Boeings e-Enabled

Advantage

Contents
Executive Summary 3
Problem Statement 3
Internal SWOT 3
External SWOT 4
Michael Porters 5 Competitive Forces 5

Executive Summary
Boeing is a world leader in the aerospace industry. At one point they were the highest sellers
commercial aviation with no competition in sight. That all changed, and soon Boeing had to change.
Background
Boeing was founded in 1916 by William Boeing. The company started by making small seaplanes with
low top speeds. The first customer of Boeing was the New Zealand government. They used the planes
for the countries mail, and to train pilots. The real pay-off was when the United States entered World
War I and ordered a large amount of seaplanes. Between World War I and II, they became one of largest
manufacturers by supplying the Air force with fighter planes. Skipping ahead to 1985, we see the start of
record breaking sales for six years in a row. By 1992 Boeing had employed 150,000 people with net
earnings of 1.55 billion dollars. But, in 1994 they had to cut those 150,000 employees to 126,000, and
earnings down to 856 million. An economic slowdown, the Gulf War, competitors, and outdated
business models were all contributors to this downturn.
Problem Statement
Boeing is a world leader in Aerospace technology, development, and manufacturing. After year upon
year of growth, Boeing was hit with adversity which threatened their position within the market. Boeing
had to come up with a new business plan so they could sustain current and future changes with the
aerospace industry, and allow them to stay a strong company in a mature industry.
Internal SWOT
Strengths
* Boeing has extensively detailed knowledge and information about its customers.
* Have a healthy core business with new products and services.
* Large scale integrations system.

Weaknesses
* Boeing does have a history of production delays.
* The need to develop a plan to retrofit existing planes with e-Enabled technology.
* High development costs for technology and equipment.
Opportunities
* Replace old aircraft with new ones that have better technology.
* They are capable of easily developing new designs for aircraft and implementing them with ease
through their extensively integrated technology.

Threats
* Difficulty differentiating itself from other companies.
* More competition means that there is more pressure to keep costs down.
* Convincing customers that they are a service provider.
External SWOT
Strengths
* Market wise they are one of the largest aerospace manufacturers in the world.
* Boeing is able to offer a comprehensive package of services and solutions that can address airline
operations across the board.
* Boeing has proven their longevity in the market, and that bodes well for them moving forward.
* Boeing also has their name and is a well-known aerospace technology company.
* Outsourcing has allowed Boeing to become more competitive.

Weaknesses
* Historically Boeing has relied heavily on Government subsidies.
* Inability to adapt to a changing environment.
* A matured industry making differentiation difficult

Opportunities
* Boeing can of course increase its market share with this new technology.
* Sell and promote its e-Enabled technology that adds value to a business.
* Develop new services that can integrate with the e-Enabled technology.
* Expand into new markets such as China or India.
* There is expected to be increased air traffic; both passenger and cargo in the next 5 years.

Threats
* Increasing fuel prices along with inflation pose threats for Boeing.
* There is adequate and capable competition, especially from Airbus.
* Airbus is able to match everything Boeing does, but Airbus sells their products for cheaper prices due
to extensive outsourcing.
* Some customers are pushing ahead and are capable of taking steps to e-Enable themselves without
Boeings help.
Michael Porters 5 Competitive Forces
1. Threat of New Entrants
The threat of new entrants for Boeing would be extremely low risk. There is also a high level of barriers
to entry. Before entering to the airline industry, a company will face high capital and operating cost.
New entrants would need to invest tremendously as a substantial amount of money is needed to start
up in the aerospace industry. Majority of the cost are operating cost like air service, fuel, labor, IT
services and equipment, engines, spare parts, insurance, airport handling services, catering and training.
Another problem to start up a new aerospace company is trying to market the new company and to
create clientele with airline companies. If a company does enter to the airline industry, it is a long term
project. Not all airlines are making profit and that is why many airline companies fail.
2. Power of Suppliers
The probability of power of suppliers would be low-medium risk. The bargaining powers of suppliers are
low due to the limited numbers in the industry. This gives Boeing a high degree of control over the
suppliers. Since Boeing started as an engineering company, they provide suppliers with unique features
to decorate the crafts and supply parts. But if Boeing needed certain parts from their suppliers, their
bargaining power can decrease. Boeing can also lose more bargaining power if government created new
laws on making planes more eco-friendly. This would cause Boeing to purchase new parts just to follow
the new rules and regulation.
3. Power of Buyers
The probability of buyers having control of Boeing would be medium-high risk. Customers would be
considered medium risk because they have the power to place pressure on Boeing to lower their price.
The main factor for this is that customers are price sensitive. If flights are too expensive, customers will
switch to other companies for air travel. Therefore, customer has a large impact on how it can affect a
companys margins and volumes.
Airline companies are considered to be high risk because they can place higher pressures on Boeing.
Airline companies purchases large volumes of aircrafts when they are expanding or replacing outdated
aircrafts. If Boeings aircrafts are too expensive, airline companies will purchase their aircrafts from
Boeings competitors at a lower price. Switching aircraft manufactures is simple for airlines cause due to
the competitive rivalry in the airline industry.
4. Availability of Substitutes
The availability of substitutes would be medium-high risk. Since there are many aerospace
manufacturing companies out there. If an airline needed extra aircrafts and Boeing planes are too
expensive, they will look for cheaper plans from their competitors. Consumers also have the ability to
use substitutes as well. If flights on certain airlines are too expensive, consumers can take their money
and spend it elsewhere. Consumers also have the option of using other methods of transportation when
airline industry is too expensive. Passengers may use buses, ship, trains, cars, helicopter, or private jets
for their transportation. Since substitutions are low, this poses a serious threat for Boeing.

5. Competitive Rivalry
There is a high risk of competitive rivalry in the aerospace industry. Boeing has many competitors in the
aerospace industry, but their biggest competitor is Airbus. There are also smaller well known aerospace
companies that can affect the rivalry of Boeing. Companies like Embraer, an aerospace company based
out of Brazil and Bombardier, an aerospace company from Canada. There is not much differentiation in
products or services between the two companies because they all part of the aerospace and defense
industry. All four companies are known for aircraft manufacturing. Since there is a high intensity of
competition between companies, they tend to create low returns. Due to the nature of competition,
price wars may occur between the aerospace companies. For example, if Airbus can manufacture a
more eco-friendly aircraft at lower price, airline companies will purchase them. Boeing would have to
lower their manufacturing cost just to keep with their competitors.
Competitive Analysis
Boeing is a major player in the aircraft manufacturing industry. It is an industry which is mature and
extremely difficult to enter. Boeing is slightly behind its main competitor Airbus in terms of value chain
business models. Although the aerospace industry is Boeings majority of earnings, it is trying to become
a major player in aviation services. It was able to differentiate itself from industry players such as IBM,
through its total package deal. Boeing was able to offer full service in all aspects of airline operations.
Boeing provided solutions and allowed third-parties to develop and improve the applications. Airbus
was able to address this new develop and create competition in this new segment of airline operations.
Airbus was able to sell a similar but in some cases inferior products, at a highly discounted rate. They
were undercutting Boeing by providing the same services as Boeing but cheaper than Boeing. This again
created a lack of differentiation between industry leaders. The lack of differentiation means that Boeing
must push forward. The good thing with Boeing is they are coming up with the ideas first and thats why
you get Airbus coming in with competition after the fact.

Alternatives

Maintain the Status Quo/Do Nothing
This alternative gives Boeing the choice to simply carry on with their business practices the way they
have been for the past couple of years, and business finances would remain constant.
Advantages
* No added expenses acquired
* No need to adjust goals and objectives
* No additional strategic adjustments required
Disadvantages
* No company expansion and growth
* Loss of opportunities to extend into new markets
* No chance to separate themselves from their competition (Airbus)
* Playing catch-up instead of innovating

Communicate the Value of e-Enabling to the Customers
A good way to connect to current customers and to attract new customers is to emphasize the
importance of marketing and presenting the value of e-Enabling to them and gaining feedback.
Advantages
* Attracting new customers will increase profits
* Feedback can help with innovation
* Can help grow the gap between Boeing and Airbus
Disadvantages
* Need enough new customers to profit from additional marketing costs
* The type of customer (business or individual consumer) might upset the healthy core
* Adjustment to company strategy needed

Utilize large scale system integration with IT capabilities associated with e-Enabling
Boeing can cut costs by integrating a large scale system to equip all of their current and future products
with a new IT system.
Advantages
* Introduce a strong and responsive infrastructure
* Cut costs by integrating the company as a whole, instead of different departments and silos
* More Potential to drive annual revenue growth
* Greater efficiency
Disadvantages
* More training needed for employees
* High switching cost for new IT

Recommendation
It would in Boeings greatest interest to implement alternative number three. Integrating IT is the key for
Boeing to keep reforming to deliver more effective aircrafts to the airline industry. The integration of IT
will also help Boeing to focus on the commercial aviation sector and the defense sector, instead of
prioritizing on one over the other. Last, but not least, the integrated IT can make the more advanced
applications used by the e-Enabling Advantage more synergistic, instead of working against current
technologies.
Implementation
With any type of IT implementation, hiring a credible IT consultant is always on the top of the list. A gap
analysis should also be conducted to see where Boeing currently stands, and the direction they want to
head in. For the short term, implementing the new IT infrastructure and integrating the company as a
whole is the top priority. For the long term, employing vastly proficient IT leaders for ongoing review
and evaluation is the priority in order to ensure that Boeing stays on the top of their industry and
separates themselves as the best aeronautics provider.