The Boeing Company Overview

PROBLEM DIFINITION THE CUSTOMERS DID NOT RESPOND EFFECTIVELY TO THE SERVICE PROVIDED BY BOEING

THE CUSTOMERS DID NOT RESPOND EFFECTIVELY TO THE SERVICE PROVIDED BY BOEING

The Boeing Company Overview

How Boeing is Organized Corporate functions: Business Development and Strategy Communications Engineering, Operations and Technology Finance/Shared Services Group/Boeing Capital Corp. Human Resources/Administration International Law Office of Internal Governance Public Policy World-class performance Integrated Defense Systems Commercial Airplanes Two businesses supported by nine corporate functions

Company Leadership

Mission To be the number one aerospace company in the world and among the premier industrial concerns in terms of quality, profitability and growth MISSION STATEMENT

Mission

To be the number one aerospace company in the world and among the premier industrial concerns in terms of quality, profitability and growth

CULTURE- VALUES LEADERSHIP INTEGRITY QUALITY CUSTOMER SATISFACTION PEOPLE WORKING TOGETHER A DIVERSE AND INVOLVED TEAM GOOD CORPORATE CITIZENSHIP ENHANCING SHAREHOLDER VALUE

LEADERSHIP

INTEGRITY

QUALITY

CUSTOMER SATISFACTION

PEOPLE WORKING TOGETHER

A DIVERSE AND INVOLVED TEAM

GOOD CORPORATE CITIZENSHIP

ENHANCING SHAREHOLDER VALUE

OBJECTIVES CONTINUOUS IMPROVEMENTS IN QUALITY OF PRODUCTS AND PROCESSES A HIGHLY SKILLED AND MOTIVATED WORKFORCE CAPABLE AND FOCUSED MANAGEMENT TECHNICAL EXCELLENCE FINANCIAL STRENGTH COMMITMENT TO INTEGRITY

CONTINUOUS IMPROVEMENTS IN QUALITY OF PRODUCTS AND PROCESSES

A HIGHLY SKILLED AND MOTIVATED WORKFORCE

CAPABLE AND FOCUSED MANAGEMENT

TECHNICAL EXCELLENCE

FINANCIAL STRENGTH

COMMITMENT TO INTEGRITY

CORE COMPETENCIES Detailed customer knowledge and focus Boeing seek to understand, anticipate and be responsive to the customers' needs. Large-scale systems integration Boeing continuously develop, advance, and protect the technical excellence that allows us to integrate effectively the systems we design and produce.

Detailed customer knowledge and focus Boeing seek to understand, anticipate and be responsive to the customers' needs.

Large-scale systems integration Boeing continuously develop, advance, and protect the technical excellence that allows us to integrate effectively the systems we design and produce.

Lean enterprise Boeing’s entire enterprise will be a lean operation, characterized by the efficient use of assets, high inventory turns, excellent supplier management, short cycle times, high quality and low transaction costs. CORE COMPETENCIES

Lean enterprise Boeing’s entire enterprise will be a lean operation, characterized by the efficient use of assets, high inventory turns, excellent supplier management, short cycle times, high quality and low transaction costs.

ACHIEVEMENTS & REWARDS 2005 Awards The US Environmental Protection Agency (US EPA) named Boeing one of its Best Workplaces for Commuters (for company programs that encourage HOV participation. Vista Fibers presented Boeing's San Antonio Aerospace Support Center with an outstanding achievement award for the center's recycling efforts (recycling more than 180 tons of paper in 2004).

2005 Awards

The US Environmental Protection Agency (US EPA) named Boeing one of its Best Workplaces for Commuters (for company programs that encourage HOV participation.

Vista Fibers presented Boeing's San Antonio Aerospace Support Center with an outstanding achievement award for the center's recycling efforts (recycling more than 180 tons of paper in 2004).

2006 Awards The National Business Group on Health, a national non-profit organization, named Boeing one of the Best Employers for Healthy Lifestyles. ACHIEVEMENTS & REWARDS

2006 Awards

The National Business Group on Health, a national non-profit organization, named Boeing one of the Best Employers for Healthy Lifestyles.

SITUATION ANALYSIS PEST ANALYSIS Political factor Economic factor Social factor Technological factor

PEST ANALYSIS

Political factor

Economic factor

Social factor

Technological factor

SWOT ANALYSIS Strengths • Strong global network • Broad product line that covers most major market niches / R&D development SITUATION ANALYSIS

SWOT ANALYSIS

Strengths • Strong global network • Broad product line that covers most major market niches / R&D development

Weaknesses • A hierarchical, ridged, and semi- autocratic management style, which is a product of its military heritage. • Labour problems. • Dependence on US government and WTO-incompatible subsidies. SITUATION ANALYSIS

Weaknesses • A hierarchical, ridged, and semi- autocratic management style, which is a product of its military heritage. • Labour problems. • Dependence on US government and WTO-incompatible subsidies.

Opportunities • New aircraft to gain market share • Increase demand for point to point routes SITUATION ANALYSIS

Opportunities • New aircraft to gain market share • Increase demand for point to point routes

Threats • Slowdown in the commercial jet market • Uncertain airline industry environment SITUATION ANALYSIS

Threats

• Slowdown in the commercial jet market • Uncertain airline industry environment

TOP COMPETITORS Airbus 2. Lockheed Martin 3. Northrop Grumman VS

Airbus

COMPETITOR ANALYSIS Extremely high capital requirements High risks New product development cost are high Long payback periods Cyclical demand Only a few can survive Swings through boom and bust cycles A. CHARACTERISTICS OF THE INDUSTRY

Extremely high capital requirements

High risks

New product development cost are high

Long payback periods

Cyclical demand

Only a few can survive

Swings through boom and bust cycles

Know - how Capital costs Long time horizons Risks High fixed costs B. BARRIERS TO ENTRY COMPETITOR ANALYSIS

Know - how

Capital costs

Long time horizons

Risks

High fixed costs

MARKETING POLICY Segmentation Boeing uses Geography as its segmentation tool. Short haul routes appear to reveal that Europe and North America is the more attractive segment.

Segmentation

Boeing uses Geography as its segmentation tool. Short haul routes appear to reveal that Europe and North America is the more attractive segment.

Double-digit growth in revenue and earnings INVESTOR RELATIONS Revenue and Earnings $18 $12 $6 $0 $14.7 $16.5 Revenue Billions 2006Q3 2007Q3 $0.0 $1.0 $1.50 $0.5 $0.89 $1.44 EPS +12% + 62% 2006Q3 2007Q3 Per share

INTRODUCTION TO RESEARCH AREA

INTRODUCTION TO RESEARCH AREA

CONNEXION Overview Launched on May 17 2004 Connexion offered a satellite-based internet connection

Overview

Launched on May 17 2004

Connexion offered a satellite-based internet connection

Connexion by Boeing pricing was designed to provide affordable Internet access CONNEXION

Connexion by Boeing pricing was designed to provide affordable Internet access

The Market Connexion by Boeing's real-time, high-speed Internet and data communications service is designed to meet the needs of commercial airline operators and their passengers, as well as executive aircraft for business and government. CONNEXION

The Market

Connexion by Boeing's real-time, high-speed Internet and data communications service is designed to meet the needs of commercial airline operators and their passengers, as well as executive aircraft for business and government.

The Connexion by Boeing service is installed on more than 140 aircrafts. operated by Lufthansa, SAS (Scandinavian Airlines System), ANA, Japan Airlines, Singapore Airlines, China Airlines, Korean Air, Asiana Airlines, El Al Israel Airlines, and Etihad Airways. CONNEXION- Market

The Connexion by Boeing service is installed on more than 140 aircrafts. operated by Lufthansa, SAS (Scandinavian Airlines System), ANA, Japan Airlines, Singapore Airlines, China Airlines, Korean Air, Asiana Airlines, El Al Israel Airlines, and Etihad Airways.

As part of its service evolution, Connexion by Boeing has expanded the availability of its live global television service, which features four channels of news, financial and sports news-related programming delivered directly to passengers’ laptop computers. CONNEXION- Market

As part of its service evolution, Connexion by Boeing has expanded the availability of its live global television service, which features four channels of news, financial and sports news-related programming delivered directly to passengers’ laptop computers.

ENABELING TECHNOLOGY Connexion by Boeing uses a worldwide network of geosynchronous satellites and ground-based receiving stations to relay data between aircraft and the global information network. An advanced-technology antenna designed and built by Mitsubishi Electric Co. enables aircraft to maintain high-quality connectivity, even at high latitudes.

Connexion by Boeing uses a worldwide network of geosynchronous satellites and ground-based receiving stations to relay data between aircraft and the global information network. An advanced-technology antenna designed and built by Mitsubishi Electric Co. enables aircraft to maintain high-quality connectivity, even at high latitudes.

CONNEXION-COST COST Research results shows that Connexion's system costs about $500,000 or more to install on an aircraft. American, Delta and United, which initially wanted to invest in Connexion, pulled out in 2001 as potential partners. High cost resulting in large expenditures before getting a single paying customer

COST

Research results shows that Connexion's system costs about $500,000 or more to install on an aircraft.

American, Delta and United, which initially wanted to invest in Connexion, pulled out in 2001 as potential partners. High cost resulting in large expenditures before getting a single paying customer

CONNEXION-EFFICIENCY Speed was 150-200kbps Boeing's Connexion service won the " World's Leading High Speed Inflight Internet Service Provider " award from the World Travel Awards organization in London for 3 years running.

Speed was 150-200kbps

Boeing's Connexion service won the " World's Leading High Speed Inflight Internet Service Provider " award from the World Travel Awards organization in London for 3 years running.

CONNEXION-PRICING Pricing for In-Flight Internet The prices varied from airline to airline, but were typically…

Pricing for In-Flight Internet

The prices varied from airline to airline, but were typically…

CONNEXION-PRICING $29.95 $19.95 $14.95 $9.95 More than 6 hours- for long-haul flights between three and six hours- medium-haul flights flights less than three hours. 30-minute starter package Flat rate option (Unlimited access to the Internet) Metered Pricing Option (with rates of $0.25 per minute thereafter) price duration options

CONNEXION-USERS Research results shows that users are very sensitive to price

Research results shows that users are very sensitive to price

FIELD WORK Data Collection process: Secondary Data External data Governmental Sources Internet database Bibliographic databases E-mails Telephonic interviews

Data Collection process:

Secondary Data

External data

Governmental Sources

Internet database

Bibliographic databases

E-mails

Telephonic interviews

Secondary data used in our research project includes: External data General business data Market Analysis Guide Government sources FIELD WORK

Secondary data used in our research project includes:

External data

General business data

Market Analysis Guide

Government sources

FIELD WORK-EVALUATION TIME AND COST TIME: It took about 40 days to gather the information needed, analyzing data, drawing statistical conclusions and to draw final findings & recommendations.

TIME AND COST

TIME:

It took about 40 days to gather the information needed, analyzing data, drawing statistical conclusions and to draw final findings & recommendations.

COST Opportunity cost Energy Billings Personal activities Time spend on surfing FIELD WORK-EVALUATION

COST

Opportunity cost

Energy

Billings

Personal activities

Time spend on surfing

STATISTICAL ANALYSIS Statistical analysis results conclude that in case of Boeing’s flight internet service price and consumer buying behaviour are closely related to each other

Statistical analysis results conclude that in case of Boeing’s flight internet service price and consumer buying behaviour are closely related to each other

GRAPHICAL REPRESENTATION

GENERAL SURVEY The survey also asked respondents about the kinds of activities done while connected with the Connexion by Boeing service

The survey also asked respondents about the kinds of activities done while connected with the Connexion by Boeing service

GENERAL SURVEY-GRAPHICALLY

FINDINGS & RECOMMENDATIONS

FINDINGS & RECOMMENDATIONS MAJOR FINDINGS Cost of system Connexion's system costs about $500,000 or more to install on an aircraft Boeing's failed Connexion online service was costly to install and operate, resulting in large expenditures before getting a single paying customer. An industrywide downturn triggered by the 2001 terrorist attacks made the system an even tougher sell to struggling airlines.

MAJOR FINDINGS

Cost of system

Connexion's system costs about $500,000 or more to install on an aircraft

Boeing's failed Connexion online service was costly to install and operate, resulting in large expenditures before getting a single paying customer. An industrywide downturn triggered by the 2001 terrorist attacks made the system an even tougher sell to struggling airlines.

Boeing to End In-Flight Internet Service

Boeing to End In-Flight Internet Service Connexion suffered a major setback with potential U.S. airlines after the 2001 terrorist attacks triggered an industry-wide downturn. Boeing published a marketing survey report of airline passengers FINDINGS & RECOMMENDATIONS-FINDINGS

Boeing to End In-Flight Internet Service

Connexion suffered a major setback with potential U.S. airlines after the 2001 terrorist attacks triggered an industry-wide downturn.

Boeing published a marketing survey report of airline passengers

only a handful of people — in the “low single digits” — on each Connexion-equipped flight were actually using it FINDINGS & RECOMMENDATIONS-FINDINGS

only a handful of people — in the “low single digits” — on each Connexion-equipped flight were actually using it

Marketing Stupidity Results in Colossal Failure of Boeing Connexion Service According to data released by Boeing, "more than 20,000 passengers have used the Connexion by Boeing service during its first year of availability." one person on every 3 flights using the service. Not such a stunning success anymore. FINDINGS & RECOMMENDATIONS-FINDINGS

According to data released by Boeing, "more than 20,000 passengers have used the Connexion by Boeing service during its first year of availability."

one person on every 3 flights using the service. Not such a stunning success anymore.

Revenue Assume that everyone who used the service paid the top daily rate during that first year of $30. 20,000 paying customers at $30 each is a grand total of $600,000 revenue. FINDINGS & RECOMMENDATIONS-FINDINGS

Assume that everyone who used the service paid the top daily rate during that first year of $30. 20,000 paying customers at $30 each is a grand total of $600,000 revenue.

lets give a nice round number and say they had $500,000 in air-time revenue from end consumers. This for a technology that cost over $500,000 per plane to install (140 aircraft had been outfitted at the time) Connexion had $25M in revenue, but also notes that over $1B was invested over 6 years. FINDINGS & RECOMMENDATIONS-FINDINGS

lets give a nice round number and say they had $500,000 in air-time revenue from end consumers. This for a technology that cost over $500,000 per plane to install (140 aircraft had been outfitted at the time)

Connexion had $25M in revenue, but also notes that over $1B was invested over 6 years.

Losses the losses due to Connexion were approximately the $200M annually. To generate $200M in revenue and break even, Connexion needed 400x the usage Or, instead of 1 person every 3 flights, an average of about 130 paying customers on each and every flight. FINDINGS & RECOMMENDATIONS-FINDINGS

the losses due to Connexion were approximately the $200M annually. To generate $200M in revenue and break even, Connexion needed 400x the usage

Or, instead of 1 person every 3 flights, an average of about 130 paying customers on each and every flight.

Counting the Marketing Mistakes "Extensive" market research by Boeing came up with a definitive statement that "38% of frequent travelers are willing to pay at least $25 per flight for full, high-speed access to the Internet and their corporate network". Clearly, Boeing believed that it they built it, the users would come, and had boxed themselves into a cost structure that embedded this assumption. FINDINGS & RECOMMENDATIONS-FINDINGS

"Extensive" market research by Boeing came up with a definitive statement that "38% of frequent travelers are willing to pay at least $25 per flight for full, high-speed access to the Internet and their corporate network".

Clearly, Boeing believed that it they built it, the users would come, and had boxed themselves into a cost structure that embedded this assumption.

Survey Question Q: at this price level, how often would you use the service? FINDINGS & RECOMMENDATIONS-FINDINGS

Q: at this price level, how often would you use the service?

Other Factors affecting the service Loss of sleep time Other activities competing for time. Scoble notes that most flights don't have access to power. Desire to be off the grid FINDINGS & RECOMMENDATIONS-FINDINGS

Loss of sleep time

Other activities competing for time.

Scoble notes that most flights don't have access to power.

Desire to be off the grid

Lack of space. Poor promotion by airlines. Lack of uptake by US carriers. Lack of direct communication with end-users. FINDINGS & RECOMMENDATIONS-FINDINGS Other Factors affecting the service

Lack of space.

Poor promotion by airlines.

Lack of uptake by US carriers.

Lack of direct communication with end-users.

Poor Marketing Bottom Line… Other Factors affecting the service FINDINGS & RECOMMENDATIONS-FINDINGS

Poor Marketing

Bottom Line…

FINDINGS & RECOMMENDATIONS RECOMMENDATIONS What could they have done differently? Ask smarter research survey questions Use a strategy more akin to the early dotcom successes like Amazon and Yahoo and Google.

RECOMMENDATIONS

What could they have done differently?

Ask smarter research survey questions

Use a strategy more akin to the early dotcom successes like Amazon and Yahoo and Google.

RECOMMENDATIONS What could they have done differently? FINDINGS & RECOMMENDATIONS Understand that the airlines weren't really their customers, just gatekeepers

RECOMMENDATIONS What could they have done differently? Realize that there was a potential network effect to be gained by being first out of the blocks. Accessibility. FINDINGS & RECOMMENDATIONS

Realize that there was a potential network effect to be gained by being first out of the blocks.

Accessibility.

RECOMMENDATIONS Boeing should do the following to get fruitful results -Make proper plan -use ground based system -market its service in a proper way -identify their real customers’ need -maintain separate account for this service FINDINGS & RECOMMENDATIONS

Boeing should do the following to get fruitful results

-Make proper plan

-use ground based system

-market its service in a proper way

-identify their real customers’ need

-maintain separate account for this service

END OF SLIDE SHOW Prepared by Nazish Sohail