Agenda• The Boeing Company – Background/Five Forces Analysis• Boeing in the 1990’s• The e-Enabled Advantage• Analysis• Recommendations
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Background• Founded in 1916, Boeing’s first customer was the government of New Zealand• George Conrad Westervelt and William Boeing built planes as a hobby• The first plane, named the B&W Seaplane was used for pilot and airmail• Boeing became the largest aircraft manufacturer in the US during WWI and WWII
Background• In 1954, Boeing successfully entered commercial aviation with the Boeing 707• Unfortunately, 1968 brought crisis to the aviation industry and the company was forced to lay off 60,000 employees• In the 1970’s Boeing regained profit by releasing several new 7-series models and becoming an industry leader
Porter’s Five Forces for the Airline Industry Low – New entrants need to invest Threat of tremendously as a substantial amount of Entry money is needed for the production of commercial airplanes.Low –The company hasthe power to negotiatethe price of supplies Suppliers Buyersdue to globaleconomies of scale. Low – For many years Boeing has been one of the leading aviation manufacturers in the worldwide commercial airline industry. Rivalry Substitutes High - The commercial airplane marketplace is a duopoly market, largely Airbus and High – The passenger airplane can be Boeing, resulting in low profit substituted with a train, a ship, a car, a margins in the airline industry. helicopter or a private jet.
Case Questions1. As case background, discuss the challenges and opportunities that Boeing faced in the late 1990s.2. What steps did Boeing take in its journey to build its e-Enabled Advantage?3. Is the e-Enabled advantage a sustainable advantage and, if so, for how long?4. What recommendations do you have for Scott Carson, leader of the company’s e- Enabled Advantage initiatives?
Boeing in the 1990’s• Boeing enjoyed great success through the 1980’s – Virtually unrivaled • Boeing > McDonnell Douglas & Airbus – Broke its own sales record six years in a row• Challenges arose for Boeing in the 1990’s – Gulf War – Economic downturn• Boeing’s production: inefficient model caused orders to plunge – Earnings shrank by nearly half – 9,300 of 126,000 employees were laid off
Challenges & Opportunities • Boeing released the 777 in 1995 – United Airlines flew the first 777 • Onboard local area network (OLAN) • Onboard server • Boeing spent years advertising these new systems – The airlines did not know what to do with all the data – Boeing did not have a good answer – The technology was ahead of its time
Challenges & Opportunities • Phil M. Condit: CEO from 1996-2003 – “Boeing will not be able to survive on selling airplanes alone” • Transformation – Agile – Geographically diverse – Broadly based company – Less dependent on the highly cyclical commercial jetliner market
Challenges Opportunities 1997: Boeing experienced a August 1996: Boeing became production delay which resulted “one of the world’s strongest in a lost of $178 million and a aerospacereported 90% profit drop Q1 1998 1999: Airbus outsold Boeing for Mid-1990s Boeing dominated the first time commercial aviation and signed military and space contracts 1998: Production reform – adopted simpler procedures for configuring aircraft to customer specifications, scheduling and ordering parts, and managing inventory
Competition from Airbus # of orders (1999) 355 476 # of deliveries (2003) 281 305
Vision 2016• “An integrated aerospace company and a global enterprise, designing, producing, and supporting commercial airplanes, defense systems, and cival space systems.” – Run a healthy core business – Leverage strengths into new products and new services – Open new frontiers
1. Maintenance performance toolbox2. Airplane health management (AHM)3. Electronic Flight Bag (EFB)4. Electronic Log Book5. My Boeing Fleet6. Connexion by Boeing7. Solutions Consulting
Steps to e-Enabled1. Problem with differentiation from Airbus2. Management strategy formulation3. Communication of new changes across the company4. Strategies communicated to individuals business units5. Intelligent acquisitions6. CAS (Commercial Airlines Services)7. OLAN (Online Local Area Network)
Analysis of the e-Enabled Advantage • Will serve as a sustainable advantage – Strategic positioning – Innovation ability • Provides stakeholders with resources to reduce costs – By increasing operational efficiencies, Boeing can develop a virtuous cycle
IT Utilization• IT will serve as the main driver of Boeing’s sustainable advantage – Employ highly competent IT leaders – Institute a lean, yet agile infrastructure• Embed IT into existing products/newly launched services – Will drive revenue growth – Creates high switching costs
Sustainable Advantage• Provides information-enabled products and services – Information is easily customized• Drives asset efficiency, cost savings, and revenue growth• Unpredictable lifespan – As long as Boeing maintains innovation capabilities and leads technology growth
Recommendations1. Boeing must implement the consultative selling approach and provide services that move toward a partnership relationship with customers. This involves altering the business plan to fit the demands of the environment.2. Boeing needs to emphasize the importance of communicating the value of e-Enabling to their customers.3. Boeing must utilize large scale system integration to equip all products with the IT capabilities associated with e-Enabling.
“It’s going to happen, and the mindset is, if Boeing doesn’t do it first, someone else will.” “Right now, it’s sort of like a very pre-emptive chess game. The e-Enabled environment is going to happen, and the question is, are we going to be following or leading?”