Organizational Analysis of Boeing Company - Report Example

Table of Contents

Introduction4

Analysis of External Environment6

Porter’s 5 Forces analysis of the Airline industry6

Analysis of the Internal Environment12

The mission statement of Boeing is a reflection of the company’s commitment to working in partnership to develop and provide innovative or creative solutions to improve health and safety as well as promote employee development, ensure quality and productivity in the workplace. This is achieved through its International Association of Machinists and Aerospace Workers. In order to achieve its vision of people working in collaboration as global enterprise for the aerospace industry leadership, the company focus on operating as one Boeing, by delivering customer value, leading with innovation, fueling their growth through enhanced productivity and leveraging their global strength. However, Boeing Company does all these by taking into consideration their current position and where they would like to be tomorrow (Boeing, 2016).12

As the company’s current business-level strategy, Boeing uses the current market outlook as their long-term forecast of passenger and cargo traffic. The company conducts strategic estimations of the number of airplanes that can be manufactured to support the forecast. In addition, Boeing publishes their forecast on annual basis purposely to factor within the dynamic market forces which affect the industry, and thus uses the forecast to shape their product strategy as well as guide their long-term business planning. Through publishing its forecast annually, Boeing shares their outlook with the general public to inform airlines, the financial community and suppliers of the occurring trends the company see within the industry (Boeing, 2015).12

SWOT Analysis16

Identification and explanation of the Key Strategic Issues (KSI’s) and Strategic their Alternatives17

Recommendations19

Balakrishnan, A., (2016). Boeing posts earnings of $1.74 a share vs. $1.82 expected. Retrieved April 29, 2016 from,20

<http://www.cnbc.com/2016/04/27/boeing-q1-earnings.html>20

Boeing Company (2016). A foundation of Innovation. Retrieved April 29, 2016 from,21

http://www.iam-boeing.com/about/mission.cfm21

Boeing Company (2000).Gale Encyclopedia of U.S. Economic History. Retrieved April 28, 2016 from Encyclopedia.com,21

<http://www.encyclopedia.com/doc/1G2-3406400107.html>21

Centre for Asia Pacific Aviation (2010). Strong airline demand emerges in February: IATA. Mindset shift needed for booming emerging markets. Retrieved April 28, 2016 from, <http://www.centreforaviation.com/news/2010/03/31/strong-airline-demand-emerges-in-february-iata-mindset-shift-needed-for-booming-emerging-markets/page1>21

Neale, T., (2009). For Boeing, international trade counts, even in bad times. A look at the myths and truths of trade. Boeing Frontiers/Feature Story, pp.42-49.21

Schmidt, A., (2015). The Boeing Company: From the Beginning, A brief look at Boeing’s history. Retrieved April 29, 2016 from,21

<http://marketrealist.com/2015/04/boeing-company-beginning/comments>21

Thompson, L., (2015). Boeing To Build Its First Offshore Plane Factory In China As Ex-Im Bank Withers. Retrieved April 29, 2016 from,21

<http://web.stanford.edu/class/e297a/U.S.%20Defense%20Industry%20and%20Arms%20Sales.htm>22

Appendices23

Appendix 6.1: Boeing’s Region-wise Revenue23

Appendix 6.2: Narrow-body aircraft/ airliners of Boeing Company24

24

Appendix 6.3: Boeing’s Wide-Body Aircraft24

• Introduction

Boeing Company is considered the largest aerospace company in the world. It is headquartered in Chicago and specializes in manufacturing commercial jetliners and defense, space as well as security systems. The company traces its origin from Pacific Aero Products Company, established in 1916 by William Boeing. Being the founder of the company, William Boeing was inspired by the ancient aviators and he remained determined to manufacture different practical airplanes. In a period of one year, he renamed the company as Boeing Airplane Company. Boeing after merging with McDonnell Douglas in 1997 has expanded over the years (Boeing Company, 2016).

The industries which Boeing Company is affiliated to include Aerospace, Aircraft, Aeronautical, Arms industry, Aircraft Manufacturing, Detection, Guided Missile, Search and Space Vehicle Manufacturing. The company is an American multinational corporation that is involved in the design, manufacture and sell of airplanes, rockets, rotorcrafts and satellites. The commonly known products of Boeing are its commercial jetliners such as the 737,747,767,777 and 787 groups of airline. Generally, the company works in collaboration with its subsidiaries to develop and market commercial jet aircraft. In addition, Boeing offers leasing and product support services to commercial airline industry in the world. Through research, the company produces, modifies and provides support information, space and defense systems such as military aircraft, helicopters as well as missile systems (Boeing Company, 2016).

Boeing is the largest manufacturer of both satellites and commercial jetliners across the world, and it is also America’s largest exporter, making huge sales in commercial airplanes, air traffic management, in-flight entertainment, financial services and integrated defense systems. The company makes an average annual gross profit of $ 6.9 billion, from which about half of its sales are domestic and foreign. Boeing has built strong relations with China where the company has invested 10% of its business. Today, Boeing Company has more than 169,000 employees working in over 65 countries across the world (U.S. Defense Industry and Arms Sales, 2016).

Boeing Company’s strategic outlook in relation to market forces shows that the global economic expansion will continue and the overall business operation is encouraging. Over the past years, emerging markets have contributed positively towards economic growth. The company has a strong belief that with a favorable cost environment as well as strengthening demand, quite a number of its airlines will find opportunities for record profits in the nearby future. Boeing’s long-term outlook takes into consideration the effects of market forces particularly on the growth of aviation industry. By considering the shape of the current market, the company plans to get 38,050 airlines in the next 20 years which will be valued at over $5.6 trillion. This is simply because the aviation industry is becoming more diverse, and as a result approximately 40% of all new airplanes are delivered to Asia Pacific region airlines. It is noted that the wide-body fleets will require extra 8, 830 new airplanes, and thus the airlines will find a great opportunity to serve the new markets in a more efficient way as compared in the past. With the current market outlook as its long-term forecast of passenger and cargo traffic, Boeing Company conducts strategic estimations of the number of airplanes that can be manufactured to support the forecast. The company publishes their forecast on annual basis purposely to factor within the dynamic market forces which affect the industry. Boeing uses the forecast to shape their product strategy as well as guide their long-term business planning. Through publishing its forecast annually, Boeing shares their outlook with the general public to inform airlines, the financial community and suppliers of the occurring trends the company see within the industry (Boeing, 2015).

• Analysis of External Environment
  • Porter’s 5 Forces analysis of the Airline industry

Generally, the airline industry offers very unique services to its customers because its nature of transportation makes its passengers feel a high level convenience and efficiency rendered to them. Such tender attendance is rarely provided by any other industry which may act in substitute of the airline industry. In most cases, one would see airline companies showing pride on the manner in which they treat or handle their customers during the flight. For instance, food, drinks, welcoming staff as well as entertainment are some of the key things the airline companies consider motivating for their customers. Although the service of transportation may be provided in some other industries, however, it should be noted that the airline industry always emerge the best of all them in terms of timeliness. It cannot be denied that the geographical scope in which the airline industry operates is clearly at a global level. In this case, therefore, the Porter’s five forces model becomes the ideal way to assess and respond to the significant question commonly asked in strategic management, reasons why some industries are considered more attractive than others?” The model with its five forces illustrated below will show how the airline industry competition is shaped through bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products and competitors (Centre for Asia Pacific Aviation 2010).

Based on the above illustration of the five forces, it is important to note that the airline industry is comprised of two groups of buyers. The buyer could be individual flyers who often buy tickets for various reasons either personal or business related. Other group of buyers could be; travel agencies and online portals who operate as middle man to deliver services between the airlines and flyers. With all these different groups of buyers, it means that there is always low switching costs between firms because most people would prefer to use the fight on the basis of where they are traveling to and the cost at that particular moment. Therefore, the bargaining behaviors of buyers will make the airlines pay more attention on cost, while others will focus on providing the most appealing amenities. In regard to the bargaining power of suppliers, it should be noted that the major suppliers in airline industry are the airplane manufacturers, Boeing Company and Airbus as a case in point. These to two manufactures make the inputs in this industry to appear highly standardized, making the airline companies only able to differentiate with amenities. This means that airline companies have no power to switch suppliers, and instead involve in long-term contracts with their suppliers. Given that there are few suppliers within the airline industry, the bargaining powers of suppliers cause low threat for the airline industry (Centre for Asia Pacific Aviation 2010).

Similarly, the threat of new entrants causes a low threat for the airline industry because of the low switching costs as well as lack of proprietary products or services offered. However, consumers in the airline industry have a tendency of choosing popular names of flight. Since airline tickets are often very expensive, people are not willing their money to airline firms they are not familiar with and fear for safety, making consumers to opt for firms they feel safer and have existed for a long-period of time. Additionally, airline industry involves people with plane and flying experience which limits the threat of entry. The airline industry is subject to a medium substitute risk level, implying that consumers may decide to use other forms of transportation such as bus, boat, or train to reach their destination. In terms of cost, convenience and service, Airlines remains the best form of transportation. Sometimes, consumers go for other methods of transportations for different reasons which include cost particularly if they do not intend to travel very far, and this raises the risk. Concerning the aspect of rivalry among existing players, it is important to understand that rivalry within the airline industry is very high for many reasons, for instance, the industry is very stagnant. Competitors in this industry are not developing even in the long-run and tend not to be under or over capacitated. The main products-the planes are considered to be highly complex in nature, which heightens the competition. However, the competition is sometimes reduced by the brand identities of various firms, for instance, Jetblue is liked for its amenities while Southwest is commonly known or used because of its low prices (Centre for Asia Pacific Aviation 2010).

In summary, the competition of existing firms and the power of suppliers can be seen as the strongest of the five forces in the airline industry. From Aircraft Manufacturing Industry life analysis in relation to the operation of Boeing, it can be noted that the company is well positioned as a broad, balanced and global enterprise symbolizing the future of aerospace.

From the analysis of the political circles and legal environment in which the company operates, it can be noted that Boeing is popularly known for its strong advocacy or support for international trade. It is notable that Boeing plays major role in debating over issues of U.S. trade policy such as policies and programs aimed at ensuring the competitiveness of U.S as well as assist workers displaced by trade. It is apparent that being a global company and of the largest exporters of the manufactured goods from U.S, Boeing achieves significant benefits from international trade. Today, it is crucial to understand that global markets have become significant to Boeing Company in the sense that 40% of their total revenue are obtained from customers outside the U.S. Furthermore, international sales contribute about 14 percent of Integrated Defense Systems total revenue. A part from supporting the Boeing’s growth, it can be noted that international trade helps the company to improve its productivity because global partners work to make sure that Boeing’s products and services become of high quality and more competitive. As a result of this holistic commitment, all Boeing stakeholders in particular, customers, employees, investors and suppliers benefit a great deal. Thus, Boeing Company has decided to stay fully-engaged on matters associated with trade by fighting against protectionism, advocating for lower barriers to international trade as well as working to ensure fair trade and supporting workers displaced by trade (Neale, 2009, p.42-43).

In regard to economic, technological, social and cultural forces affecting the airline manufacturing industry, it is crucial to note that the increased tensions creates a high demand for the company’s defense and security products. Therefore, Boeing continues to experience a strong order growth in future. However, with stiff competition that Boeing faces from global competitors, for instance, Airbus, Bombardier and Embraer ((Boeing, 2005). It means that the company’s competition for commercial aircraft products is intensifying. Therefore, the company will have to advance more in technologies and develop unique aircraft products in order to maintain the top position in the aerospace market. The company also needs to improve on its weaknesses resulting from its own actions and lack of efficient handling of its operations.

The Organizational Structure and Culture of Boeing Company is built and sustainably implemented by encouraging its employees to pay more attention on the company’s operating philosophy which focus on running healthy core business, leveraging strengths into developing new products and services as well as opening up new frontiers. This clearly shows that Boeing Company is actively committed to seeking growth opportunities in the world. By employing more than 156, 000 people in 38 states within the U.S and in operating in 70 countries, having about 11,350 suppliers within the 66 countries, its capacity to manufacture partnerships with companies across the world, all these reflect how Boeing Company is ready for change and willing to adapt in a rapidly changing or dynamic global economy with the objective of sustainably surviving, growing and prospering in the global market of aerospace. In order to develop its global scope, Boeing Company has also established its own research, design and technology enhancement centers and programs within multiple countries (Boeing, 2005).

• Analysis of the Internal Environment
  • The mission statement of Boeing is a reflection of the company’s commitment to working in partnership to develop and provide innovative or creative solutions to improve health and safety as well as promote employee development, ensure quality and productivity in the workplace. This is achieved through its International Association of Machinists and Aerospace Workers. In order to achieve its vision of people working in collaboration as global enterprise for the aerospace industry leadership, the company focus on operating as one Boeing, by delivering customer value, leading with innovation, fueling their growth through enhanced productivity and leveraging their global strength. However, Boeing Company does all these by taking into consideration their current position and where they would like to be tomorrow (Boeing, 2016).
  • As the company’s current business-level strategy, Boeing uses the current market outlook as their long-term forecast of passenger and cargo traffic. The company conducts strategic estimations of the number of airplanes that can be manufactured to support the forecast. In addition, Boeing publishes their forecast on annual basis purposely to factor within the dynamic market forces which affect the industry, and thus uses the forecast to shape their product strategy as well as guide their long-term business planning. Through publishing its forecast annually, Boeing shares their outlook with the general public to inform airlines, the financial community and suppliers of the occurring trends the company see within the industry (Boeing, 2015).

The Narrow-Body aircraft/ airliners of Boeing Company have cabin diameters which typically range from 10–13 feet wide, with seating configurations as illustrated in-appendix 2. Boeing Company develops a large number of aircraft variants which are used in the wide-body aircraft segment. The company’s Wide-Body Aircraft families include; 747, 767, 777, and 787 which compete fiercely with Airbus to serve this segment. Additionally, these aircrafts are commonly used for both transcontinental and international passenger as well as freight routes (Schmidt, 2015).

From their functional or value chain strategy analysis, it can be noted that the Boeing Company is one of the largest aerospace companies worldwide, and has been leading the aircraft manufacturer for 30 consecutive years. Ever since Boeing merged with McDonnell Douglas in 1997, the company has successfully managed the continuing demand for commercial passenger airliners with its increased defense contracts, which is estimated to account 30% of their business. In so doing, Boeing has taken lead in the aircraft manufacturing market through their primary functions or businesses namely; commercial aircraft construction, computer services as well as defense and space. Although its involvement in the lunar missions seems to be the company’s most spectacular moment, Boeing has firmly maintained its involvement in the space program. The company has been sustainably launching the Delta rockets, playing a major role in Space Shuttle operations. It also processes a variety of space suits and equipment (Boeing Company, 2000).

Boeing manufactures two largest commercial aircraft that carry 100-500 passengers and companies in the world-Airbus. Basically, Boeing Company focuses on the production of wide-body aircrafts that have the capacity of serving long-range destinations. The Airbus Boeing companies serve the narrow-body segment, which enabled with the four-to-seven-across seating. Other companies affiliated to Boeing venture in narrow-body aircraft, and thus achieve their stability through smaller three-and-four cross seating designs and turboprop aircraft (Schmidt, 2015).

The Financial analysis of the Boeing firm shows that the company’s planes are typically more technologically advanced compared to those of their competitors. However, their planes often are purchased at a higher cost than Airbus offerings albeit being economical to operate within the lifetime of the aircraft. The global market share of Boeing has been sustainably facilitated by the Federal export financing. By setting the price-tags frequently over $100 million per plane, Boeing has emerged as one of the most expensive categories of capital equipment (Thompson, 2015).

The analysts’ report shows that Boeing as an airplane maker is expected to report an increase in their first-quarter earnings per share from $1.74 to $1.97 in the year-earlier and increased revenue for the quarter from 22.15 to $22.63 billion. Although the company has seen a boost from the military deliveries, it was weighed below by investments within a tanker program, seen to be in the transition. Research indicates that Boeing recorded a tanker charger of about $156 million, which is approximately 24% per share in quarter period whilst developing the KC-46 aerial refueling tanker needed for the Air Force as illustrated below;

Boeing’s teams are focused more on delivering on their commitments such as the production ramp-up related to their huge and diverse back-long, improving on their companywide performance on quality, safety and production, paying back greater value to shareholders by ensuring profitable growth as well as investing in the future as they mark their second century in business (Balakrishnan, 2016).

The Organizational Structure and Culture of Boeing Company is built and sustainably implemented by encouraging its employees to pay more attention on the company’s operating philosophy which focus on running healthy core business, leveraging strengths into developing new products and services as well as opening up new frontiers. This clearly shows that Boeing Company is actively committed to seeking growth opportunities in the world. By employing more than 156, 000 people in 38 states within the U.S and in operating in 70 countries, having about 11,350 suppliers within the 66 countries, its capacity to manufacture partnerships with companies across the world, all these reflect how Boeing Company is ready for change and willing to adapt in a rapidly changing or dynamic global economy with the objective of sustainably surviving, growing and prospering in the global market of aerospace. In order to develop its global scope, Boeing Company has also established its own research, design and technology enhancement centers and programs within multiple countries (Boeing, 2005).

Generally, the strength and competitive advantage of Boeing result from the commitment of its employees. It is important to note that the company focuses more on its vision ensuring that people are working together as a global enterprise for enhancing aerospace leadership. Therefore, all workers in the Boeing Company are encouraged to strive for sustainable quality improvement. In particular, the company invests in its workforce through offering benefits programs as well as fostering a balanced work-life culture. For example, Boeing Company has Lifelong Learning Program, which specifically promotes advance learning and creates career development opportunities for all its employees at different levels. The company is also committed to enhancing the quality of life within those communities where they do business, and some of the strategies through which Boeing exercises corporate citizenship is cash donations, employee involvement and in-kind services. This implies that corporate citizenship is one of the core values driving the business operation or a unique way Boeing does its business (Boeing, 2005).

• • SWOT Analysis

Strengths

-strong international ties and focus on research and development

-wide variety of jetliners able to cater for huge and diverse market

-international presence and global network

Weakness

-787 Dream-liner gulps cash

-declining performance of Boeing’s integrated defense systems division

Opportunities

-Rising demand for its defense products and commercial airplanes

-growing demand within Asian-Pacific, Europe and South America

-strong backlog as well as order growth

Threats

-more defense cuts are likely to hamper revenues

-faces stiff competition from both domestics and international companies

-heavy dependence on U.S government contracts

• • Identification and explanation of the Key Strategic Issues (KSI’s) and Strategic their Alternatives

Although strengths of a company are usually built over time, Boeing Company being on competitive edge over other players within the aerospace industry has several strengths such as its strong presence particularly in the domestics markets. Boeing is well-known as the U.S government’s second largest manufacturer or contractor in defense products, which sustains the business of the company. The ability to offer a variety of commercial jetliner families such as 717,737, 747, 757, 767 and 777 is also a major boost for Boeing. Over and above, Boeing Company aims to build sustainable and strong relationships particularly with its customer and suppliers, and thus enabling the company to develop and build on its global partnerships to advance in technologies as well as design concepts of its aircraft products. Boeing also focuses on venturing in development of technically advanced aerospace systems as way to achieve advantage over its competitors (Schmidt, 2015).

Given all these strengths, the company has rich opportunities available to it because the aerospace industry is currently having demand for its products in the Asia-Pacific, African regions and Middle East. The increased tensions would mean a high demand for the company’s defense and security products. Therefore, Boeing continues to experience a strong order growth in future. With stiff competition that Boeing faces from global competitors, for instance, Airbus, Bombardier and Embraer, it means that the company’s competition for commercial aircraft products is intensifying. Therefore, the company will have to advance more in technologies in order to maintain the top position in the aerospace market. The company also needs to improve on its weaknesses resulting from its own actions and lack of efficient handling of its operations. For instance, Boeing needs to focus on venturing in projects that will not cause production delays, cost overruns or technical problems as it was the case with its 787 Dream-liner project that forced the company to use a lot of cash beyond its projected estimates. It is unfortunate that the public support for international trade seems encouraging only when times are favorable, and can as well be downright annoying when times are bad. For instance, the increased fear of unemployment contributes more towards protectionist sentiment about international trade. The management of Boeing strongly believes that global trade has direct influence on the company’s growth, and so do Boeing’s involvement in international sale of their manufactured goods and services support the company’s jobs within the United States. Boeing Company emphasizes that elimination of trade barriers, enables the global economy to operate more efficient and it cannot be doubted that increased efficiency facilitates global economic activities as well as encourages business and leisure travel, shipments via air. With favorable conditions enhanced, therefore, the products and services of Boeing particularly, defense and security related products and services are seen to be highly demanded across the world (U.S. Defense Industry and Arms Sales, 2016).

• Recommendations

The company will have to advance more in technologies in order to maintain the top position in the aerospace market. The company also needs to improve on its weaknesses resulting from its own actions and lack of efficient handling of its operations. For instance, Boeing needs to focus on venturing in projects that will not cause production delays, cost overruns or technical problems as it was the case with its 787 Dream-liner project that forced the company to use a lot of cash beyond its projected estimates.

After assessing the Five Forces Model, it comes out clearly that Boeing Company being in the airline industry should focus on addressing the competition issue as their main priority for ensuring sustainable growth and development. Since other forces within the model seem to have relatively low threat, it means that Boeing being one of the top existing firms in the airline industry should not focus more on the threat of substitutes and threat of new entrants when improving their business strategy. Instead, the company should continue to conduct market research and adopt new technologies to develop more unique aircraft product which can enable it to continue competing favorably in the aerospace markets.