marketing research on boeing


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marketing research on boeing (why flight internet failed?)

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marketing research on boeing

  1. 1. The Boeing Company Overview
  3. 3. The Boeing Company Overview
  4. 5. 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
  5. 6. Company Leadership
  6. 8. <ul><li>Mission </li></ul><ul><li>To be the number one aerospace company in the world and among the premier industrial concerns in terms of quality, profitability and growth </li></ul>MISSION STATEMENT
  7. 9. CULTURE- VALUES <ul><li>LEADERSHIP </li></ul><ul><li>INTEGRITY </li></ul><ul><li>QUALITY </li></ul><ul><li>CUSTOMER SATISFACTION </li></ul><ul><li>PEOPLE WORKING TOGETHER </li></ul><ul><li>A DIVERSE AND INVOLVED TEAM </li></ul><ul><li>GOOD CORPORATE CITIZENSHIP </li></ul><ul><li>ENHANCING SHAREHOLDER VALUE </li></ul>
  9. 11. CORE COMPETENCIES <ul><li>Detailed customer knowledge and focus Boeing seek to understand, anticipate and be responsive to the customers' needs. </li></ul><ul><li>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. </li></ul>
  10. 12. <ul><li>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. </li></ul>CORE COMPETENCIES
  11. 14. ACHIEVEMENTS & REWARDS <ul><li>2005 Awards </li></ul><ul><li>The US Environmental Protection Agency (US EPA) named Boeing one of its Best Workplaces for Commuters (for company programs that encourage HOV participation. </li></ul><ul><li>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). </li></ul>
  12. 15. <ul><li>2006 Awards </li></ul><ul><li>The National Business Group on Health, a national non-profit organization, named Boeing one of the Best Employers for Healthy Lifestyles. </li></ul>ACHIEVEMENTS & REWARDS
  13. 16. SITUATION ANALYSIS <ul><li>PEST ANALYSIS </li></ul><ul><li>Political factor </li></ul><ul><li>Economic factor </li></ul><ul><li>Social factor </li></ul><ul><li>Technological factor </li></ul>
  14. 17. <ul><li>SWOT ANALYSIS </li></ul><ul><li>Strengths •     Strong global network •     Broad product line that covers most major market niches / R&D development </li></ul>SITUATION ANALYSIS
  15. 18. <ul><li>       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. </li></ul>SITUATION ANALYSIS
  16. 19. <ul><li>Opportunities •     New aircraft to gain market share •     Increase demand for point to point routes </li></ul>SITUATION ANALYSIS
  17. 20. <ul><li>Threats </li></ul><ul><li>•     Slowdown in the commercial jet market •     Uncertain airline industry environment </li></ul>SITUATION ANALYSIS
  18. 21. TOP COMPETITORS <ul><li>Airbus </li></ul>2. Lockheed Martin 3. Northrop Grumman VS
  19. 22. COMPETITOR ANALYSIS <ul><li>Extremely high capital requirements </li></ul><ul><li>High risks </li></ul><ul><li>New product development cost are high </li></ul><ul><li>Long payback periods </li></ul><ul><li>Cyclical demand </li></ul><ul><li>Only a few can survive </li></ul><ul><li>Swings through boom and bust cycles </li></ul>A. CHARACTERISTICS OF THE INDUSTRY
  20. 23. <ul><li>Know - how </li></ul><ul><li>Capital costs </li></ul><ul><li>Long time horizons </li></ul><ul><li>Risks </li></ul><ul><li>High fixed costs </li></ul>B. BARRIERS TO ENTRY COMPETITOR ANALYSIS
  21. 24. MARKETING POLICY <ul><li>Segmentation </li></ul><ul><li>Boeing uses Geography as its segmentation tool. Short haul routes appear to reveal that Europe and North America is the more attractive segment. </li></ul>
  22. 25. 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
  23. 26. <ul><li>INTRODUCTION TO RESEARCH AREA </li></ul>
  24. 27. CONNEXION <ul><li>Overview </li></ul><ul><li>Launched on May 17 2004 </li></ul><ul><li>Connexion offered a satellite-based internet connection </li></ul>
  25. 28. <ul><li>Connexion by Boeing pricing was designed to provide affordable Internet access </li></ul>CONNEXION
  26. 29. <ul><li>The Market </li></ul><ul><li>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. </li></ul>CONNEXION
  27. 30. <ul><li>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. </li></ul>CONNEXION- Market
  28. 31. <ul><li>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. </li></ul>CONNEXION- Market
  29. 32. ENABELING TECHNOLOGY <ul><li>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. </li></ul>
  30. 34. CONNEXION-COST <ul><li>COST </li></ul><ul><li>Research results shows that Connexion's system costs about $500,000 or more to install on an aircraft. </li></ul><ul><li>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 </li></ul>
  31. 35. CONNEXION-EFFICIENCY <ul><li>Speed was 150-200kbps </li></ul><ul><li>Boeing's Connexion service won the &quot; World's Leading High Speed Inflight Internet Service Provider &quot; award from the World Travel Awards organization in London for 3 years running. </li></ul>
  32. 36. CONNEXION-PRICING <ul><li>Pricing for In-Flight Internet </li></ul><ul><li>The prices varied from airline to airline, but were typically… </li></ul>
  33. 37. 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
  34. 38. CONNEXION-USERS <ul><li>Research results shows that users are very sensitive to price </li></ul>
  35. 39. FIELD WORK <ul><li>Data Collection process: </li></ul><ul><li>Secondary Data </li></ul><ul><li>External data </li></ul><ul><ul><li>Governmental Sources </li></ul></ul><ul><ul><li>Internet database </li></ul></ul><ul><ul><ul><li>Bibliographic databases </li></ul></ul></ul><ul><li>E-mails </li></ul><ul><li>Telephonic interviews </li></ul>
  36. 40. <ul><li>Secondary data used in our research project includes: </li></ul><ul><li>External data </li></ul><ul><li>General business data </li></ul><ul><li>Market Analysis Guide </li></ul><ul><li>Government sources </li></ul>FIELD WORK
  37. 41. FIELD WORK-EVALUATION <ul><li>TIME AND COST </li></ul><ul><li>TIME: </li></ul><ul><li>It took about 40 days to gather the information needed, analyzing data, drawing statistical conclusions and to draw final findings & recommendations. </li></ul>
  38. 42. <ul><li>COST </li></ul><ul><li>Opportunity cost </li></ul><ul><li>Energy </li></ul><ul><li>Billings </li></ul><ul><li>Personal activities </li></ul><ul><li>Time spend on surfing </li></ul>FIELD WORK-EVALUATION
  39. 43. STATISTICAL ANALYSIS <ul><li>Statistical analysis results conclude that in case of Boeing’s flight internet service price and consumer buying behaviour are closely related to each other </li></ul>
  41. 45. GENERAL SURVEY <ul><li>The survey also asked respondents about the kinds of activities done while connected with the Connexion by Boeing service </li></ul>
  44. 48. FINDINGS & RECOMMENDATIONS <ul><li>MAJOR FINDINGS </li></ul><ul><li>Cost of system </li></ul><ul><li>Connexion's system costs about $500,000 or more to install on an aircraft </li></ul><ul><li>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. </li></ul>
  45. 49. Boeing to End In-Flight Internet Service
  46. 50. <ul><li>Boeing to End In-Flight Internet Service </li></ul><ul><li>Connexion suffered a major setback with potential U.S. airlines after the 2001 terrorist attacks triggered an industry-wide downturn. </li></ul><ul><li>Boeing published a marketing survey report of airline passengers </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  47. 51. <ul><li>only a handful of people — in the “low single digits” — on each Connexion-equipped flight were actually using it </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  48. 52. Marketing Stupidity Results in Colossal Failure of Boeing Connexion Service <ul><li>According to data released by Boeing, &quot;more than 20,000 passengers have used the Connexion by Boeing service during its first year of availability.&quot;  </li></ul><ul><li>one person on every 3 flights using the service. Not such a stunning success anymore. </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  49. 53. Revenue <ul><li>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. </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  50. 54. <ul><li>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) </li></ul><ul><li>Connexion had $25M in revenue, but also notes that over $1B was invested over 6 years. </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  51. 55. Losses <ul><li>the losses due to Connexion were approximately the $200M annually. To generate $200M in revenue and break even, Connexion needed 400x the usage </li></ul><ul><li>Or, instead of 1 person every 3 flights, an average of about 130 paying customers on each and every flight. </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  52. 56. Counting the Marketing Mistakes <ul><li>&quot;Extensive&quot; market research by Boeing came up with a definitive statement that &quot;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&quot;. </li></ul><ul><li>Clearly, Boeing believed that it they built it, the users would come, and had boxed themselves into a cost structure that embedded this assumption. </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  53. 57. Survey Question <ul><li>Q: at this price level, how often would you use the service? </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  54. 58. Other Factors affecting the service <ul><li>Loss of sleep time </li></ul><ul><li>Other activities competing for time.   </li></ul><ul><li>Scoble notes that most flights don't have access to power. </li></ul><ul><li>Desire to be off the grid </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS
  55. 59. <ul><li>Lack of space. </li></ul><ul><li>Poor promotion by airlines. </li></ul><ul><li>Lack of uptake by US carriers. </li></ul><ul><li>Lack of direct communication with end-users. </li></ul>FINDINGS & RECOMMENDATIONS-FINDINGS Other Factors affecting the service
  56. 60. <ul><li>Poor Marketing </li></ul><ul><li>Bottom Line… </li></ul>Other Factors affecting the service FINDINGS & RECOMMENDATIONS-FINDINGS
  57. 61. FINDINGS & RECOMMENDATIONS <ul><li>RECOMMENDATIONS </li></ul><ul><li>What could they have done differently? </li></ul><ul><li>Ask smarter research survey questions </li></ul><ul><li>Use a strategy more akin to the early dotcom successes like Amazon and Yahoo and Google. </li></ul>
  58. 62. RECOMMENDATIONS What could they have done differently? FINDINGS & RECOMMENDATIONS Understand that the airlines weren't really their customers, just gatekeepers
  59. 63. RECOMMENDATIONS What could they have done differently? <ul><li>Realize that there was a potential network effect to be gained by being first out of the blocks. </li></ul><ul><li>Accessibility. </li></ul>FINDINGS & RECOMMENDATIONS
  60. 64. RECOMMENDATIONS <ul><li>Boeing should do the following to get fruitful results </li></ul><ul><li> -Make proper plan </li></ul><ul><li>-use ground based system </li></ul><ul><li>-market its service in a proper way </li></ul><ul><li>-identify their real customers’ need </li></ul><ul><li>-maintain separate account for this service </li></ul>FINDINGS & RECOMMENDATIONS
  61. 65. END OF SLIDE SHOW Prepared by Nazish Sohail