Boeing Commercial Aircraft : Comeback ?Presented by- Amit Barman Debasish Patra Devkumar Mukherjee Kaushik Samanta Sougata Mitra
ORDER PLACEDBY BOEING & AIRBUS ORDER PLACED BY BOIENG VS AIRBUS12001000800600400200 0 1990 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 BOEING AIRBUS
COMPANY PROFILE• Found in the year 1916 in the Puget Sound region of Washington state.• Market leader in the industry of military and commercial aircraft manufacturing.• Customer base and support in 150 countries.• Employee strength of 165000 around the globe• More than 12000 commercial jetliner engaged in aviations services.• The commercial jetliner (SBU) total revenue earned during the period in 2011 stands at 36.5 bn USD.
TIMELINE • William Boeing establish Boeing Company.1916 • 1950- Strategic move to enter commercial airlines as passenger plane – known as the Dash 80 • Boeing decided to spend $16 millions to develop Dash 80 which accounted1950 for 2/3 of the Company entire profit. • Model 367-80 introduce1954
TIMELINEYEAR EVENTS1957 Boeing 707 was the worlds first commercially successful passenger Jet aircraft.1959 model 720 successfully introduce.1963 Model 727 introduce.1967 Model 737 introduce.1969 Model 747 introduce.1970 Boeing Computer Service is formed.1971 Boeing SUPERSONIC project is scrapped.1972 Boeing become involved in Space Shuttle program & puts its mark on satellites.1983 Airbus starts giving competition to Boeing.1994 Boeing 777, largest twinjet, takes off.1995 Boeing gets involved in space station project.
TIMELINEyear EVENTS1996 Boeing merges with Rockwell Aerospace and Defense unit, Renamed as Boeing North American.1997 McDonnell Corp & Boeing merge. Boeing 777 sets a record for flying around the world in 41 hrs and 59 Min. Rocket Dyne division of Boeing North American wins the first NASA award for excellence2000 -Boeing announced acquisition of Jeppesen Sanderson Inc. the world leading provider of Flight Information Services for $1.5 bn cash. -Receive and order of $ 10.4 Million contract to begin low rate initial production for the US Navy.2001 Headquarters is moved to Chicago.
Contd….year EVENTS2002 Boeing deliver 1000th 757 China airlines orders 10 Boeing 7472002 Boeing named 13th largest corporate air polluter.2003 Airbus bites more market share.
Commercial aircraft product line Boeing 737 Boeing 777 Produced1968–present Produced1993–present Number built7,251 as of July Number built1,030 as of July 2012 2012 Unit cost737-100: US$-32 Unit cost777-200ER: million US$258.8 million Boeing 747 Boeing 787 Produced1968–present Number built31 Number built1,435 as of April Program cost US$32 billion 2012 (Boeings expenditure) Unit cost747-100: Unit cost787: US$24 million (1967) US$206.8 million (2012 Boeing 767 BBJ Produced1981–present Produced1998–present Number built1,030 as of July Number built159 - As of July 2012 28, 2010 (Including Unit cost767-200ER: Unit cost US$ -47–310 million US$160.2 million as of 2009
DuopolyBoeing and Airbus compete in a near-duopoly in the global market forlarge commercial jets comprising narrow-body aircrafts, wide-bodyaircrafts and jumbo jets.• Acquired former arch-rival, • Began as a consortium of Mcdonnell Douglas, in 1997 aerospace manufacturers.• The largest global aircraft • Subsidiary of European manufacturer by revenue, orders Aeronautic Defense and Space and deliveries. Company (EADS)
Products Outline Airbus A320 Airbus A330 Boeing 737 Airbus A350 Boeing 767 & 777 Airbus A380 Boeing 787 Dreamliner & 777 Boeing 747• Both companies compete against each other at every product level
Product Development Cost of Airbus & Boeing.Category Airbus Development Boeing Development Cost costSingle Aisle A-319 757Family Model A-320 $2.5 bn 737- 200 A-321 767 $1.5 bn. A-318 757-300Wide Bodied A-350 767,747Aircraft Model A-330 $3.5 bn 777 A-340 $ 3.5 bnSuper Jet A-380 $15 Bn 787 $ 8 Bn
PORTER’S FIVE FORCES FOR AIRLINE INDUSTRY Threat of New Entrants- Low Existing loyalty to major brands Incentives for using a particular buyer (such as frequent shopperprograms) High fixed costs in R & DScarcity of resources (technical )High costs of switching companies (maintenance cost)Government restrictions or legislation
Power of Suppliers- High The airline supply business is mainly dominated by Boeing and Airbus.For this reason, there isnt a lot of cutthroat competition amongsuppliers. Also, the likelihood of a supplier integrating vertically isnt very likely. Power of Buyers- Low There are high costs involved with switching airplanes, but also take alook at the ability to compete on service.
Availability of Substitutes-LowFor regional airlines, the threat might be a little higher thaninternational carriers. When determining this you should considertime, money, personal preference and convenience in the air travelindustry. Competitive Rivalry. – HighHighly competitive industries generally earn low returns because thecost of competition is high. This can spell disaster when times gettough in the economy.
Future Trends Of Aviation IndustryFuture trends and forces of Aviation industry depends upon 1. Hub and spoke vs. point to point model 2. Fuel cost 3. Strength of euro vs. dollar 4. Eco friendly operation.
Core Competency• Proactive in meeting customer demand and needs.• Customizing of aircraft and designing.• Large-scale implementation system.• Uniqueness in contract and agreement with both NASA and United States Air Force.• The power of vertical integration.
Boeing Entering Turbulent Times Uncertainty to words target market. Concern about Boeing corporate leadership. Lack of proper and ethical Management during the rein of Philip M Condit. Labour discord(Frequent in sourcing, Transfer of labour to another company at lower remuneration and benefit) Boeing sluggish response to competition to airbus Quality being a concern as most of the manufacturing unit are outsource.
Comeback Strategy of Boeing• Unique leadership style of Jim McNerney by making innovation as a culture.• Manufacturing of fuel efficient Airplanes in contrast to the enhancement of fuel prices.• Competitive advantage gained from the ongoing management strife and other problem in airbus.
Corporate Level StrategyStrategic Decision Value addition and Business outcome1. Investments in narrow bodied 757 and 1. Investments made from the positivewide bodied 767. cash flows attained through breakeven of their earlier models.2. Subcontracting in case of Boeing 777( 2. Resulted in reduction of developmental60% of the work) costs.3. Merger between Boeing and 3. Resulting in increase of their presenceMcDonnell Douglas in the defense and space side of aerospace4. Movement of corporate head quarter 4. signal to the investment communityfrom Seattle to Chicago. that Boeing was farmore than commercial business
Corporate Level StrategyStrategic Decision Value addition and Business outcome5. Decision to produce new low cost, right 5. Resulting in increase in profit due tosized aircrafts demand for nonstop point to point flight.6. launch of 787 aircraft 6. stiff competition to Airbus A350 and A380 aircrafts.
Business Level StrategyStrategic Decision Value addition and Business outcome1.Adoption of Lean Production and Six 1. Better Management of warehouses inSigma quality improvement process. terms of inventory, space and time as well as capital, ultimately improving the value chain.2. Introduction of moving assembly lines. 2. Reaching of timeliness concepts by tools being delivered directly on the shop floor instead of fetching it.3. Government subsidies 3. Boeing got subsidies from NASA to develop technology which had helped them in developing their commercial jet aircraft.
Quality and Productivity Improvement Through lean Progress737 Lean Progress 50% factory cycle time reduction. 132% inventory turns increase. 55% cost of quality reduction 36% customer introduction hours reduction. 41% covered floor space reduction.777 Lean Progress 14% Factory flow time reduction 32% Inventory turns increase 27% Engineering quality improvement 7% Cost of quality reduction 43% Factory footprint reduction
SWOT Analysis of Boeing1. Management of supply process through 1.Constrains to reach break even point without vertical integration. reaching the projected demand.2.Degital technology used for assembling. 2. Complex assembly of aircraft.3. Strong focus on R&D. 3. Higher R&D cost.4. Enhancement of operational performance. 4. High volatility of customer 5. Delay in Commercial aircraft Development Program. SWOT1. Good financial health of aviation industry 1.Increase of jet fuel prices. and economy 2.Terrorist attack effecting the number of2.Competative advantage of spoke and hub travelers travelling. model increases demand 3. Suppliers falling behind schedule designing3.Growth of transcontinental traffic. for projects.4.Demand for more frequent nonstop flights. 4.Changing Govt. politics and business partners based on those countries.
PORTER’S FIVE FORCES FOR BOEING Factor High Moderate LowNew Entrant - AirbusThreat from Substitute Bargaining power of Supplier -Vertical IntegrationBargaining power of buyer -Duopoly marketRivalry -First mover advantage
Boeing Orders vs. Airbus ORDER1600140012001000 800 600 400 200 0 1993 2010 1989 1990 1991 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 BOEING AIRBUSSource: www.boeing.com : www.airbus.com