the organizational success needs one to take risks in developing differentiated products considering that the modern businesses competition has increased the creativity and innovation needed for developing new products. Therefore, for an organization to maintain its market share it must broaden its products as well as work together with all the industrial parties. As evidenced by Boeing, the external environment is influenced by the organization mainly through its services as well as products, but when it relates with other organizations they manage to make their mark in the market. It was established that Boeing was facing supply chain issues because of inadequate communication strategies, so the strategy plan is to improve Supply Chain Information System of Boeing so as to assist the company in improving delivery of service and developing improved external and internal communication plan Work Cited Boeing. Boeing Resources. 2013. 9 December 2014. . —. Boeing: Airline strategies and business models. 2013. 9 December 2014. . Cohan, Peter. Boeing's Dreamliner Delays: Outsourcing Goes Too Far. 21 January 2011. 9 December 2014. Coyle, John, et al. Supply Chain Management: A Logistics Perspective. New York: Cengage Learning, 2012. Drum, Bruce. Dreamjet proposes trans-Atlantic Paris-New York Boeing 757 business class flights (sound familiar?). 10 May 2014. 9 Decemeber 2014. . Harrison, Jeffrey and Caron St. John. Foundations in Strategic Management. New York: Cengage Learning, 2009. Mayer, Sascha. Airbus versus Boeing. Strategic Management Report. Berlin: GRIN Verlag, 2008. Milmo, Dan. Airlines 'to lose $9bn' as they fight to survive recession. 8 June 2009. 9 December 2014. Saeed, Muhammad Sajid. Dynamics of Strategy. 29 December 2012. 9 December 2014. . Sahaf, Musadiq A. STRATEGIC MARKETING: Making Decisions for Strategic Advantage. New Delhi .: PHI Learning Pvt. Ltd, 2006. Read More