Dynamics of StrategyDynamics of Strategy Evaluation of external business environment of Boeing

A critical assessment of the strategic resource capability (strategic fit)

Provide detailed recommendations after assessment of the feasibility,

acceptability and suitability of Boeing

A detailed implementation plan

NOTE: SEE APPENDICES FOR DETAILED ANALYSIS

For Assignment or Dissertation Help, Please Contact:

Muhammad Sajid Saeed

+44 141 4161015

Email: tosajidsaeed@hotmail.com

Skype ID: tosajidsaeed

0 | P a g e

TABLE OF CONTENTS

1. 1. INTRODUCTIONINTRODUCTION------------------------------------------------------------------------------------- 03

2.2. VISION, MISSION, GOALS, AND OBJECTIVES VISION, MISSION, GOALS, AND OBJECTIVES ----------------------------------------------- 03

3.3. STRATEGIC ANALYSIS STRATEGIC ANALYSIS ----------------------------------------------------------------------------- 04

3.1 3.1 INTERNAL ANALYSIS INTERNAL ANALYSIS -------------------------------------------------------------------- 04

3.1.1 3.1.1 RESOURCE-BASED VIEW RESOURCE-BASED VIEW ---------------------------------------------------- 04

3.1.2 3.1.2 VALUE CHAIN ANALYSIS VALUE CHAIN ANALYSIS ----------------------------------------------------- 06

3.1.3 3.1.3 FINANCIAL ANALYSIS FINANCIAL ANALYSIS --------------------------------------------------------- 07

3.2 3.2 EXTERNAL ANALYSIS EXTERNAL ANALYSIS -------------------------------------------------------------------- 08

3.2.1 3.2.1 PEST ANALYSIS PEST ANALYSIS ---------------------------------------------------------------- 08

3.2.2 3.2.2 PORTER’S FIVE FORCES PORTER’S FIVE FORCES ------------------------------------------------------ 09

3.3 3.3 SUMMARY SUMMARY --------------------------------------------------------------------------------- 10

3.3.1 3.3.1 SWOT ANALYSIS SWOT ANALYSIS --------------------------------------------------------------- 10

3.3.2 3.3.2 KEY STRATEGIC ISSUES KEY STRATEGIC ISSUES ------------------------------------------------------ 12

4.4. FUTURE STRATEGIC DIRECTION FUTURE STRATEGIC DIRECTION ---------------------------------------------------------------- 13

4.1 4.1 STRATEGY FORMULATION STRATEGY FORMULATION ------------------------------------------------------------ 13

4.2 4.2 CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND SUITABILITY CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND SUITABILITY ------ 14

4.3 4.3 IMPLEMENTING THE STRATEGY IMPLEMENTING THE STRATEGY ----------------------------------------------------- 15

4.3.1 4.3.1 CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S PERSPECTIVE) CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S PERSPECTIVE) -- 15

4.3.2 4.3.2 CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE) CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE) ------------- 16

4.3.3 4.3.3 CONTROL SYSTEMS CONTROL SYSTEMS ----------------------------------------------------------- 16

4.3.4 4.3.4 BALANCED SCORECARD BALANCED SCORECARD ----------------------------------------------------- 16

5. 5. CONCLUSION CONCLUSION ---------------------------------------------------------------------------------------- 16

REFERENCES REFERENCES ----------------------------------------------------------------------------------------- 18

APPENDIX A: APPENDIX A:

TABLE 1 –TABLE 1 – RESOURCE BASED VIEW OF BOEING RESOURCE BASED VIEW OF BOEING -------------------------------------------- 23

TABLE 2 –TABLE 2 – VALUE CHAIN ANALYSIS OF BOEING VALUE CHAIN ANALYSIS OF BOEING --------------------------------------------- 24

TABLE 3 –TABLE 3 – PEST ANALYSIS OF BOEING PEST ANALYSIS OF BOEING -------------------------------------------------------- 25

TABLE 4 –TABLE 4 – PORTER’S FIVE FORCES ANALYSIS OF BOEING PORTER’S FIVE FORCES ANALYSIS OF BOEING -------------------------------- 25

TABLE 5 –TABLE 5 – SWOT ANALYSIS OF BOEING SWOT ANALYSIS OF BOEING ------------------------------------------------------- 26

TABLE 6 –TABLE 6 – KEY CURRENT STRATEGIC ISSUES AND THEIR IMPACTS KEY CURRENT STRATEGIC ISSUES AND THEIR IMPACTS -------------------- 27

TABLE 7 –TABLE 7 – RECOMMENDED STRATEGY TO IMPROVE SCIS RECOMMENDED STRATEGY TO IMPROVE SCIS ------------------------------- 28

1 | P a g e

TABLE 8 –TABLE 8 – TYPES OF THE CHANGE TYPES OF THE CHANGE ------------------------------------------------------------- 28

TABLE 9 –TABLE 9 – CONTROL SYSTEM CONTROL SYSTEM -------------------------------------------------------------------- 29

TABLE 10 –TABLE 10 – BALANCED SCORECARD BALANCED SCORECARD ----------------------------------------------------------- 29

APPENDIX B: APPENDIX B:

FIGURE 1 –FIGURE 1 – THE GANTT CHART THE GANTT CHART ----------------------------------------------------------------- 30

2 | P a g e

1. INTRODUCTION

Boeing was founded in 1916 in Seattle, Washington and became one of the World’s

largest and leading manufacturers in making commercial and military aircrafts. The

company has been involved in acquiring international firms and making strategic

alliances with many aerospace pioneers in the past. Some of the big acquired and merged

aerospace companies are Hughes Space and Communications, North American Aviation,

McDonnell Douglas, Rockwell International and Jappesen (Boeing, 2012). Presently,

Boeing is operating in 70 countries with 22,000 suppliers and 170,000 most diverse,

innovative, and talented workforce having advance education and substantial experience

in the aerospace industry.

Boeing commercial airplanes and Boeing defence, space & security are the two

systematic business units of the organization where the products and modified services

are based on providing commercial and military aircrafts, satellites, weapons, electronic

and defence systems, launch systems, advanced information and communication systems,

and performance-based logistics and training (Boeing, 2012). Boeing is also involved in

exporting its products and services worldwide through its sub-divisions (i.e. Boeing

Capital Corporation, Shared Services Group, and Boeing Engineering, Operations &

Technology).

The purpose of this report is twofold and accordingly the report is divided into two parts.

The first part consists of a critical evaluation of the internal and external business

environments of Boeing to find out to at what extent Boeing is strategically fit with its

current business environment. In the second part, an improvement strategy will be

recommended to the company to effectively manage its supply chain practices after

critically reviewing the feasibility, acceptability and suitability of the strategy.

2. VISION, MISSION, GOALS, AND OBJECTIVES

The core aim of Boeing leadership is to “focus on the execution today and into the future”

(Boeing media, 2012) which directly addresses the vision of the company which is based

on “people working together as a global enterprise for aerospace leadership” (Boeing,

2001). The company’s long-range mission is very much future-oriented that consists of

“to become the number one aerospace company in the world and among the premier

3 | P a g e

industrial concerns in terms of quality, profitability, and growth” (Boeing, 1995). The

commercial airplane segment is involved “in developing, producing and marketing

commercial jet aircraft and providing related support services, principally to the

commercial airline industry worldwide” (Boeing segment information, 1998).

The fundamental goal of Boeing is to improve the performance, quality and profitability

of each product/service where performance and quality are measured by customer’s

satisfaction, and the profitability is measured by reviewing the increased shareholder’s

wealth and value (Boeing, 1997). In order to achieve the particular strategic goals and

also to address mission and vision of the company, Boeing established a standard set of

objectives that include continuous improvement, extremely skilled and motivated staff,

competent and focused management, technological excellence, financial strength, and

commitment to future integrity (Boeing, 2001).

3. STRATEGIC ANALYSIS

3.1 INTERNAL ANALYSIS

Boeing was popular in producing and exporting commercial jetliners and McDonnell

Douglas was famous for making commercial airplanes. The merger of both companies in

1997 provided a 70-years heritage of leadership to commercial aviation. The company’s

most popular and successful commercial products are 737, 747, 767 and 777 families of

airplanes and the Boeing Business Jet (Boeing, 2012). In this part of the report, the

detailed internal analysis of Boeing will be conducted.

3.1.1 RESOURCE-BASED VIEW

According to Mintzberg et al (1999), the competitive advantage is based on utilizing the

bundle of unique internal resources that leads to develop distinctive capabilities and core

competencies. Ireland et al (2008) state that there can be two types of internal resources:

tangible and intangible; where tangible resources include physical assets like equipment,

machinery, and financial strength, and on the other hand, intangible resources include

assets that do not exist physically but causes to increase customer and shareholder’s value

such as reputation, brand name, and organizational culture.

4 | P a g e

Mintzberg et al (1999) state that the efficient integration of firm’s internal resources

results in competitive capabilities to accomplish comprehensive series of interrelated

tasks. In general, the strategic capability of the company refers to the ability to develop

and implement strategies to perform entire organizational functions such as marketing,

finance, human resource, and manufacturing in order to achieve sustained competitive

advantages (Armstrong, 2012). Thompson and Strickland (2001) pointed out that

resources and capabilities of the organization leads to develop core competencies which

are distinctive in nature in terms of technology, marketing, innovation, quality, human

and financial resources.

Starting and running a successful airline is very hard because it requires extensive

resources, capabilities, and core competencies. The Boeing commercial airplanes segment

is strategically fit and an enriched division in terms of developing new and managing

existing resources that helps the organization to develop distinctive capabilities and core

competencies. The segment has a comprehensive set of tools and services which are

necessary to run a successful airline.

The resources and capabilities of Boeing include Airport Technology, Boeing Capital

Corporation, Commercial Aviation Services, Fuel Conservation Services, and Training

and Flight Services (Boeing resources, 2012). The airport technology is eminent in terms

of planning, engineering, and assessing airport services and Boeing Capital Corporation is

responsible for airplane financing. Commercial Aviation Services deal with customer

support, flight operations, fleet enhancement, maintenance services, and material

management whereas Fuel Conservation Services help the company to increase the fuel

efficiency of the airplanes. Finally, with the help of training and flight services, the

company is maintaining the flight crew training activities.

The core competencies of Boeing commercial airplane division can be divided into two

categories: product innovation and process innovation (Mayer, 2008). With product

innovation strategy, Boeing is forecasting the market trends extremely well after

obtaining detailed and accurate knowledge of designing and implementing customer-

based needs and demands. The process innovation strategy of Boeing is based on Lean

manufacturing policy that includes the efficient use of company’s assets, inventory, and

5 | P a g e

supplier management in achieving high quality and low transaction costs. The key

competency of Boeing commercial airplane segment is the capability to put into practice

large-scale systems integration in making advanced and technology-based commercial

aircrafts (Hitt et al., 2009). Also, Boeing’s operational strength is primarily based on

distinctive level of leadership and management in obtaining competitive advantage.

Armstrong (2012) explained that the organization is strategically fit if it is attaining and

sustaining better results as compared to its competitors. ‘Direct point-to-point traffic’ is a

differential strategy of Boeing to obtain competitive advantage. The strategy was

implemented by Boeing in developing Boeing 787 Dreamliner which is capable to carry

passengers with non-stop point-to-point flights between secondary airports (Boeing,

2005). In addition, Boeing constantly explores opportunities in the external environment.

The agreement of Global Airline Inventory Network between Boeing and the British

Airways is the best example where it was agreed that Boeing will handle the supply chain

of the spare parts of British Airways (Schleh, 1999). According to Johnson et al (2008),

the resource based view is the appropriate way to outline company’s unique resources and

core competencies. The summary of Boeing’s resources and competencies are presented

in table 1 (see appendix A).

Waugh (2011) argued that there is a competency gap between Boeing’s vision and

strategies. The company has failed to meet deadlines multiple times in the past and the

delays have caused to increase the costs in millions. The core reason for delays was the

major outsourcing strategy of Boeing over its global suppliers. In order to reduce the

impact of delays and to manage the supply chain, Boeing has adapted threefold strategy

that includes acquisition, on-site technical support, and quality control (Piriankov, 2010).

3.1.2 VALUE CHAIN ANALYSIS

According to Johnson et al (2008) and Hitt et al (2010), value chain analysis is the

description of the primary and secondary activities of any organization that causes to

strengthen the competitive advantage of the firm. In addition, the value chain analysis is

used to determine which resources are best utilized by the company (Johnson et al.,

2008). In order to create value, Boeing always tries to set up value-creating activities for

the satisfaction of the customers. Boeing Capital Corporation is one such establishment

6 | P a g e

which provides the facility to the customers to finance commercial airplanes (Boeing

resources, 2012).

The after sale service so-called ‘Advance Aviation Performance Program’ is another

value chain activity of Boeing where 24x7 customer service support is provided to the

customers from all around the World. The fundamental objective of the program is to

provide best technical support to the customers and also to deliver spare parts and

equipment if urgently required (Nuic et al., 2005). Another valuable service provided to

the customers by Boeing is Alteon Aviation Training system where customers get

computer-based training in all the aspects of new product.

MyBoeingFleet web portal is another value added online information system that

provides a facility to the customers to maintain their fleets remotely (MyBoeingFleet,

2012). Also, the Global Airline Inventory Network system designed by Boeing assists the

customers to manage and track their costly inventories in order to improve their supply

chain management (Schleh, 1999). In the past, Boeing was able to influence its suppliers

using effective control procedures but currently the company is facing difficulties in

managing its supply chain due to lack of internal and external communication (Sanders,

2010). The summary of the value chain analysis is presented in table 2 (see appendix A).

3.1.3 FINANCIAL ANALYSIS

Although the fuel prices are increasing day-by-day, Boeing is able to successfully manage

its revenue and growth in the airline industry. In 2007, the total revenue of Boeing

($66,387) was increased by 8% as compared to the previous year. Due to the financial

crisis of 2008, the total revenue was decreased and remained $60,909 but the company

recovered well in 2009 and 2010. The total revenue in 2011 reported by the company was

$68.7 billion where $36.2 billion were generated from Boeing commercial airplanes

(Stock Analysis on Net, 2012). Approximately 70% annual revenue of commercial

airplanes comes from outside world and commercial division has more or less 79,000

employees all around the World.

7 | P a g e

3.2 EXTERNAL ANALYSIS

3.2.1 PEST ANALYSIS

The PEST analysis approach is useful in examining external macro environmental factors

such as political, economic, social, and technological (Johnson et al, 2008). These factors

are important in the airline industry because they may have strong impacts on the airline

business. The PEST analysis of Boeing is as follows.

Political factors: Government laws, regulations, and policies can have significant impacts

on any company. Boeing has deep relations and strong agreements with US Government

and Federal Aviation Administration (FAA), so the policies of the US government may

be a major driving force in accepting new orders of aircrafts. Similarly, the political

intervention may also affect the sales of the company, for example restrictions of selling

specific equipments or airplanes to particular countries like Iran, Iraq, Afghanistan and

Pakistan. But on the other hand, the political policies may support the company as well

like trading of large commercial jetliners has been tariff free since 1979 (GATT, 1994)

and ‘Open Skies’ agreement of US government with other countries (US Department of

State, 2011).

Economic factors: With respect to airline industry, subsidy and fuel prices are very

important to Boeing for their daily/weekly transactions in terms of cost of capital. The

debate/dispute between Airbus and Boeing on unfair subsidies was the centre of attention

in 2010 which was settled through WTO agreement next year (Reppert-Bismarck and

Lewis, 2011). Similarly, an increase in fuel costs, environmental restrictions, high

security equipment due to terrorism threat, and insurance costs are becoming more vital

for Boeing in the near future. Cherian (2009) identified that recent recession has caused to

decrease the aircraft prices by 20% and several airline companies has already closed

global tourism industry.

Social factors: The social factors primarily deal with cultural factors which are very

important to Boeing because the company is operating in multinational environment

globally. Boeing needs to consider social factors which may affect the demand and sale of

the aircrafts in the future; for example, changing needs and demands of the customers due

to an increase in the population growth rate. Also, the Anti-US policy of US government

8 | P a g e

is also affecting the sale of Boeing especially in West Asia which can be a highly

profitable market for the company.

Technological factor: Currently, Boeing is utilizing computer-based cost effective

technology in making faster commercial airplanes. Many researchers have proved the

importance of using light weight material (i.e. composite) and equipment in the formation

of commercial airplanes for the effective utilization of resources (Hoskin and Baker,

1984; Weeten et al., 1987). The Boeing has an edge over Airbus and other competitors in

using composite light weight material in the development of commercial airplanes

(Cohan, 2011). The summary of the key findings of PEST analysis is presented in table 3

in appendix A.

3.2.2 PORTER’S FIVE FORCES

According to Mintzberg et al (1998 and 2000), Porter’s five forces model of competition

is primarily based on the idea that the long-term business strategy of the firm should meet

opportunities and threats in the external environment. The five forces of Porter’s model

are threat of new entrants, threat of substitute products, the bargaining power of suppliers,

the bargaining power of customers, and rivalry among competitors (Johnson et al., 2008).

The application of Porter’s five forces model on Boeing will determine that how Boeing

deals threats and avails opportunities in the external environment.

Threat of new entrance: The entrance in the airline industry is not easy and can be

considered as low on the scale of 1 to 5 because it needs extensive costs and resources. In

addition, it is hard for a commercial aircraft company to become popular and profitable

overnight because long period of time is required in reaching at the break-even point (Hill

et al., 2004). However, Boeing may face the threat of new entrance from China in 2020 as

the Chinese government has already approved the launch of Chinese commercial

airplanes (Dillow, 2010).

Threat of substitutes: There are many substitutes of the airline such as trains, buses, cars,

and cruises where trains are becoming faster, cheaper, and suitable source for travelling

day-by-day. In terms of international travelling, due to the delays in the delivery of the

commercial airplanes from Boeing Company, the World leasing industry starts to prefer

9 | P a g e

Airbus (the leading competitor of Boeing) especially in the Asian markets (Orient

Aviation, 2005).

Bargaining power of suppliers: The bargaining power of suppliers is high in the airline

industry because Boeing has lost effective control over its suppliers as evident from

recent delay of Boeing 787 Dreamliner (Cohan, 2011). At many occasions in the past,

Boeing blamed its suppliers for delays in the delivery of the commercial airplanes (The

Economist, 2011; Ray, 2012). If in case the Boeing will expand the product capacity in

the future, there could be a problem for the company in terms of loosing bargaining

power.

Bargaining power of customers: The bargaining power of customers is also low because

there are only two major companies (i.e. Boeing and Airbus) in the global competition.

For the customers, it is not an easy process to switch between the airlines because both

companies are different in terms of their control systems and if the customer wants to

switch between the airplanes, it might need extensive costs of training of pilots.

Competitive rivalry between competitors: The commercial airplane division is imperative

for the Boeing because it is accounted for nearly 65% of its total revenue (Stock Analysis

on Net, 2012) and loosing the market share can leave deep impacts on the profitability of

the company. Therefore, the competition with Airbus has great significance for Boeing

(Hill et al., 2004) and can be considered as 4 to 5 on the ordinary scale. From past couple

of decades, Airbus is making great efforts in conducting market research for the purpose

of new product development. The survey study reveals that Airbus spent nearly 6% of

their total revenue on R&D activities in 1999 whereas Boeing spent just 2.3% in the same

year but in 2002 Boeing spent nearly $860 million on R&D activities against $490

million by Airbus (Piazza, 2005). Table 4 in appendix A is presenting the summary of

importance of each force in terms of its scale.

3.3 SUMMARY

3.3.1 SWOT ANALYSIS

SWOT analysis helps the organizations to conduct strategic planning. It is also essential in

terms of analysing internal strengths and weaknesses of the firm as well as to identify

10 | P a g e

potential opportunities and threats in the external environment (Sallis, 2002; Thomson and

Martin, 2010). The SWOT analysis of Boeing is also based on finding company’s strengths,

weaknesses, opportunities, and threats as follows.

Strengths: One of the major strengths of Boeing is that the company is having a leadership

role in the airline industry due to its large scale design and development operations, and

support activities for commercial, defence, and space systems (Datamonitor, 2009).

Furthermore, the company is also involved in providing its products and services to over 90

countries and establishing strategic alliances with other powerful aerospace companies all

around the World. The total annual revenue of Boeing is always double higher than its

competitors (Datamonitor, 2011). The strong association with Federal Government and large

contracts with NASA and US Air Force is giving an edge to Boeing in establishing strong

competitive position (Hill et al., 2004).

From the past decade, Boeing is paying deep attention on Research and Development

activities in terms of developing new products in order to satisfy customer needs. The

company is spending nearly 6 to 7% of its total revenue on R&D activities annually (Piazza,

2005). The commercial airplane division is successfully contributing nearly 65% in the total

revenue and also increasing its market share in attracting new customers from all around the

World (Stock Analysis on Net, 2012).

Weaknesses: One major weakness of Boeing is that the company has been failed to meet

deadlines in delivering commercial aircrafts to its customers. In the past, many deliveries

have been delayed either due to lack of engineering services (Datamonitor, 2011) or delays

from the suppliers (The Economist, 2011). According to Mayer (2008), the market share of

Boeing is shifting towards Airbus due to the delay problem. The increased competition has

also caused to weaken the financial performance of few key segments of Boeing. For

instance, the profit from commercial airplane division was declined by 6.5% in 2010 and in

the same year, the space system division also faced decline of 13.1% (Datamonitor, 2011).

The study reveals that Boeing is also facing many legal proceedings due to some significant

matters such as commercial contract disputes, employment matters, environmental liabilities,

and intellectual property disputes (Datamonitor, 2009).

Opportunities: The changing trends in the travelling industry especially in Asia have resulted

in an increase in the demand of commercial airplanes. Similarly, the surge of spending heavy

11 | P a g e

amounts on defence and acquiring latest equipment also created many opportunities for

Boeing (Datamonitor, 2009). The financial crisis of 2008 also brought many acquisition

opportunities for the company in expanding company’s operations in the area of supply chain

and logistic. The contract of Global Airline Inventory Network between Boeing and the

British Airways was also the result of such opportunities (Schleh, 1999).

Threats: Among all existing competitors, Airbus is the most obvious one for Boeing in

terms of commercial airplanes. In addition, Boeing may face the threat of new entrant

from China as Chinese government is planning to launch commercial airplanes in 2020

(Dillow, 2010). According to the survey study, another threat is the labour strikes from

the employees as Boeing’s 36% workforce is union represented and in 2008 company has

already faced minor delays due to the labour strikes (Datamonitor, 2011). It was also

mentioned in the report that the operations of Boeing 777 and 787 have been affected

from the impact of 2011 great East Japan earthquake because company’s 35% major

suppliers are operating from Japan. The precise summary of the SWOT analysis is

presented in table 5 (see appendix A).

3.3.2 KEY STRATEGIC ISSUES

In order to recover the market shrink after 9/11 attacks and also to compete with Airbus,

Boeing introduced a new aircraft namely ‘Boeing 787 Dreamliner’ which is popular as

one of the best commercial airplanes of Boeing Company. After the initial success,

Boeing is losing its market share once again by experiencing delays in delivering

particular products to its customers (Lamba and Elahi, 2012). In addition, these delays are

resulting in huge extra costs for the company. Cohan (2011) pointed out that since 2008

the cost of developing Boeing’s 787 Dreamliner has been increased by 120% as

compared to its original budget. He further mentioned that since 2008 Boeing announced

the delay in the delivery schedule of Dreamliner seven times.

It is evident from various sources that numbers of factors are causing delays in the

development of a particular airplane model. Lamba and Elahi (2012) found that Boeing is

currently struggling with supply chain problems. Drew and Clark (2010) reported that the

delivery of Boeing’s Dreamliner to potential customer can be delayed by two more years

due to engine problems. Cohan (2011) identified that Boeing has lost control over

12 | P a g e

development activities because the company outsourced both the design and the

manufacturing of Dreamliner. Another problem is that Boeing’s engineers are lacking in

the experience of developing aircraft with composite material because in the past, the

company has been involved in developing commercial airplanes using aluminium

material (Cohan, 2011). According to Boeing “the company made too many changes at

the same time - new technology, new design tools and a change in the supply chain - and

thus outran the ability to manage it effectively for a period of time” (Peterson, 2011). The

key strategic issues under the light of internal and external analysis are shown in table 6

in appendix A.

4. FUTURE STRATEGIC DIRECTION

It is evident from table 6 that Boeing is currently facing delay problems due to ineffective

Supply Chain Information System (SCIS). After facing extensive delays in the delivery of

a particular airplane model, the present Vice President of Boeing is currently looking to

change the strategy of supply chain management. In this part of the paper, the attempt

will be made to formulate and recommend an appropriate strategy to Boeing to overcome

the delay factor in developing new aircraft models.

4.1 STRATEGY FORMULATION

For implementing the new technology in designing and manufacturing 787 Dreamliner,

Boeing is dealing with top high tech equipment makers all around the World. After

selecting sophisticated suppliers, it is also essential to put maximum efforts to stay in

touch with all the suppliers at the same time. According to Greeff and Ghoshal (2004),

large enterprises often face problems due to cut in the communication patterns with

different departments, suppliers, or manufacturers and thus this lack of communication

results in delays in the production processes. It is also evident in Boeing’s case when the

company hired an external organization to reshape the corporate culture of commercial

airplanes segment in the beginning of 2010 to overcome the delay factor. The attempt was

failed due to internal and external communication problems (Sanders, 2010).

In order to deal with current supply chain problems, Boeing needs to improve its Supply

Chain Information System (SCIS) to overcome communication problems. Coyle et al

13 | P a g e

(2008, p.195) defined SCIS as “information systems that automate the flow of information

between a firm and its suppliers to optimise the planning, sourcing, manufacturing, and

delivery of the products and services”. The successful implementation of SCIS is based

on strong and well-integrated approach of people, processes, and technology (Wang,

2011).

People are important in terms of their skills and competencies in watching over complex

processes as well as using latest technology. On the other hand, organisations should be

careful in using outdated technologies that may cause to slow down the processes. Today,

many SCIS software are available in the market that can help the organisations to

stimulate the supply chain processes. Enterprise Resource Planning (ERP) is multi-

purpose software that also includes supplier relationship management features. Though

Boeing is well aware from the latest technologies and already implementing ERP

technology for different suppliers but there is a need to improve the current ERP system

with by keeping in mind current supply chain problems. Table 7 in appendix A is

showing the recommended strategy with its key objectives in order to reduce or eliminate

the current supply chain problems.

4.2 CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND SUITABILITY

The selected improvement strategy for Boeing to effectively handle supply chain

management can be critically reviewed in terms of Feasibility, Acceptability and

Suitability (FAS) framework proposed by Johnson et al (2008). The feasibility refers the

availability of firm’s resources (i.e. funding, time, people, and information) to implement

the strategic options whereas acceptability examines the potential strategic outcomes of

the chosen strategy for the company and its stakeholders. Finally, the suitability deals

with overall rationale of the strategy to determine the strategic position of the company in

the industry.

Feasibility: Based on the current strategic issues and their impacts (table 6 in appendix

A), the key issue of competency gap between Boeing’s vision and strategies due to supply

chain problems was highlighted (Waugh, 2011). The reengineering process of Supply

Chain Information System (SCIS) using people, processes, and technology will provide

the opportunity to Boeing to establish and retain strong relationship with suppliers with

14 | P a g e

effective control. The Boeing is highly unionised company in the airline industry and

company’s internal and external resources and core competencies will support them to

implement the improvement strategy of Supply Chain Information System. In addition,

the current financial position and retained earnings of Boeing are showing that the

company should not face financial difficulties in implementing the change. However, the

current economic condition and cost overrun of Dreamliner may hinder the company’s

decision in adapting the strategy. The recommended strategy will also tend to improve

relationships with the people (i.e. suppliers) but improvements to supplier’s relationships

may be hindered by the uncooperative staff, giving the importance to incomplete training

and support.

Acceptability: Based on the Value Chain analysis (table 2 in appendix A), it was

discovered that the organization is facing supply chain problems due to lack of

communication strategies (Sanders, 2010). The proposed strategy is highly acceptable to

Boeing because it will facilitate the organization to fill the communication gap between

the company and their suppliers by using ERP software. The total cost of the Boeing 787

Dreamliner has already increased by 120% as compared to its original budget (Cohan,

2011). The outcome of the strategy will result in avoiding further delays that will be

beneficial for the company in terms of cost-saving and increasing shareholder’s value.

Suitability: Based on the SWOT analysis (table 5 in appendix A), the improvement of

SCIS strategy is suitable to Boeing because of recent weak performance of the company

in commercial airplane segment; and the company is also facing delays due to ineffective

supply chain management approach. In addition, due to the deep impacts of Great East

Japan earthquake, Boeing has a long-term plan to establish supplier relationships with

China (Xinhua, 2011). The improvement SCIS strategy will also suitable to Boeing to

develop relationships with new suppliers in the Asian markets.

4.3 IMPLEMENTING THE STRATEGY

4.3.1 CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S PERSPECTIVE)

According to Johnson et al (2008), people have crucial roles in implementing the strategy.

In order to apply SCIS strategy effectively, Boeing may need to change its business and

15 | P a g e

functional level structures. At the business level, staff will implement the strategy by

considering relevant actions need to be taken to improve current Supply Chain

Information System. For example, acquiring more licences of ERP or to customize the

existing ERP packages to meet the required criteria. At the functional level, staff will

ensure that every function must coordinate with other in order to address strategic

objectives.

4.3.2 CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE)

In implementing the improvement strategy, the nature and scope of the change will be

‘adaptive’ as shown in the table 8 (see appendix A). In addition the Gantt chart in

Appendix B is showing the core processes involved in managing the change.

4.3.3 CONTROL SYSTEMS

The control system helps the organisation to manage, command, and re-organise the

behaviour of the components of entire system (Zakian, 2005). In Boeing, control system

in implementing SCIS is primarily based on people, processes, and technology. Table 9 in

appendix A is presenting how the control system will be designed in case of improving

supply chain information system in Boeing.

4.3.4 BALANCED SCORECARD

The balanced scorecard approach is used to review the progress of the implemented

strategy after a particular time period (Johnson et al., 2008). The balanced scorecard for

Boeing in implementing changed strategy is exhibited in table 10 in appendix A.

5. CONCLUSION

In this report, the internal and external business environments of Boeing were evaluated

critically to identify at what extent the company is strategically compatible with its

current business environments. As a result of strategic analysis of Boeing, it was

concluded that company is currently facing the problem of delay in developing Boeing

787 Dreamliner. The delay issue has been caused by supply chain management problems

due to the outsourcing of both design and the manufacturing services in making 787

16 | P a g e

Dreamliner. Also, the company has made too many changes in implementing the new

technology (i.e. using composite material) and designing new tools (Peterson, 2011).

In order to minimise or to eliminate the delay factor, an improvement strategy was

recommended to Boeing after critically reviewing the feasibility, acceptability, and

suitability of the strategy. The recommended strategy is based on to improve Boeing’s

current Supply Chain Information System (SCIS) using People, Process, and Technology

strategy in order to develop effective control system to manage supplier relationships to

overcome delay problems. For this purpose, Enterprise Resource Planning software was

recommended as one of the best available programs today to manage organisational

operations. The improvement of SCIS of Boeing will help the organisation to improve

service delivery efficiency as well as to develop better internal and external

communication plan.

In this research, there was no primary investigation was carried out. Also, due to the

restricted access to the company information, there may be few limitations in our findings

and recommended strategy but it is believed that company will get success if the general

directions of the recommended strategy will be followed.

17 | P a g e

REFERENCES

Armstrong, M., (2012). Handbook of Management and Leadership: Developing Effective People Skills for Better Leadership and Management, 3rd edition, Kogan Page Publishers

Boeing, (1995). Message to the shareholders, Boeing annual report 1995, [online]. Available from: http://www.boeing.com/companyoffices/financial/finreports/annual/95annualreport/message.htm [Accessed: 20 April 2012]

Boeing, (1997). Compensation committee report on executive compensation, Boeing annual report 1997, [online]. Available from: http://www.boeing.com/companyoffices/financial/finreports/annual/98proxy1/part11.htm [Accessed: 20 April 2012]

Boeing, (1998). Boeing Segment Information, Boeing annual report 1998, [online]. Available from: http://www.boeing.com/companyoffices/financial/finreports/annual/98annualreport/segment_info.htm [Accessed: 20 April 2012]

Boeing, (2001). The Boeing company 2001 annual report, [online]. Available from: http://www.boeing.com/companyoffices/financial/finreports/annual/01annualreport/BOEING2001AR_all.pdf [Accessed: 20 April 2012]

Boeing, (2005). Point-to-Point, Financial trends in commercial aviation, 1(2)

Boeing, (2009). The Boeing Company annual report 2009. [online]. Available from: http://www.boeing.com/companyoffices/financial/finreports/annual/2010/annual_report.pdf [Accessed: 22 April 2012]

Boeing, (2012). Boeing in brief, [online]. Available from: http://www.boeing.com/companyoffices/aboutus/brief.html [Accessed: 20 April 2012]

Boeing media, (2012). Realignment of leaders brings enhanced functional excellence, Boeing media, [online]. Available from: http://boeing.mediaroom.com/index.php?s=43&item=1047 [Accessed: 20 April 2012]

Boeing resources, (2012). Start-up Boeing – Boeing resources, [online]. Available from: http://www.boeing.com/commercial/startup/resources.html [Accessed: 20 April 2012]

18 | P a g e

Cherian, J., (2009). The politics of aircraft sales, Frontline, 19(21), pp. 4

Cohan, P., (2011). Boeing's Dreamliner Delays: outsourcing goes too far, Daily Finance, 21 January 2011

Coyle, J. J., Langley, J., Gibson, B., Novack, A. and Bardi, E. J., (2008). Supply Chain Management: A logistics perspective, 8th edition, Cengage Learning

Datamonitor, (2009). The Boeing Company: company profile. London: Datamonitor

Datamonitor, (2011). The Boeing Company: company profile. London: Datamonitor

Dillow, C., (2010). China plans commercial jet, challenger to Boeing and Airbus, POPSCI.com, 15 November 2010

Drew, C. and Clark, N., (2010). Engine problem delays delivery of Boeing’s Dreamliner, New York Times, 27 August 2010, New York

General Agreement on Tariff and Trade (GATT), (1994). WTO analytical index: GATT 1994, World Trade Organization

Greeff, G. and Ghoshal, R., (2004). Practical E-manufacturing and supply chain management, Elsevier

Hill, C.W.L., Jones, G.R. and Galvin, P. (2004). Strategic Management: An Integrated Approach, Sydney: John Wiley and Sons

Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., (2009). Strategic Management: Competitiveness and Globalization : Cases, 8th edition, Cengage Learning

Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., (2010). Strategic Management: Competitiveness and Globalization, Concepts, 9th edition, Cengage Learning

Hoskin, B.C. and Baker, A. A., (1984). Composite Materials for Aircraft Structures, New York: American Institute of Aeronautics and Astronautics, Inc

19 | P a g e

Ireland, R. D., Hoskisson, R. E. and Hitt, M. A., (2008). Understanding business strategy: concepts and cases, 2nd edition, Cengage Learning

Johnson, G., Scholes, K. and Whittington, R. (2008). Exploring Corporate Strategy, 8th edition, Prentice Hall

Lamba, N. and Elahi, E., (2012). When Supply Chain strategy does not match supply chain capabilities, IGI Global, DOI: 10.4018/978-1-4666-0065-2, pp. 159 – 160

Mayer, S., (2008). Airbus versus Boeing- Strategic Management Report, GRIN Verlag

Mintzberg, H., Ahlstrand, B. and Lampel, J. (1998). Strategy Safari: The complete guide through the wilds of strategic management, Financial Times Prentice Hall

Mintzberg. H., Quinn, J. B., and Ghoshal, S. (1999). The strategy process, Pearson Education

Mintzberg, H., Ahlstrand, B. and Lampel, J. (2001). Strategy Safari: The complete guide through the wilds of strategic management, Simon and Schuster

MyBoeingFleet, (2012). Commercial Aviation services – customer support, [online]. Available from: http://www.boeing.com/commercial/aviationservices/myboeingfleet/ [Accessed: 22 April 2012]

Nuic, A., Poinsot, C. and Iagaru, M-G., (2005). Advanced aircraft performance modelling for ATM: enhancements to the BADA model, 24th Digital Avionics System Conference, Washington

Orient Aviation, (2005). A380 to swing through Asia-Pacific on long-haul flight trials, Orient Aviation Magazine, 13(2), p. 8

Peterson, K., (2011). Boeing says learned from outsourcing issues with 787, Reuters.com, 20 January 2011, Chicago

Piazza, K. D., (2005). Boeing vs. Airbus - The biggest WTO dispute ever, Airport Journals, [online]. Available from: http://www.airportjournals.com/Display.cfm?varID=0507010 [Accessed 23 April 2012]

20 | P a g e

Piriankov, N., (2010). Boeing case study, 2010 Global Business Case Study Competition, Washington

Ray, S., (2012). Boeing boosts supplier checks as rising jet output adds risk, Bloomberg, 08 February 2012

Reppert-Bismarck, J. and Lewis, B., (2011). WTO Airbus, Boeing disputes: what next? Reuters.com, 31 May 2011, Geneva

Sallis, E., (2002). Total quality management in education, 3rd edition, Routledge

Sanders, P., (2010). Boeing has new delay for Dreamliner, Wall Street Journal, [online]. Available from: http://online.wsj.com/article/SB10001424052748703959704575454582232255168.html [Accessed: 25 April 2012]

Schleh, D., (1999). Boeing and British Airways launch Global Airline Inventory Network, Boeing media, 22 September 1999

Stock Analysis on Net, (2012). Boeing Co. (BA) | Income Statement, [online]. Available from: http://www.stock-analysis-on.net/NYSE/Company/Boeing-Co/Financial-Statement/Income-Statement [Accessed: 22 April 2012]

The Economist, (2011). Blame suppliers for delays in delivery of Boeing's 'Nightmareliner', The Economist, 08 September 2011

Thompson, A. A. and Strickland, A. J., (2001). Crafting and executing strategy: text and readings, 12th edition, McGraw-Hill/Irvin

Thomson, and Martin, F., (2010). Strategic management, 6th edition, Cengage Learning

US Department of State, (2011). Open Skies Partners, Bureau of Economic and Business Affairs, Washington, [online]. Available from: http://www.state.gov/e/eb/rls/othr/ata/114805.htm [Accessed: 23 April 2012]

Wang, K., (2011). People, Process, and Technology management framework, Createspace

21 | P a g e

Waugh, R., (2011). Not just a load of hot air: Dream becomes reality as Boeing's new carbon-fibre 787 Dreamliner heralds a new age of air travel, Dailymail online, 26 September 2011

Weeton, J. W., Peters, D. M. and Thomas, K. L., (1987). Engineers' Guide to Composite Materials, Metals Park, Ohio: American Society for Metals

Xinhua, (2011). Boeing to double Chinese procurement by 2015, China Daily, 12 May 2011

Zakian, V., (2005). Control systems design: A new framework, Springer

22 | P a g e

APPENDIX A

Table 1 – Resource Based View of Boeing

RESOURCES COMPETENCIEST

HR

ES

HO

LD

CA

PA

BIL

ITIE

S

THRESHOLD RESOURCES THRESHOLD COMPETENCIES

o Strong financial position

o International customers

o Acquisitions, strategic alliances, and subsidiaries

o Addition services (see unique resources below)

o Research and development activities

o Ability to manage multiple divisions at the same time

o Strong order backlog

o Provision of financing facilities

o Strong association with US government and other government institutions like NASA and US Air force

UN

IQU

E A

BIL

ITIE

S

UNIQUE RESOURCES CORE COMPETENCIES

o Airport technology

o Boeing Capital Corporation

o Commercial Aviation Services

o Fuel conservative services

o Training and flight service

o Lean manufacturing policy

o Large scale system integration

o Latest technology-based commercial aircrafts

o Global Airline Inventory Network

Source: Johnson et al (2008)

23 | P a g e

Table 2 –Value Chain analysis of Boeing

SU

PP

OR

T A

CT

IVIT

IES

Firm Infrastructure

o Well organised hierarchy

o Managing operations in over 70 countries

Human Resource Management

o Managing its human resources successful in attracting best workforce from all around the world

Technology Development

o Implementation of latest computer-based technology

o Utilizing composite material instead of aluminium

Procurement

o In the past, Boeing was able to influence its suppliers

o Currently facing difficulties in managing supply chain

o Lack of communication

PRIMARY ACTIVITIES

Inbound Logistics Operations Outbound Logistics Marketing and Sales Post Sale Service

o Stock control through Global Airline Inventory Network

o On-going Supplier’s relationships

o Quality computer-based training through Alteon Aviation Training System

o Increased security system

o MyBoeingFleet Web Portal to access info online

o Advance Aviation Performance Program

o Advance Aviation Performance Program

o After sale service program ‘Advance Aviation Performance Program’

Source: Johnson et al (2008)

24 | P a g e

25 | P a g e

Table 3 – PEST analysis of Boeing

FACTOR KEY FINDINGS

POLITICAL

o Tariff free agreement of 1979o Open Skies agreemento Restriction of selling products to particular countries due to retain

sufficient security

ECONOMIC

o Dispute of unfair subsidies between Boeing and Airbus o Increased fuel costso Environmental regulations and restrictionso Global recession impacts

SOCIALo Increased population growth rateo Changing needs and demands of the customerso Anti-US policy

TECHNOLOGICALo Cost effective computerised technologyo Utilising new technology (i.e. composite material)o Using lighter materials in the development of commercial planes

Source: Johnson et al (2008)

Table 4 –Porter’s Five Forces analysis of Boeing

FORCE IMPORTANCE SCALE

Threat of new entrance LOW 1 to 5

Threat of substitutes MIDDLE 3 to 5

Bargaining power of suppliers HIGH 5 to 5

Bargaining power of customers LOW 1 to 5

Competitive rivalry between competitors HIGH 4 to 5

Source: Mintzberg (1998 and 2001) and Johnson et al (2008)

26 | P a g e

Table 5 – SWOT analysis of Boeing

LOCATIONSTRENGTHS WEAKNESSES

FAVOURABLE UNFAVOURABLE

INTERNAL

o Largest aerospace organization

o Leading manufacturing experience of commercial and military aircrafts

o Strong order backlog

o Providing products and services to over 90 countries all around the world

o High demands of airplanes due to design and facilities

o Competitive edge in generating healthy total revenues

o Providing financing facilities to customers

o Strong global network

o Broad range of products and services

o Strong association with Government and other big organizations such as NASA and US Air Force

o High spending on R&D activities

o Delays in delivering products

o Weak performance of key business segments (i.e. commercial airplanes)

o Weakening financial performance

o Legal proceedings due to commercial disputes

EXTERNAL

OPPORTUNITIES THREATS

o Increasing world defence spending

o Increasing demand for commercial airplanes

o Acquisitions due to financial crisis 2008

o Global Airline Inventory Network

o Increase in oil prices

o Slowdown of commercial jet market

o Risks related to labour issues

o Great East Japan earthquake impact

o Change in US budgetary priorities

27 | P a g e

Source: Thomson and Martin (2010)

Table 6 – Key Current strategic issues and their impacts

ANALYTICAL TOOL KEY ISSUE RESULT ACTION

Resource Based Viewo Competency gap between Boeing’s vision and

strategies due to supply chain problems which have caused delays

Delay Under review

Value Chain analysiso Boeing is currently facing supply chain problem due to

lack of effective communication strategyDelay Under review

Financial analysis o 8% decline in the revenue due to global recession 2008 Decline in profit Taken

PEST analysis

o Decreased consumer spending due to global recessiono Changing needs and demands of the customerso Higher regulatory and environmental restrictionso Dispute of unfair subsidieso Anti-US Policy

Decline in sale Taken

Porter’s Five Forces analysis

o Bargaining powers of suppliers Delay Under review

SWOT analysiso Delays due to supply chain problemso Great East Japan earthquakeo Increased fuel prices

Delay Taken

28 | P a g e

Table 7 – Recommended strategy to improve supply chain management system

STRATEGY OBJECTIVES

Improving Supply Chain Information System (SCIS) using People, Processes, and Technology strategy

o Developing effective control system to manage supplier relationships to overcome delay problems

o To fill the competency gap between Boeing’s vision and strategies

o To improve service delivery efficiency

o To improve internal and external communication

Table 8 – Types of the change

NATURE OF CHANGESCOPE OF CHANGE

REALIGNMENT TRANSFORMATION

INCREMENTAL Adaptive Evolution

BIG BANG Reconstruction Revolution

29 | P a g e

Table 9 – Control System

STRATEGY RESOURCE ALLOCATION AND ACTIVITIES

PEOPLE and PROCESSES

o Introduce the new technology to the people of the organizationo Utilising service blueprints to designing processeso Research and development activitieso Promoting internal and external communicationo Continuous research and feedback

TECHNOLOGY

o Installation of new ERP systemo Combine new technology with the existing oneo Training and development activitieso Ongoing support and up-gradation

Source: Zakian (2005)

Table 10 – Balanced Scorecard

FINANCIAL PERSPECTIVE CUSTOMER’S PERSPECTIVEGOALS MEASURES GOALS MEASURES

Improving financial performance

o Y/E financial statementso Liquidity and profitability ratios

Product’s quality and customer service

o Customer’s feedback

Shareholder valueo Share priceo Dividend price

On time deliveryo Increased number of customerso Advance orders

INTERNAL PERSPECTIVE SUPPLIER’S PERSPECTIVEGOALS MEASURES GOALS MEASURES

Continuous improvement

o Balanced scorecard approach Improving supply chain management

o Implementing Enterprise Resource Planning (ERP)

Customer orientedo Increase in saleso Positive feedback

Timely deliveries o Customer satisfaction

Supplier’s orientedo Relationship with supplierso Effective control over suppliers

Long-term supplier relationships

o Implementing improved Supply Change Information System using People, Processes, and Technology strategy

Source: Johnson et al. (2008)

30 | P a g e

APPENDIX B

Figure 1 – The Gantt chart

STAGE ACTIVITIES YEAR 1 YEAR 2 YEAR 3 ACTING PARTIESQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

PlanningInternal / external marketing research Marketing departmentFormulation of strategy Corporate executivesResource allocation Finance department

ImplementationProcess design Operations departmentCoordination departmental strategies Functional managersInternal / external communication Functional departments

EvaluationContinuous research and feedback Marketing and HR depart.Reviewing control systems Functional departments

31 | P a g e