Dynamics 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
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TABLE OF CONTENTS
1.
INTRODUCTION-------------------------------------------------------------------------------------
03
2.
VISION, MISSION, GOALS, AND OBJECTIVES -----------------------------------------------
03
3.
STRATEGIC ANALYSIS -----------------------------------------------------------------------------
04
3.1
INTERNAL ANALYSIS --------------------------------------------------------------------
04
3.1.1
RESOURCE-BASED VIEW ----------------------------------------------------
04
3.1.2
VALUE CHAIN ANALYSIS -----------------------------------------------------
06
3.1.3
FINANCIAL ANALYSIS ---------------------------------------------------------
07
EXTERNAL ANALYSIS --------------------------------------------------------------------
08
3.2.1
PEST ANALYSIS ----------------------------------------------------------------
08
3.2.2
PORTER’S FIVE FORCES ------------------------------------------------------
09
SUMMARY ---------------------------------------------------------------------------------
10
3.3.1
SWOT ANALYSIS ---------------------------------------------------------------
10
3.3.2
KEY STRATEGIC ISSUES ------------------------------------------------------
12
FUTURE STRATEGIC DIRECTION ----------------------------------------------------------------
13
4.1
STRATEGY FORMULATION ------------------------------------------------------------
13
4.2
CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND SUITABILITY ------
14
4.3
IMPLEMENTING THE STRATEGY -----------------------------------------------------
15
4.3.1
CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S PERSPECTIVE) --
15
4.3.2
CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE) -------------
16
4.3.3
CONTROL SYSTEMS -----------------------------------------------------------
16
4.3.4
BALANCED SCORECARD -----------------------------------------------------
16
CONCLUSION ----------------------------------------------------------------------------------------
16
REFERENCES -----------------------------------------------------------------------------------------
18
3.2
3.3
4.
5.
APPENDIX A:
TABLE 1 – RESOURCE BASED VIEW OF BOEING --------------------------------------------
23
TABLE 2 – VALUE CHAIN ANALYSIS OF BOEING ---------------------------------------------
24
TABLE 3 – PEST ANALYSIS OF BOEING --------------------------------------------------------
25
TABLE 4 – PORTER’S FIVE FORCES ANALYSIS OF BOEING --------------------------------
25
TABLE 5 – SWOT ANALYSIS OF BOEING -------------------------------------------------------
26
TABLE 6 – KEY CURRENT STRATEGIC ISSUES AND THEIR IMPACTS --------------------
27
TABLE 7 – RECOMMENDED STRATEGY TO IMPROVE SCIS -------------------------------
28
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TABLE 8 – TYPES OF THE CHANGE -------------------------------------------------------------
28
TABLE 9 – CONTROL SYSTEM --------------------------------------------------------------------
29
TABLE 10 – BALANCED SCORECARD -----------------------------------------------------------
29
APPENDIX B:
FIGURE 1 – THE GANTT CHART -----------------------------------------------------------------
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30
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
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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.
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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 customerbased 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
supplier management in achieving high quality and low transaction costs. The key
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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
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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.
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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
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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
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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
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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
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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
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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
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(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 multipurpose 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
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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
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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
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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
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APPENDIX A
UNIQUE ABILITIES
THRESHOLD CAPABILITIES
Table 1 – Resource Based View of Boeing
o
o
o
o
RESOURCES
COMPETENCIES
THRESHOLD RESOURCES
THRESHOLD COMPETENCIES
Strong financial position
International customers
Acquisitions, strategic alliances, and subsidiaries
Addition services (see unique resources below)
o
o
o
o
o
UNIQUE RESOURCES
o
o
o
o
o
Airport technology
Boeing Capital Corporation
Commercial Aviation Services
Fuel conservative services
Training and flight service
Research and development activities
Ability to manage multiple divisions at the same time
Strong order backlog
Provision of financing facilities
Strong association with US government and other
government institutions like NASA and US Air force
CORE COMPETENCIES
o
o
o
o
Lean manufacturing policy
Large scale system integration
Latest technology-based commercial aircrafts
Global Airline Inventory Network
Source: Johnson et al (2008)
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Table 2 –Value Chain analysis of Boeing
Firm Infrastructure
o Well organised hierarchy
SUPPORT ACTIVITIES
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
o Stock control through
Global Airline Inventory
Network
o On-going Supplier’s
relationships
o Quality computer-based
training through Alteon
Aviation Training System
Operations
o Increased security
system
o MyBoeingFleet Web
Portal to access info
online
Outbound Logistics
o Advance Aviation
Performance Program
Marketing and Sales
o Advance Aviation
Performance Program
Post Sale Service
o After sale service
program ‘Advance
Aviation Performance
Program’
Source: Johnson et al (2008)
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Table 3 – PEST analysis of Boeing
FACTOR
POLITICAL
ECONOMIC
SOCIAL
TECHNOLOGICAL
o
o
o
o
o
o
o
o
o
o
o
o
o
KEY FINDINGS
Tariff free agreement of 1979
Open Skies agreement
Restriction of selling products to particular countries due to retain
sufficient security
Dispute of unfair subsidies between Boeing and Airbus
Increased fuel costs
Environmental regulations and restrictions
Global recession impacts
Increased population growth rate
Changing needs and demands of the customers
Anti-US policy
Cost effective computerised technology
Utilising new technology (i.e. composite material)
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
LOW
1 to 5
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
Threat of new entrance
Threat of substitutes
Source: Mintzberg (1998 and 2001) and Johnson et al (2008)
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Table 5 – SWOT analysis of Boeing
LOCATION
INTERNAL
STRENGTHS
WEAKNESSES
FAVOURABLE
UNFAVOURABLE
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
OPPORTUNITIES
EXTERNAL
o Increasing world defence spending
o Increasing demand for commercial
airplanes
o Acquisitions due to financial crisis 2008
o Global Airline Inventory Network
THREATS
o
o
o
o
o
Increase in oil prices
Slowdown of commercial jet market
Risks related to labour issues
Great East Japan earthquake impact
Change in US budgetary priorities
Source: Thomson and Martin (2010)
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Table 6 – Key Current strategic issues and their impacts
ANALYTICAL TOOL
o
Resource Based View
Value Chain analysis
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o
KEY ISSUE
Competency gap between Boeing’s vision and
strategies due to supply chain problems which have
caused delays
Boeing is currently facing supply chain problem due to
lack of effective communication strategy
RESULT
ACTION
Delay
Under review
Delay
Under review
Financial analysis
o
8% decline in the revenue due to global recession 2008
Decline in profit
Taken
PEST analysis
o
o
o
o
o
Decreased consumer spending due to global recession
Changing needs and demands of the customers
Higher regulatory and environmental restrictions
Dispute of unfair subsidies
Anti-US Policy
Decline in sale
Taken
Porter’s Five Forces
analysis
o
Bargaining powers of suppliers
Delay
Under review
SWOT analysis
o
o
o
Delays due to supply chain problems
Great East Japan earthquake
Increased fuel prices
Delay
Taken
Table 7 – Recommended strategy to improve supply chain management system
STRATEGY
o
Improving Supply Chain Information
System (SCIS) using People,
Processes, and Technology strategy
o
o
o
OBJECTIVES
Developing effective control
system to manage supplier
relationships to overcome delay
problems
To fill the competency gap
between Boeing’s vision and
strategies
To improve service delivery
efficiency
To improve internal and external
communication
Table 8 – Types of the change
SCOPE OF CHANGE
NATURE OF CHANGE
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REALIGNMENT
TRANSFORMATION
INCREMENTAL
Adaptive
Evolution
BIG BANG
Reconstruction
Revolution
Table 9 – Control System
STRATEGY
PEOPLE and PROCESSES
TECHNOLOGY
o
o
o
o
o
o
o
o
o
RESOURCE ALLOCATION AND ACTIVITIES
Introduce the new technology to the people of the organization
Utilising service blueprints to designing processes
Research and development activities
Promoting internal and external communication
Continuous research and feedback
Installation of new ERP system
Combine new technology with the existing one
Training and development activities
Ongoing support and up-gradation
Source: Zakian (2005)
Table 10 – Balanced Scorecard
FINANCIAL PERSPECTIVE
GOALS
MEASURES
o Y/E financial statements
o Liquidity and profitability ratios
o Share price
Shareholder value
o Dividend price
INTERNAL PERSPECTIVE
Improving financial
performance
GOALS
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MEASURES
CUSTOMER’S PERSPECTIVE
GOALS
MEASURES
Product’s quality and
customer service
o Customer’s feedback
o Increased number of customers
o Advance orders
SUPPLIER’S PERSPECTIVE
On time delivery
GOALS
MEASURES
o Balanced scorecard approach
Improving supply
chain management
o Implementing Enterprise
Resource Planning (ERP)
Customer oriented
o Increase in sales
o Positive feedback
Timely deliveries
o Customer satisfaction
Supplier’s oriented
o Relationship with suppliers
o Effective control over suppliers
Long-term supplier
relationships
Continuous
improvement
o Implementing improved Supply
Change Information System
using People, Processes, and
Technology strategy
Source: Johnson et al. (2008)
APPENDIX B
Figure 1 – The Gantt chart
STAGE
Planning
Implementation
Evaluation
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ACTIVITIES
Internal / external marketing research
Formulation of strategy
Resource allocation
Process design
Coordination departmental strategies
Internal / external communication
Continuous research and feedback
Reviewing control systems
YEAR 1
Q1
Q2
Q3
YEAR 2
Q4
Q1
Q2
Q3
YEAR 3
Q4
Q1
Q2
Q3
Q4
ACTING PARTIES
Marketing department
Corporate executives
Finance department
Operations department
Functional managers
Functional departments
Marketing and HR depart.
Functional departments