Case Study

Boeing Commercial Aircraft: Comeback?

Amey Warude (EAIC)
Ashok Makhijani (Hydrocarbon Upstream)
Dinesh Parmar (Forging)
Girish Mandhene (MMH)
K Ramesh Reddy (Infra, Delhi Metro)
Krishna Bathe (EWAC)
Presented by-
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26.04.2014
Agenda
Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams opinion
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Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams opinion
3
Agenda
Company Profile
Founded in the year 1916 in the Seattle by Mr.
William Boeing.

Boeing acquired Mc Donnell Douglas in 1997,
who was a major and stronger player in Military
business.

Moved its corporate HQ to Chicago in 2000.

Market leader in the industry of military and
commercial aircraft manufacturing.




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Core Competencies of Boeing
Proactive in meeting customer demand and
needs.

Customization of aircraft and designing.

Product layout for manufacturing.

Contract and agreement with both NASA and
United States Air Force.

The power of vertical integration.
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Agenda
Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams opinion
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Boeing 737
Seating Capacity 110 to
215
Miles Range 2000 5000
miles
Boeing 747
Seating Capacity 400 to
550
Miles Range 7700 -
8700 miles
Boeing 767
Seating Capacity up to
400
Miles Range up to 9000
miles
Boeing 777
Seating Capacity up to
400
Miles Range up to 9000
miles
Boeing 787
Seating Capacity 200 to
300
Miles Range up to 8500
miles
Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams Judgment
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Agenda
Challenges Faced
Business uncertainty
Synchronizing thousands of designs and deliveries to build an
aero plane
Maintaining supply chains while evolving business processes
and technologies
Cost over-runs
Offshore outsourcing
Tough competition by Airbus

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Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams Opinion
10
Agenda
1. Increase/ decrease in immigration

2. Fuel cost

3. Technology up gradation improving fuel
efficiency

4. Global economic growth


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Market Drivers for Aviation Industry
Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams Opinion
12
Agenda
Market leader in military and commercial
aircraft.

Broad Product Line that covers most major
market niches.

R&D & Innovation.

Strong global network.

Strong supplier network.
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SWOT Analysis: Strength
A hierarchical, rigid and semi-autocratic management style,
which is a product of its military heritage.

Constrains to reach break even point without reaching the
projected demand.

Dependence on US government and NASA.

Labour problems.

Dependence on supplier.
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SWOT Analysis: Weakness
Good financial health of aviation industry
and economy.

New aircraft to gain market share.

Airline travel pattern (point to point) changes
supports Boeing Product lines.

Growth of transcontinental traffic.
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SWOT Analysis: Opportunities
Increase of jet fuel prices.

Terrorist attack effecting the number of travellers
travelling.

Suppliers falling behind schedule designing for
projects.

Changing Govt. politics and business partners.

High volatility.

Aggressive pricing strategy by Airbus.
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SWOT Analysis: Threats
Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams Opinion
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Agenda
Strategic Decision Value addition and Business
outcome
1. Investments in narrow bodied 757
and wide bodied 767.
1. Investments made from the positive
cash flows attained through breakeven
of their earlier models.
2. Subcontracting in case of Boeing
777 (60% of the work)
2. Resulted in reduction of costs.
3. Merger between Boeing and
McDonnell Douglas
3. Resulting in increase of their
presence in the defense and space side
of aerospace
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Corporate Level Strategy
Strategic Decision Value addition and Business
outcome
4. Movement of corporate head quarter
from Seattle to Chicago.
4. Signal to the investment community
that Boeing was far more than
commercial business
5. Decision to produce new low cost,
right sized aircrafts
5. Resulting in increase in profit due to
demand for nonstop point to point
flight.
6. Launch of 787 aircraft 6. Stiff competition to Airbus A350 and
A380 aircrafts.
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Corporate Level Strategy
Strategic Decision Value addition and Business
outcome
1. Adoption of Lean Production and
Six Sigma quality improvement
process.
1. Better Management of warehouses
in terms of inventory, space and time
as well as capital, ultimately improving
the value chain.
2. Introduction of moving assembly
lines.
2. Reduction in time by 50% for
assembly, in addition to reduction of
WIP and stores inventory by 55% and
59% respectively.
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Operational Strategy
Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Current Strategy

Teams Opinion
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Agenda
Boeing- Current Strategy
Manufacturing of fuel efficient Airplanes
Complete product mix to meet aviation industry requirements

R&D partnership worldwide in biofuels, manufacturing
processes and robotics

Concurrent and Collaborative Manufacturing

Global Sourcing

Address & Focus Bottom of Pyramid





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Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeings Comeback Strategy

Teams Opinion
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Agenda
Yes, Boeing can comeback*

Become frontrunner in Innovation and New Product
Development
Follow Fair Trade Practices
Leverage System Integration in two ways viz.
Suppliers contribute to the development cost
Subcontractors become risk sharing partners responsible of
aircraft design
Improve Supply Chain and Logistics for improving delivery
of outsourced assemblies/ parts
Acceptance of other currencies (, , ) to book orders
Improve on Time to Market of new aircraft(s)
Address Safety!!


Teams Opinion
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* Conditions apply
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Composition of Launch Funding for Boeing 7e7
Courtesy: Industrial Subsidies and Politics of World Trade. Pritchard & MacPherson
The WTO SCM Agreement contains a definition of the term subsidy. The definition
contains three basic elements: (i) a financial contribution (ii) by a government or
any public body within the territory of a Member (iii) which confers a benefit. All
three of these elements must be satisfied in order for a subsidy to exist (WTO,
2003A).
46% of estimated $ 13.4 bn launch funding consisted
of actionable/ prohibited subsidies under both 1994
WTO-SCM Agreements & 1992 US-EU Agreement on
Trade in Light Commercial Aircraft.
SCM: Subsidies & Countervailing Measures
Launch Cost of Boeing 7e7: $13.4 bn
Launch Cost of A380: $10-12 bn
7e7 launch cost equivalent to A380, though
7e7 was smaller in size
Given that high proportion of the launch cost was
covered by subsidies (illegal?) by its risk-sharing
partners, Boeing might have looked at development
of 7e7 as a profitable venture, provided WTO
litigations did not take place
But Airbus would never sit back and observe
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The 7e7 launch plan consisted of both
foreign & domestic subsidies
Nearly 50% of the subsidies were slated to
come from sources classified as actionable/
prohibited under WTO-SCM
This implies: Most of the value added on 7e7
would be earned by foreign partners rather
than by Boeing or by US based suppliers
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Devolution of critical tasks/ part development
& mfg to foreign suppliers raise questions
regarding long term viability of Boeing in
production of Commercial Aircraft category

Boeing should serve its own interest by
subsidizing those aspects of its aerospace
business that operates with higher Boeing &
US content


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