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Boeing A competitive review of their Commercial Aircraft strategy

Boeing A competitive review of their Commercial Aircraft strategy. Objectives: Identification of Boeing’s Main Competitive Weaknesses Identification of the Most likely area of Boeing’s business to be threatened Key actions required of Boeing to avoid competitive damage.

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Boeing A competitive review of their Commercial Aircraft strategy

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  1. BoeingA competitive review of their Commercial Aircraft strategy • Objectives: • Identification of Boeing’s Main Competitive Weaknesses • Identification of the Most likely area of Boeing’sbusiness to be threatened • Key actions required of Boeing to avoid competitive damage Presentation by: Charles Curzon, Robert Craig, Mark Simmons, Lisa Pell & Stephen Eykyn.

  2. Agenda What Do We Know? • Porter’s Five Competitive Forces • PEST - political, economic, social, technological • Value Chain Analysis • SEKT - skills, experience, knowledge, technology • Resource Audit • Strengths & Weaknesses • Opportunities & Threats Conclusion • Most Likely area of business to be threatened • Key Actions to avoid competitive damage

  3. Porter’s 5 Competitive Forces • Threat of new entrants… • Commercial Aircraft Corporation of China (CACC) • Bargaining power of suppliers… • Choice of engine suppliers • Boeing Supply chain issues (outsourcing) • Bargaining power of buyers… • Large number of Airlines • Airlines could decide to buy as alliances Boeing v Airbus A380 v 747-8 A350 v 787 • Threat of substitute products… • Other forms of transport • Video conferencing • New Fuel Sources Adapted from: Porter (2008)

  4. PEST • ECONOMIC • Fuel & parts cost increases • Low switching costs • Equity is trading at 2005 levels in 2008 • High debt ratio • POLITICAL • World Trade Organisation (WTO) dispute • Open Skies Agreement • Pentagon suspicion of Boeing culture. • SOCIAL • Demographics • Changing attitudes to air travel – economics vs environment • TECHNOLOGICAL • Low rate of technological change • Long lead times to market Adapted from Aguilar F.J. (1967) and Marti, J lecture slides (2008)

  5. 20 Year Traffic Growth Source: Boeing Current Market Outlook 2007-2027 Source: Airbus website (2008)

  6. Value Chain Analysis

  7. SEKT • SKILLS • Composites materials knowledge • EXPERIENCE • In business since 1916 • Experiential learning • KNOWLEDGE • Patents on historically reliable (747) and new (787) aircraft. • TECHNOLOGY • Large business at forefront of aircraft design. • New composite materials on 787 • Build smaller, fuel efficient planes that can fly point to point (smaller airports) • TODAY: No new large aircraft capable of more than 365 passengers • Launch in 2011 (Q4) of 747-8 still does not provide a Boeing aircraft capable of more than 500 passengers Source: Adapted from Marti, J (2008)

  8. Resource Audit For Against Large manufacturing facilities and assets Highly skilled workforce with ‘historical’ knowledge & experience Military and Governmental links. Large asset base. Long lead time on aircraft gives extra stability in financial forecasting Universally global enterprise Large asset overheads which need to be recovered Strength of union control could be detrimental to future direction of business (e.g. recent & impending strikes) Long lead times mean bad decisions have lasting impact Can fail to respond. E.g. to requirement for large new design aircraft. Physical (land) Labour (human) Capital (finance) Enterprise (systemic) Source: Adapted from Marti, J (2008)

  9. Strengths & Weaknesses • STRENGTHS • Leaders in building smaller (300+passengers) fuel efficient planes that can fly point to point in smaller airports - suits current airport infrastructure. • U.S. (Home), Asia and Europe: Already investing in a growth market in India and China with the U.S. remaining the largest growth market. • Facilitating Purchase: Have a finance company that enables the purchase of their products. • Building relationship with suppliers in principle future markets - e.g. China • WEAKNESSES • Boeing planes are less advanced in fuel economyfor long haul flights (seats fewer passengers for same distance) • Perception of ethics in Boeing corporate culture: Still seen with suspicion in some parts of the Pentagon • Declining margins & share price • High debt • Strength of Unionised workforce

  10. Opportunities & Threats • OPPORTUNITIES • Growing demand for commercial jetliners • Increasing size of Mid East and Asian markets driven by population demographics • Mid-East and Asian point to point no-frills airlines. • THREATS • Airport congestion - pressure to increase capacity (aircraft with more seats). • A380 threatens 747-8 in hub to hub market. • A380 landing requirements less stringent than first thought • Powerful Unions - striking employees

  11. Most Likely Area of Boeing’s Business to be Threatened • Boeing’s offer in the high capacity, wide-body, long-haul aircraft type • 747-8 will not start delivery until Q2 2011, delayed by systemic failures and union action. Airbus A380 will have been delivering for 2.5 years by then.

  12. Boeing’s Key Actions To Avoid Competitive Damage • Focus on production of 747-8 aircraft without further delays • Maintain focus on existing strengths in leadership in building smaller (300+ passengers) aircraft • Build much closer bonds with unions to prevent damage to manufacturing programmes

  13. Sources • Aguilar, F.J. (1967) Scanning The Business Environment. New York, Macmillan • Airbus Global Market Forecast 2007 – 2026 http://www.airbus.com/en/corporate/gmf/ accessed 01/11/08 • Datamonitor, (2007) Boeing Company, The Company Profile by Datamonitor, publication date 12 July 2007 • Deutsche Bank Research “Boeing v Airbus: The WTO dispute that neither can win“ February 1, 2007 • Economist (2007) Opposite Headings? Economist, 6 Dec in Southampton University Management School (2008), MBA Course handout • http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article3648860.ece (accessed 21/11/2008) • http://events.airbus.com/A380/default1.aspx • http://UK.Finance.yahoo.com/q?s=ba (accessed 01/11/08) • http://www.airbus.com/fileadmin/documents/gmf/PDF_dl/00-all-gmf_2007.pdf page 47 accessed 01/11/08 • http://www.boeing.com/commercial/747family/747-8_background.html (accessed 21/11/2008) • http://www.boeing.com/commercial/cmo/pdf/Boeing_Current_Market_Outlook_2008_to_2027.pdf (accessed 22/11/2008) • http://www.boeing.com/commercial/news/2008/q4/081114c_nr.html • http://www.boeing.com/companyoffices/aboutus/boechina.html (accessed 21/11/2008) • http://www.ft.com/cms/s/0/3d7a3c48-d977-11da-8b06-0000779e2340.html (accessed 21/11/2008) • http://www.ft.com/cms/s/0/f6580bc6-513b-11dd-b751-000077b07658.html?nclick_check=1 (accessed 22/11/2008) • http://www.hubbertpeak.com/summary.html(accessed 21/11/2008) • http://www.ism.ws/files/Pubs/Proceedings/FCBehrens.pdf (accessed 21/11/2008) • http://www.purchasing.com/article/CA6297749.html (accessed 21/11/2008) • Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, HarvardBusiness review in Southampton University Management School (2008), MBA Course handout

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