Dynamics of Strategy

Evaluation of external business environment of Boeing A critical assessment of the strategic resource capability (strategic fit) Provide detailed recommendations after assessment of the feasibility, acceptability and suitability of Boeing A detailed implementation plan
NOTE: SEE APPENDICES FOR DETAILED ANALYSIS

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TABLE OF CONTENTS

1. 2. 3.

INTRODUCTION------------------------------------------------------------------------------------VISION, MISSION, GOALS, AND OBJECTIVES ----------------------------------------------STRATEGIC ANALYSIS ----------------------------------------------------------------------------3.1 INTERNAL ANALYSIS -------------------------------------------------------------------3.1.1 3.1.2 3.1.3 3.2 RESOURCE-BASED VIEW ---------------------------------------------------VALUE CHAIN ANALYSIS ----------------------------------------------------FINANCIAL ANALYSIS ---------------------------------------------------------

03 03 04 04 04 06 07 08 08 09 10 10 12 13 13 14 15 15 16 16 16 16 18

EXTERNAL ANALYSIS -------------------------------------------------------------------3.2.1 3.2.2 PEST ANALYSIS ---------------------------------------------------------------PORTERS FIVE FORCES ------------------------------------------------------

3.3

SUMMARY --------------------------------------------------------------------------------3.3.1 3.3.2 SWOT ANALYSIS --------------------------------------------------------------KEY STRATEGIC ISSUES ------------------------------------------------------

4.

FUTURE STRATEGIC DIRECTION ---------------------------------------------------------------4.1 4.2 4.3 STRATEGY FORMULATION -----------------------------------------------------------CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND SUITABILITY -----IMPLEMENTING THE STRATEGY ----------------------------------------------------4.3.1 4.3.2 4.3.3 4.3.4 CHANGE IN COMPANYS STRUCTURE (PEOPLES PERSPECTIVE) -CHANGE MANAGEMENT (PROCESSESS PERSPECTIVE) ------------CONTROL SYSTEMS ----------------------------------------------------------BALANCED SCORECARD -----------------------------------------------------

5.

CONCLUSION ---------------------------------------------------------------------------------------REFERENCES -----------------------------------------------------------------------------------------

APPENDIX A: TABLE 1 RESOURCE BASED VIEW OF BOEING -------------------------------------------TABLE 2 VALUE CHAIN ANALYSIS OF BOEING --------------------------------------------TABLE 3 PEST ANALYSIS OF BOEING -------------------------------------------------------TABLE 4 PORTERS FIVE FORCES ANALYSIS OF BOEING -------------------------------TABLE 5 SWOT ANALYSIS OF BOEING ------------------------------------------------------TABLE 6 KEY CURRENT STRATEGIC ISSUES AND THEIR IMPACTS -------------------TABLE 7 RECOMMENDED STRATEGY TO IMPROVE SCIS ------------------------------1|Page
23 24 25 25 26 27 28

TABLE 8 TYPES OF THE CHANGE ------------------------------------------------------------TABLE 9 CONTROL SYSTEM -------------------------------------------------------------------TABLE 10 BALANCED SCORECARD -----------------------------------------------------------

28 29 29

APPENDIX B: FIGURE 1 THE GANTT CHART ----------------------------------------------------------------30

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1. INTRODUCTION

Boeing was founded in 1916 in Seattle, Washington and became one of the Worlds largest and leading manufacturers in making commercial and military aircrafts. The company has been involved in acquiring international firms and making strategic alliances with many aerospace pioneers in the past. Some of the big acquired and merged aerospace companies are Hughes Space and Communications, North American Aviation, McDonnell Douglas, Rockwell International and Jappesen (Boeing, 2012). Presently, Boeing is operating in 70 countries with 22,000 suppliers and 170,000 most diverse, innovative, and talented workforce having advance education and substantial experience in the aerospace industry. Boeing commercial airplanes and Boeing defence, space & security are the two systematic business units of the organization where the products and modified services are based on providing commercial and military aircrafts, satellites, weapons, electronic and defence systems, launch systems, advanced information and communication systems, and performance-based logistics and training (Boeing, 2012). Boeing is also involved in exporting its products and services worldwide through its sub-divisions (i.e. Boeing Capital Corporation, Shared Services Group, and Boeing Engineering, Operations & Technology). The purpose of this report is twofold and accordingly the report is divided into two parts. The first part consists of a critical evaluation of the internal and external business environments of Boeing to find out to at what extent Boeing is strategically fit with its current business environment. In the second part, an improvement strategy will be recommended to the company to effectively manage its supply chain practices after critically reviewing the feasibility, acceptability and suitability of the strategy.
2. VISION, MISSION, GOALS, AND OBJECTIVES

The core aim of Boeing leadership is to focus on the execution today and into the future (Boeing media, 2012) which directly addresses the vision of the company which is based on people working together as a global enterprise for aerospace leadership (Boeing, 2001). The companys long-range mission is very much future-oriented that consists of to become the number one aerospace company in the world and among the premier
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industrial concerns in terms of quality, profitability, and growth (Boeing, 1995). The commercial airplane segment is involved in developing, producing and marketing commercial jet aircraft and providing related support services, principally to the commercial airline industry worldwide (Boeing segment information, 1998). The fundamental goal of Boeing is to improve the performance, quality and profitability of each product/service where performance and quality are measured by customers satisfaction, and the profitability is measured by reviewing the increased shareholders wealth and value (Boeing, 1997). In order to achieve the particular strategic goals and also to address mission and vision of the company, Boeing established a standard set of objectives that include continuous improvement, extremely skilled and motivated staff, competent and focused management, technological excellence, financial strength, and commitment to future integrity (Boeing, 2001).
3. STRATEGIC ANALYSIS 3.1 INTERNAL ANALYSIS

Boeing was popular in producing and exporting commercial jetliners and McDonnell Douglas was famous for making commercial airplanes. The merger of both companies in 1997 provided a 70-years heritage of leadership to commercial aviation. The companys most popular and successful commercial products are 737, 747, 767 and 777 families of airplanes and the Boeing Business Jet (Boeing, 2012). In this part of the report, the detailed internal analysis of Boeing will be conducted.
3.1.1 RESOURCE-BASED VIEW

According to Mintzberg et al (1999), the competitive advantage is based on utilizing the bundle of unique internal resources that leads to develop distinctive capabilities and core competencies. Ireland et al (2008) state that there can be two types of internal resources: tangible and intangible; where tangible resources include physical assets like equipment, machinery, and financial strength, and on the other hand, intangible resources include assets that do not exist physically but causes to increase customer and shareholders value such as reputation, brand name, and organizational culture.

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Mintzberg et al (1999) state that the efficient integration of firms internal resources results in competitive capabilities to accomplish comprehensive series of interrelated tasks. In general, the strategic capability of the company refers to the ability to develop and implement strategies to perform entire organizational functions such as marketing, finance, human resource, and manufacturing in order to achieve sustained competitive advantages (Armstrong, 2012). Thompson and Strickland (2001) pointed out that resources and capabilities of the organization leads to develop core competencies which are distinctive in nature in terms of technology, marketing, innovation, quality, human and financial resources. Starting and running a successful airline is very hard because it requires extensive resources, capabilities, and core competencies. The Boeing commercial airplanes segment is strategically fit and an enriched division in terms of developing new and managing existing resources that helps the organization to develop distinctive capabilities and core competencies. The segment has a comprehensive set of tools and services which are necessary to run a successful airline. The resources and capabilities of Boeing include Airport Technology, Boeing Capital Corporation, Commercial Aviation Services, Fuel Conservation Services, and Training and Flight Services (Boeing resources, 2012). The airport technology is eminent in terms of planning, engineering, and assessing airport services and Boeing Capital Corporation is responsible for airplane financing. Commercial Aviation Services deal with customer support, flight operations, fleet enhancement, maintenance services, and material management whereas Fuel Conservation Services help the company to increase the fuel efficiency of the airplanes. Finally, with the help of training and flight services, the company is maintaining the flight crew training activities. The core competencies of Boeing commercial airplane division can be divided into two categories: product innovation and process innovation (Mayer, 2008). With product innovation strategy, Boeing is forecasting the market trends extremely well after obtaining detailed and accurate knowledge of designing and implementing customerbased needs and demands. The process innovation strategy of Boeing is based on Lean manufacturing policy that includes the efficient use of companys assets, inventory, and supplier management in achieving high quality and low transaction costs. The key
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competency of Boeing commercial airplane segment is the capability to put into practice large-scale systems integration in making advanced and technology-based commercial aircrafts (Hitt et al., 2009). Also, Boeings operational strength is primarily based on distinctive level of leadership and management in obtaining competitive advantage. Armstrong (2012) explained that the organization is strategically fit if it is attaining and sustaining better results as compared to its competitors. Direct point-to-point traffic is a differential strategy of Boeing to obtain competitive advantage. The strategy was implemented by Boeing in developing Boeing 787 Dreamliner which is capable to carry passengers with non-stop point-to-point flights between secondary airports (Boeing, 2005). In addition, Boeing constantly explores opportunities in the external environment. The agreement of Global Airline Inventory Network between Boeing and the British Airways is the best example where it was agreed that Boeing will handle the supply chain of the spare parts of British Airways (Schleh, 1999). According to Johnson et al (2008), the resource based view is the appropriate way to outline companys unique resources and core competencies. The summary of Boeings resources and competencies are presented in table 1 (see appendix A). Waugh (2011) argued that there is a competency gap between Boeings vision and strategies. The company has failed to meet deadlines multiple times in the past and the delays have caused to increase the costs in millions. The core reason for delays was the major outsourcing strategy of Boeing over its global suppliers. In order to reduce the impact of delays and to manage the supply chain, Boeing has adapted threefold strategy that includes acquisition, on-site technical support, and quality control (Piriankov, 2010).
3.1.2 VALUE CHAIN ANALYSIS

According to Johnson et al (2008) and Hitt et al (2010), value chain analysis is the description of the primary and secondary activities of any organization that causes to strengthen the competitive advantage of the firm. In addition, the value chain analysis is used to determine which resources are best utilized by the company (Johnson et al., 2008). In order to create value, Boeing always tries to set up value-creating activities for the satisfaction of the customers. Boeing Capital Corporation is one such establishment

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which provides the facility to the customers to finance commercial airplanes (Boeing resources, 2012). The after sale service so-called Advance Aviation Performance Program is another value chain activity of Boeing where 24x7 customer service support is provided to the customers from all around the World. The fundamental objective of the program is to provide best technical support to the customers and also to deliver spare parts and equipment if urgently required (Nuic et al., 2005). Another valuable service provided to the customers by Boeing is Alteon Aviation Training system where customers get computer-based training in all the aspects of new product. MyBoeingFleet web portal is another value added online information system that provides a facility to the customers to maintain their fleets remotely (MyBoeingFleet, 2012). Also, the Global Airline Inventory Network system designed by Boeing assists the customers to manage and track their costly inventories in order to improve their supply chain management (Schleh, 1999). In the past, Boeing was able to influence its suppliers using effective control procedures but currently the company is facing difficulties in managing its supply chain due to lack of internal and external communication (Sanders, 2010). The summary of the value chain analysis is presented in table 2 (see appendix A).
3.1.3 FINANCIAL ANALYSIS

Although the fuel prices are increasing day-by-day, Boeing is able to successfully manage its revenue and growth in the airline industry. In 2007, the total revenue of Boeing ($66,387) was increased by 8% as compared to the previous year. Due to the financial crisis of 2008, the total revenue was decreased and remained $60,909 but the company recovered well in 2009 and 2010. The total revenue in 2011 reported by the company was $68.7 billion where $36.2 billion were generated from Boeing commercial airplanes (Stock Analysis on Net, 2012). Approximately 70% annual revenue of commercial airplanes comes from outside world and commercial division has more or less 79,000 employees all around the World.

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3.2 EXTERNAL ANALYSIS 3.2.1 PEST ANALYSIS

The PEST analysis approach is useful in examining external macro environmental factors such as political, economic, social, and technological (Johnson et al, 2008). These factors are important in the airline industry because they may have strong impacts on the airline business. The PEST analysis of Boeing is as follows. Political factors: Government laws, regulations, and policies can have significant impacts on any company. Boeing has deep relations and strong agreements with US Government and Federal Aviation Administration (FAA), so the policies of the US government may be a major driving force in accepting new orders of aircrafts. Similarly, the political intervention may also affect the sales of the company, for example restrictions of selling specific equipments or airplanes to particular countries like Iran, Iraq, Afghanistan and Pakistan. But on the other hand, the political policies may support the company as well like trading of large commercial jetliners has been tariff free since 1979 (GATT, 1994) and Open Skies agreement of US government with other countries (US Department of State, 2011). Economic factors: With respect to airline industry, subsidy and fuel prices are very important to Boeing for their daily/weekly transactions in terms of cost of capital. The debate/dispute between Airbus and Boeing on unfair subsidies was the centre of attention in 2010 which was settled through WTO agreement next year (Reppert-Bismarck and Lewis, 2011). Similarly, an increase in fuel costs, environmental restrictions, high security equipment due to terrorism threat, and insurance costs are becoming more vital for Boeing in the near future. Cherian (2009) identified that recent recession has caused to decrease the aircraft prices by 20% and several airline companies has already closed global tourism industry. Social factors: The social factors primarily deal with cultural factors which are very important to Boeing because the company is operating in multinational environment globally. Boeing needs to consider social factors which may affect the demand and sale of the aircrafts in the future; for example, changing needs and demands of the customers due to an increase in the population growth rate. Also, the Anti-US policy of US government
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is also affecting the sale of Boeing especially in West Asia which can be a highly profitable market for the company. Technological factor: Currently, Boeing is utilizing computer-based cost effective technology in making faster commercial airplanes. Many researchers have proved the importance of using light weight material (i.e. composite) and equipment in the formation of commercial airplanes for the effective utilization of resources (Hoskin and Baker, 1984; Weeten et al., 1987). The Boeing has an edge over Airbus and other competitors in using composite light weight material in the development of commercial airplanes (Cohan, 2011). The summary of the key findings of PEST analysis is presented in table 3 in appendix A.
3.2.2 PORTERS FIVE FORCES

According to Mintzberg et al (1998 and 2000), Porters five forces model of competition is primarily based on the idea that the long-term business strategy of the firm should meet opportunities and threats in the external environment. The five forces of Porters model are threat of new entrants, threat of substitute products, the bargaining power of suppliers, the bargaining power of customers, and rivalry among competitors (Johnson et al., 2008). The application of Porters five forces model on Boeing will determine that how Boeing deals threats and avails opportunities in the external environment. Threat of new entrance: The entrance in the airline industry is not easy and can be considered as low on the scale of 1 to 5 because it needs extensive costs and resources. In addition, it is hard for a commercial aircraft company to become popular and profitable overnight because long period of time is required in reaching at the break-even point (Hill et al., 2004). However, Boeing may face the threat of new entrance from China in 2020 as the Chinese government has already approved the launch of Chinese commercial airplanes (Dillow, 2010). Threat of substitutes: There are many substitutes of the airline such as trains, buses, cars, and cruises where trains are becoming faster, cheaper, and suitable source for travelling day-by-day. In terms of international travelling, due to the delays in the delivery of the commercial airplanes from Boeing Company, the World leasing industry starts to prefer

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Airbus (the leading competitor of Boeing) especially in the Asian markets (Orient Aviation, 2005). Bargaining power of suppliers: The bargaining power of suppliers is high in the airline industry because Boeing has lost effective control over its suppliers as evident from recent delay of Boeing 787 Dreamliner (Cohan, 2011). At many occasions in the past, Boeing blamed its suppliers for delays in the delivery of the commercial airplanes (The Economist, 2011; Ray, 2012). If in case the Boeing will expand the product capacity in the future, there could be a problem for the company in terms of loosing bargaining power. Bargaining power of customers: The bargaining power of customers is also low because there are only two major companies (i.e. Boeing and Airbus) in the global competition. For the customers, it is not an easy process to switch between the airlines because both companies are different in terms of their control systems and if the customer wants to switch between the airplanes, it might need extensive costs of training of pilots. Competitive rivalry between competitors: The commercial airplane division is imperative for the Boeing because it is accounted for nearly 65% of its total revenue (Stock Analysis on Net, 2012) and loosing the market share can leave deep impacts on the profitability of the company. Therefore, the competition with Airbus has great significance for Boeing (Hill et al., 2004) and can be considered as 4 to 5 on the ordinary scale. From past couple of decades, Airbus is making great efforts in conducting market research for the purpose of new product development. The survey study reveals that Airbus spent nearly 6% of their total revenue on R&D activities in 1999 whereas Boeing spent just 2.3% in the same year but in 2002 Boeing spent nearly $860 million on R&D activities against $490 million by Airbus (Piazza, 2005). Table 4 in appendix A is presenting the summary of importance of each force in terms of its scale.
3.3 SUMMARY 3.3.1 SWOT ANALYSIS SWOT analysis helps the organizations to conduct strategic planning. It is also essential in terms of analysing internal strengths and weaknesses of the firm as well as to identify

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potential opportunities and threats in the external environment (Sallis, 2002; Thomson and Martin, 2010). The SWOT analysis of Boeing is also based on finding companys strengths, weaknesses, opportunities, and threats as follows. Strengths: One of the major strengths of Boeing is that the company is having a leadership role in the airline industry due to its large scale design and development operations, and support activities for commercial, defence, and space systems (Datamonitor, 2009). Furthermore, the company is also involved in providing its products and services to over 90 countries and establishing strategic alliances with other powerful aerospace companies all around the World. The total annual revenue of Boeing is always double higher than its competitors (Datamonitor, 2011). The strong association with Federal Government and large contracts with NASA and US Air Force is giving an edge to Boeing in establishing strong competitive position (Hill et al., 2004). From the past decade, Boeing is paying deep attention on Research and Development activities in terms of developing new products in order to satisfy customer needs. The company is spending nearly 6 to 7% of its total revenue on R&D activities annually (Piazza, 2005). The commercial airplane division is successfully contributing nearly 65% in the total revenue and also increasing its market share in attracting new customers from all around the World (Stock Analysis on Net, 2012). Weaknesses: One major weakness of Boeing is that the company has been failed to meet

deadlines in delivering commercial aircrafts to its customers. In the past, many deliveries
have been delayed either due to lack of engineering services (Datamonitor, 2011) or delays from the suppliers (The Economist, 2011). According to Mayer (2008), the market share of Boeing is shifting towards Airbus due to the delay problem. The increased competition has also caused to weaken the financial performance of few key segments of Boeing. For instance, the profit from commercial airplane division was declined by 6.5% in 2010 and in the same year, the space system division also faced decline of 13.1% (Datamonitor, 2011). The study reveals that Boeing is also facing many legal proceedings due to some significant matters such as commercial contract disputes, employment matters, environmental liabilities, and intellectual property disputes (Datamonitor, 2009). Opportunities: The changing trends in the travelling industry especially in Asia have resulted in an increase in the demand of commercial airplanes. Similarly, the surge of spending heavy
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amounts on defence and acquiring latest equipment also created many opportunities for Boeing (Datamonitor, 2009). The financial crisis of 2008 also brought many acquisition opportunities for the company in expanding companys operations in the area of supply chain and logistic. The contract of Global Airline Inventory Network between Boeing and the

British Airways was also the result of such opportunities (Schleh, 1999). Threats: Among all existing competitors, Airbus is the most obvious one for Boeing in terms of commercial airplanes. In addition, Boeing may face the threat of new entrant from China as Chinese government is planning to launch commercial airplanes in 2020 (Dillow, 2010). According to the survey study, another threat is the labour strikes from the employees as Boeings 36% workforce is union represented and in 2008 company has already faced minor delays due to the labour strikes (Datamonitor, 2011). It was also mentioned in the report that the operations of Boeing 777 and 787 have been affected from the impact of 2011 great East Japan earthquake because companys 35% major suppliers are operating from Japan. The precise summary of the SWOT analysis is presented in table 5 (see appendix A).
3.3.2 KEY STRATEGIC ISSUES

In order to recover the market shrink after 9/11 attacks and also to compete with Airbus, Boeing introduced a new aircraft namely Boeing 787 Dreamliner which is popular as one of the best commercial airplanes of Boeing Company. After the initial success, Boeing is losing its market share once again by experiencing delays in delivering particular products to its customers (Lamba and Elahi, 2012). In addition, these delays are resulting in huge extra costs for the company. Cohan (2011) pointed out that since 2008 the cost of developing Boeings 787 Dreamliner has been increased by 120% as compared to its original budget. He further mentioned that since 2008 Boeing announced the delay in the delivery schedule of Dreamliner seven times. It is evident from various sources that numbers of factors are causing delays in the development of a particular airplane model. Lamba and Elahi (2012) found that Boeing is currently struggling with supply chain problems. Drew and Clark (2010) reported that the delivery of Boeings Dreamliner to potential customer can be delayed by two more years due to engine problems. Cohan (2011) identified that Boeing has lost control over
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development activities because the company outsourced both the design and the manufacturing of Dreamliner. Another problem is that Boeings engineers are lacking in the experience of developing aircraft with composite material because in the past, the company has been involved in developing commercial airplanes using aluminium material (Cohan, 2011). According to Boeing the company made too many changes at the same time - new technology, new design tools and a change in the supply chain - and thus outran the ability to manage it effectively for a period of time (Peterson, 2011). The key strategic issues under the light of internal and external analysis are shown in table 6 in appendix A.
4. FUTURE STRATEGIC DIRECTION

It is evident from table 6 that Boeing is currently facing delay problems due to ineffective Supply Chain Information System (SCIS). After facing extensive delays in the delivery of a particular airplane model, the present Vice President of Boeing is currently looking to change the strategy of supply chain management. In this part of the paper, the attempt will be made to formulate and recommend an appropriate strategy to Boeing to overcome the delay factor in developing new aircraft models.
4.1 STRATEGY FORMULATION

For implementing the new technology in designing and manufacturing 787 Dreamliner, Boeing is dealing with top high tech equipment makers all around the World. After selecting sophisticated suppliers, it is also essential to put maximum efforts to stay in touch with all the suppliers at the same time. According to Greeff and Ghoshal (2004), large enterprises often face problems due to cut in the communication patterns with different departments, suppliers, or manufacturers and thus this lack of communication results in delays in the production processes. It is also evident in Boeings case when the company hired an external organization to reshape the corporate culture of commercial airplanes segment in the beginning of 2010 to overcome the delay factor. The attempt was failed due to internal and external communication problems (Sanders, 2010). In order to deal with current supply chain problems, Boeing needs to improve its Supply Chain Information System (SCIS) to overcome communication problems. Coyle et al

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(2008, p.195) defined SCIS as information systems that automate the flow of information between a firm and its suppliers to optimise the planning, sourcing, manufacturing, and delivery of the products and services. The successful implementation of SCIS is based on strong and well-integrated approach of people, processes, and technology (Wang, 2011). People are important in terms of their skills and competencies in watching over complex processes as well as using latest technology. On the other hand, organisations should be careful in using outdated technologies that may cause to slow down the processes. Today, many SCIS software are available in the market that can help the organisations to stimulate the supply chain processes. Enterprise Resource Planning (ERP) is multipurpose software that also includes supplier relationship management features. Though Boeing is well aware from the latest technologies and already implementing ERP technology for different suppliers but there is a need to improve the current ERP system with by keeping in mind current supply chain problems. Table 7 in appendix A is showing the recommended strategy with its key objectives in order to reduce or eliminate the current supply chain problems.
4.2 CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND SUITABILITY

The selected improvement strategy for Boeing to effectively handle supply chain management can be critically reviewed in terms of Feasibility, Acceptability and Suitability (FAS) framework proposed by Johnson et al (2008). The feasibility refers the availability of firms resources (i.e. funding, time, people, and information) to implement the strategic options whereas acceptability examines the potential strategic outcomes of the chosen strategy for the company and its stakeholders. Finally, the suitability deals with overall rationale of the strategy to determine the strategic position of the company in the industry. Feasibility: Based on the current strategic issues and their impacts (table 6 in appendix A), the key issue of competency gap between Boeings vision and strategies due to supply chain problems was highlighted (Waugh, 2011). The reengineering process of Supply Chain Information System (SCIS) using people, processes, and technology will provide the opportunity to Boeing to establish and retain strong relationship with suppliers with
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effective control. The Boeing is highly unionised company in the airline industry and companys internal and external resources and core competencies will support them to implement the improvement strategy of Supply Chain Information System. In addition, the current financial position and retained earnings of Boeing are showing that the company should not face financial difficulties in implementing the change. However, the current economic condition and cost overrun of Dreamliner may hinder the companys decision in adapting the strategy. The recommended strategy will also tend to improve relationships with the people (i.e. suppliers) but improvements to suppliers relationships may be hindered by the uncooperative staff, giving the importance to incomplete training and support. Acceptability: Based on the Value Chain analysis (table 2 in appendix A), it was discovered that the organization is facing supply chain problems due to lack of communication strategies (Sanders, 2010). The proposed strategy is highly acceptable to Boeing because it will facilitate the organization to fill the communication gap between the company and their suppliers by using ERP software. The total cost of the Boeing 787 Dreamliner has already increased by 120% as compared to its original budget (Cohan, 2011). The outcome of the strategy will result in avoiding further delays that will be beneficial for the company in terms of cost-saving and increasing shareholders value. Suitability: Based on the SWOT analysis (table 5 in appendix A), the improvement of SCIS strategy is suitable to Boeing because of recent weak performance of the company in commercial airplane segment; and the company is also facing delays due to ineffective supply chain management approach. In addition, due to the deep impacts of Great East Japan earthquake, Boeing has a long-term plan to establish supplier relationships with China (Xinhua, 2011). The improvement SCIS strategy will also suitable to Boeing to develop relationships with new suppliers in the Asian markets.
4.3 IMPLEMENTING THE STRATEGY 4.3.1 CHANGE IN COMPANYS STRUCTURE (PEOPLES PERSPECTIVE)

According to Johnson et al (2008), people have crucial roles in implementing the strategy. In order to apply SCIS strategy effectively, Boeing may need to change its business and

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functional level structures. At the business level, staff will implement the strategy by considering relevant actions need to be taken to improve current Supply Chain Information System. For example, acquiring more licences of ERP or to customize the existing ERP packages to meet the required criteria. At the functional level, staff will ensure that every function must coordinate with other in order to address strategic objectives.
4.3.2 CHANGE MANAGEMENT (PROCESSESS PERSPECTIVE)

In implementing the improvement strategy, the nature and scope of the change will be adaptive as shown in the table 8 (see appendix A). In addition the Gantt chart in Appendix B is showing the core processes involved in managing the change.
4.3.3 CONTROL SYSTEMS

The control system helps the organisation to manage, command, and re-organise the behaviour of the components of entire system (Zakian, 2005). In Boeing, control system in implementing SCIS is primarily based on people, processes, and technology. Table 9 in appendix A is presenting how the control system will be designed in case of improving supply chain information system in Boeing.
4.3.4 BALANCED SCORECARD

The balanced scorecard approach is used to review the progress of the implemented strategy after a particular time period (Johnson et al., 2008). The balanced scorecard for Boeing in implementing changed strategy is exhibited in table 10 in appendix A.
5. CONCLUSION

In this report, the internal and external business environments of Boeing were evaluated critically to identify at what extent the company is strategically compatible with its current business environments. As a result of strategic analysis of Boeing, it was concluded that company is currently facing the problem of delay in developing Boeing 787 Dreamliner. The delay issue has been caused by supply chain management problems due to the outsourcing of both design and the manufacturing services in making 787

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Dreamliner. Also, the company has made too many changes in implementing the new technology (i.e. using composite material) and designing new tools (Peterson, 2011). In order to minimise or to eliminate the delay factor, an improvement strategy was recommended to Boeing after critically reviewing the feasibility, acceptability, and suitability of the strategy. The recommended strategy is based on to improve Boeings current Supply Chain Information System (SCIS) using People, Process, and Technology strategy in order to develop effective control system to manage supplier relationships to overcome delay problems. For this purpose, Enterprise Resource Planning software was recommended as one of the best available programs today to manage organisational operations. The improvement of SCIS of Boeing will help the organisation to improve service delivery efficiency as well as to develop better internal and external communication plan. In this research, there was no primary investigation was carried out. Also, due to the restricted access to the company information, there may be few limitations in our findings and recommended strategy but it is believed that company will get success if the general directions of the recommended strategy will be followed.

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APPENDIX A
Table 1 Resource Based View of Boeing RESOURCES THRESHOLD CAPABILITIES
THRESHOLD RESOURCES

COMPETENCIES
THRESHOLD COMPETENCIES

o o o o

Strong financial position International customers Acquisitions, strategic alliances, and subsidiaries Addition services (see unique resources below)

o o o o o

Research and development activities Ability to manage multiple divisions at the same time Strong order backlog Provision of financing facilities Strong association with US government and other government institutions like NASA and US Air force

UNIQUE ABILITIES

UNIQUE RESOURCES

CORE COMPETENCIES

o o o o o

Airport technology Boeing Capital Corporation Commercial Aviation Services Fuel conservative services Training and flight service

o o o o

Lean manufacturing policy Large scale system integration Latest technology-based commercial aircrafts Global Airline Inventory Network

Source: Johnson et al (2008)

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Table 2 Value Chain analysis of Boeing Firm Infrastructure o Well organised hierarchy o Managing operations in over 70 countries SUPPORT ACTIVITIES Human Resource Management o Managing its human resources successful in attracting best workforce from all around the world Technology Development o Implementation of latest computer-based technology o Utilizing composite material instead of aluminium Procurement o In the past, Boeing was able to influence its suppliers o Currently facing difficulties in managing supply chain o Lack of communication PRIMARY ACTIVITIES Inbound Logistics o Stock control through Global Airline Inventory Network o On-going Suppliers relationships o Quality computer-based training through Alteon Aviation Training System Operations o Increased security system o MyBoeingFleet Web Portal to access info online Outbound Logistics o Advance Aviation Performance Program Marketing and Sales o Advance Aviation Performance Program Post Sale Service o After sale service program Advance Aviation Performance Program

Source: Johnson et al (2008)

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Table 3 PEST analysis of Boeing FACTOR POLITICAL o o o o o o o o o o o o o KEY FINDINGS Tariff free agreement of 1979 Open Skies agreement Restriction of selling products to particular countries due to retain sufficient security Dispute of unfair subsidies between Boeing and Airbus Increased fuel costs Environmental regulations and restrictions Global recession impacts Increased population growth rate Changing needs and demands of the customers Anti-US policy Cost effective computerised technology Utilising new technology (i.e. composite material) Using lighter materials in the development of commercial planes Source: Johnson et al (2008)

ECONOMIC

SOCIAL

TECHNOLOGICAL

Table 4 Porters Five Forces analysis of Boeing FORCE Threat of new entrance Threat of substitutes Bargaining power of suppliers Bargaining power of customers Competitive rivalry between competitors IMPORTANCE LOW MIDDLE HIGH LOW HIGH SCALE 1 to 5 3 to 5 5 to 5 1 to 5 4 to 5

Source: Mintzberg (1998 and 2001) and Johnson et al (2008)

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Table 5 SWOT analysis of Boeing STRENGTHS

FAVOURABLE

LOCATION

WEAKNESSES
UNFAVOURABLE

INTERNAL

o Largest aerospace organization o Leading manufacturing experience of commercial and military aircrafts o Strong order backlog o Providing products and services to over 90 countries all around the world o High demands of airplanes due to design and facilities o Competitive edge in generating healthy total revenues o Providing financing facilities to customers o Strong global network o Broad range of products and services o Strong association with Government and other big organizations such as NASA and US Air Force o High spending on R&D activities OPPORTUNITIES o Increasing world defence spending o Increasing demand for commercial airplanes o Acquisitions due to financial crisis 2008 o Global Airline Inventory Network

o Delays in delivering products o Weak performance of key business segments (i.e. commercial airplanes) o Weakening financial performance o Legal proceedings due to commercial disputes

THREATS o o o o o Increase in oil prices Slowdown of commercial jet market Risks related to labour issues Great East Japan earthquake impact Change in US budgetary priorities

EXTERNAL

Source: Thomson and Martin (2010)

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Table 6 Key Current strategic issues and their impacts ANALYTICAL TOOL o Resource Based View Value Chain analysis Financial analysis o o o o o o o o o o o KEY ISSUE Competency gap between Boeings vision and strategies due to supply chain problems which have caused delays Boeing is currently facing supply chain problem due to lack of effective communication strategy 8% decline in the revenue due to global recession 2008 Decreased consumer spending due to global recession Changing needs and demands of the customers Higher regulatory and environmental restrictions Dispute of unfair subsidies Anti-US Policy Bargaining powers of suppliers Delays due to supply chain problems Great East Japan earthquake Increased fuel prices RESULT Delay Delay Decline in profit ACTION Under review Under review Taken

PEST analysis

Decline in sale

Taken

Porters Five Forces analysis SWOT analysis

Delay

Under review

Delay

Taken

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Table 7 Recommended strategy to improve supply chain management system STRATEGY o OBJECTIVES Developing effective control system to manage supplier relationships to overcome delay problems To fill the competency gap between Boeings vision and strategies To improve service delivery efficiency To improve internal and external communication

Improving Supply Chain Information System (SCIS) using People, Processes, and Technology strategy

o o o

Table 8 Types of the change SCOPE OF CHANGE NATURE OF CHANGE

REALIGNMENT INCREMENTAL BIG BANG TRANSFORMATION

Adaptive Reconstruction

Evolution Revolution

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Table 9 Control System STRATEGY o o o o o o o o o RESOURCE ALLOCATION AND ACTIVITIES Introduce the new technology to the people of the organization Utilising service blueprints to designing processes Research and development activities Promoting internal and external communication Continuous research and feedback Installation of new ERP system Combine new technology with the existing one Training and development activities Ongoing support and up-gradation Source: Zakian (2005) Table 10 Balanced Scorecard FINANCIAL PERSPECTIVE
GOALS MEASURES

PEOPLE and PROCESSES

TECHNOLOGY

CUSTOMERS PERSPECTIVE
GOALS MEASURES

o Y/E financial statements o Liquidity and profitability ratios o Share price Shareholder value o Dividend price INTERNAL PERSPECTIVE Improving financial performance
GOALS MEASURES

Products quality and customer service On time delivery

GOALS

o Customers feedback

o Increased number of customers o Advance orders SUPPLIERS PERSPECTIVE

MEASURES

Continuous improvement Customer oriented Suppliers oriented

o Balanced scorecard approach o Increase in sales o Positive feedback o Relationship with suppliers o Effective control over suppliers

Improving supply chain management Timely deliveries Long-term supplier relationships

o Implementing Enterprise Resource Planning (ERP) o Customer satisfaction o Implementing improved Supply Change Information System using People, Processes, and Technology strategy Source: Johnson et al. (2008)

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APPENDIX B
Figure 1 The Gantt chart STAGE
Planning

ACTIVITIES
Internal / external marketing research Formulation of strategy Resource allocation Process design Coordination departmental strategies Internal / external communication Continuous research and feedback Reviewing control systems

YEAR 1
Q1 Q2 Q3 Q4 Q1

YEAR 2
Q2 Q3 Q4 Q1

YEAR 3
Q2 Q3 Q4

ACTING PARTIES Marketing department Corporate executives Finance department Operations department Functional managers Functional departments Marketing and HR depart. Functional departments

Implementation Evaluation

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