Boeing A competitive review of their Commercial Aircraft strategy

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BoeingA competitive review of their Commercial
Aircraft strategy

• Objectives
• Identification of Boeings Main Competitive
  Weaknesses
• Identification of the Most likely area of
  Boeings business to be threatened
• Key actions required of Boeing to avoid
  competitive damage

Presentation by Charles Curzon, Robert Craig,
Mark Simmons, Lisa Pell Stephen Eykyn.
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Agenda

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

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Porters 5 Competitive Forces

• Threat of new entrants
• Commercial Aircraft Corporation of China (CACC)

• Bargaining power of suppliers
• Choice of engine suppliers
• Boeing Supply chain issues (outsourcing)

• Bargaining power of buyers
• Large number of Airlines
• Airlines could decide to buy as alliances

Boeing v Airbus A380 v 747-8 A350 v 787

• Threat of substitute products
• Other forms of transport
• Video conferencing
• New Fuel Sources

Adapted from Porter (2008)
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PEST

• ECONOMIC
• Fuel parts cost increases
• Low switching costs
• Equity is trading at 2005 levels in 2008
• High debt ratio

• POLITICAL
• World Trade Organisation (WTO) dispute
• Open Skies Agreement
• Pentagon suspicion of Boeing culture.

• TECHNOLOGICAL
• Low rate of technological change
• Long lead times to market

• SOCIAL
• Demographics
• Changing attitudes to air travel economics vs
  environment

Adapted from Aguilar F.J. (1967) and Marti, J
lecture slides (2008)
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20 Year Traffic Growth

Source Boeing Current Market Outlook 2007-2027
Source Airbus website (2008)
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Value Chain Analysis
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SEKT

• SKILLS
• Composites materials knowledge

• EXPERIENCE
• In business since 1916
• Experiential learning

• TECHNOLOGY
• Large business at forefront of aircraft design.
• New composite materials on 787
• Build smaller, fuel efficient planes that can
  fly point to point (smaller airports)
• TODAY No new large aircraft capable of more
  than 365 passengers
• Launch in 2011 (Q4) of 747-8 still does not
  provide a Boeing aircraft capable of more than
  500 passengers

• KNOWLEDGE
• Patents on historically reliable (747) and new
  (787) aircraft.

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

• STRENGTHS
• Leaders in building smaller (300passengers)
  fuel efficient planes that can fly point to point
  in smaller airports - suits current airport
  infrastructure.
• U.S. (Home), Asia and Europe Already investing
  in a growth market in India and China with the
  U.S. remaining the largest growth market.
• Facilitating Purchase Have a finance company
  that enables the purchase of their products.
• Building relationship with suppliers in
  principle future markets - e.g. China

• WEAKNESSES
• Boeing planes are less advanced in fuel economy
  for long haul flights (seats fewer passengers for
  same distance)
• Perception of ethics in Boeing corporate
  culture Still seen with suspicion in some parts
  of the Pentagon
• Declining margins share price
• High debt
• Strength of Unionised workforce

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Opportunities Threats

• OPPORTUNITIES
• Growing demand for commercial jetliners
• Increasing size of Mid East and Asian markets
  driven by population demographics
• Mid-East and Asian point to point no-frills
  airlines.

• THREATS
• Airport congestion - pressure to increase
  capacity (aircraft with more seats).
• A380 threatens 747-8 in hub to hub market.
• A380 landing requirements less stringent than
  first thought
• Powerful Unions - striking employees

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Most Likely Area of Boeings Business to be
Threatened

• Boeings offer in the high capacity, wide-body,
  long-haul aircraft type
• 747-8 will not start delivery until Q2 2011,
  delayed by systemic failures and union action.
  Airbus A380 will have been delivering for 2.5
  years by then.

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Boeings Key Actions To Avoid Competitive Damage

• Focus on production of 747-8 aircraft without
  further delays
• Maintain focus on existing strengths in
  leadership in building smaller (300 passengers)
  aircraft
• Build much closer bonds with unions to prevent
  damage to manufacturing programmes

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Sources

• Aguilar, F.J. (1967) Scanning The Business
  Environment. New York, Macmillan
• Airbus Global Market Forecast 2007 2026
  http//www.airbus.com/en/corporate/gmf/ accessed
  01/11/08
• Datamonitor, (2007) Boeing Company, The Company
  Profile by Datamonitor, publication date 12 July
  2007
• Deutsche Bank Research Boeing v Airbus The WTO
  dispute that neither can win February 1, 2007
• Economist (2007) Opposite Headings? Economist, 6
  Dec in Southampton University Management School
  (2008), MBA Course handout
• http//business.timesonline.co.uk/tol/business/ind
  ustry_sectors/transport/article3648860.ece
  (accessed 21/11/2008)
• http//events.airbus.com/A380/default1.aspx
• http//UK.Finance.yahoo.com/q?sba (accessed
  01/11/08)
• http//www.airbus.com/fileadmin/documents/gmf/PDF_
  dl/00-all-gmf_2007.pdf page 47 accessed 01/11/08
• http//www.boeing.com/commercial/747family/747-8_b
  ackground.html (accessed 21/11/2008)
• http//www.boeing.com/commercial/cmo/pdf/Boeing_Cu
  rrent_Market_Outlook_2008_to_2027.pdf (accessed
  22/11/2008)
• http//www.boeing.com/commercial/news/2008/q4/0811
  14c_nr.html
• http//www.boeing.com/companyoffices/aboutus/boech
  ina.html (accessed 21/11/2008)
• http//www.ft.com/cms/s/0/3d7a3c48-d977-11da-8b06-
  0000779e2340.html (accessed 21/11/2008)
• http//www.ft.com/cms/s/0/f6580bc6-513b-11dd-b751-
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  22/11/2008)
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  21/11/2008)
• http//www.ism.ws/files/Pubs/Proceedings/FCBehrens
  .pdf (accessed 21/11/2008)
• http//www.purchasing.com/article/CA6297749.html
  (accessed 21/11/2008)