BOEING COMPANY:
A VIEW INTO GLOBALIZATION
IN THE 21st CENTURY
by
Anthony Nicholas Dionisio
ADIONISIO@LIVE.COM
http://www.anthonydionisio.com/research.html
Embry Riddle Aeronautical University
April 2007
i
Abstract
In the global marketplace of the 21st century, aviation firms must provide low-cost quality
products to customers on time if they wish to stay competitive; the Boeing Company has
embodied this statement with continued operations in 70 countries, exports to over 90 countries
and rankings as one of the top exporters in the United States. This paper will describe the Boeing
Company’s goals, operations, and plan for continued success in the global marketplace of the
future.
ii
TABLE OF CONTENTS
Page
TITLE PAGE
i
ABSTRACT
ii
Chapter
I
II
INTRODUCTION
1
The Boeing Company
1
Global Success Defined
1
OVERVIEW OF THE BOEING COMPANY
2
Company History
2
Vision
2
Mission Statement
3
Leadership
3
Integrity
3
Quality
3
Customer Satisfaction
3
Employee Cooperation
4
Diverse and Involved Team
4
Good Corporate Citizenship
4
Enhancing Shareholder Value
4
Profitability
5
Segments
6
Commercial Airplanes
iii
6
Precision Engagement and Mobility Systems
7
Network and Space Systems
8
Support
10
Boeing Capital Corporation
10
Major Competitors and Market Share
III
IIII
11
Airline Business
11
Defense Business
12
Process Management Techniques
14
Lean Enterprise
14
Supply Chain Management
14
Strategic Plan
15
Future Outlook
16
BOEING AND THE GLOBAL FRONTEIR
17
Global Operations
17
Global Employment
18
Human Resource Management Concerns
18
Compensation Issues
19
Cultural Issues
20
Currency Risks
20
Global Expansion
20
CONCLUSION
21
The Global Leader: Boeing
REFERENCES
21
22
iv
APPENDIXES
A
ACRONYMS
24
v
Boeing Company 1
CHAPTER I
INTRODUCTION
The Boeing Company
The Boeing Company has become the frontrunner in the global aviation industry of the
21st Century. This paper will first discuss an overview of the Boeing company including its
origins, current operations and future outlook; the second portion will discuss how the company
takes advantage of globalization and its plans for continued success in the global marketplace.
The Boeing Company is a prime example for all firms looking to sell their products abroad and it
is for this reason that it is the focus of this paper.
Global Success Defined
To succeed in the global marketplace, as Boeing has, a firm must first have a grasp on
what globalization is. Globalization is defined in its simplest form as the decision by a firm to
become a global company and the processes it must undergo to complete this task. To compete
in the global marketplace firms must be able to accomplish the following:
1. Understand and take advantage of complex world financial markets.
2. Manage and recruit experienced human capital effectively.
3. Have access to technology and continually improve it.
4. Understand and control legal matters involving its firm.
5. Seek out and take advantage of global markets with access and possibility for
continued growth.
When firms learn to complete the above they will have the beginnings of a global company
(Ratner & Siems, 2006). The Boeing Company has been completing these basic requirements for
years becoming one of the most successful global firms.
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CHAPTER II
OVERVIEW OF THE BOEING COMPANY
Company History
When the Wright brothers first flew in the early 1900s no one imagined that the airplane
would become the premier way to travel, move cargo and fight wars by the end of the century.
The past companies that now comprise Boeing played a large part in the aviation boom of the
20th Century. Five companies helped the present day Boeing change the course of aviation
history, the Boeing Airplane Co., Douglas Aircraft Co., McDonnell Aircraft Corp., North
American Aviation and Hughes Aircraft (“Boeing: History – Introduction,” n.d.). These
companies pioneered the American aviation industry including the development of the first
commercial aircraft, invention of jet propulsion and integrations that allowed Americans to walk
on the moon. The Boeing Company and its predecessors have always stayed on top of the world
market with innovative and consistent use of ever better technologies; this coupled with sound
business practices has made the company the largest manufacturer of commercial jetliners and
military aircraft in the world.
Vision
The Boeing Company’s vision 2016 sums up the future goal of the company, “people
working together as a global enterprise for aerospace leadership” (Boeing Frontiers, 2005). The
company also looks to complete the following in the future:
1. Continue running healthy core businesses and open them into new markets.
2. Better understand customer needs and better respond to them.
3. Continuous large-scale systems integration to improve effectiveness.
4. Continued integration of a lean enterprise.
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These ideas encompass the requirements for healthy business in globalized firms of the 21st
Century; many will be discussed in detail later.
Mission Statement
The mission statement of Boeing is much like that of its vision. The company’s focus is
on the practice of eight core company values. The values that the company wishes to instill in its
business embody that of sound business practices and innovation; they will be key to the
continued success of the firm and are discussed next.
Leadership
Good leadership is key to the success of any firm. Without good leaders the company
could not complete its mission nor satisfy its customers. Leadership should be everyone’s goal
from team leaders at the bottom level of the firm to that of the chief executive officer.
Integrity
Without ethics, business isn’t business. The company strives to conduct itself ethically
and honor its commitments both internally and externally. Every employee will treat people
fairly with dignity and respect and take personal responsibility for their actions.
Quality
Continuous quality improvement should be the goal of any firm and this is no different at
Boeing. To remain competitive in the global market the firm will need to continue to improve
quality through process improvements and ensuring every employee is responsible for quality at
their level.
Customer Satisfaction
Without complete customer satisfaction firms will inevitably loose the competitive edge
they need to succeed in the global market. Boeing will accomplish total customer satisfaction by
Boeing Company 4
first understanding their customer’s needs and then fulfilling them completely. Boeing has found
that satisfied customers will proactively cooperate with the firm and buy more of its goods in the
long haul.
Employee Cooperation
Boeing has found continued success on the global market and attributes its success to the
human capital of the company. By fostering the ideas of its employees and establishing forums
for knowledge sharing among all business segments Boeing plans to continue its success well
into the future.
Diverse and Involved Team
By providing equal opportunities to all applicants worldwide, Boeing has one of the most
diverse employee bases in the world. All employees are also expected to participate in the
company by making decision in their work that will help improve the company’s business
(Boeing Frontiers, 2005).
Good Corporate Citizenship
Boeing firmly believes that if the company takes care of its people, its people will
enhance the world around them. Boeing and employees consider themselves leaders in their
communities and proactively support a better environment, education and other ethical causes.
Enhancing Shareholder Value
Success of a firm can be found in profits. When a firm continually produces profits, year
over year, shareholders will make profits as well. For example, the Boeing stock price has
increased over 26% in 2006 and the company has increased the dividend 17% in 2006 and 20%
in 2005 (“Boeing: 2006 Annual Report,” 2007).
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The mission statement of Boeing aims to instill core values into its business practices.
By ensuring their employees consistently practice smart, innovative and ethical business, the
Boeing Company will continue to satisfy customers and investors for years to come.
Profitability
A discussion of any global firm must include a section about its profits to understand its
business. Firms must consistently post profits to both satisfy shareholders and produce capital to
reinvest into its businesses.
The following chart shows both the revenues and net earnings, or profit, for the past five
calendar years of the Boeing Company.
The Boeing Company: Revenues and Net Earnings 2002-2006
(All Values in Millions of Dollars)
2006
2005
2004
2003
2002
Revenues
61,530
53,621
51,400
49,311
52,720
Net Earnings
2,215
2,572
1,872
718
492
* SOURCE: Obtained from Boeing: 2006 Annual Report
As evident in the chart above, Boeing Company has continually posted profits in the billions
over the last three years. The company also posted multi-million dollar profits in 2002 and 2003
when civil aviation sales dropped from $51 billion in 2001 to $31 billion in 2003 (Toto, 2003)
due to the global recession at the beginning of the 21st Century and events associated with
September 11, 2001. Most aviation firms were in the red during this period but Boeing stood out
amongst competitors.
Continuing Boeing’s legacy, the company has consistently posted profits and increased
shareholder value for decades. It can be said that if a firm can make profits in the toughest times,
Boeing Company 6
it will easily weather the storm present in the global marketplace; Boeing has exemplified this
statement over the past few years and is an example for global firms everywhere.
Segments
Boeing has recently restructured itself including the acquisition of two firms and the exit
of its broadband access venture, Connexion by Boeing. The company knows it must continually
restructure itself to stay ahead of the global competition. The five principle segments of Boeing
and their programs will now be discussed.
Commercial Airplanes
The commercial airplanes segment of Boeing accounts for nearly half of the company’s
business, in fact anyone who has every traveled via air has more than likely ridden in a Boeing
aircraft. With the combined experience of the Boeing team and the integration of the McDonnell
Douglas Aircraft team in the 1990s, Boeing’s commercial airplanes segment is considered the
best in the world.
Boeing produced 398 commercial airplanes in 2006 and also began development of the
new 787 Dreamliner. Innovation is always apparent in the company’s aircraft divisions, where
the new 787 will use 20% less fuel and have 30% lower maintenance costs than conventionally
airliners (“Boeing: 2006 Annual Report,” 2007). With increased oil prices, every airline in the
world is looking for airplanes with lower operating cost. The 787 provides not only fuel savings,
but much more to customers. As mentioned early, Boeing actively listens to its customers and
the 787 is just what customers need. Airlines are not looking for increased capacity or size they
were in the 1980s. Airlines of the 21st Century are looking for a long-range low-cost aircraft
capable of connecting continents; the Boeing 787 Dreamliner is just that.
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Boeing’s Commercial Airplane production facilities and their suppliers worldwide cannot
keep up with the demand for Boeing’s line of aircraft. Boeing has consistently provided costeffective, customer oriented, and innovative airplanes that not only lower cost for airlines but
also allow airlines to provide comfortable and reasonably priced services to the traveling public
around the globe.
Precision Engagement and Mobility Systems
Boeing is a key supplier to the defense department of the both the United States and its
allies. The Precision Engagement and Mobility Systems (PEMS) segment of the company
produces systems used in airborne anti-submarine warfare, surveillance and reconnaissance,
mobility, global strike and lastly rotorcraft (“Boeing: IDS - PEMS Home,” n.d.).
Boeing has been providing the U.S. armed forces with many airborne platforms capable
of surveillance, command and control and anti-surface and sub-surface missions. These aircraft
are generally made from modified commercial aircraft that provide not only the cost-efficiency
and safety from its commercial segment, but have modifications and advanced systems that can
perform the mission of the defense department.
The global mobility systems portion of PEMS also uses modified versions of Boeing’s
extensive line of commercial aircraft. These platforms, such as the KC-767 advanced tanker, a
modified 767 capable advanced aerial refueling mission and the C-17 Globemaster III, a cargo
plane that has set numerous world records because of its large payload and distance capabilities,
have again set the bar for defense systems by providing the most mission capable and efficient
mobility platforms in the world.
From the early fighters and bombers of the 20th Century, such as the B-17 and B-29 made
infamous during World War II or the B-52 the most effective bomber ever produced in terms of
Boeing Company 8
payload and length of service, the company continues to make effective global strike systems
(GSS) for militaries around the globe. This section can be summed up by pure numbers; Boeing
currently produces the following advanced aircraft for the world’s militaries the AV-8B Harrier
II Plus, B-1B Lancer, B-2 Spirit, F/A-18 Hornet, F/A-18E/F Super Hornet, F-22 Raptor, F-15E
Strike Eagle and the T-45 Training System (“Boeing: IDS – PEMS – GSS,” n.d.). Boeing
produces more combat ready aircraft every year than most countries possess. The company is
capable of building military aircraft for nearly every military in the world; it will undoubtedly
continue its legacy with new innovations in the 21st Century including the design and production
of unmanned vehicles, currently in research and development.
The last sector of the PEMS is rotorcraft. As a world leader in the design of helicopters,
Boeing produces many combat and search and rescue capable helicopters including the Apache,
Osprey and the Chinook. From a design standpoint, the apache was one of the most
groundbreaking helicopters ever produced for the armed services due to its shear combat
capability. The Osprey has also been groundbreaking, providing effecting vertical lift and longrange capabilities for worldwide mission readiness.
The PEMS segment of Boeing has been a key part of its business since its origins in
World War II. The United States Government and its allies around the globe will continue to call
upon Boeing to produce the most innovative, effective and combat-ready airborne platforms in
the world.
Network and Space Systems
The Network and Space Systems (NSS) segment of Boeing is one of the most advanced
of its kind in the world. The NSS develops two types of systems those for the military both on
and above ground and those systems needed for various global space endeavors.
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Boeing produces various types of combat systems and integrated command, control and
communications networks for various militaries (“Boeing: IDS – NSS Home,” n.d.). These
systems link all of the aspects of a military’s capabilities into one information system that keeps
all units linked with each other. The United States has also been presented with an increase
threat of Intercontinental Ballistic Missiles (ICBM) in recent years. Boeing has answered the
call of the U.S. government to produce redundant missile defense systems to protect our nation’s
assets. The last system that the company produces for the military are those used in outer space.
There are an array of intelligence and other military satellites that are vital links to commanders
on the ground fighting global wars; these systems provide constant data collection, throughput
and analysis to help the fighting forces of the future make educated decisions on the ground in
seconds, instead of days.
Boeing has been a frontrunner in the space race of the 20th Century and beyond. The
companies that make up the present day Boeing have been responsible for the majority of
American space endeavors, including the space shuttle program and the international space
station. The commitments of the company to space exploration and commercial endeavors do not
end at the international space station either; Boeing is a global leader in the development and
production of space vehicles and satellites, these systems have been time-tested by a team that
has more experience than any in the industry.
Boeing is a company built upon innovation and technologic improvement. The company
has taken what it learned in developing the commercial aviation industry and has applied it to
their NSS segment. Boeing is a frontrunner in developing network and space platforms key to
the success of many military, commercial and scientific endeavors around the globe; without
Boeing, space exploration as we know it might very well not exist.
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Support
Boeing Support Systems segment is an integral part in the customer satisfaction and
support that has made Boeing the leader in the aerospace industry. To support the needs of its
customers during the life cycle of its products, Boeing continually introduces improved systems
and services required by the customer (“Boeing: IDS – Support Systems Home,” n.d.). The
support segment offers continued growth for the company as it continues to tailor its support
services to meet the needs of all customers on the global market.
Boeing Capital Corporation
All successful firms around the globe realize that at some point in their business they will
need to help fund or find funding for its customers. The Boeing Capital Corporation (BCC) aims
to do just that, functioning as a subsidiary of The Boeing Company. The BCC primarily funds
other Boeing segments and customers through the use of third party financiers, such as General
Electric Capital Corporation (“Boeing: BCC Home,” n.d.). The BCC’s core competencies are in
their risk management, financial management and capability to facilitate, find and structure
financial agreements for both Boeing and its customers. The Boeing Company understands that
managing financial exposure to the firm while still facilitating financing for its customers is the
best way to do business in the global aviation industry.
The Boeing Company is the leading aerospace manufacturer in the world; an overview of
its segments, like the one above, makes it easy to see why. Any global firm as innovative,
diverse and productive as Boeing will win in the long run with pure numbers; the company’s vast
product line and support structure has proved this, year after year, producing sustainable
revenues in the billions greater than that of many developed nations.
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Major Competitors and Market Share
This discussion of Boeing, its major competitors and market share information will focus
mainly on two topics, the airline business and the defense business. Through the use of sales and
market share data, an in depth discussion of Boeing and its primary competitors will now be
discussed.
Airline Business
The Boeing Company has systematically bought up every major commercial aircraft
manufacturer in the United States, as discussed earlier in this paper. The company’s main
competition derives from Airbus, a European firm headquartered in France, and its associated
aircraft manufacturing businesses. There are other commercial aircraft producers namely
Bombardier and Embraer, who manufacture regional aircraft that generally do not compete
directly with Boeing’s fleet of large commercial aircraft.
Airbus and Boeing have been competing with each other since Airbus began producing
aircraft in the 1970s. The following chart shows commercial aircraft sales data, forecasts and the
market share of each of the companies.
COMMERCIAL AIRCRAFT SALES FORECAST
(All Values in Millions of
Dollars)
Boeing
Airbus
2006
28,056(49.5%)
28,662(50.5%)
2007
32,889(50.1%)
32,787(49.9%)
Cumulative 2007-2025
1,475,726(53%)
1,308,906(47%)
* SOURCE: THE AIRLINE MONITOR COMMERCIAL AIRCRAFT MARKET FORECAST
As the chart above shows the companies each own about 50% of the commercial aircraft market
when compared to each other. In the long haul, years 2007-2025, it looks as though Boeing will
gain market share but these numbers are still quite close.
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There are large differences between these companies that cannot be shown in numbers,
mainly in their development focuses. Airbus has been continually trying to top Boeing’s
creation of the 747, the world largest operationally sound commercial aircraft, while Boeing has
been actively designing newer more customer centric designed planes; for example, the 787
Dreamliner, discussed earlier, will lower cost, increase effectiveness, fly faster and travel farther
than any current commercial aircraft. Listening to customers and designing planes that are both
economically feasible and environmentally sound will win the fight in the long haul; Boeing is
poised to do just that with the Dreamliner and its other commercial endeavors.
Defense Business
Two cases will be discussed in relation to Boeing’s defense programs, the first will be the
top five United States defense contractors in 2002, the second the top three defense exporters in
the U.S. in 1999. Both of these cases need to be studied, the first to understand Boeing’s
competitors in the industry and the second to understand Boeing’s global dominance in the
defense exporting industry.
The defense contracting practices of the U.S. Government have sometimes come into
question over the years. Usually, the government does one of the following, posts requirements
for all defense contractors to bid on using their own funding for research and development
(R&D) or they pay selected firms to conduct R&D and then bid on contracts.
All of the top five domestic defense contractors, shown in the following chart, focus on
systems development and integration. Interestingly, the top five contractors comprise nearly all
of the aircraft and associated services that are sold to the government. It can be said that Boeing
has a about a third of the domestic defense budget and this is due mainly to the acquisition of
Boeing Company 13
McDonnell Douglas and Hughes Aircraft who were both leaders in the defense industry of the
20th Century
Top Five Domestic Defense Contractors
(All Values in Billions of Dollars)
Ranking
Sales
Lockheed Martin Corp.
Boeing Co.
Northrop Grumman Corp.
Raytheon Co.
General Dynamics Corp.
1
2
3
4
5
17.0
16.6
8.7
7.0
7.0
Market Share
(As Compared With Each Other)
30.1%
29.5%
15.5%
12.4%
12.4%
* SOURCE: Pentagon’s Annual Top Ten Defense Contractors
The Boeing Company is the premier global aerospace firm; this is evident in the
following chart. The top three foreign defense suppliers, as above, all focus on the aerospace
industry. Boeing has a commanding lead in global sales of defense materials, due mainly to its
wide base of military aircraft, listed in the PEMS section above. Although the total sales to
foreign countries dwarfs that of Boeing domestic sales, Boeing’s global enterprise accounts for
nearly 25% of defense exports.
Top Three Foreign Defense Suppliers
(All Values in Billions of Dollars)
Ranking
Sales
Boeing Co.
Lockheed Martin Corp.
Raytheon Co.
1
2
3
1.42
1.08
8.14
Market Share
(Total Foreign Exports)
22.8%
17.4%
13.1%
* SOURCE: Defense Foreign Military Sales Contractors
Whether it be commercial aircraft or IDS segments of the Boeing Company, it is
important to understand what the firm competition is doing both domestically and
internationally. In the 21st Century Boeing is learning that even if it absorbs the competition at
home, there are firms abroad that will compete with the firm directly and in Airbus’ case they
have proved to be a good opponent.
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Process Management Techniques
Boeing has set key goals in process management implication and established a company
wide Internal Services Productivity (ISP) initiative that is targeted at improving productivity and
reducing the costs of business support functions (“Boeing: 2006 Annual Report,” 2007). These
initiatives focus on two main goals; establish a lean enterprise and effective supply chain
management.
Lean Enterprise
Lean production aims to minimize inventories and produce parts just in time to the
customer. Any good lean system will provide quality products to customers both internally and
externally by striving to eliminate rework and defects and at the same time lower costs. By
introducing total quality control (TQC) into a process, in conjunction with lean philosophy,
quality processes are built into a firm’s products. Improved product design is key to a lean
enterprise; by designing components with fewer standardized parts, quality is built into products
and less time will be spent producing them. In 2006 alone, Boeing has attributed over $500
million in business support cost savings through systems reduction and process simplification
(“Boeing: 2006 Annual Report,” 2007).
Supply Chain Management
Effective supply chain management (SCM) is key to the success of the Boeing Company.
SCM is achieved by investing ample time to defining the supply chain, determining what
systems are needed to manage it, and lastly managing these systems (Gould, 2005). Many
technologies are used by Boeing that take data from the firm, its suppliers, logistics providers
and customers and project the requirements for each of the units in the supply chain. Boeing has
been using its SCM in its new 787 Dreamliner development program, SCM and logistics
Boeing Company 15
planning helped reduced projected cost for the program by $200 million over 10 years (“Boeing:
2006 Annual Report,” 2007).
In the global marketplace of the 21st century Boeing must provide low-cost quality
products to customers on time if they wish to stay competitive. The firm’s process improvements
will continue to affect how company products are designed, produced and sold ensuring quality
low cost products that outweigh that of the competition.
Strategic Plan
Strategic planning has always been a strong focus at the Boeing Company, the firm
continuously scrutinizes its segments and their divisions to ensure that they are aligned with the
company’s vision, if they are not they are shut down; coupled with strategic acquisitions that
strengthen its global competitiveness this firm’s strategic plans will lead it well into the 21st
Century.
Sometimes every company must face the reality that one of its divisions is not performing
to par. This was the case with Connexion by Boeing, after research into the divisions airborne
broadband business, Boeing decided this divisions risks outweighed its cost (“Boeing: 2006
Annual Report,” 2007). To continue to be the globally diverse multi-billion dollar corporation
that Boeing is, it cannot drag along deadweight, so the company made a strategic decision to shut
down Connexion and absorb the cost now rather than later.
Hopefully, as in Boeing’s case, most of the strategic planning elements of a firm will
focus on acquisitions and not shut downs. In 2006, Boeing searched the globe to find companies
that aligned with the company’s core competences and could help the firm strategically enter
new markets. The company found just that in Aviall Inc. Aviall is one of the world’s largest
providers of services and aviation parts to the aerospace industry (“Boeing: 2006 Annual
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Report,” 2007). Boeing found that the acquisition of Aviall would enhance and expand the
support capabilities of Boeing grasping a larger piece of the multi-billion dollar aviation services
market. Boeing also acquired Carmen Systems during 2006; the company found that the crewscheduling and related systems would greatly help the firm’s support functions to world’s largest
airlines (“Boeing: 2006 Annual Report,” 2007).
The Boeing Company has been an example of how to execute strategic planning for
decades. The firm continues to use strategic planning to shape its businesses, including
acquisitions, shut downs, and program re-evaluation in every sector of its businesses.
Future Outlook
The future outlook for The Boeing Company is the best in the global aerospace industry.
The following points made by Boeing in its 2006 Annual Report will amplify this statement:
The company has combined order backlogs of $250 billion dollars filling production
operations well into 2010.
The firm posted net earnings of nearly two billion dollars three years running.
The firm has provided greater than 25% returns to shareholders four years running,
consistently increased its stock dividend and bought back nearly two billion dollars in
stock in 2006 alone.
The firm is increasing revenues, research and development funding, acquisitions funding
and global expansion to become more strategically aligned with the firm’s Vision 2016.
The Boeing Company and its subsidiaries look poised to continue growing well into the 21st
Century and will continue to be the leading aerospace manufacturer in the world for the
foreseeable future.
Boeing Company 17
CHAPTER III
BOEING AND THE GLOBAL FRONTEIR
Global Operations
Global presence has become one of the primary goals of the Boeing Company in the 21st
Century. Sales from international markets accounted for over one third of company revenues in
2006 and the company looks to continue its expansion and success in the global frontier with
continuing operations in 70 countries and customers in more than 90 (“Boeing: 2006 Annual
Report,” 2007). Some of the current global operations of The Boeing Company will now be
discussed.
The growth of many third world countries into booming industrialized marketplaces is an
ever-present site in the 21st Century. Boeing is committed to providing services to firms that
operate in these areas including Asia and South America. The Asian region alone is predicted to
need about $770 billion worth of aircraft alone (“Boeing: 2006 Annual Report,” 2007); in
response to these increased customer requirements, Boeing has built aviation services facilities in
both India and China and looks to sell thousands of aircraft in the region in the coming years.
Boeing is also committed to its subsidiaries and strategic alliances with firms in countries
such as Australia, Japan, Canada and many other developed countries. By fostering dual-interest
relationships with global aviation firms everywhere, Boeing has found continued success in
selling both new aircraft and services the world over.
The future of the Integrated Defense Systems segment of the firm may seem bleak from a
United States perspective, but when coupled with the defense needs of its allies, the opportunities
for IDS are enormous. The various divisions of the IDS are finding emerging growth and sales
opportunities in India, Singapore, Japan and other countries around the globe (“Boeing: 2006
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Annual Report,” 2007). The company has found that it is increasingly globalizing its business,
finding demand for all of its products at every end of the globe.
By continued global presence including the marketing of its products, acquisition of firms
and expanded operations, Boeing is poised to continue its evolution from the simple exporter of
the mid 20th Century to the largest global aerospace firm on earth.
Global Employment
Boeing employs 154,000 people in 70 different countries around the globe, from Europe
to Asia and all the Americas (“Boeing: 2006 Annual Report,” 2007). Anyone can imagine
managing, compensating and controlling the cultural diversity of all of these employees can be
quite a task, but this is the goal of Boeing, to be as resourceful and diverse in its human capital as
the company is when it comes to its working capital.
Human Resource Management Concerns
There are many human resource management concerns in any aerospace business. The
compelling argument is typically what type of production planning strategies the firm will need
in its production enterprises in an industry wrought by with large workforces during upturn and
large layoffs during downturns. Production planning strategies involve employees and how they
are hired and scheduled. There are three strategies to production planning each handling
personnel, inventory and customer service differently; these strategies will now be discussed.
Manufacturing firms that are not highly specialized usually use the chase strategy. This
strategy works basically by chasing demand, for example if there are no customer orders
personnel are laid-off, but if there is an order backlog personnel will be hired.
The stable workforce strategy consists of variable work hours and is generally used by
specialized manufactures. Worker’s hours vary with order quantity, if there is an order backlog
Boeing Company 19
employees will work overtime, without orders workers would expect shorter workweeks. This
approach keeps trained personnel (company investment) where they should be, at the company.
Boeing uses this type of approach consistently, the idea as stated above is to keep human capital
with the company for the long-term.
Raw material manufacturers and others use the level strategy often; surpluses are
absorbed in inventory and shortages by the customer. This approach, although good for workers,
has many potential costs including inventory holding cost and low customer service levels. With
lean enterprise increasing spreading throughout Boeing’s segments, it would be hard to fathom
this type of approach every working at the company.
The contractual basis of the aerospace industry makes the job of the human resource
manager very dynamic. With the increased implication of lean enterprises into its business
coupled with a stable workforce production strategy, Boeing is going to find itself with order
backlogs such that it had at the end of 2006, $250 billion as previously stated.
Compensation Issues
Boeing realizes that the company’s strength lies within its people. By consistently
providing competitive base pay, benefits and career development opportunities the firm looks to
keep a stable, experienced and diverse workforce. Boeing’s approach to pay and compensation
abroad is quite simple; the company pays locally hired employees as residents of the country in
which they are employed, generally they are paid in the local currency and most benefits are
country specific (“Boeing: Employee/Retiree – Benefits and Compensation,” n.d.). Employees
generally have no complaints with Boeing’s global compensation packages; although not as
lucrative as some firms, these packages provide employees with ample compensation that is
moreover competitive in its local market.
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Cultural Issues
Boeing strives to make its employee base as culturally diverse as the company’s product
lines. The firm strongly believes that by fostering the ideas of a diverse workforce, the best ideas
will be brought about and shared amongst employees companywide. Culturally the Boeing
Company is one of the most diverse in the world, it builds on the expression that people should
learn from each other’s differences rather than be divided by them. Boeing firmly believes that
cultural differences do not bring so-called issues into the firm, diversity brings the firm what it
has always used to succeed, creativity.
Currency Risks
As a globally operating firm, Boeing interacts with customers and suppliers whose home
currencies are not U.S. dollars. Boeing is exposed to a variety of market risks, including the
effects of changes in interest rates and currency exchange rates. To protect against the risks from
currency fluctuations, Boeing and most global companies turn to currency hedging. Hedging
operates by keeping the exchange rate between two currencies at a known value. Hedging is
implemented by entering into "financial instruments such as forward contracts, which allows
Boeing to lock into a known future exchange rate at a future date" (Boeing Frontiers Online,
2003). Without hedging, the values of payments made in the future both to and from Boeing will
bear some type currency exchange risk that could work in or out of the company’s favor. By
actively managing its currency positions and exchange rate risks, Boeing can not only find
protection in hedging, it can learn to profit from it.
Global Expansion
As discussed in the first section of this chapter, the global revenues for Boeing accounted
for over one third of the company’s business in 2006 alone. The Boeing Company has a vision to
Boeing Company 21
execute continued expansion in both acquisitions of global firms, operations abroad and revenues
abroad. In the end the company looks well poised to complete its goal through its strategic
planning and investment sense that has made it the leading global aerospace firm.
CHAPTER IIII
CONCLUSION
The Global Leader: Boeing
Boeing has answered the call of the 21st Century and is a leader not only in its industry
but also in business. Boeing is the best aerospace production firm on the globe and stands to be
for years to come. From its begins at the dawn of the 20th Century with the first Boeing Airplane
Co. seaplanes to the rollout of a virtual 787 Dreamliner in 2006, the company has exemplified
the statement “forever new frontiers.” Boeing is best summed up by the words of its Chief
Executive Officer, Jim McNerney, “There is built-in excitement in doing things that other
companies cannot do and turning dreams into reality. That is part of the heritage – and the
destiny – of The Boeing Company”(“Boeing: 2006 Annual Report,” 2007).
Boeing Company 22
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APPENDIX A
ACYRONYMS
BCC – Boeing Capital Corporation
GSS – Global Strike Systems
IDS – Integrated Defense Systems
ISP – Internal Services Productivity
NSS - Network and Space Systems
PEMS – Precision Engagement and Mobility Systems
R&D – Research and Development
SCM – Supply Chain Management
TQC – Total Quality Control