Dynamics of StrategyDynamics of Strategy Evaluation of external business environment of

Boeing

A critical assessment of the strategic resource

capability (strategic fit)

Provide detailed recommendations after assessment

of the feasibility, acceptability and suitability

of Boeing

A detailed implementation plan

NOTE: SEE APPENDICES FOR DETAILED ANALYSIS

For Assignment or Dissertation Help, PleaseContact:

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Muhammad Sajid Saeed+44 141 4161015Email: tosajidsaeed@hotmail.comSkype ID: tosajidsaeed

TABLE OF CONTENTS

1. 1.

INTRODUCTIONINTRODUCTION--------------------------------------------------------

----------------------------- 03

2.2. VISION, MISSION, GOALS, AND OBJECTIVES VISION, MISSION, GOALS, AND OBJECTIVES

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3.3. STRATEGIC ANALYSIS STRATEGIC ANALYSIS

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3.1 3.1 INTERNAL ANALYSIS INTERNAL ANALYSIS

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04

3.1.1 3.1.1 RESOURCE-BASED VIEW RESOURCE-BASED VIEW

---------------------------------------------------- 04

3.1.2 3.1.2 VALUE CHAIN ANALYSIS VALUE CHAIN ANALYSIS

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3.1.3 3.1.3 FINANCIAL ANALYSIS FINANCIAL ANALYSIS

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07

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3.2 3.2 EXTERNAL ANALYSIS EXTERNAL ANALYSIS

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08

3.2.1 3.2.1 PEST ANALYSIS PEST ANALYSIS

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-- 08

3.2.2 3.2.2 PORTER’S FIVE FORCES PORTER’S FIVE FORCES

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3.3 3.3 SUMMARY SUMMARY

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3.3.1 3.3.1 SWOT ANALYSIS SWOT ANALYSIS

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- 10

3.3.2 3.3.2 KEY STRATEGIC ISSUES KEY STRATEGIC ISSUES

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4.4. FUTURE STRATEGIC DIRECTION FUTURE STRATEGIC DIRECTION

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13

4.1 4.1 STRATEGY FORMULATION STRATEGY FORMULATION

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13

4.2 4.2 CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND

SUITABILITY SUITABILITY ------ 14

4.3 4.3 IMPLEMENTING THE STRATEGY IMPLEMENTING THE STRATEGY

----------------------------------------------------- 15

4.3.1 4.3.1 CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S

PERSPECTIVE) PERSPECTIVE) -- 15

4.3.2 4.3.2 CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE) CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE)

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4.3.3 4.3.3 CONTROL SYSTEMS CONTROL SYSTEMS

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16

4.3.4 4.3.4 BALANCED SCORECARD BALANCED SCORECARD

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5. 5. CONCLUSION CONCLUSION

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REFERENCES REFERENCES

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APPENDIX A: APPENDIX A:

TABLE 1 –TABLE 1 – RESOURCE BASED VIEW OF BOEING RESOURCE BASED VIEW OF BOEING

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TABLE 2 –TABLE 2 – VALUE CHAIN ANALYSIS OF BOEING VALUE CHAIN ANALYSIS OF BOEING

--------------------------------------------- 24

TABLE 3 –TABLE 3 – PEST ANALYSIS OF BOEING PEST ANALYSIS OF BOEING

-------------------------------------------------------- 25

TABLE 4 –TABLE 4 – PORTER’S FIVE FORCES ANALYSIS OF BOEING PORTER’S FIVE FORCES ANALYSIS OF BOEING

-------------------------------- 25

TABLE 5 –TABLE 5 – SWOT ANALYSIS OF BOEING SWOT ANALYSIS OF BOEING

------------------------------------------------------- 26

TABLE 6 –TABLE 6 – KEY CURRENT STRATEGIC ISSUES AND THEIR IMPACTS KEY CURRENT STRATEGIC ISSUES AND THEIR IMPACTS

-------------------- 27

TABLE 7 –TABLE 7 – RECOMMENDED STRATEGY TO IMPROVE SCIS RECOMMENDED STRATEGY TO IMPROVE SCIS

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TABLE 8 –TABLE 8 – TYPES OF THE CHANGE TYPES OF THE CHANGE

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28

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TABLE 9 –TABLE 9 – CONTROL SYSTEM CONTROL SYSTEM

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29

TABLE 10 –TABLE 10 – BALANCED SCORECARD BALANCED SCORECARD

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APPENDIX B: APPENDIX B:

FIGURE 1 –FIGURE 1 – THE GANTT CHART THE GANTT CHART

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30

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1. INTRODUCTION

Boeing was founded in 1916 in Seattle, Washington and became

one of the World’s largest and leading manufacturers in

making commercial and military aircrafts. The company has

been involved in acquiring international firms and making

strategic alliances with many aerospace pioneers in the

past. Some of the big acquired and merged aerospace

companies are Hughes Space and Communications, North

American Aviation, McDonnell Douglas, Rockwell International

and Jappesen (Boeing, 2012). Presently, Boeing is operating

in 70 countries with 22,000 suppliers and 170,000 most

diverse, innovative, and talented workforce having advance

education and substantial experience in the aerospace

industry.

Boeing commercial airplanes and Boeing defence, space &

security are the two systematic business units of the

organization where the products and modified services are

based on providing commercial and military aircrafts,

satellites, weapons, electronic and defence systems, launch

systems, advanced information and communication systems, and

performance-based logistics and training (Boeing, 2012).

Boeing is also involved in exporting its products and

services worldwide through its sub-divisions (i.e. Boeing

Capital Corporation, Shared Services Group, and Boeing

Engineering, Operations & Technology).

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The purpose of this report is twofold and accordingly the

report is divided into two parts. The first part consists of

a critical evaluation of the internal and external business

environments of Boeing to find out to at what extent Boeing

is strategically fit with its current business environment.

In the second part, an improvement strategy will be

recommended to the company to effectively manage its supply

chain practices after critically reviewing the feasibility,

acceptability and suitability of the strategy.

2. VISION, MISSION, GOALS, AND OBJECTIVES

The core aim of Boeing leadership is to “focus on the execution

today and into the future” (Boeing media, 2012) which directly

addresses the vision of the company which is based on “people

working together as a global enterprise for aerospace leadership” (Boeing,

2001). The company’s long-range mission is very much future-

oriented that consists of “to become the number one aerospace

company in the world and among the premier industrial concerns in terms of

quality, profitability, and growth” (Boeing, 1995). The commercial

airplane segment is involved “in developing, producing and marketing

commercial jet aircraft and providing related support services, principally to the

commercial airline industry worldwide” (Boeing segment information,

1998).

The fundamental goal of Boeing is to improve the

performance, quality and profitability of each

product/service where performance and quality are measured

by customer’s satisfaction, and the profitability is

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measured by reviewing the increased shareholder’s wealth and

value (Boeing, 1997). In order to achieve the particular

strategic goals and also to address mission and vision of

the company, Boeing established a standard set of objectives

that include continuous improvement, extremely skilled and

motivated staff, competent and focused management,

technological excellence, financial strength, and commitment

to future integrity (Boeing, 2001).

3. STRATEGIC ANALYSIS

3.1 INTERNAL ANALYSIS

Boeing was popular in producing and exporting commercial

jetliners and McDonnell Douglas was famous for making

commercial airplanes. The merger of both companies in 1997

provided a 70-years heritage of leadership to commercial

aviation. The company’s most popular and successful

commercial products are 737, 747, 767 and 777 families of

airplanes and the Boeing Business Jet (Boeing, 2012). In

this part of the report, the detailed internal analysis of

Boeing will be conducted.

3.1.1 RESOURCE-BASED VIEW

According to Mintzberg et al (1999), the competitive

advantage is based on utilizing the bundle of unique

internal resources that leads to develop distinctive

capabilities and core competencies. Ireland et al (2008)

state that there can be two types of internal resources:

tangible and intangible; where tangible resources include

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physical assets like equipment, machinery, and financial

strength, and on the other hand, intangible resources

include assets that do not exist physically but causes to

increase customer and shareholder’s value such as

reputation, brand name, and organizational culture.

Mintzberg et al (1999) state that the efficient integration

of firm’s internal resources results in competitive

capabilities to accomplish comprehensive series of

interrelated tasks. In general, the strategic capability of

the company refers to the ability to develop and implement

strategies to perform entire organizational functions such

as marketing, finance, human resource, and manufacturing in

order to achieve sustained competitive advantages

(Armstrong, 2012). Thompson and Strickland (2001) pointed

out that resources and capabilities of the organization

leads to develop core competencies which are distinctive in

nature in terms of technology, marketing, innovation,

quality, human and financial resources.

Starting and running a successful airline is very hard

because it requires extensive resources, capabilities, and

core competencies. The Boeing commercial airplanes segment

is strategically fit and an enriched division in terms of

developing new and managing existing resources that helps

the organization to develop distinctive capabilities and

core competencies. The segment has a comprehensive set of

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tools and services which are necessary to run a successful

airline.

The resources and capabilities of Boeing include Airport

Technology, Boeing Capital Corporation, Commercial Aviation

Services, Fuel Conservation Services, and Training and

Flight Services (Boeing resources, 2012). The airport

technology is eminent in terms of planning, engineering, and

assessing airport services and Boeing Capital Corporation is

responsible for airplane financing. Commercial Aviation

Services deal with customer support, flight operations,

fleet enhancement, maintenance services, and material

management whereas Fuel Conservation Services help the

company to increase the fuel efficiency of the airplanes.

Finally, with the help of training and flight services, the

company is maintaining the flight crew training activities.

The core competencies of Boeing commercial airplane division

can be divided into two categories: product innovation and

process innovation (Mayer, 2008). With product innovation

strategy, Boeing is forecasting the market trends extremely

well after obtaining detailed and accurate knowledge of

designing and implementing customer-based needs and demands.

The process innovation strategy of Boeing is based on Lean

manufacturing policy that includes the efficient use of

company’s assets, inventory, and supplier management in

achieving high quality and low transaction costs. The key

competency of Boeing commercial airplane segment is the

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capability to put into practice large-scale systems

integration in making advanced and technology-based

commercial aircrafts (Hitt et al., 2009). Also, Boeing’s

operational strength is primarily based on distinctive level

of leadership and management in obtaining competitive

advantage.

Armstrong (2012) explained that the organization is

strategically fit if it is attaining and sustaining better

results as compared to its competitors. ‘Direct point-to-

point traffic’ is a differential strategy of Boeing to

obtain competitive advantage. The strategy was implemented

by Boeing in developing Boeing 787 Dreamliner which is

capable to carry passengers with non-stop point-to-point

flights between secondary airports (Boeing, 2005). In

addition, Boeing constantly explores opportunities in the

external environment. The agreement of Global Airline

Inventory Network between Boeing and the British Airways is

the best example where it was agreed that Boeing will handle

the supply chain of the spare parts of British Airways

(Schleh, 1999). According to Johnson et al (2008), the

resource based view is the appropriate way to outline

company’s unique resources and core competencies. The

summary of Boeing’s resources and competencies are presented

in table 1 (see appendix A).

Waugh (2011) argued that there is a competency gap between

Boeing’s vision and strategies. The company has failed to

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meet deadlines multiple times in the past and the delays

have caused to increase the costs in millions. The core

reason for delays was the major outsourcing strategy of

Boeing over its global suppliers. In order to reduce the

impact of delays and to manage the supply chain, Boeing has

adapted threefold strategy that includes acquisition, on-

site technical support, and quality control (Piriankov,

2010).

3.1.2 VALUE CHAIN ANALYSIS

According to Johnson et al (2008) and Hitt et al (2010),

value chain analysis is the description of the primary and

secondary activities of any organization that causes to

strengthen the competitive advantage of the firm. In

addition, the value chain analysis is used to determine

which resources are best utilized by the company (Johnson et

al., 2008). In order to create value, Boeing always tries to

set up value-creating activities for the satisfaction of the

customers. Boeing Capital Corporation is one such

establishment which provides the facility to the customers

to finance commercial airplanes (Boeing resources, 2012).

The after sale service so-called ‘Advance Aviation

Performance Program’ is another value chain activity of

Boeing where 24x7 customer service support is provided to

the customers from all around the World. The fundamental

objective of the program is to provide best technical

support to the customers and also to deliver spare parts and

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equipment if urgently required (Nuic et al., 2005). Another

valuable service provided to the customers by Boeing is

Alteon Aviation Training system where customers get

computer-based training in all the aspects of new product.

MyBoeingFleet web portal is another value added online

information system that provides a facility to the customers

to maintain their fleets remotely (MyBoeingFleet, 2012).

Also, the Global Airline Inventory Network system designed

by Boeing assists the customers to manage and track their

costly inventories in order to improve their supply chain

management (Schleh, 1999). In the past, Boeing was able to

influence its suppliers using effective control procedures

but currently the company is facing difficulties in managing

its supply chain due to lack of internal and external

communication (Sanders, 2010). The summary of the value

chain analysis is presented in table 2 (see appendix A).

3.1.3 FINANCIAL ANALYSIS

Although the fuel prices are increasing day-by-day, Boeing

is able to successfully manage its revenue and growth in the

airline industry. In 2007, the total revenue of Boeing

($66,387) was increased by 8% as compared to the previous

year. Due to the financial crisis of 2008, the total revenue

was decreased and remained $60,909 but the company recovered

well in 2009 and 2010. The total revenue in 2011 reported by

the company was $68.7 billion where $36.2 billion were

generated from Boeing commercial airplanes (Stock Analysis

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on Net, 2012). Approximately 70% annual revenue of

commercial airplanes comes from outside world and commercial

division has more or less 79,000 employees all around the

World.

3.2 EXTERNAL ANALYSIS

3.2.1 PEST ANALYSIS

The PEST analysis approach is useful in examining external

macro environmental factors such as political, economic,

social, and technological (Johnson et al, 2008). These

factors are important in the airline industry because they

may have strong impacts on the airline business. The PEST

analysis of Boeing is as follows.

Political factors: Government laws, regulations, and policies can

have significant impacts on any company. Boeing has deep

relations and strong agreements with US Government and

Federal Aviation Administration (FAA), so the policies of

the US government may be a major driving force in accepting

new orders of aircrafts. Similarly, the political

intervention may also affect the sales of the company, for

example restrictions of selling specific equipments or

airplanes to particular countries like Iran, Iraq,

Afghanistan and Pakistan. But on the other hand, the

political policies may support the company as well like

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trading of large commercial jetliners has been tariff free

since 1979 (GATT, 1994) and ‘Open Skies’ agreement of US

government with other countries (US Department of State,

2011).

Economic factors: With respect to airline industry, subsidy and

fuel prices are very important to Boeing for their

daily/weekly transactions in terms of cost of capital. The

debate/dispute between Airbus and Boeing on unfair subsidies

was the centre of attention in 2010 which was settled

through WTO agreement next year (Reppert-Bismarck and Lewis,

2011). Similarly, an increase in fuel costs, environmental

restrictions, high security equipment due to terrorism

threat, and insurance costs are becoming more vital for

Boeing in the near future. Cherian (2009) identified that

recent recession has caused to decrease the aircraft prices

by 20% and several airline companies has already closed

global tourism industry.

Social factors: The social factors primarily deal with cultural

factors which are very important to Boeing because the

company is operating in multinational environment globally.

Boeing needs to consider social factors which may affect the

demand and sale of the aircrafts in the future; for example,

changing needs and demands of the customers due to an

increase in the population growth rate. Also, the Anti-US

policy of US government is also affecting the sale of Boeing

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especially in West Asia which can be a highly profitable

market for the company.

Technological factor: Currently, Boeing is utilizing computer-

based cost effective technology in making faster commercial

airplanes. Many researchers have proved the importance of

using light weight material (i.e. composite) and equipment

in the formation of commercial airplanes for the effective

utilization of resources (Hoskin and Baker, 1984; Weeten et

al., 1987). The Boeing has an edge over Airbus and other

competitors in using composite light weight material in the

development of commercial airplanes (Cohan, 2011). The

summary of the key findings of PEST analysis is presented in

table 3 in appendix A.

3.2.2 PORTER’S FIVE FORCES

According to Mintzberg et al (1998 and 2000), Porter’s five

forces model of competition is primarily based on the idea

that the long-term business strategy of the firm should meet

opportunities and threats in the external environment. The

five forces of Porter’s model are threat of new entrants,

threat of substitute products, the bargaining power of

suppliers, the bargaining power of customers, and rivalry

among competitors (Johnson et al., 2008). The application of

Porter’s five forces model on Boeing will determine that how

Boeing deals threats and avails opportunities in the

external environment.

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Threat of new entrance: The entrance in the airline industry is

not easy and can be considered as low on the scale of 1 to 5

because it needs extensive costs and resources. In addition,

it is hard for a commercial aircraft company to become

popular and profitable overnight because long period of time

is required in reaching at the break-even point (Hill et

al., 2004). However, Boeing may face the threat of new

entrance from China in 2020 as the Chinese government has

already approved the launch of Chinese commercial airplanes

(Dillow, 2010).

Threat of substitutes: There are many substitutes of the airline

such as trains, buses, cars, and cruises where trains are

becoming faster, cheaper, and suitable source for travelling

day-by-day. In terms of international travelling, due to the

delays in the delivery of the commercial airplanes from

Boeing Company, the World leasing industry starts to prefer

Airbus (the leading competitor of Boeing) especially in the

Asian markets (Orient Aviation, 2005).

Bargaining power of suppliers: The bargaining power of suppliers

is high in the airline industry because Boeing has lost

effective control over its suppliers as evident from recent

delay of Boeing 787 Dreamliner (Cohan, 2011). At many

occasions in the past, Boeing blamed its suppliers for

delays in the delivery of the commercial airplanes (The

Economist, 2011; Ray, 2012). If in case the Boeing will

expand the product capacity in the future, there could be a

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problem for the company in terms of loosing bargaining

power.

Bargaining power of customers: The bargaining power of customers

is also low because there are only two major companies (i.e.

Boeing and Airbus) in the global competition. For the

customers, it is not an easy process to switch between the

airlines because both companies are different in terms of

their control systems and if the customer wants to switch

between the airplanes, it might need extensive costs of

training of pilots.

Competitive rivalry between competitors: The commercial airplane

division is imperative for the Boeing because it is

accounted for nearly 65% of its total revenue (Stock

Analysis on Net, 2012) and loosing the market share can

leave deep impacts on the profitability of the company.

Therefore, the competition with Airbus has great

significance for Boeing (Hill et al., 2004) and can be

considered as 4 to 5 on the ordinary scale. From past couple

of decades, Airbus is making great efforts in conducting

market research for the purpose of new product development.

The survey study reveals that Airbus spent nearly 6% of

their total revenue on R&D activities in 1999 whereas Boeing

spent just 2.3% in the same year but in 2002 Boeing spent

nearly $860 million on R&D activities against $490 million

by Airbus (Piazza, 2005). Table 4 in appendix A is

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presenting the summary of importance of each force in terms

of its scale.

3.3 SUMMARY

3.3.1 SWOT ANALYSIS

SWOT analysis helps the organizations to conduct strategic

planning. It is also essential in terms of analysing internal

strengths and weaknesses of the firm as well as to identify

potential opportunities and threats in the external

environment (Sallis, 2002; Thomson and Martin, 2010). The SWOT

analysis of Boeing is also based on finding company’s

strengths, weaknesses, opportunities, and threats as follows.

Strengths: One of the major strengths of Boeing is that the

company is having a leadership role in the airline industry

due to its large scale design and development operations, and

support activities for commercial, defence, and space systems

(Datamonitor, 2009). Furthermore, the company is also involved

in providing its products and services to over 90 countries

and establishing strategic alliances with other powerful

aerospace companies all around the World. The total annual

revenue of Boeing is always double higher than its competitors

(Datamonitor, 2011). The strong association with Federal

Government and large contracts with NASA and US Air Force is

giving an edge to Boeing in establishing strong competitive

position (Hill et al., 2004).

From the past decade, Boeing is paying deep attention on

Research and Development activities in terms of developing new

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products in order to satisfy customer needs. The company is

spending nearly 6 to 7% of its total revenue on R&D activities

annually (Piazza, 2005). The commercial airplane division is

successfully contributing nearly 65% in the total revenue and

also increasing its market share in attracting new customers

from all around the World (Stock Analysis on Net, 2012).

Weaknesses: One major weakness of Boeing is that the company has

been failed to meet deadlines in delivering commercial

aircrafts to its customers. In the past, many deliveries have

been delayed either due to lack of engineering services

(Datamonitor, 2011) or delays from the suppliers (The

Economist, 2011). According to Mayer (2008), the market share

of Boeing is shifting towards Airbus due to the delay problem.

The increased competition has also caused to weaken the

financial performance of few key segments of Boeing. For

instance, the profit from commercial airplane division was

declined by 6.5% in 2010 and in the same year, the space

system division also faced decline of 13.1% (Datamonitor,

2011). The study reveals that Boeing is also facing many legal

proceedings due to some significant matters such as commercial

contract disputes, employment matters, environmental

liabilities, and intellectual property disputes (Datamonitor,

2009).

Opportunities: The changing trends in the travelling industry

especially in Asia have resulted in an increase in the demand

of commercial airplanes. Similarly, the surge of spending

heavy amounts on defence and acquiring latest equipment also

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created many opportunities for Boeing (Datamonitor, 2009). The

financial crisis of 2008 also brought many acquisition

opportunities for the company in expanding company’s

operations in the area of supply chain and logistic. The

contract of Global Airline Inventory Network between Boeing

and the British Airways was also the result of such

opportunities (Schleh, 1999).

Threats: Among all existing competitors, Airbus is the most

obvious one for Boeing in terms of commercial airplanes. In

addition, Boeing may face the threat of new entrant from

China as Chinese government is planning to launch commercial

airplanes in 2020 (Dillow, 2010). According to the survey

study, another threat is the labour strikes from the

employees as Boeing’s 36% workforce is union represented and

in 2008 company has already faced minor delays due to the

labour strikes (Datamonitor, 2011). It was also mentioned in

the report that the operations of Boeing 777 and 787 have

been affected from the impact of 2011 great East Japan

earthquake because company’s 35% major suppliers are

operating from Japan. The precise summary of the SWOT

analysis is presented in table 5 (see appendix A).

3.3.2 KEY STRATEGIC ISSUES

In order to recover the market shrink after 9/11 attacks and

also to compete with Airbus, Boeing introduced a new

aircraft namely ‘Boeing 787 Dreamliner’ which is popular as

one of the best commercial airplanes of Boeing Company.

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After the initial success, Boeing is losing its market share

once again by experiencing delays in delivering particular

products to its customers (Lamba and Elahi, 2012). In

addition, these delays are resulting in huge extra costs for

the company. Cohan (2011) pointed out that since 2008 the

cost of developing Boeing’s 787 Dreamliner has been

increased by 120% as compared to its original budget. He

further mentioned that since 2008 Boeing announced the delay

in the delivery schedule of Dreamliner seven times.

It is evident from various sources that numbers of factors

are causing delays in the development of a particular

airplane model. Lamba and Elahi (2012) found that Boeing is

currently struggling with supply chain problems. Drew and

Clark (2010) reported that the delivery of Boeing’s

Dreamliner to potential customer can be delayed by two more

years due to engine problems. Cohan (2011) identified that

Boeing has lost control over development activities because

the company outsourced both the design and the manufacturing

of Dreamliner. Another problem is that Boeing’s engineers

are lacking in the experience of developing aircraft with

composite material because in the past, the company has been

involved in developing commercial airplanes using aluminium

material (Cohan, 2011). According to Boeing “the company made

too many changes at the same time - new technology, new design tools and a

change in the supply chain - and thus outran the ability to manage it effectively

for a period of time” (Peterson, 2011). The key strategic issues

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under the light of internal and external analysis are shown

in table 6 in appendix A.

4. FUTURE STRATEGIC DIRECTION

It is evident from table 6 that Boeing is currently facing

delay problems due to ineffective Supply Chain Information

System (SCIS). After facing extensive delays in the delivery

of a particular airplane model, the present Vice President

of Boeing is currently looking to change the strategy of

supply chain management. In this part of the paper, the

attempt will be made to formulate and recommend an

appropriate strategy to Boeing to overcome the delay factor

in developing new aircraft models.

4.1 STRATEGY FORMULATION

For implementing the new technology in designing and

manufacturing 787 Dreamliner, Boeing is dealing with top

high tech equipment makers all around the World. After

selecting sophisticated suppliers, it is also essential to

put maximum efforts to stay in touch with all the suppliers

at the same time. According to Greeff and Ghoshal (2004),

large enterprises often face problems due to cut in the

communication patterns with different departments,

suppliers, or manufacturers and thus this lack of

communication results in delays in the production processes.

It is also evident in Boeing’s case when the company hired

an external organization to reshape the corporate culture of

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commercial airplanes segment in the beginning of 2010 to

overcome the delay factor. The attempt was failed due to

internal and external communication problems (Sanders,

2010).

In order to deal with current supply chain problems, Boeing

needs to improve its Supply Chain Information System (SCIS)

to overcome communication problems. Coyle et al (2008,

p.195) defined SCIS as “information systems that automate the flow of

information between a firm and its suppliers to optimise the planning, sourcing,

manufacturing, and delivery of the products and services”. The successful

implementation of SCIS is based on strong and well-

integrated approach of people, processes, and technology

(Wang, 2011).

People are important in terms of their skills and

competencies in watching over complex processes as well as

using latest technology. On the other hand, organisations

should be careful in using outdated technologies that may

cause to slow down the processes. Today, many SCIS software

are available in the market that can help the organisations

to stimulate the supply chain processes. Enterprise Resource

Planning (ERP) is multi-purpose software that also includes

supplier relationship management features. Though Boeing is

well aware from the latest technologies and already

implementing ERP technology for different suppliers but

there is a need to improve the current ERP system with by

keeping in mind current supply chain problems. Table 7 in

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appendix A is showing the recommended strategy with its key

objectives in order to reduce or eliminate the current

supply chain problems.

4.2 CRITICAL REVIEW OF FEASIBILITY, ACCEPTABILITY, AND

SUITABILITY

The selected improvement strategy for Boeing to effectively

handle supply chain management can be critically reviewed in

terms of Feasibility, Acceptability and Suitability (FAS)

framework proposed by Johnson et al (2008). The feasibility

refers the availability of firm’s resources (i.e. funding,

time, people, and information) to implement the strategic

options whereas acceptability examines the potential

strategic outcomes of the chosen strategy for the company

and its stakeholders. Finally, the suitability deals with

overall rationale of the strategy to determine the strategic

position of the company in the industry.

Feasibility: Based on the current strategic issues and their

impacts (table 6 in appendix A), the key issue of competency

gap between Boeing’s vision and strategies due to supply

chain problems was highlighted (Waugh, 2011). The

reengineering process of Supply Chain Information System

(SCIS) using people, processes, and technology will provide

the opportunity to Boeing to establish and retain strong

relationship with suppliers with effective control. The

Boeing is highly unionised company in the airline industry

and company’s internal and external resources and core

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competencies will support them to implement the improvement

strategy of Supply Chain Information System. In addition,

the current financial position and retained earnings of

Boeing are showing that the company should not face

financial difficulties in implementing the change. However,

the current economic condition and cost overrun of

Dreamliner may hinder the company’s decision in adapting the

strategy. The recommended strategy will also tend to improve

relationships with the people (i.e. suppliers) but

improvements to supplier’s relationships may be hindered by

the uncooperative staff, giving the importance to incomplete

training and support.

Acceptability: Based on the Value Chain analysis (table 2 in

appendix A), it was discovered that the organization is

facing supply chain problems due to lack of communication

strategies (Sanders, 2010). The proposed strategy is highly

acceptable to Boeing because it will facilitate the

organization to fill the communication gap between the

company and their suppliers by using ERP software. The total

cost of the Boeing 787 Dreamliner has already increased by

120% as compared to its original budget (Cohan, 2011). The

outcome of the strategy will result in avoiding further

delays that will be beneficial for the company in terms of

cost-saving and increasing shareholder’s value.

Suitability: Based on the SWOT analysis (table 5 in appendix

A), the improvement of SCIS strategy is suitable to Boeing

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because of recent weak performance of the company in

commercial airplane segment; and the company is also facing

delays due to ineffective supply chain management approach.

In addition, due to the deep impacts of Great East Japan

earthquake, Boeing has a long-term plan to establish

supplier relationships with China (Xinhua, 2011). The

improvement SCIS strategy will also suitable to Boeing to

develop relationships with new suppliers in the Asian

markets.

4.3 IMPLEMENTING THE STRATEGY

4.3.1 CHANGE IN COMPANY’S STRUCTURE (PEOPLE’S PERSPECTIVE)

According to Johnson et al (2008), people have crucial roles

in implementing the strategy. In order to apply SCIS

strategy effectively, Boeing may need to change its business

and functional level structures. At the business level,

staff will implement the strategy by considering relevant

actions need to be taken to improve current Supply Chain

Information System. For example, acquiring more licences of

ERP or to customize the existing ERP packages to meet the

required criteria. At the functional level, staff will

ensure that every function must coordinate with other in

order to address strategic objectives.

4.3.2 CHANGE MANAGEMENT (PROCESSES’S PERSPECTIVE)

In implementing the improvement strategy, the nature and

scope of the change will be ‘adaptive’ as shown in the table

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8 (see appendix A). In addition the Gantt chart in Appendix

B is showing the core processes involved in managing the

change.

4.3.3 CONTROL SYSTEMS

The control system helps the organisation to manage,

command, and re-organise the behaviour of the components of

entire system (Zakian, 2005). In Boeing, control system in

implementing SCIS is primarily based on people, processes,

and technology. Table 9 in appendix A is presenting how the

control system will be designed in case of improving supply

chain information system in Boeing.

4.3.4 BALANCED SCORECARD

The balanced scorecard approach is used to review the

progress of the implemented strategy after a particular time

period (Johnson et al., 2008). The balanced scorecard for

Boeing in implementing changed strategy is exhibited in

table 10 in appendix A.

5. CONCLUSION

In this report, the internal and external business

environments of Boeing were evaluated critically to identify

at what extent the company is strategically compatible with

its current business environments. As a result of strategic

analysis of Boeing, it was concluded that company is

currently facing the problem of delay in developing Boeing

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787 Dreamliner. The delay issue has been caused by supply

chain management problems due to the outsourcing of both

design and the manufacturing services in making 787

Dreamliner. Also, the company has made too many changes in

implementing the new technology (i.e. using composite

material) and designing new tools (Peterson, 2011).

In order to minimise or to eliminate the delay factor, an

improvement strategy was recommended to Boeing after

critically reviewing the feasibility, acceptability, and

suitability of the strategy. The recommended strategy is

based on to improve Boeing’s current Supply Chain

Information System (SCIS) using People, Process, and

Technology strategy in order to develop effective control

system to manage supplier relationships to overcome delay

problems. For this purpose, Enterprise Resource Planning

software was recommended as one of the best available

programs today to manage organisational operations. The

improvement of SCIS of Boeing will help the organisation to

improve service delivery efficiency as well as to develop

better internal and external communication plan.

In this research, there was no primary investigation was

carried out. Also, due to the restricted access to the

company information, there may be few limitations in our

findings and recommended strategy but it is believed that

company will get success if the general directions of the

recommended strategy will be followed.

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APPENDIX A

Table 1 – Resource Based View of Boeing

RESOURCES COMPETENCIESTH

RESH

OLD CA

PABI

LITIES

THRESHOLD RESOURCES THRESHOLD COMPETENCIES

o Strong financial positiono International customerso Acquisitions, strategic alliances,

and subsidiarieso Addition services (see unique

resources below)

o Research and development activitieso Ability to manage multiple divisions

at the same timeo Strong order backlogo Provision of financing facilitieso Strong association with US government

and other government institutions like NASA and US Air force

UNIQUE A

BILITIES

UNIQUE RESOURCES CORE COMPETENCIES

o Airport technologyo Boeing Capital Corporationo Commercial Aviation Serviceso Fuel conservative serviceso Training and flight service

o Lean manufacturing policyo Large scale system integrationo Latest technology-based commercial

aircraftso Global Airline Inventory Network

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Source: Johnson et al (2008)

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Table 2 –Value Chain analysis of Boeing

SUPP

ORT

ACTIVI

TIES

Firm Infrastructureo Well organised hierarchy

o Managing operations in over 70 countriesHuman Resource Management

o Managing its human resources successful in attracting best workforce from all around the

worldTechnology Development

o Implementation of latest computer-based technology

o Utilizing composite material instead of aluminiumProcurement

o In the past, Boeing was able to influence its suppliers

o Currently facing difficulties in managing supply chain

o Lack of communication

PRIMARY ACTIVITIESInbound Logistics Operations Outbound Logistics Marketing and

SalesPost Sale Service

o Stock control through Global Airline InventoryNetwork

o On-going

o Increased security system

o MyBoeingFleet Web Portal to

o Advance AviationPerformance Program

o Advance Aviation Performance Program

o After sale service program ‘Advance Aviation

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Supplier’s relationships

o Quality computer-based training through Alteon Aviation TrainingSystem

access info online

Performance Program’

Source: Johnson et al (2008)

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Table 3 – PEST analysis of Boeing

FACTOR KEY FINDINGS

POLITICAL

o Tariff free agreement of 1979o Open Skies agreemento Restriction of selling products to

particular countries due to retain sufficient security

ECONOMIC

o Dispute of unfair subsidies between Boeing and Airbus

o Increased fuel costso Environmental regulations and restrictionso Global recession impacts

SOCIALo Increased population growth rateo Changing needs and demands of the customerso Anti-US policy

TECHNOLOGICAL

o Cost effective computerised technologyo Utilising new technology (i.e. composite

material)o Using lighter materials in the development

of commercial planesSource: Johnson et al (2008)

Table 4 –Porter’s Five Forces analysis of Boeing

FORCE IMPORTANCE SCALEThreat of new entrance LOW 1 to 5

Threat of substitutes MIDDLE 3 to 5

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Bargaining power of suppliers HIGH 5 to 5

Bargaining power of customers LOW 1 to 5

Competitive rivalry between competitors HIGH 4 to 5Source: Mintzberg (1998 and 2001) and Johnson et al (2008)

Table 5 – SWOT analysis of Boeing

LOCATION STRENGTHS WEAKNESSESFAVOURABLE UNFAVOURABLE

INTERNAL o Largest aerospace organization

o Leading manufacturing experience of commercial and military aircrafts

o Strong order backlogo Providing products and

services to over 90 countriesall around the world

o High demands of airplanes dueto design and facilities

o Competitive edge in generating healthy total revenues

o Providing financing

o Delays in delivering products

o Weak performance of key business segments (i.e. commercial airplanes)

o Weakening financial performance

o Legal proceedings due to commercial disputes

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facilities to customerso Strong global networko Broad range of products and

serviceso Strong association with

Government and other big organizations such as NASA and US Air Force

o High spending on R&D activities

EXTERNAL

OPPORTUNITIES THREATSo Increasing world defence

spendingo Increasing demand for

commercial airplaneso Acquisitions due to financial

crisis 2008o Global Airline Inventory

Network

o Increase in oil priceso Slowdown of commercial jet

marketo Risks related to labour

issueso Great East Japan earthquake

impacto Change in US budgetary

prioritiesSource: Thomson and Martin (2010)

Table 6 – Key Current strategic issues and their impacts

ANALYTICAL TOOL KEY ISSUE RESULT ACTION

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Resource Based View

o Competency gap between Boeing’s vision and strategies due to supply chain problems which have caused delays

Delay Under review

Value Chain analysis

o Boeing is currently facing supply chain problem due to lack of effective communication strategy

Delay Under review

Financial analysis o 8% decline in the revenue due to global recession 2008

Decline in profit Taken

PEST analysis

o Decreased consumer spending due to global recession

o Changing needs and demands of the customers

o Higher regulatory and environmental restrictions

o Dispute of unfair subsidieso Anti-US Policy

Decline in sale Taken

Porter’s Five Forces analysis o Bargaining powers of suppliers Delay Under review

SWOT analysiso Delays due to supply chain problemso Great East Japan earthquakeo Increased fuel prices

Delay Taken

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Table 7 – Recommended strategy to improve supply chain management system

STRATEGY OBJECTIVES

Improving Supply Chain Information System (SCIS)using People, Processes, and Technology strategy

o Developing effective control system to manage supplier relationships to overcome delay problems

o To fill the competencygap between Boeing’s vision and strategies

o To improve service delivery efficiency

o To improve internal and external communication

Table 8 – Types of the change

NATURE OF CHANGESCOPE OF CHANGE

REALIGNMENT TRANSFORMATION

INCREMENTAL Adaptive Evolution

BIG BANG Reconstruction Revolution

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Table 9 – Control System

STRATEGY RESOURCE ALLOCATION AND ACTIVITIES

PEOPLE and PROCESSES

o Introduce the new technology to the people ofthe organization

o Utilising service blueprints to designing processes

o Research and development activitieso Promoting internal and external communicationo Continuous research and feedback

TECHNOLOGY

o Installation of new ERP systemo Combine new technology with the existing oneo Training and development activitieso Ongoing support and up-gradation

Source: Zakian (2005)

Table 10 – Balanced Scorecard

FINANCIAL PERSPECTIVE CUSTOMER’S PERSPECTIVEGOALS MEASURES GOALS MEASURES

Improving o Y/E financial Product’s o Customer’s feedback

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financial performance

statementso Liquidity and

profitability ratios

quality and customer service

Shareholder value

o Share priceo Dividend price

On time delivery

o Increased number of customers

o Advance ordersINTERNAL PERSPECTIVE SUPPLIER’S PERSPECTIVE

GOALS MEASURES GOALS MEASURES

Continuous improvement

o Balanced scorecard approach

Improving supply chain management

o Implementing Enterprise Resource Planning (ERP)

Customer oriented

o Increase in saleso Positive feedback

Timely deliveries o Customer satisfaction

Supplier’s oriented

o Relationship with suppliers

o Effective control over suppliers

Long-term supplier relationships

o Implementing improvedSupply Change Information System using People, Processes, and Technology strategy

Source: Johnson et al. (2008)

APPENDIX B

Figure 1 – The Gantt chart

STAGE ACTIVITIES YEAR 1 YEAR 2 YEAR 3 ACTING PARTIESQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Planning Internal / external

marketing researchMarketing department

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Formulation of strategy Corporate executives

Resource allocation Finance department

Implementation

Process design Operations department

Coordination departmentalstrategies

Functional managers

Internal / external communication

Functional departments

Evaluation

Continuous research and feedback

Marketing and HR depart.

Reviewing control systems Functional departments

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