Boeing Business Strategy Analysis

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Boeing Business Strategy

Nowadays, strategy is a fundamental rod in managing an organization, which should ensure sustainable economic growth and development of a company, advanced employee hiring, and increasing the competitiveness of its products and services. In a highly competitive and rapidly changing environment, a company should not only focus on the internal state of affairs but also develop a long-term strategy of behavior that would allow keeping pace with changes occurring in their environment (Dransfield, 2001).

In the past, many firms could operate successfully, focusing mainly on daily work and issues related to improving the efficiency of resource use in current operations. In current days, however, it becomes extremely important to exercise control, which provides an adaptation of a company to rapidly changing business conditions (Campbell et al., 2002).

Acceleration of changes in the environment, the emergence of new demands and changing position of the consumer, increased competition for resources, internationalization, new unexpected business opportunities offered by advances in science and technology, the development of information networks, the widespread availability of modern technology, the changing role of human resources, and several other reasons have led to a sharp increase in the value of strategic management (Dransfield, 2001).

Boeing Company Analysis

The Boeing Company is the world’s largest aerospace company. The company was incorporated by William Boeing on July 15, 1916, in Seattle, Washington, as Pacific Aero Products Co. The company’s name changed in the course of its development, with the modern name being adopted in 1964. The company’s headquarters is located at 100 North Riverside Chicago, Illinois.

The Boeing Company also holds a leading position in the field of missile defense services related to manned space flight. Boeing assists airlines and private owners to maintain the fleet. In addition, The Boeing Company produces a wide range of aerospace equipment for military purposes (including helicopters). The company works closely with NASA; in particular, it has supplied equipment for the shuttle and the International Space Station. Such a wide range of services and manufactured goods was made possible through a series of mergers undertaken by the corporation.

Boeing Business Strategy Analysis

The company’s mission is to ensure effective implementation of the industrial, intellectual and financial potential of the American aircraft industry through the creation, production, placing on the market, and after-sales support of high-tech competitive products for military and civil purposes.

The company strives to achieve results in designing, manufacturing, and repairing aircraft that will best meet the needs and expectations of customers, and shareholders and strengthen the interest of society in The Boeing Company as a reliable and attractive partner for customers and suppliers through the improvement of the quality and work.

Boeing’s corporate-level strategy is mostly based on a large-scale diversification of production, consolidating and expanding its position in the aviation market and services in its operation. This strategy is realized by implementing the abovementioned business strategies (portfolio strategy and competitive strategy) (Dransfield, 2001).

The main goal is the formation and stable development of cost-effective and high-tech aircraft company the world level.

1. The short-term objectives of the company include the preservation and development of accumulated developers and production plants of scientific, technical, and industrial capacity to effectively implement contracts.
2. Medium-term objectives are holding competitive positions in the aviation market through the creation and implementation of new fighter and civilian aircraft, as well as the development of new types of after-sales services.
3. Long-term objectives include access to new markets through the implementation of programs to build a new-generation aircraft of frontline aviation, civil aviation, and unmanned aerial vehicles in cooperation with local and foreign partners, as well as the further development of after-sales services.

Out of the corporate-level strategies, the strategy of diversification is most important, due to the dual nature of the company. The Boeing Company consists of two major divisions: Boeing Commercial Airplanes constructing civil aircraft and Integrated Defense Systems, which implement military and space programs. Such structure increases the survivability and competitiveness of the company in the long run; in the case, the commercial aircraft market is shrinking, the military aircraft market may experience a period of growth (Dransfield, 2001).

Analysis of Business-Level Strategies

The business-level strategy of The Boeing Company consists of the following strategies:

Competitive Strategy

• Formulation and implementation of targeted programs of development and production of competitive products in the field of military and civil aircraft.
• Expansion of the market and services, improving the competitiveness of products and services, as well as improving the effectiveness of marketing activities. To achieve the goal of expanding the market, it is required to release new models of planes.
• Providing translation of aircraft production processes to a worldwide level through the use of new technologies and materials, as well as a mechanism of industrial cooperation through integrated management of local and international suppliers.
• Creating an effective high-tech product based on technical re-equipment of enterprises, as well as the establishment of an effective quality management system.

Additional opportunities to increase exports of the company are possible through enhanced cooperation with other countries. An important task is to develop long-term programs aimed at the transition from the current operating software to perform work on the modernization of the aircraft, and in the future - to new aircraft deliveries (Campbell et al., 2002).

Portfolio Strategy

The Boeing Company’s portfolio contains mostly “problem children” and “star” groups of products, requiring a considerable investment of funds for their development. For example, Boeing’s F/A-18E/F Super Hornet occupies one of the leading positions in the international aviation market, although it needs constant support from the company in an increasingly competitive environment. This plan allows Boeing to utilize a “market development” portfolio strategy. Its implementation will enable the company to increase the production of this aircraft, enter new markets, and, consequently, obtain new investment (Campbell et al., 2002).

According to the analysis, the competitive strategy of the company, specifically, the expansion of the market and services, improving the competitiveness of products and services, as well as improving the effectiveness of marketing activities is most important for the long-term success of the company. In the next years, the world aircraft market will require a considerable amount of planes. It is projected that in the next two decades, the annual growth of the air travel market will be 5%. The stable growth of markets of China and India and other developing countries is a key factor that will influence the increase in sales volume in the next years. Moreover, there is a need to replace old and inefficient aircraft. All these facts make it clear that the expansion strategy is the most important for the long-term success of the company.

Comparative Analysis of Competitors

The Boeing Company’s main competitor in the global civil aircraft market is Airbus S.A.S, based in Blagnac, France. Back in the mid-90s, the American company had no competitors in the global market of civil aircraft: Boeing completely dominated the airspace. However, by the beginning of the new century, the situation changed: many customers prefer European Airbus. And if in 1988, the Europeans controlled only 16% of the market; in 2004, their share had risen to 50% (Hitt, Ireland, & Hoskisson, 2009).

Differences in the strategies of the two companies concluded that Boeing lives mainly due to the exploitation of its old machines, modernizing them, or simply lowering prices while Airbus primarily invests in technical development, aiming for a more sophisticated model in terms of technology (Hitt, Ireland, & Hoskisson, 2009).

The advantages of The Boeing Company include a more centralized control system. Airbus S.A.S is an artificial combination of different, dissimilar players who are constantly engaged in the harmonization of interests. However, European managers try to rectify the situation. Airbus Group refused the principle of dual power when France and Germany appointed two co-chairmen of the board and two co-presidents of the consortium. However, according to experts, Airbus will not succeed in building the same chain of command as The Boeing Company (Hitt, Ireland, & Hoskisson, 2009).

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Moreover, two private shareholders who launched EADS (parent company of Airbus) sold their shares in the concern. German car manufacturer Daimler and French media group Lagardere, who owned 15% and 7.5% of the concern respectively, are subject to a plan to restructure the company’s shareholders (Hitt, Ireland, & Hoskisson, 2009). As a result, the influence of France and Germany on the company decreases. In addition to the sale of shares, Lagardere France was forced to cut its government’s share from 15% to 12%, and Germany, which previously did not directly own shares of EADS, bought them from Daimler (Hitt, Ireland, & Hoskisson, 2009).

These measures were a part of a strategy to make the company less biased and more efficient. However, nowadays, when Europe is experiencing a split, many have doubts about the prospects for European aviation projects (in times of crisis, manufacturing model when the tail of the aircraft is produced in Spain, regulators - in Germany, the cabin - in France, and wings - in Wales looks much less reliable than that of the American company).

Boeing also benefits from the defense departments of the company, which are significantly higher than those of Airbus. As was already mentioned, The Boeing Company consists of two major divisions: Boeing Commercial Airplanes constructing civil aircraft and Integrated Defense Systems, which implement military and space programs. Such structure increases the survivability and competitiveness of the company in the long run; in the case, the commercial aircraft market is shrinking, the military aircraft market may experience a period of growth. It is no secret that Airbus Group wants to repeat the experience of its competitor, but so far the company’s defense projects do not play a significant role (Hitt, Ireland, & Hoskisson, 2009).

Boeing Company Research

In a summary, it can be said that both of the mentioned companies possess efficient strategies for survival in a highly competitive environment. However, The Boeing Company is more likely to be successful in the long run due to its centralized control system and utilization of a diversification strategy. Besides, the company vastly uses outsourcing in its construction process – mostly in the countries of Eastern Asia – which allows for reducing production costs thus increasing profitability. Boeing’s dual structure makes it possible for the company to survive the downfall of the civil aircraft market at the cost of the military one and vice versa.

Airbus Group, however, seems to be more successful in the short run, due to its focus on the civil aircraft market. That means that, unlike Boeing, Airbus does not have to spend a significant amount of costs for expansion and development of all the spheres it works in, resulting in larger investment into the development of new, more technologically advanced aircraft, thus raising its competitiveness and marking the company as a manufacturer of aircraft satisfying all the needs of potential customers.

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