Boeing is the largest aerospace company in the world and a leading manufacturer of security, jetliners and space systems. Its products consist of military and commercial aircrafts, weapons, I.T. systems, electronic and defense systems as well as performance based logistics and training. The company has a lot of experience in aerospace leadership and innovation. It’s the leading manufacturer of sophisticated defense mechanisms for most countries in the world. The company continues to expand in an effort of meeting its customers’ needs. Its main offices are based in Chicago. It has a workforce of around 180,000 people across the US and in more than 60 countries. Its staff is diverse, talented and innovative in all aspects relating to aerospace and IT. The company is organized into two units i.e. Commercial Airplanes and Defense, Space & Security. These two units are supported by Boeing Capital Corporation, which provides financial solutions; Boeing Engineering, Operations & Technology, which develops, applies and protects innovative technologies; and Shared Services Group, a global provider of a range of services to Boeing worldwide.
Both the airline and IT industry are the most dynamic in today’s market. There is increased innovation among IT companies which makes the industry volatile and competitive. For a company in such an industry to survive in the market, it needs to have strategic plans and innovative management as well as hands-on aspect of developing new products. Boeing has continued to stand firm amid ever increasing pressure for new products to satisfy the consumer needs. Boeing has been manufacturing commercial jetliners for the last 40 years. Its main commercial products are the families of airplanes and Boeing Business Jet. It has the biggest market share in commercial jetliners commanding about 75% of the world fleet. In addition to manufacturing, it offers technical training and support to help flight operators to maintain their airplanes in good working conditions that are safe for the passengers and crew. Through Boeing Commercial Aviation Services, the company offers various services in engineering, logistics and information to its global customer base. These services include passenger and cargo airlines, maintenance and repair and other overhaul facilities.
Strengths and weaknesses
There are number of reasons why Boeing is a leader in its industry. One of them is its strong global network. The company enjoys strong international relations with customers in around 150 countries. Its employees are global, coming from different countries and its operations are spread in over 26 states. Worldwide, Boeing and its subsidiaries has employed close to 200,000 people across the continents to run its operations. Boeing is a commercial brand with effective and far reaching awareness on a global scale. Boeing has maintained strong business relationships with its partners. The other reason is that the company enjoys strong alliances with many other powerful companies in the world. For example, in defense projects Boeing works together with Northrop Grumman, a company involved in missile programs. Boeing is also in a joint-venture with Lockheed Martin in the United Space alliance. The company also works with organizations such as NASA. This has strengthened its position in the world market. The third reason is that it has a broad product line which covers major market requirements. Each year, its product line continues to expand, creating new innovations of its family of commercial airplanes. This technology development helps ensure the company stays a leader in the industry.
In order to remain competitive, Boeing has invested in developing the latest technologies. Its strong R& D has enabled the company to be on the winning side in its competition with Airbus. The company continues to invest a fraction of its revenue in research and development of new versions of its products. The organization employs the matrix structure of management. Boeing understands that communication is vital for its success. The matrix structure allows free communication and thus increased accountability both from the team and the management. To manage its vast enterprises, the company uses Corporate Governance. It’s managed by its executive staff and board of directors who uses integration to run the business empire. Integration brings together all its technical and management units in an effort to stay competitive and profitable.
Analysis and Evaluation
Boeing uses a number of strategies in managing its operations. Boeing pricing strategy is based on environmental analysis. The strategy is aimed at saving money while at the same time responding to customer’s needs. Boeing strives to achieve economies of scale through saving in the process of procuring raw materials and cutting cost in designing and manufacturing. Its mission is to take advantage of opportunities that leverages economies of scale. The company has also been able to achieve horizontal integration through making alliances with other aircraft to create the EXOSTAR platform which is an online business to business trading website for procuring. Boeing has continued to focus on point to point route travel increase. The company’s all 787 new products, were developed to increase its jet portfolio and hence command the largest market share.
The fact the Boeing faces only one competitor in the market i.e. Airbus has led to a duopoly pricing strategy. Increase in duopoly results to an imperfect competition as both manufacturers fight over prices in order to attract buyers. This usually affects the prices of their products. The airline industry is one of the most volatile and turbulent sector. There is therefore the need of airlines to be price cautious. This has seen firms in the industry working hard to cut on their operating costs. Profits earned by airline companies are low as compared to the cost of purchasing a new commercial airline. This has made companies to be very sensitive to financial support through leasing services. Boeing understands the needs of its clients as it offers leasing services to its customers. This has enabled the company to build a long-term relationship with its clients. In an effort to entice new customers and retain the already established ones, the company has engaged in giving out discounts. It periodically cuts its prices in order to boost its sales.
We cannot under-estimate the importance of asset-backed lending together with leasing in today’s market. Many of today’s airlines continue to incur losses with only a few making some profits. Bankruptcy is not a new term to many airlines. It’s the order of doing business nowadays. Since de-regulation was introduced in 1978, more than 100 fillings of bankruptcy have taken place. This is according to Air Transport Association estimates. It’s because of the above reason that most airline companies would not risk in fully buying Boeings products. The company through its Boeing Capital Corporation offers these airline firms alternatives and advice on financing and leasing commercial jet airplanes.
The company only manufactures products once they have been ordered. This minimizes losses and establishes lasting relations with its customers. Boeing’s products are unique and specific to each customer. Their defense systems for governments are manufactured with care to ensure information about their design and capability is not exposed to the general team. Its matrix structure has made it possible for the firm to design and manufacture products that are unique and one of a kind while still allocating resources to other projects.
The company uses the concept of segmentation in marketing its products. This is because economic and traffic growth rates vary by region. The firm’s customer segmentation process is done through geographic regions. Big economies purchase the largest share of its products. The company analysis the market and keeps trend of growth in traffic in order to determine the future demand of its products. The company’s use of geographical segmentation is vital due to the differences in the global air travel. In addition, the demand for short haul routes is high in Europe and North America as compared to the rest of the regions where long haul routes are popular. Boeing’s ability to segment geographically enables it to precisely determine and predict each segment’s demand patterns. Segmentation also enables the company to assemble other probabilities that help it in its marketing, like the probability that North America require the most number of airplanes over the next 30 years because it has an aging fleet that will need to be replaced and has high traffic.
The company utilizes the Experience Curve Effect in its management. As a result of many years manufacturing airplanes the company has been able to significantly reduce its production costs. The Experience Curve affects the success of a business, its profits relative to competitors, and its pricing strategies. A market leader firm like Boeing usually has greater demand for its goods and services than its competitor. Due to the increased production, the Experience Curve suggests its costs decreases with time. This has allowed the company to decrease its prices resulting in increased competitive advantage. As years go by and more experience is gained, the company strengthens its overall position through making good returns.
Another model employed by the company is the Baumol’s Model of Sales Revenue Maximization. The company’s target is to maximize sales rather than profits. The management understands that for the company to survive in the long-run, sales volume should always be given the first priority. Financiers will prefer lending to companies that exhibit high sales year after year rather than those which make high profit in one year and a loss in the other.
The company employs Y – Theory in its strategic management. Theory Y is a flexible style that advocates for productivity and the concept of a full day’s work where reward is based on performance. The theory suggests that there is no room for failure when it comes to management. It challenges the employees to innovate and come up with new ways of doing business to achieve the company’s goals. The theory assumes that people will give their best in terms of direction and control so as to achieve the organization’s objectives. This theory is based on the concept of perfect organization which in reality cannot be achieved. Boeing has come under criticism for extending the working hours of its staff. They barely rest as they have to beat deadlines dictated by the management. This theory mostly affects the technical crew who are often under pressure to deliver results especially when production problems delay delivery. On high demand, the company is forced to increase its working hours resulting to more than two shifts in a day. At times, increased workforce results to employment of inexperienced employees who slow down the rate of production. The company has had conflicts with its union workers for being sidelined in decision making.
Forecast and Recommendations
The future of Boeing’s airplanes looks favorable since the world population is constantly increasing and therefore a high demand of airplanes. There is currently no other means of connecting across the globe except through airlines or ships. Both Boeing and Airbus operate as a Duopoly and as such the marketability of the company’ products depends relatively to that of its competitor. Airplane industry is unlikely to get saturated anytime soon since the emerging economies aren’t growing rapidly in that aerospace sector as it would be expected. The company enjoys a competitive advantage over Airbus. Strong relations with governments have boosted the market for its defense systems.
The strategies employed by the firm concur with expectations of its customers. Boeing is a brand that has made a name in the aerospace industry, its products and services are continuously improved to match the customer needs. The main challenge facing the company is the unpredictable airline industry. Most airline companies continue to record mixed results in terms of their performance. The company ought to be cautious on its predictions and forecasts as they can be influenced by the business environment. Economic recession can lead to downfall of its sales as airline companies go bankrupt. The company should enhance corporate responsibility so as to create awareness in new markets such as the developing countries.
Summary
Boeing Company has been in the market for many years. It has created a good reputation and recognition throughout the world. It has conquered the Airline industry with its quality products and good working relations. The company has become systems provider for Airline companies and several governments including the US. Its market share of 75% is ever increasing and going by the forecast, in 10 years time the company will have a market share of 85%. The company’s strong global network and broad product range puts it at competitive advantage over its main competitor. In addition, the continuous demand for point to point routes in many industrialized countries promises a good return for the company.