In the 21st century, any company whose ultimate goal is to achieve leadership within its industry, it is necessary that they think beyond their domestic market and consider global markets instead. By doing this, they need to be able to change or implement their strategy in order to stay as competitive as they were before, form alliances and partners along the way and outperform the competition. For Boeing, trying to become the global leader in its industry again meant that they needed to launch an exceptional, better aircraft than their competition, Airbus.
They were also relying on foreign partners more than ever before to get every part ready in time for assembly. With the launch of their 25th model named the 787 Dreamliner, scheduled for delivery in 2008, Boeing promised to provide airlines with a fuel efficient aircraft and passengers with a modern, convenient airplane that will take them distances in comfort at competitive prices. A potential benefit of this new aircraft was to decrease fuel consumption by 20% making it more environmental friendly with its quieter takeoffs and landings.
In order to achieve this grand goal, however, Boeing allied with the world’s best and most capable companies to help them design the plane’s components. By doing this, Boeing perceived its extended supply chain and resources provided by its manufacturing partners as their competitive advantage that will allow them to reduce total costs. As far as pleasing the passengers’ tastes, Boeing was committed in providing them with the option of flying to their destinations non-stop. This will then save them from having to change from big, overcrowded planes to smaller, uncomfortable ones when connecting their flights.
They also thought of incorporating a mood lighting system as well as changing the pressure to allow more humidity with the ultimate goal of stimulating the passengers’ senses and decrease fatigue from the long flight. This all sounded great and very promising from Boeing however, demand from the buyers, competition from Airbus and a conflicting industry forecast were issues that Boeing needed to be aware of. A good way to know about a company’s future strategic course is through its vision and mission statements.
Boeing’s vision is “People working together as a global enterprise for aerospace leadership”. Although somewhat broad, it does mention that they are aiming for the industry leadership. They way they will end up doing is this is by running healthy core businesses, leveraging their strengths into new products and services, and by opening new frontiers whether it is domestically or globally. As far as their mission statement goes, it seems to be more specific as to how they will actually put their mission into action. We will be a world-class leader in every aspect of our business: in developing our team leadership skills at every level, in our management performance, in the way we design, build and support our products, and in our financial results. ” However, they still don’t mention anything about partnering with foreign companies as they have obviously done when designing the Dreamliner. Their main strategy, at least that is shown in this case study, is to outsource their operation to foreign partners which could be a complicated thing to do.
This could actually cause some kind of political controversy as far as the motives behind this outsourcing are concerned. Boeing sought for suppliers that were very capable, technological advanced and highly skilled in manufacturing especially with India and China. However, Boeing only pays a fraction of the cost that would take a U. S. supplier. But it seems that the main reason behind Boeing outsourcing to these countries in specific is because there is potential market growth and they want to have access to it.
With India and China becoming very proficient in the art of manufacturing airplanes, it would be of great advantage that Boeing partners with them when the boom hasn’t reached its climax. This is a very smart strategy, indeed. Boeing’s strategy is put into action by appealing to the Asian market as their main demographic of customer ordering their planes. For instance, Nippon Airways was the first launch customer ordering 50 Boeing 787’s followed by 60 more orders from Chinese Airlines. With a successful launch of the 787, not only will they be able to regain industry leadership but also outperform Airbus’s A380 model.
Boeing was hit negatively by some economic issues that could have slowed them down in achieving their goal for regaining leadership in the industry. As their traditional airline customers were facing economic hardships due to high fuel and labor costs, union strife, very high prices of airplanes and competitive pricing across the industry, it all affected Boeing directly as well. Most if not all of these factors were outside of Boeing’s control. Gas prices were not going any lower and regional, cheaper and Boeing’s customer concerns were that the 20% uel reduction should be the minimum requirement rather than a stretch goal. Also, efficient airlines such as JetBlue and Virgin America were emerging with their Airbus models. Not only were these airlines big threats for the main airlines such as United, American and Delta, they were, in one way or another, affecting Boeing as a whole. In the political aspect of things, Boeing accused Airbus of receiving $15 billion dollars for launch aid which backfired due to Airbus’s response that Boeing is no innocent in receiving tax breaks and money from the American Defense Budget.
Good thing for Boeing to have partners in Japan as well, as they were in line for receiving subsidies from the Japanese government. In the international and technological aspects, Boeing was very tactful in forming alliances and partnerships with key players in future industry such as India, Japan and China. Not only were they using their highly technological advances and skills at lower prices but also getting their foot in the door for major expansion as theses countries become bigger, influential players in the airline industry.
This brings a major concern of new entrant threats and how that will affect Boeing in the long run. The threat for these new entrants is moderate. In outsourcing its operations externally, Boeing also agreed to transfer their know-how manuals to these countries. Before Boeing had almost full control of their operations as they used their “build to print” technique. But by providing all the performance specifications to their suppliers and manual, it could potentially mean that these countries could use what they learn to enhance it and use it for their own growth in the industry.
This means that there is major competition, especially from Asia, that will come into Boeing’s way. Once China or any other country start building their own airplanes to sell them at lower prices, then this could mean inevitable growth for them. As far as the threat of substitute products is concerned, Airbus is definitely a threat as a substitute product. Not only are they readily available and attractively priced, they have been outperforming Boeing for the last few years.
The buyers definitely see a distinct difference between Boeing and Airbus as they think that one is superior than the other. This is shown when customers want Boeing to adapt or change their main cabin controls to those are in Airbus models even though Boeing thinks that their way is better. In order to make their customers happy, they will need to do what they ask. Also, as far as cost is concerned, if an airline company wish to change to Airbus, their cost of obtaining it would be just about the same as obtaining a model from Boeing.
As far as the bargaining power or suppliers and buyers are concerned, even though these suppliers are highly trained and capable and what they do nobody can do better which is the reason why Boeing chose them to get the job done, they are still paid less than a U. S. supplier would. This could be due in part of exchange rates in the currencies of these countries or simply in the cheaper cost of raw materials. When buyers of Boeing products are concerned, they do definitely have the option to shop around and see which company offers the best reasonable price.
Yes, billions of dollars are in jeopardy here but whichever company has the better price, that’s where they will go. It seems that Asian countries were predominantly interested in buying from Boeing. This will make it easier for them to negotiate a good price with Boeing so that they stay in business with them rather than going to the competition. Although, as mentioned before, it won’t be too long until China becomes a major player in the airline industry so this could actually change.
After having analyzed these forces, it seems that Boeing could stay competitively attractive as long as it is aware of its surroundings and is able to bring success with the 787 Dreamliner. If everything goes as planned in their forecast, it will be able to stand the test of new entrants and Airbus as competition. Boeing’s management team is a capable, experienced group of individuals that have been in this industry for quite some time. Despite the fact that Boeing had some issues with past managers for violating the code of ethics, it was crucial that they chose the right people that were ready to get the 787 Dreamliner project going.
Four of the key people to achieve this were Michael B. Bair, Walter B. Gillette, John N. Feren, and Craig A. Saddler. They were in charge of full development of the airplane, sales, marketing, and finance. However, the major area of concentration for the 787 Dreamliner would be marketing as they needed to brand this product the right way in order to be differentiated from the competition. To work on their branding, Boeing is really pushing their new features that will help improve the passenger’s experience.
Some of those features are having bigger, non-shaded windows, mood lighting, large stove bins, larger lavatories, etc. Other features are customizable by the airlines themselves at their own discretion. Another branding strategy that the 787 has is their magnificent entry way which creates a transition space for airline customers which provides an architectural welcome to the airplane. Also, the sitting configuration is another feature which the airline has full control of according to which customers they will be servicing.
Overall, the main goal is for customer to have an enjoyable flying experience that will enhance their senses and get them to where they need to go fast and efficiently. Even though Boeing has been around for a while now and it once became the industry leader which is trying to regain again, it could not have done it if didn’t have strong characteristics to back it up. One of this company’s strength is to have a wide product diversification. Not only are they involved with information space and defense systems, they are also in the cargo business as well as the commercial aviation business.
Another strength is that they count with international suppliers that are just as capable if not more as the ones in the U. S. but charge a lower price. Boeing is also the largest exporter in the U. S. which helps them leverage with the government. Another strength is that they try to stay as competitive as they can when prices and innovation of new airplanes are concerned. Not only do they have efficient design and production systems, they are innovators because they try to make their products as unique as possible.
One of their biggest opportunities is their international expansion in emerging markets that are forecasted to create the boom in the airline industry in the future. Another opportunity is to serve additional customer groups by rebranding and meeting those new customers’ needs. Even though these options will be offered by the airlines themselves, at least Boeing is able to provide them with the possibilities that the competition may not. Among its weaknesses are relying way too much on foreign suppliers to the extent that they may use what they have learned from them and use them to their own enefit causing a competition threat to Boeing. As far as the threats are concerned, they will really need to stay ahead and try to outperform their biggest competitor, Airbus as well as be looking out for new entrants mentioned before. Even though it is probable to occur about China being the driving force in the airline industry, it would be beneficial to Boeing to maintain a good relationship with its suppliers and workout any agreements later in order to stay strong. Should China become more powerful than both Boeing and Airbus together, then there should be some kind of alliance between them two to outperform China.