1. Executive Summary

The aircraft manufacturing industry comprises four competitive existing in the market – Boeing, Airbus, Embraer and Bombardier. This report focuses the emergence of a duopoly, with Boeing and Airbus undergoing strategic partnership to extend their brand positions in the industry. This report explores the causes and consequences of Boeing’s strategic management decisions, focusing the micro factors such as its observable strengths such as its core competencies, some weaknesses, opportunities and threats in the internal and external environment. Imperatively, this report asserts certain assumptions through an industry analysis and certain empirical evidences for analysis purposes. Finally, this report will provide recommendations through strategy evaluation of its internal and external environment to ascertain how Boeing can remain competitive and to effectively out-compete Airbus.

• Introduction

This report will primarily focus on a market analysis followed by the provision of background information for the aircraft manufacturing industry in light of identifying the main challenges associated with the industry Boeing operates in. Furthermore, this report will cover the key success factors of this global market and explain the current strategies and capabilities of Boeing in relation to its goals and major challenges faced in 2018.

In the context of evaluating the emergence of a duopoly, with Boeing and Airbus undergoing strategic partnership to extend their brand positions in the industry to satisfy their stakeholders, this report explores the causes and consequences of Boeing’s strategic management decisions – thereby paving the way for evaluation frameworks and models that this report has chosen to leverage on.

Specifically, a business environment analysis will be conducted in the form of an internal focus framework, PEST analysis, Porter’s Five Forces Model, and through the assessment of Boeing’s external analysis of the environment in which it operates by way of Porter’s Value Chain Model. Through the discussion of certain forces that correlates to Boeing’s strengths and opportunities through its core competencies and financial performance, a converse view will be taken to evaluate its observable weaknesses and threats by which, includes a quality control problem which affects Boeing’s operating performances.

After which, from the inference of Boeing’s internal strengths and weaknesses and its observable opportunities and threats, this report aims to integrate these competitive qualities and characteristics into a TOWS Matrix, which forms the foundations of recommendations in order to provide Boeing a strategic alternative to compete in the aircraft manufacturing industry.

• Industry Analysis

Since inception to date, the global airline industry is composed of more than 2,000 airlines which operate over 23,000 aircrafts. This way, it is offering passenger and cargo travel services to over 3,500 international airports. Most importantly, the average growth of the air travel is approximated by five percent per annum. Considering the U.S. airline for example, it is operating about one hundred certified passenger airlines. Consequently, there have been significant economic impacts which range from the global airline’s direct influence on employment, net worth, and profitability (Ringham, Kate, and Samantha 2018, 15). Therefore, there are key success factors and main challenges behind the airline industry’s positive economic impacts highlighted in detail as follows.

•  Key Success Factors and Challenges in Global Airline Industry   

The global airline industry offers both passenger and cargo travel services in almost every part of the globe. As a result, the industry has become an integral factor in supporting the creation of the world economy. In terms of its operations and impacts it has on associated industries such as tourism and aircraft manufacturing make it a major global economic force. In particular, it focused on major technological innovations during its initial development. Some of the technological advances include the development of ‘jumbo jets’ (wide-body aircrafts) and the inception of jet airplanes used commercially. Therefore, the present writing highlights key success factors and the main challenges in the global airline industry.

Key success factors refer to integral parts of performance that enable either a firm or an industry to fulfil its objectives. In particular, an industry’s key success factors refer to competitive factors that influence its prosperity in the market (Albers et. 2017, 45). They are essential to the competitive success of each firm operating in the industry. For example, these factors always provide a widespread opportunity and knowledge for the high performance. Therefore, the airline industry executes the following key success factors.

3.1.1 A Strong Management in The Industry

Firstly, the airline industry across the world has ensured a strong management of every operation contributes to high-quality, affordable, efficient, and safety service delivery. According to (Albers et. 2017, 49), its main focus has been to invest in new technologies that make travels safe, efficient, and cost-effective by evading practices that might increase risks such as costs. The management invests heavily on new technologies that make the basic travel process easy. The management focuses on certain areas such as managing fleet and people. In fleet management, it deals with how airplanes are used effectively as a group.

On the other hand, in handling people, the industry uses factors namely employees’ productivity and morale in the workplace. In the airline, productivity is defined as the measures of the way employees work effectively together in offering high-quality services to clients (Albers et. 2017, 55). Morale measures commitment of workers in providing efficient and appropriate service to passengers in the airline. Therefore, as a regular duty of the management, it hires, trains, and rewards capable workforce fairly. It helps to boost each employee’s morale and stay committed to serving airline customers efficiently. Consequently, this has resulted in increased productivity at the global industry’s desired level courtesy of a strong management of both people and fleet.

3.1.2 Service Promotion and Introduction of In-Flight Services

The second key success factor in the global airline industry involves regular service promotions and in-flight services offered. The promotion in most situations is targeted to improve the base of regular and loyal airline clients. Additionally, it is focused to the regular passengers with high-revenue. In line with (Alamdari and Simon, 2017, 75), the industry provides in-house services such as specific class of service offering, booking ease and adequate aircraft seating space to attract regular high-revenue airline clients throughout the world. Since business clients prefer simple and affordable travel services, the industry provides decent coach cabins.

3.1.3. Efficient Financial and Cost Management

The other key success factor in the global industry regards its efficient management of both revenue and costs incurred in various operations. In order to control investment for growth and development, it ensures the highest level of accountability of the unit revenue. For example, (Alamdari and Simon, 2017, 85) assert that by applying competitive and innovative pricing systems, it is able to maximize revenue and still attracts and maintains regular and profitable customer base. The strategy forms one of the most essential key success factors for the global airline industry. Lastly, to manage costs efficiently, it focuses on price hedging and maintains fuel procurement processes. However, even with the following key success factors, the industry faces major challenges discussed in detail as follows.

3.2 Main Challenges of the Global Airline Industry

The international airline industry continues to face certain setbacks even with the key success factors it has put in place. The main challenges of the global airline industry include the cyclical nature of the business, limited capacity of the airspace and airports, and restrictive bilateral regimes highlighted below.

3.2.1 The Cyclical Nature of the Airline Business

Firstly, the cyclical nature of the airline business is caused by a number of factors. For example, when the airline begins to make profits, it results in increased cost of operations. It is because labour unions become active and thus making charges to increase (Alamdari, Fariba, and Simon 2017, 77). Also, it occurs when the airline industry places orders for new technology aircraft to help it to achieve a competitive advantage. As a result, it borrows money from financial markets which in turn increases interest costs and reduces return on capital.

3.2.2 Limited Airspace and Airport Capacity

Next, the global airline industry has limited airspace and airport capacity which is also a major challenge. Some arriving aircrafts in certain countries have to wait in the air before they land and this increases on fuel consumption which is expensive. Thus the industry spends an extra cost of about twelve percent on fuel that could be invested in the development plans such as enhancing runway capacity. Therefore, as highlighted by (Baumeister, Stefan, and Tiina 2017, 1372), to prevent holding in the air and reduce fuels costs, the industry needs to increase runways capacity.

3.2.3. Restrictive Bilateral Regimes

Lastly, the airline industry grapples with the problem of bilateral regimes which are restrictive in nature. They make the airline industry to remain as the most regulated industry globally. Even though open skies bilateral air service agreements have been signed by many countries, some nations have been reluctant to put it into practice. It makes such countries unable to privatize their national airlines due to huge losses they make. Also, investment in the global airline industry is allowed only up to about forty eight percent of shareholding (Williams 2017, 88).

In brief, the global airline industry has experienced a great improvement in the recent past with a continued high demand for airline passenger travel despite the challenges it faces. It indicates that the airlines quest for connectivity throughout the world has the opportunity to grow. Therefore, investing in the key success factors such as strong people and financial management, the airline industry can overcome challenges and increase its travel services.

• Boeing’s History

Boeing, the Aerospace company, have been found in 1916, and still present on the market as the largest commercial jet transfer (Encyclopaedia Britannica 2018). Started with development of small single-engine seaplane, Boeing has evolved through the World War I by creating bombers, torpedo and pursuit planes. One of the legendary bombers created before the Second World War was B-17. After the war was over, the next eight motor bomber B-52 was created (Encyclopedia Britannica 2018). Developing its industry, in the 60’s, the company was engaged in construction of lunar orbiter for NASA.

In accordance with Turnipseed et al. (1999, 69), when Boeing became a global leader, the main goal was identified as to continue to be the leader in the segment of the production of air vehicles. Moreover, were established the following strategic objectives:

1. Became and hold a leadership position in industry.
2. Develop a single and basic system for each market branch.
3. Creating a well-coordinated marketing team to lead on the global market.
4. Low-cost manufacturer through well-coordinated and controlled R&D system.

By 2003 the company had implemented an organisational learning culture aimed at improving the service of immediate and future customers. The main characteristics of this culture were active sharing knowledge between departments and discussing mistakes and possible improvements after the end of each project (Emerald 2003). By virtue of this, it was possible to strengthen the entrepreneurial and innovative activity of the company’s employees.

• Fuel pump problem in 747

In 1996 by the US Federal Aviation Administration has been investigated a fuel system of 747s after explosion of one aircraft 747-100, belonged to Transia Airlines. During this investigation have been figured out some issues regards to excessive wear of pumps, which lead to produce arcing, if in tanks remain less than 3200 kg of fuel (FlightGlobal 1998). However, Boeing actively supported FAA the decision of the commission to issue special regulations that require the company to install flame arrestors in pumps, and filters that exclude copper contamination of wires (Boeing 2018).

4.2 787 Dreamliner

During the last time of the company’s activity, Boeing was engaged in improving passenger satisfaction by improving the comfort of the seats and reducing the cost of the flight with the emphasis on economy class (Ford 2004). It was dictated by the high profitability of economy class, by analysing revenue per square metre of cabin space, compare to business and first class.

All the requirements and wishes of passengers were considered in the development of the Boeing 787 making it more comfortable and large shelves for luggage. An important improvement was the improvement of the microclimate inside the cabin, increasing the humidity of the air, compared with competitive airplanes (Ford 2004). Thus, it helped passengers to reduce the dryness of the eyes, and thereby improve the flight experience.

Finally, the most important was the reduction in the cost of the flight due to a 20% reduction in fuel consumption (Ford 2004).

4.3 Boeing’s Current Situation

Boeing have an opportunity to be served by smaller airports, because many of them already has been have a capacity for Boeing’s aircraft sizes

4.3.1 Focus on Asian Market

Since 1940, Boeing has been actively cooperating with Southeast Asia, understanding the important role of this region in the global market, as well as opportunities in the development of the aerospace industry in this region (Boeing 2018).

Currently, Boeing is active in investing in this region, expecting a strong demand for future products of the company. This is due to the fact that a high level of economic growth in this region creates a demand for aircraft, namely more than 4,000 aircraft in the next 20 years (Boeing 2018). The main markets for the implementation of Boeing aircraft are Singapore, Philippines, Thailand, Malaysia (Boeing 2018). China and India are considered as a strategic customer with big market to 2024 (9% for China growth and 25% for India).

4.3.2 Cash Flow

Analysing the financial performance of the company, it can be seen that by the last 5 years, the level of cash flow significantly increased to reach the level of 13 billion in 2017 (MarketWatch 2018). This indicates that the main task of the business, namely, to generate profits, is performed by the company quite successfully.

4.3.3 Product Differentiation Strategy

About twenty years ago, when Airbus started to take away the market from the Boeing, the Boeing management decided to use a differentiated approach to its products in order to remain in demand on the market (Gantenbein 2007). The new Boeing-787 model is the embodiment of a differentiated strategy which serves as the main competitive advantage over the Airbus A380.

In addition to the fact that the main difference for aircraft buyers from similar products of the company Airbus is a 20% reduction in fuel consumption, the differentiated strategy focused on improving the comfort and service for passengers.

Thus, the space in the passenger compartment was expanded, and the LED was installed to control the brightness of the interior lighting. And also, work was done on the shape of the wings, which allowed to reduce noise in the cabin. In general, the design of the aircraft turned out to be futuristic, which is one of the factors of the differentiated strategy (Gantenbein 2007). Moreover, not all airports currently have the capability to receive large A-380, while the medium-sized 787 is capable of landing at any airport in the world.

4.4. Challenges Boeing Faced and Is Still Facing

The company is experiencing difficulties with a large amount of production, which was outsourced.  In accordance with the data provided Consultancy (2013), 40% of the total aircraft 787 is produced by 50 subcontractors.

The driving force behind outsourcing is lower production costs. However, many engineers are not happy, as this allows the leakage of technology to other countries, as well as reduces the quality of materials.

Thus, it was revealed that the energy panels that play a critical role in the safety of the aircraft are made of cheap plastic, which is an unreliable material (Denning 2013). Moreover, due to the large volume of outsourcing, and the difficulties with quality control, many details do not match one another during the final assembly (Denning 2013).

4.5 How Can Boeing Remain Competitive in the Aviation Sector?

To ensure a highly profitable future for Boeing, it is necessary to pay attention and solve existing problems.

It is required to reduce the level of outsourcing, or at least key for the safety of the details to produce at their own plant. This will ensure quality assurance and prevent risks from the leakage of technology and intellectual property.

Also, despite stable cash flow, the company is recommended to use financial resources more wisely, develop marketing and advertising campaigns to cover different markets, in particular, Asia.

• External Analysis

5.1 External Analysis

The PEST analysis is a strategic framework used by management or analysts, in the context of Political, Economic, Social and Technological factors, to evaluate and observe the macro-environment in which an organization operates (Johnson et al, 2008). In the case of Boeing, this strategic tool allows for the organisation to assess the intricate external factors that encompass competitive qualities and regulatory influences of the airline industry – in the form of an analysis as such:

5.1.1Political Factors

Factors such as government, regulatory concerns, laws and policies play an important role in how airline industries operating in the commercial sector operates (GATT, 1994). It not acts as a driving force of commercial activities, but also impacts business-to-business buying decisions based on national relations such as ‘Open-Skies’ (US Department of State, 2011). For example, Open Skies is an international policy which aids commercial aircraft transactions through calling upon transparency and liberalisation of certain rules and regulations to birth a free-market environment for which companies such as Boeing benefits (Zhang, 2018).

5.1.2 Economic Factors

Economic characteristics such as influences on fuel prices, play an imperative role in the advancement of demand for Boeing’s aircrafts. The recent steady increase in fuel prices could ascertain the movement in tandem, between the demand for more fuel-efficient aircrafts, and Boeing’s provision for those demanded fuel-efficient airplanes (Garcia, 2018). Despite analysts’ views of the prior, a converse view was presented where increases in fuel costs and demand for high security equipment had affected Boeing’s progression in the past, where cyclical cycles presented itself, thereby influencing a 20% decrease in Boeing’s aircraft selling prices (Cherian, 2009).

5.1.3. Social Factors

An inherent requirement for factors such as the social environment associated with the airlines industry must be established as Boeing operates heavily in domestic and international borders, wherein other words, a multi-national environment. Wilfing (2012) endorses the analysis that changes within the cognitive perceptions of airline-travel in the context of safety, affordability and convenience are inevitable examples of social factors in favour of commercial aircraft in recent years demand increases.

5.1.4 Technological Factors

As a central growth factor for companies operating in the airlines industry, technological capabilities allow for advantages such as fuel efficiency, high production rates and effective infrastructural frameworks (Swedberg, 2017). Boeing, in using its external environment to its advantage, utilizes cost-effective I.T. based technologies and leverages outsourced expertise in the multi-national environment to stay ahead of the curve where in a duopoly market exists, hence allowing the company to gain unprecedented advancements – using technological factors. 

5.2 Porter’s Five Forces Model

In accordance to Mintzberg et al (1998 and 2001), the analysis tool, known as Porter’s Five Forces Model, encompasses the imperative nature by which an organisation’s strategic management must integrate external environment factors such as opportunities and threats to attain an element of competitive advantage through the understanding of its external forces. In the context of Boeing, evaluating these forces gives rise to a determinant factor through which the company may formulate strategies to deal with threats and opportunities within the external environment. Figure 1, denotes and displays the modular elements of Porter’s Five Forces framework being:

Competitive rivalry between competitors (Moderately high):

The industry remained rather competitive where existed only four players in the market – Boeing, Airbus, Embraer and Bombardier (Hsu, 2018). Instinctively, the aircrafts manufacturing industry has seen an evolution into a pure duopoly, with Boeing and Embraer forming a strategic partnership to take on the collaborative venture between Airbus and Bombardier (Hsu, 2018). As a case in point, this would signify a moderately higher form of competition wherein these two behemoths hold back from “colluding”. However, given the movement of relatively slow industry growth, constant technological leverage and an apparent use of undifferentiated strategies, evidence is lacking a suggestive transformation for this industry to become more competitive than it already is.

Threat of new entrance (Extremely Low):

Due to the nature of the aircrafts manufacturing industry, which encapsulates high fixed costs, capital investments, extensive research and development budgets and high barriers to success, new entrants to this market would require huge allocations and utilisation of resources in order to successfully enter the market, let alone succeed in the long-run. As ascertained by a lead economist, “the business of business is business” – meaning to say that most companies would forgo entering this market where risks are so high and chances of being profitable is so low.

Threat of substitute Products (Moderately low):

An objective assessment must be undertaken to evaluate current substitute products for aircrafts. Where the main features of aircrafts predominantly serve purposes of travel, tourism, military prowess and transportation of goods, substitute products of such would lean towards the likes of trains, ships, cruises and cars. Case in point, however, since commercial air travel derives its main characteristics of speed and efficiency in travel, the objectivity of this evaluation identifies relevant equivalents (being close substitutes) as bullet trains, fast-travelling electric cars, commercial submarines and fast-sailing cruises. All of which, rely heavily on further advancements in technology and proof of concepts in order to be classified as a disruptive substitute to Boeing’s aircrafts. This is conclusive explanation to the point that threats of substitute products remain along the boundaries of ‘moderately low’.

Bargaining power of suppliers (Moderately Low):

Boeing’s leverage on suppliers encompasses trade relationships in raw materials such as aluminum, steel and titanium. Along with the commonality of these commodities and intricacy in the manufacturing process, bargaining power of suppliers (in the context of Boeing) have been overcome through mass-acquisitions and strategic vertical integration of supply lines. This had been an inevitable result of Boeing’s abilities to flex their financial clout and use their resources effectively, hence not only lowering negotiation powers of other outsourced suppliers but importantly, to streamline production and decrease the reliance on materials suppliers – thus deriving a moderately low magnitude of supplier bargaining power

Bargaining power of customers (Mild):

As with the aforementioned point of strategic partnerships formulated between the four major players, this industry has now evolved into an evident duopoly market. By the same token, this signifies much fewer purchasing options (or power) for customers, leaving them with limited options (one of two aircraft manufacturers) – Boeing or Airbus. In addition to that, long-term customer relationships forged by Boeing, along with its huge backlog, resources and assets under control leaves buyers with little choice, signifying a mild or low threat to the organization.

•  Observable Opportunities

5.3.1 Aircraft Demand Conditions – Commercial, Space and Security

With Boeing’s three different business units achieving a stipulated and overarching $488 billion backlog value, opportunities may arise for Boeing to maintain its market position and lead the apparent industrial revolution in the form of goods transport. Through its current relationships with other brands, Boeing can look to expand its product lines to bullet trains, fast-travelling electric cars, commercial submarines and fast-sailing cruises. Despite the requirement and reliance on further advancements in technology and proof of concepts, Boeing could potentially look to acquire other companies specialized in these vehicle types to disrupt the global transport and deliveries industry. 

Internal Analysis

5.3.2Ramping Up Production Rates

Where in the market exists a duopoly, Boeing’s main competitor, Airbus, have been in pace with many core competencies which Boeing has in their arsenal. For instance, Airbus’s production rates are forecasted at 800 airplanes a year, just falling short to Boeing’s 815 rate of production for military and commercial aircrafts. One observable opportunity for Boeing to attain an advantage over its competitor would be to ramp up production schedules and supply chain capabilities.

5.4 Observable Threats

5. 4.1 Quality Control

Quality control serves as an observable threat to Boeing’s market and brand position as the world’s leading manufacturer of commercial aircrafts. Case in point, an operational Issues arose due to supplying partner Rolls-Royce’s escalated engine manufacturing deficiencies, which became a causal effect for Boeing’s actions of grounding a significant number of 787 Dreamliner aircrafts (Johnsson and Katz, 2018). It is not without basis to say that this could become a recurring event, hence posing as a significant threat to Boeing’s position.

• Internal Analysis

6.1 Strengths

6. 1.1 Resources & Capabilities

Financial Performance

Boeing’s revenue outlooks indicate its annual figures to hit nearly $100 billion, with its share price experiencing steady increases over each quarter (Sheetz, 2018). In addition to that, Boeing three different business units have stipulated an overarching $488 billion backlog value, this pile-up means that the organisation’s financial performance, in a case where Boeing’s supply or production ability can match up to such huge demands, will propel the organization into being the most well-performing aircraft manufacturer for the years to come (Sheetz, 2018).

Record Production Pace

The aerospace giant has declared its expectations to accomplish production rates of 1 plane every 11 hours, totaling 815-820 planes on an annual basis (Ostrower, 2018). This is a remarkable increase from the company’s reported 47 airplanes a month in 2017 through coordinated efforts of Boeing’s suppliers, employees and in-house production team (Sturm, 2017).

6.1.2. Core Competencies

Global Presence

Boeing’s global customer reach extends to more than 150 countries, with employees and operations existing in more than 60 countries worldwide (Boeing, 2018d). Exacting influence around the globe, the company has more than 10 research and development facilities and 18 regional offices worldwide, along with 70% of its backlog orders coming from countries outside of the United States (Boeing, 2018d). This not only signifies its core competencies as an aircraft manufacturer, but also an impressive international strategy to attain global presence.

Portfolio of Products & Services

Whist operating in three different business spaces – Commercial Airplanes, Military and Space, and Global Services, they have built a product portfolio of 40 different aircrafts with variants between commercial and military designs. Distinctively, the organisation’s products and services further include satallites, weapons, information technology and defense systems, launch structures, communication systems, and logistical expertise in high-performance training services (Boeing, 2018e).

6.2. Weakness

6.2.1 Operational Issues

Operational Issues arose due to supplying partner Rolls-Royce’s escalated engine manufacturing deficiencies, which became a causal effect for Boeing’s actions of grounding a significant number of 787 Dreamliner aircrafts (Johnsson and Katz, 2018). This hiccup meant the halt of Boeing’s operations, with not only impacting the efficiency of its business performance, but also affecting Boeing’s overall brand positioning to a small extent, as the parent corporate whose responsibility indirectly lies with eliminating errors in the manufacturing process.

6.2.2 Value Chain Analysis

Core business operations are divided into two groups, primary and support activities. The value chain model, in the context of strategic management, was introduced as a framework to assist in the analysis of activities through which add value directly or indirectly to an organisation’s products and services (Hanson et. al 2008, 88).

Importantly, this model requires a thorough understanding of Boeing’s supply chain management, which is the main source of value creation for a participant in the aircraft manufacturing industry. Drawing reference from figure 1, it can be theorized that Boeing’s source of added value stems from its heavy annual investments in research and development. Despite the cashflow magnitude of its R&D expenditure, this annual commitment has allowed Boeing to realize cost leadership through supply chain digitization, a differential operating capacity in that they leverage robots into the manufacturing process, hence relying more on automation. In addition to that, Boeing leverages on computer-based technology to model and simulate asset lifecycles, hence expediting marketing and sales through accurate demand forecasting and schedules.

Figure 1. Value Chain Model of Boeing Corporation

• Strategy Evaluation

Boeing has always been in line with the aviation market requirements, adapting a wide range of strategies. Boeing’s strategic purpose is expressed in the long-term aligned with the company’s mission statement – ‘People working together as a global enterprise for aerospace leadership”-into a reality that benefits stakeholders.’ (Cover Story 2005, para 1). In the aviation sector, Boeing is known to having incorporate an open culture where employees and staffs of all managerial levels are allowed to express freely and raise necessary concerns (Boeing 2006). This fundamental culture forms a bridge between employers and employees and enhances a better working environment for all staffs. Apart from having the basis of a good management system, Boeing has many other strategies targeting the different areas that could aid them in better ways.

7.1 Boeing Current Strategies

            7.1.1. Innovating New Technology

Innovation alone is one of the most crucial factors in determining a company’s competitive success. Companies who are inefficient in their innovation aspect tend to lose out and gradually leave the competitive market field. Same goes for technological innovations, which is a key driver in the aviation sector. Boeing’s aircraft have progressed over the years as technology have evolved. Focusing on the demand of the market and its consumers, Boeing was involved in multiple major deals such as Apollo project (Historical Snapshot 2018) and Dyna-Soar Boeing (Geiger 1963). These major projects allow Boeing to develop innovative technologies as well as working on to improve on the current ones to make put itself ahead of others and make a significant impact in the aviation sector.

7.1.2. Research Programs

Boeing has constantly got itself involved with major research programs such as National Aeronautics and Space Administration (NASA) to ensure that they stay on the top of the aviation list (NASA 2018). In the previously mentioned Apollo project, Boeing played a critical role by coming up with a cohesive plan that forms an integrated system for the project. Boeing had also partnered up with fellow aviation rivals Hughes Aircraft Co where they collaborated to build the Viking Mars probe (Viking Lander 2018).

7.1.3 Environmental Strategy

One of Boeing’s achievement is to always retain and improve its environmental goals, working towards environmental sustainability by having corporate social responsibility (CSR). In 1982, Boeing has already developed a solar power satellite system that is strong enough to provide electricity across the United State (Little 2014) and flies it first every solar powered plane across the Pacific Ocean in 2012 (Furness 2016). Boeing has also teamed up with Energy Star to work towards reduction of energy consumption and minimise greenhouse emission (Griffin 2014). The actions Boeing took to cultivate an environmental-friendly industry goes on and on and it shows that they do not neglect the little aspects that makes a business successful.

The way Boeing work around their internal and external managerial system and management strategies is paid off with the company’s positive performance over the years. As show in the table below, it is noted that even with the reduction of employees, Boeing continued to receive increasing numbers of aircraft order which explains the growth of turnover revenue from a period of 2004 to 2013. 

Boeing’s company performance 2004 – 2013. 

Source: table reproduced from Mocenco (2015)

7.2 SWOT Analysis

Even with their current accomplishments in the aviation sector and good managerial system, Boeing ought to constantly keep track of areas that they might be lacking in and dominant with in every aspect. The phase to analyse the process of a strategic management is through internal and external analysis, also termed SWOT analysis (Ommani 2011). SWOT analysis is a framework that allows managers and researchers to prioritise organisational goals by identifying and understanding their strengths and weaknesses in the internal working process, and external threats and opportunities (Gurel and Tat 2017).

Strengths

With its past achievement and success in the aviation sector, Boeing has imprinted itself with a global presence by being the airplane manufacturer. According to Air Transport World (2016), the number of commercial aircraft delivered in 2015 is increased by 5.4% as compared to the number delivered in 2014. The high demand of these 787 commercial planes in 2015 were due to the strong built-in capabilities of the aircraft, manufactured to better enhance the aeronautic range and fuel efficiency (Boeing 787 2018). In the aforementioned paragraph, Boeing has joint up with several major partnerships and is widely supported by numerous large supplier firms.

Weaknesses

It was previously mentioned that Boeing was constantly involved in major research and development (R&D) programs. However, these R&D plans involved incurring heavy expenses that Boeing needs to fork out for. With all the focus placed on designing and developing newer and more efficient models of aircraft, Boeing is investing in areas that require large expenditure (Esty and Ghemawat 2001). However, apart from the large sum of expenditures that goes to Boeing’s annual investment projects, Boeing other immense spending includes annuity and pension given to benefit staffs after their retirement (Smolkin 2016).

Opportunities

With a $440 billion worth strong backlog of 5800 airplanes, Boeing’s business will continue to prosper with the positive sign (Boeing Reports 2015). In addition, in an article by Stone and Shalal (2018), Boeing has other backlogs in areas such as defence and security, measuring up to $50 billion. The opportunity in the security and defence market present itself allow Boeing to brilliantly manifold its investment programs in area such as the missile and defence systems. This allow Boeing to further produce useful technological products and launch useful and appropriate satellite systems and aircraft vehicles.

Threats

The aviation sector is no doubt risky, pressurising and full of threats. Global competitors from all over the world are constantly increasing their market share in order to generate immense pressure on competitors who might pose disadvantage to them. Competitors are not long putting downward pressure on the profitability of Boeing, they are also putting away Boeing’s overall sales and revenue.   In the current day, political and economic tides are also a major threat to the aviation industry, meaning more regulatory pressure will be posted on them (Talton 2016).

7.3 TOWS Matrix

With all the positive and negative factors in hand, Boeing is able to establish and pinpoint their strategy according to what is identified above. Similarly, managers and researchers can also make use of TOWS matrix. A derivation of SWOT analysis, TOWS matrix is used to acquire useful and critical strategies (Salmi and Hasnan 2015). The acronym stands for internal strength and weaknesses an organisation possesses and external opportunities and threats which the organisation might potentially face (Ravanavar and Charantimath 2012).

Strengths – opportunities

Rather than strengthening the ties of their current existing customers, which they are already doing very well, Boeing should invest time to generate new customers. Boeing should also be developing and coming up with products that specifically cater to the needs and comfort of their customers (Slayton 2016). Apart from targeting consumer groups, Boeing should also be introducing the new products and services to other geographical regions, contributing to additional sales and revenue. With its opportunity present in the defence market, Boeing can easily partner up with a reputable aero defence company to expand into the military market. 

Weakness – opportunities

Apart from the aforementioned investment in R&D and retirement funds, Boeing should attempt to greatly reduce unnecessary cost and diversify their strategy in managing and optimising in areas of outsourcing.

Strengths – threats

With political tides being one of the potential threats to the aviation sector, Boeing should step up and strengthen the ties between the organisation and the government. This creates mutual trust and understanding in order to have a communicate effectively between the two, which will very much benefit Boeing should they meet any political mishap.

Weakness – threats

Boeing can enter joint-partnership with the government, for instance, promoting and developing military aircrafts. With numerous growing competitors in the market, Boeing have to eliminate these competitions by developing a unique system and strengthen their standard of quality of their product and services.

That being said, Boeing have to constantly review their revenues, identify their strengths and weaknesses and keep a lookout for growing competitors who might possible pose a threat to their business. With the SWOT analysis and TOWS matrix, Boeing can have a clearer picture of the issues they are facing and counter these obstacles efficiently and effectively.

Figure 2. Tows Matrix

• Recommendation                             

Being a business, it is not in Boeing’s best interest to pursue all of its strategic recommendations as it would incur a high cost for the company. Therefore, it is best to optimize the recommendations into feasible solutions which the company can actually act on and operate. Boeing is mainly focusing on the future. It spends a lot on R&D which has brought great results in the more of more efficient planes and a big fat backlog. Nonetheless, there are a few weaknesses that Boeing itself can manage. However, the environment it operates in is highly risky and subject to a number of risk factors that are to a large extent outside Boeing control.

It is understandable that even though as stated by Porter when he originally published his competitive strategy (Porter, 1985), that a company should choose between Cost Leader, Differentiation, Cost focus and Differentiation Focus when choosing a competitive strategy so as to avoid being “Stuck-In-The-Middle”, and that should it occur, the business would fail (Acquaah & Ardekani, 2006).

However, it has been debated and theorized that due to the advent of globalisation and the introduction of the internet, that these two factors have actually proven that it is feasible for a company to adopt a hybrid theory (Miller and Dess. 1991). This is in part due to the fact that it has allowed businesses to decrease costs and allow for faster communication between their business operations. This hybrid or combination competitive strategy have shown to be profitable and may actually prove to incur more profit than when pursuing a single competitive strategy, especially if used by a high-cost firm, such as Boeing (Kim et al, 2004).

Hence, as observed from above, Boeing should implement a hybrid competitive strategic goal, with 2 main objectives, being; Streamline Production and Optimized Outsourcing. This is determined due to the key success factors of the global airline industry being both strong management as well as strategic management of wealth, these factors, together with the duopoly nature of the airline industry, it is determined that until further development by the Research & Development department or technology in general, the logical strategy for Boeing would be to improve on their production and make sure that their overseas counterpart are operating at maximum capacity level to incur the benefits of economies of scale. Moving most productions in-house would also give Boeing a reputation for quality, as the company can oversee more quality control from their business operations and activities.

8.1 Streamline Production          

Production in the airline industry is important, due in part of the duopoly nature, should Boeing’s customers not be satisfied with the production period or quality of a Boeing plane, this will be detrimental for Boeing it could be assumed that they lost the customer to their direct competitor, Airbus. Thus, with 912 backlog orders for Boeing Planes to date, it is concern for Boeing to streamline the production of their planes. Capitalizing on the race for efficient and effective in-house production would be result in the ability to pursue both cost-leadership and differentiation competitive strategies in Porter’s Generic Competitive Strategy Theory.

For the 787 Dreamliner airplane, only the Wing-to-body fairing and the tail fin is currently being produced by the Boeing in the United States, with the assembly of the plane being done in the United States, it makes practical and fiscal sense for Boeing to move production of other body parts of the plane in-house, leave for the engine which is produced by Rolls-Royce in the UK and other parts of the plane which are manufactured specifically by suppliers. It is important to note, that this strategy would incur high short-term expenses but in the long-term, will reap both tangible and non-tangible benefits. For the tangible benefits, there will no doubt be a lowered expense in the long-run, as since Boeing in the United States already has a forgery for the production of the body and tail fin, the company should make use of economies of scale by producing more products in-house.

This would no doubt alleviate the problems of backlogs as production will be more manageable in the home country of the company. This strategic vertical integration would not only mean an increase in production rates, it would also tackle the issue of bottlenecks and also set a standard of quality of the products and lastly, Boeing will be less dependent on their supply-chain and removes the risk of production halts due to strikes from labour unions and also changes in governmental policies. As of now, there are 50 subcontractors to produce a single Boeing jet, from countries such as France, Japan, Italy and Sweden, this in-housing would remove the risk of production lag as there are too many liabilities which may occur that leads to a backlog in production.

• Optimized Outsourcing

The problems of outsourcing are very comprehensive, deriving from many different factors. For the airline industry, the crucial expectations from subcontractors is that their product should be of high quality, and that the meet the contracted production period. This is because, the main importance for Boeing is that they do incur any product failures, as should it occur, there will be casualties – a literally life-or-death scenario. Time is also of importance, and outsourced intermediary products should be expected to reach Boeing in time, so that there is no production backlog. However, due to the large amount of subcontracted work, there is no way to effectively control all the variables. Thus, along with the first objective of moving production in-house, the rest of the products that is unable to be produced in-house, should be treated as a regrettable necessity.

Not every part of the plane should be outsourced, and tiered outsourcing should occur only in cases where relationships of trust and integrity have been developed. Another important factor that comes into play is whether their subcontractors are unionized or not. Also, part in due to face the issue of backlog, currently, 80% of a Boeing plane is produced by unionized workers, therefore production halts are part-and-parcel when dealing with trade/labour unions. To add on, there is also the political risks of the host country of the outsourced products; should be any civil issues in the country or if there are any changes in government trade policies, Boeing is subjected to being open for liabilities.

Therefore, optimized outsourcing would mean that Boeing only outsource necessary products which they are unable to produce in-house, and that their outsourced suppliers should ideally be from a stable country with a stable tripartite framework in place. This would drastically reduce any risk of production halts as a stable tripartite framework would allow trade unions, employers and government to work hand-in-hand to settle labour disputes, thus, reducing the risks of strikes.

• Conclusion

The conclusion of this report is undeniably focused on resolving real world problems faced by Boeing. The issues being mainly on management and production, and what are the key strategies that Boeing can pursue to alleviate this? Realistically, a business is unable to pursue too many strategies at once, and ideally should select a strategy that is achievable and not to foregone. Therefore, this report highlights the SWOT analysis along with the TOWS matrix, to select 2 main recommendations which can be achieved. With the weaknesses being that research and development Is a huge cost to the company, and along with political and economic threats, the logical strategy for Boeing to pursue is to edge out Airbus in production period and quality control of the product. From the duopoly nature of the industry, Boeing just has to satisfy their customer’s need more than Airbus, in order to gain majority market share. Thus, until there is ground-breaking new technology, Boeing is unable to move ahead of the competition in terms of technology, thus, the main customer expectations would be that Boeing meets the stipulated time period of production as well as quality. Both of which are encompassed by the recommendations provided in this report.

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