Boeing Case Analysis Essay
Boeing Case Analysis
William Boeing founded the Boeing Company in 1916 in Puget Sound, Washington. William had modest goals as a young Yale engineering graduate, first making it big in the timber industry. When the Wright bothers showed the world the idea of flight, William was intrigued. He then decided that it was time that he should enter into the field of aviation.
Boeing and his friend Conrad Westervelt teamed up to create a more practical plane after witnessing the Wright brother’s creation and further advances. Their first plane was a twin-float seaplane, aptly named the B & W, after their initials. Boeing’s company had its big break when the United States joined World War II. His company became one of the main manufacturer’s for the military’s aircraft division. The Boeing Company continued to be a major military plane supplier and then went into the civilian aircraft division. Through these successes, Boeing grew into the company that it is today.
The Boeing Company is one of the world’s largest aerospace firms. They are also the world’s largest manufacturer of commercial jetliners and military aircraft. Boeing is divided into various business units which are: Commercial Airplanes, Military Aircraft and Missile Systems, Space and Communications, the Boeing Capital Corporation, Connexion by Boeing, Air Traffic Management, and Boeing Technology. Through these distinct business segments, Boeing operates in more than 70 countries and does business with over 140 countries. They operate approximately 14,000 aircraft, and nearly 75% of the world’s fleet use Boeing jetliners. The primary aircraft that Boeing sells are the 717, 737, 747, 757, 767, and the 777. The newest aircraft, the 7E7, is expected to be in service by 2008 and it will be the next generation of commercial aircraft.
The industries that Boeing competes in are: aircraft, aircraft parts and equipment, guided missiles and space vehicles, aircraft engines and engine parts, space vehicle equipment, and computer integrated systems design. The SIC codes are 3721, 3728, 3761, 3724, 3769, and 7373 respectively. We will be focusing on the aircraft industry with SIC code 3721.
The headquarters have recently moved from Puget Sound, Washington to Chicago, Illinois. They are now located at 100 North Riverside Plaza, Chicago, Illinois, 60606.
Boeing has branches across the world, but most of them lie in the United States. There are 30 facilities in the US, 3 in Australia, 2 in Canada, and they also have locations in England, Germany, China, and the United Arab Emirates. (See Figure 1 in appendix)
When researching Boeing Company, we did not find a mission statement, but they do have core strategies, competencies, and values. These are: run healthy core businesses, leverage strengths into new products and services, open new frontiers, detailed customer knowledge and focus, large-scale system integration, lean enterprise, leadership, integrity, quality, customer satisfaction, people working together, a diverse and involved team, good corporate citizenship, and enhanced shareholder value.
The mission statement that we created is as follows: Our mission at Boeing Company is to ensure customer satisfaction by delivering detailed customer knowledge and focus on airlines, space agencies, and the military. We will be a good corporate citizen, and maintain a leadership position in our businesses by preserving the highest quality available. We want to maintain and enhance shareholder value through running our Aircraft, Military, Space, and Technology segments with a diversified and involved team of employees who work together. And, through the use of breakthrough technologies and engineering, we will continue to be a world leader, which is important to our customers and business partners of the world.
Components of Mission Statement
The mission statement addresses customers with the statement: detailed customer knowledge and focus on airlines, space agencies, and the military. This shows their commitment and focus upon what kinds of customers they will target.
The mission addresses products and services with the statement: running our Aircraft, Military, Space, and Technology segments. This shows their commitment to the specific businesses. These are the main business segments in which Boeing competes.
The market is addressed with: world leader, which is important to our customers and business partners of the world. This is the geographic area that Boeing serves, and that is the entire world.
Technology is addressed with the statement: the use of breakthrough technologies and engineering. Boeing is renowned for its commitment to advanced technologies and engineering. This is an integral part of their mission statement.
Boeing’s concern for survival, growth, and profitability is mentioned with: maintain and enhance shareholder value. These are the very words that every company should strive for. This is the overall focus of their operations.
The mission statement addresses philosophy with: ensure customer satisfaction by delivering detailed customer knowledge and focus. Boeing’s philosophy is important because it gives a sense of belonging to customers.
The self-concept component is addressed with the statement: maintaining a leadership position in our businesses and preserving the highest quality available. Again, Boeing is renowned for its leadership and engineering accomplishments. These are the basis for Boeing’s success.
The statement that mentions public image is as follows: being a good corporate citizen. This is another of Boeing’s strengths. They continually support the local communities that they serve and are very active in volunteerism.
The mission addresses the employee component with the statement: with a diversified and involved team of employees who work together. Boeing is very committed to their employees by having the very best and brightest individuals working for them. They also value their employees by offering various continuing education classes.
External Analysis: Opportunities
The economy itself, has been improving since the terrorist attacks, and as such, air travel is increasing as well. This will allow the industry to begin easing back into pre-attack production levels for aircraft.
Social, cultural, demographic, and environmental
One opportunity available is with the development of highly efficient engines. This is a very large opportunity for the industry as the costs of fuel are rising and the available natural resources are continually being diminished. Also, the future of jet engines is being developed into non-combustion engines. The future of engines is in pulse, whereby the reaction takes place with a pulse, rather than continuously which provides greater efficiency.
Political, legal, and government
This opportunity exists with the ability of firms to merge to reduce costs. This has been a very popular method in the industry to facilitate growth and product development. Also, with more free trade agreements, the industry can obtain a cost advantage with new suppliers in other countries.
The entire industry has the ability to stream ahead by equipping planes with wireless internet access and new and improved guidance software. With up to the minute information on weather and other pertinent information, the industry can better serve their customers.
The industry is very competitive and with the recent mergers, the industry has time sensitive opportunities to take market share away from other companies. Thus, the other firms in the industry pose as opportunities for the firms in the industry to be on guard to take advantage of each other whenever possible.
External Analysis: Threats
The terrorist attacks have caused airlines to delay the purchase of new aircraft, and they have also started to delay the retirement of aircraft. Also, with the decline in passenger travel post 9/11, the airlines are having trouble making enough money and they are shutting down routes. The shutting down of the routes has decreased the need for new aircraft. The industry has also been vulnerable to businesses cutting their air travel. Again, this is related to terrorism. A big business does not want to lose their top executives from hijackings.
Social, cultural, demographic, and environmental
The increase in the amount of telecommuting software has decreased the need for business travel. Also, because of the terrorist attacks, many people are using alternate means of travel.
Political, legal, and governmental
The industry is facing large, class action lawsuits from the terrorist attacks. Airlines and manufacturers have to set aside money for this and are thereby unable to fully focus on their businesses.
The biggest technological threat is falling behind the competition with technological advances. The industry has the ability to take advantage of the companies that lag behind in the implementation of new technology.
As stated with the social, cultural, demographic, and environmental, the industry faces competition with telecommuting. They also face competition from the push for high-speed train lines. This alternate way of travel has seen success around the world, and there are plans for construction of these already in the works. With the lingering threat of more terrorism, many people are using buses to go from one place to another.
Competitive Profile Matrix
A competitive profile matrix identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position. The ratings are as follows: 1 major weakness, 2 minor weaknesses, 3 minor strengths, and 4 major strengths. (Figure 2 in the appendix)
By comparison Boeing Company, Airbus, and Lockheed Martin are very similar in their critical success factors. These are all aerospace companies competing in the global market. These three companies all compete for contracts with various airline companies and governments.
In the Competitive Profile Matrix, the most critical success factor we chose was product quality with a weighted score of 0.25. Product quality is very important for these companies. Without good quality none of these companies would hold any ground competing with each other. In this, Boeing Company, Airbus, and Lockheed Martin all rated a 4 because they all have a great product quality.
The second most critical success factor is market share. It is weighted score is 0.20. This is important because it shows how much of the market wants your business. We rated Boeing with a 4 because our company has a big part of the market and they are also well known like a household name. Airbus and Lockheed Martin we rated as a 3 because they are not too far behind us in this area.
Price competitiveness, financial position, and customer loyalty are all tied with a weighted score of 0.15. Airbus comes in with the highest with a ranking of 4 in price competition. This is because Airbus has the lowest prices compared to Boeing and Lockheed Martin. Boeing and Lockheed Martin are both rated a 3 with their prices being about the same. When it comes to financial position, Boeing is on top with a 4, while Airbus has a 3 and Lockheed Martin a 2 respectively. This is because Boeing is a very strong company that has been in business for years and continues to grow every year. Customer loyalty is also a critical success factor for these companies. Airbus and Lockheed Martin both rate a 3 while Boeing takes a backseat with a 2. From this we see that Boeing needs to be more loyal to their customers because Airbus and Lockheed Martin could have a chance taking over Boeing’s business.
The final critical success factor is management. We weighted this with a score of 0.10. All three companies have a rating of 3. This means all three are in very good competition with each other when it comes to their management teams. Boeing, Airbus, and Lockheed Martin all have great management that will keep them all on top of their game and in good competition with one another.
Boeing is in very good standing with their competitors having a total score of 3.45. Airbus is following Boeing closely behind though with a score of 3.40 which shows they are gaining momentum in the industry. Lockheed Martin is behind both their competitors with a total score of 3.10. In conclusion, Boeing Company is ahead of the competition and rises above their competitors.
External Factor Evaluation
An external factor evaluation matrix identifies the industry-wide opportunities and threats. Weights are assigned to the various opportunities and threats based on how well the subject company are responding to the threats and opportunities. The ratings are as follows: 1 = poor response, 2 = average response, 3 = above average response, and 4 = superior response. (Figure 3 in the appendix)
The main opportunities that we identified were technological advances in aircrafts, new forms of alliances, Raytheon and Lockheed Martin are still recovering from merger integration, economies are getting better, air travel increasing, new engine developments, and customers comfort. The threats that we identified were not staying up to date with current technological advances, decreasing defense spending, teleconferencing with high speed trains, airline aircraft needs decreasing, and terrorist attacks.
The opportunities were weighted .05 for technological advances in aircrafts, .15 for new forms of alliances, .05 for Raytheon and Lockheed Martin are still recovering from merger integration, .05 for the economies are getting better, .05 for air travel increasing, .10 for the new engine developments, and .10 for customers comfort. The threats were weighted .05 for not staying up to date with current technological advances, .10 for the decreasing of defense spending, .10 for the teleconferencing and high speed trains, .05 for airline aircraft needs are decreasing, and terrorist attacks.
The weights are representative of the importance the opportunities and threats represented to Boeing. They were determined by considering the impact that each one has on the industry and how well Boeing is conditioned to react to the situations presented. We felt that the most important factors were the new forms of alliances, and terrorist attacks. These two factors are paramount to the industry and all of its counterpart’s success. If these factors are not addressed by the industry then there is a chance that the industry might start declining in nature.
We rated each of the opportunities based on how well Boeing has been positioning itself in the market. Boeing’s technological advances in aircrafts had a major response because of its wireless internet access and new and improved guidance software; we rated this a 4. Also, Boeings response to customer comfort was rated a 4. This is because Boeing is responding very well to what the customers expect from them. This does include the comfort everyone wants. We felt that new forms of alliances, air travel increasing, and new engine developments all were above average; we rated these a 3. This is because the forms of alliances are very important.
By having new forms of alliances this could help the company to become stronger. The importance of air travel is also very important to both the industry and to the company. Boeings response to this is above average because they are responding very well to the increase of air travel since September 11th. Also, the importance of new engine developments is above average because Boeings response to this is very high. They are on their way to provide different types of engines that are very efficient. Finally, Raytheon and Lockheed Martin are still recovering from merger integration and economies are getting better we rated these each a 2. This is because Boeings response could have been way better then it actually was considering the top competitors are still recovering from merger integration, especially when the economies are getting better.
The response to threats has been equally impressive. The threat of terrorist attacks has been very successful for Boeing. The fact Boeing is creating new and improved aircrafts, to help against terrorist attacks while in the air, is a major impact; we also rated this a 4. Not staying up to date with current technological advances and the threat of teleconferencing or high-speed trains was rated a 3. This is because Boeings response to each of these is above average. Being a threat to the industry does not necessarily make it a major weakness for Boeing. They are responding very well by keeping up with all the technological advances that the industry creates. Also, the response to other competitors is above average. Finally decreasing defense spending and airline aircraft needs decreasing were rated both a 2. We believed each of these responses were just plain average. Nothing seems to be changing for the spending but the airline aircraft needs are being implemented a little at a time.
The final score, 3.05, that was obtained from the external factor evaluation matrix shows that Boeing is way above average when reacting to opportunities and threats.
Internal Analysis: Strengths
The biggest strength of Boeing is in its people. With more than 160,000 employees, Boeing has a vast number of highly skilled workers. This is enhanced by Boeings commitment to continuing education. They offer an on-site training program and encourage employees to constantly improve themselves. Boeing offers various courses intended to increase employee competency, productivity, and well-being. The main areas of study are: Industrial Skills, Certification, Engineering, Computing, Leadership, and Business Awareness.
This employee enrichment program takes place in the Boeing Learning Centers. According to Boeing statistics, in any given 24 hour period, 336 employees will be taking one of 3200 courses being offered, 80 will be taking a class on their own time through the Boeing Learning Together Program, and there will be instructors teaching classes from more than 1600 on and off hour training courses. The Boeing Learning Together Program is considered to be one of the largest corporate tuition-reimbursement programs in the world. In 2002, 23000 employees earned degrees in 1500 concentrations tuition-free.
The management of Boeing is also engaged in leading the company into lucrative contracts and partnerships that leverage the company on the business front. Be it the bidding of a contract, development of new technology, or delivery of equipment, the management of Boeing is there every step of the way. And, through its global scope, Boeing can hedge against practically any type of disruption imaginable.
Another aspect of the Boeing Company is its corporate citizenship. Boeing is very committed to the local areas where they are located. The consistently provide cash donations, in-kind services, and employee involvement whenever possible. Last year, Boeing employees volunteered 250,000 hours of their time to community causes, which is equivalent to $3.8 million in free labor. They also operate the world’s largest employee-owned charitable organization. In 2001, the total amount raised by the company and employees was an astounding $92.7 million.
Perhaps the biggest strength for Boeing is simply its name. Boeing enjoys overwhelming success because of its brand name awareness. The marketing department set out on this goal more than 50 years ago, and Boeing’s success is a direct result of that campaign. Marketing for Boeing can be seen on magazines, television, the internet, and through word of mouth. They have also recently created a radio broadcast called “Forever New Frontiers” which is geared towards developing a positive image of Boeing. They have consistently garnered respect from many high profile trade and business magazines praising their commitment to the environment, employees, and business partners.
Boeing also has a very successful marketing campaign when it comes to attracting employees. They are very open and are always looking for bright, energetic people to come and work for them. Because of the benefits associated with being employed at Boeing, attracting new employees is easy. This is one of the core concepts of the Boeing Company, and they promote this by stating, “the strength and competitive advantage of Boeing comes from its employees.
Success can also be shown through the fact that nearly 75% of the world uses Boeing built airliners. Out of 10 Boeing aircrafts only 7 are exported overseas. This is not something that can be accomplished without a successful marketing campaign. The loyalty and brand recognition of Boeing is a very large part of their success.
Boeing is one of the world’s largest suppliers of commercial aircraft, and as such, they are very well positioned in the aircraft industry. In 2002, they booked $28 billion in revenue from their aircraft division. This makes up nearly 53% of Boeing total revenues, with 47% coming from their other businesses. This breakdown has been one of Boeing’s strategies to diversify their operations. In 1993, the commercial aircraft segment made up 80% of their revenues. All together, Boeing booked 54.1 billion in revenue for 2002, which was a slight decrease from 2001.
The Boeing Capital Company is a very valuable asset to the company. This is a service provided by Boeing to their business partners, which provides competitively priced financing options. Through creative financing option, thousands of customers can afford to purchase Boeing’s products and services. Handling purchasing, leasing, and many other financial aspects of their clients needs.
Boeing also has a very large amount of account receivables. At the end of 2002, they had $104,173 billion in backlogs. This figure does not include any foreign government contracts, which is a significant amount for Boeing. Outside this figure, the foreign government backlog was $34.7 billion. Also, at the end of 2002, Boeing had cash and cash equivalents of $2,333 billion, and they had long term debt obligations of $28,565 billion.
Boeing is a very strong company overall. The changes in accounting procedures resulted in a decreased net income from one year to the next. Even though net income was lower, it is still going to be strength because the accounting change was necessary. A major part of this accounting change happened when they chose to expense their stock options. This will probably become an SEC requirement in the near future, showing they are ahead of the game. (Figure 4 in the appendix)
The production and operations department is a very large part of Boeing. These are the brain centers of the company. Through the use of a diversified product line and very talented employees, Boeing excels in their businesses. Using thousands of suppliers, manufacturing sites, and technology development centers, Boeing can distribute their products very efficiently. This enables Boeing to compete at the lowest cost and offer the best quality. It is stated that in 24 hours, they will make 4,650 shipments of spare parts to airlines, 15,000 suppliers will provide parts to Boeing facilities, they will export $53 million of goods and services to customers worldwide, and Boeing satellites will provide one-third of the world’s satellite communication services.
Boeing also uses its own proprietary software and satellite transmission service for managing production lines and equipment deliveries. In a 24-hour period, more than 8 million emails will circulate through the Boeing network. This will keep all stages of product development, construction, and delivery under a close eye. Since Boeing offers an internet-based purchasing platform, they can reach thousands of customers instantly.
Another aspect of Boeing Company is with its implementation of special design and build process. Boeing essentially created its own form of manufacturing and assembly line in order to reduce turnover time and to increase employee productivity. Through the implementation of these practices, they have effectively reduced lead-time, cycle time, inventory, and defects. For the 717, these processes have cut the overall final assembly time in half. This has also been complimented through the direct investment in new technologies.
Research and Development
This is essentially the backbone to Boeing’s success. It is where all of Boeing’s greatest work is invented, tested, and implemented. Since this department is so important, they have it separated form the rest o f the company and named it Phantom Works. It is headquartered in St Louis, but it exists as a virtual department with 4500 employees working together at any given time on 500 projects. This department is constantly developing new
products and technologies and is considered to be the most secret place of the company.
The research and development budget is significant to the company as exemplified by Boeing’s commitment of $1.639 billion dollars. This is equal to 3% of 2002 sales, and is a needed expense for Boeing to continue to offer the very best in quality and performance. This amount covers the design, development, and testing of defense systems, new commercial aircraft, and space programs.
Computer Information Systems
The biggest impact of this area is in sales. Boeing is considered to be one of the top five internet sellers. Their statistics state that in 24 hours, they will sell more than $2 million of products over the internet. This is a very important factor to Boeing’s success. They have successfully developed a way for clients to securely purchase Boeing products. Because of its ability to receive financing from Boeing Capital, clients can make Boeing a one-stop source for all of their needs.
Another strength of Boeing’s website is that it caters to all people. Retired employees, current employees, clients, and even children can go to the website and find all the information that they need. This is important because it shows that Boeing has a true commitment to its employees, clients, and everyone in between. The website gives employees and retiree the ability to check in their benefits and retirement accounts, while children can play games, and learn about the history of flight.
Internal Analysis: Weaknesses
The major weakness of Boeing’s management is in its format. They operate with a mechanistic management style. This means that they have a very hierarchical, ridged, and semi-autocratic way of dispersing orders down through management. This style is a direct reflection of its military heritage. The problems of this management style lie in the fact that it does not promote the free flow of ideas. The orders are simply made at the top of the chain and dispersed downward through the rest of the company.
This then causes problems when management tries to motivate and lead their employees. With the orders coming down from the top, the employees do not have the ability to provide input into the decisions. This causes friction between the employees and management and it does not work very well in the business world today. This type of management can and will lead to employees revolting, quitting, or striking. The free flow of information between management and the employees is integral to the company’s future success.
We determined that the biggest marketing weakness for Boeing lies in its ultra secret business practices. This is good for research and development, as it will promote a competitive advantage, but when Boeing is marketing products, they need to be straight forward. This is also a direct result of their management style. Also, because of the nature of their work and products, they do need to be secretive, but their internal policies and procedures can be too secretive.
One example of this lies with the marketing of a new military product. They marketed it as an answer to the military’s problem of transportation, but upon testing, found that the product was rife with mechanical problems. This was after the military had already ordered the product.
Boeing has been hit with the brunt of the economic slowdown in its commercial aircraft division. With the state of the airlines in the balance, Boeing has seen its full year aircraft division’s profit significantly eroded. Because the United States is the main consumer of their aircraft, until the economy begins improving, and airlines see a pickup in travelers and profits, Boeing will continue to see financial weakness from this division. They are projecting a 2 to 4 year decline in the profitability of this division.
The ratio analysis shows the difficulties that Boeing has been experiencing from the economic downturn.
The main production weakness stems from the management style. Because of the mechanistic management style, the first-line employees feel alienated. The vertical and horizontal communication typically associated with manufacturing firms is not present with Boeing employees. This leads to low morale among employees and low productivity. This is a significant problem for Boeing because it undermines their reputation.
This aspect of the company also had to make significant alterations to its production line. Because of the terrorist attacks, they had to retool their assembly lines so that they could reduce their production. This also required the elimination of several positions. This is certainly not a positive practice for any company, but it was required for the continued success of the company.
Research and Development
We have determined the weakness in Boeing’s research and development as being a slow response time. We believe that Boeing has become lackadaisical in their commercial aircraft development. We feel this is true because of the astonishing surge of their main competitor. Boeing has always been then number one company in the aircraft industry and they essentially held a monopoly over the industry. Because of this, they did not respond fast enough to the threat of competitors.
This is exemplified through the fact that its main competitor has shipped more aircraft than Boeing for three years in a row. This is a major problem because they are losing customers. While they are planning on rolling out the most efficient aircraft named the 7E7, they do not expect to have it in service until 2008. This provides a huge advantage to competitors that have been working on similar projects.
Computer Information Systems
The weaknesses associated with their technology lies in their leadership abilities. Boeing has been a leader in the technology field of aircraft and aerospace; however, they have been slipping behind their competition. This is a very strong weakness, because a competitor has taken over in fly-by-wire avionics. This is a very integral part of flying an aircraft. This technology is what is used to determine routes, receive weather updates, find their bearings, and receive information pertinent to flights in progress.
Internal Factor Evaluation
The internal factor evaluation is used to evaluate the major strengths and weaknesses of a company. There are weights assigned to strengths and weaknesses based on how the company responds to them. The ratings are: 1 = poor response, 2 = average response, 3 = above average response, and 4 = superior response. (Figure 5 in the appendix)
The key strengths we identified were highly skilled workers, companies corporate citizens, name recognition, Phantom Works, internet sales, and Boeing’s web-site. Along with strengths, we also identified weaknesses of Boeing Company. The key weaknesses are mechanistic management style, ultra-secretive business practices, economic slowdown, production communications, slow response time, and technology.
The strengths were weighted: .15 for highly skilled workers, .05 for companies corporate citizens, .10 for name recognition, .05 for Phantom Works, .10 for internet sales, and .05 for Boeing’s web-site. The weaknesses were also evaluated and weighted accordingly. The weaknesses weighted scores were .10 for mechanistic management style, .05 for ultra-secretive business practices, .10 for economic slowdown, .05 for production communications, .05 for slow response time, and .15 for technology.
These weights show the importance of the strengths and weaknesses of Boeing Company. These are determined by how important the quality is to Boeing and how much of an impact each has against other business competitors. We felt the most important factors were highly skilled workers and technology. These two factors are very important to Boeing’s structure and its well being as a company. If these two factors are not evaluated accordingly, this could put a damper on the company’s competitiveness.
We rated the strengths and weaknesses based on how Boeing Company positions itself against its competitors. Its highly skilled workers, the company’s corporate citizenship, and name recognition have been successful strengths for Boeing and make the company what it is today. We rated all of these with a 4 because they have been such successful strengths. Phantom Works, internet sales, and Boeings web-site have also helped with the success of the company. We felt that these played a key role but we rated these a little lower with a 3.
We thought the minor weaknesses of Boeing Company were ultra-secretive business practices, economic slowdown, production communications, and technology. Since these were only minor we rated them with a 2. We also rated some major weaknesses. These included mechanistic management style and slow response time, which we rated as a 1.
By using these scores in the internal factor evaluation matrix, we came to a total score of Boeing Company being a 2.75, which is slightly above average. They are above the average company when it comes down to strengths and weaknesses and how they deal with them. Although Boeing needs to stay on top of their game, a slight trickle downward could result in trouble for their business.
Existing and Potential Problems
The three potential problems that we identified for Boeing are: reducing costs, travelers demanding point-to-point travel, and a lack of contracts. These are problems because Boeing is a major producer of aviation products and thus, these problems are directly related to their success. If they do not address these problems, they will have a difficult time maintaining their competitive edge and solvency.
Costs have been a problem simply because of the economic downturn. Boeing is not making as much of a profit on their business, and they are maintaining their current staff, production, and various expenses. These are problems because they are having a negative effect on Boeing’s income. If they are earning less profit on their products, they simply cannot maintain current production and staff levels. Also, because of the rising costs associated with employee benefits, utilities, and specifically parts, Boeing has to be more aggressive in cost cutting. We believe that Boeing has not been as successful as they could be in eliminating specific costs associated with parts.
Another problem that we identified for Boeing is in its response to customer demand with point-to-point flights. This is a newer development in the aviation world due to customers wanting less crowded, more direct flights. Point-to-point flights are simply direct paths to destinations. This eliminates the need for layovers and therefore, more security checkpoints, which have been increased drastically post 9/11. Customers have realized the importance of this procedure, but they also do not take kindly to the constant search and seizure procedures. Boeing has been developing aircraft to cater to this demand, but we believe that they could increase their exposure in a more efficient, timely matter.
The final problem that we identified for Boeing is in its bidding process. Boeing has lost and has been losing very lucrative contracts from the United States government, airlines, and the armed forces. This poses a problem not only for income reasons, but also for the company’s perception. If they continually lose contracts, it may be seen in the consumer industry as very negative. Each contract that they lose will put more doubt into the minds of
companies that do business with them. This also has a huge impact on their commitment to be an industry leader. Their competitors have an even greater advantage and motivation for securing contracts with Boeing’s business partners. We believe that Boeing needs to redefine itself in the market place in order to overcome this hurdle.
The internal-external matrix is also known as a portfolio matrix because it involves plotting organization divisions in a schematic diagram. It is based on two key dimensions: the internal factor evaluation total weighted score on the x-axis and the external factor evaluation total weighted scores on the y-axis.
On the x-axis of the internal-external matrix, an internal factor evaluation total weighted score of 1.0 to 1.99 represents a weak internal position, a score of 2.0 to 2.99 is considered average, and a 3.0 to 4.0 is considered strong. Similarly, on the y-axis, an external factor evaluation total weighted score of 1.0 to 1.99 is considered low, a score of 2.0 to 2.99 is medium, and a score of 3.0 to 4.0 is high.
The internal-external matrix is divided into three different regions. The first region is described as grow and build and can use intensive or integrative strategies. The second region is described as hold and maintain. This region can use market penetration and product development strategies. The third and final region is described as harvest or divest and this is where successful organizations are able to achieve portfolio of businesses. (This is figure 6 in the appendix)
Boeing Company is part of the grow and build strategies and the three strategies appropriate for this are horizontal integration, backward integration, and market penetration. This is because the internal factor evaluation total weighted score is 2.75 and the external factor evaluation total weighted score is 2.75 causing it to fall into quadrant II.
As determined by the IE Matrix, Boeing fits into the category of grow and build strategies. Thus, the three strategies that we have determined to be the best for Boeing are: backward integration, horizontal integration, and market penetration. We believe that Boeing can be successful with any or all of these strategies because they are in-line with the mission statement, they will fulfill their needs, and they will solve or reduce their exposure to the previously identified problems.