THE BOEING CORPORATION
CLASS NOTES
THE BOEING CORPORATION
EARLY BACKGROUD
GOV’T MAIL CONTRACT
BOEING 247 VS. DC 2 & 3
B - 17 & B29
B - 47 & B52
707
727 & 737
747
757 & 767
777
SYNOPSIS
ISSUES
The competitive structure of the world commercial jet industry.
Trends taking place in the industry.
Boeing’s dominant position in manufacturing jet commercial aircraft.
Strategies - distinctive competencies - competitive advantage.
Changing the culture at Boeing
Trade dispute with EU over subsidies provided Airbus.
VISION
PEOPLE WORKING TOGETHER AS ONE GLOBAL
COMPANY FOR AEROSPACE LEADERSHIP.
BOEING - THE FUTURE OF FLIGHT
CORE COMPETENCIES
DETAILED CUSTOMER
KNOWLEDGE AND FOCUS
We will seek to understand, anticipate, and be responsive to out customers’ needs.
Large-Scale System Integration
We will continuously develop, advance, and protect the technical excellence that allows us to integrate effectively the systems we design and produce.
CORE COMPETENCIES
DETAILED CUSTOMER
KNOWLEDGE AND FOCUS
We will seek to understand, anticipate, and be responsive to out customers’ needs.
Lean, Efficient Design and Production Systems
Our design and production systems will be among the best in the world, characterized by efficient use of assets, short time-to market, short flow times, short cycle times, high quality and high inventory turns.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
LEADERSHIP
We will be a world-class leader in every aspect of our business-in developing our team leadership skills at every level; in our management performance; in the way we design, build and support our products; and in our financial results.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
INTEGRITY
We will always take the high road by practicing the highest ethical standards, and by honoring our commitments. We will take personal responsibility for our actions, and treat everyone fairly and with trust and respect.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
QUALITY
We will strive for continuous quality improvement in all that we do, so that we will rank among the world’s premier industrial firms in customer, employee and community satisfaction.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
CUSTOMER SATISFACTION
Satisfied customers are essential to our success. We will achieve total customer satisfaction by understanding what the customer wants and delivering it flawlessly.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
PEOPLE WORKING TOGETHER
We recognize our strength and our competitive advantage is - and always will be - people. We will continually learn, and share ideas and knowledge. We will encourage cooperative efforts at every level and across all activities in out company.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
A DIVERSE AND INVOLVED TEAM
We value the skills, strengths, and perspectives of our diverse team. We will foster a participatory workplace that enables people to get involved in making decisions about their work that advance out common business objectives.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
GOOD CORPORATE CITIZENSHIP
We will provide a safe workplace and protect the environment. We will promote the health and well being of Boeing people and their families. We will work with our communities by volunteering and financially supporting education and other worthy causes.
VALUES
In all our relationships we will demonstrate our steadfast commitment to:
ENHANCING SHAREHOLDER VALUE
Our business must produce a profit, and we must generate superior returns on the assets entrusted to us by our shareholders. We will ensure our success by satisfying our customers and increasing shareholder value.
LONG - RANGE MISSION
TO BE THE NUMBER ONE AEROSPACE COMPANY IN THE WORLD
AND AMONG THE PREMIER INDUSTRIAL CONCERNS IN TERMS
OF QUALITY, PROFITABLILITY, AND GROWTH.
FUNDAMENTAL GOALS
QUALITY AS MEASURED BY CUSTOMER, EMPLOYEE, AND COMMUNITY SATISFACTION.
PROFITABILITY AND GROWTH AS MEASURED BY
INCREASED SHAREHOLDER VALUE OVER THE LONG TERM.
OBJECTIVES
TO ACHIEVE THE ABOVE GOALS AND FULFILL
BOEING’S MISSION, THE FOLLOWING
OBJECTIVES WILL GUIDE COMPANY:
OBJECTIVES
Continuous improvements in quality of products and processes:
Our commitment to steady, long-term improvement in our products and processes is the cornerstone of our business strategy. To achieve this objective, we must work to continuously improve the overall quality of our design, manufacturing, administrative, and support organizations.
OBJECTIVES
A HIGHLY SKILLED AND MOTIVATED WORKFORCE:
Our most important resource is our human resource: the people who design and build our products and service our customers. Given the right combination of skills, training, communications, environment, and leadership, we believe our employees will achieve the needed gains in productivity and quality to meet our goals.
OBJECTIVES
CAPABLE AND FOCUSED MANAGEMENT:
To employ our technical and human resources with optimum efficiency, we must ensure that managers are carefully selected, appropriately trained, and work together to achieve our long-range goals.
OBJECTIVES
TECHNICAL EXCELLENCE:
In a world of fast-challenging technology, we can only remain competitive by continuously refining and expanding our technical capability.
OBJECTIVES
FINANCIAL STRENGTH:
The high-risk, cyclical nature of our business demands a strong financial base. We must retain the capital resources to meet our current commitments and make substantial investments to develop new products and new technology for the future. This objective also requires contingency planning and control to ensure the company is not overextended should a severe economic downturn occur the plan period.
OBJECTIVES
COMMITMENT TO INTEGRITY:
Integrity, in the broadest sense, must pervade our actions in all relationships, including those with our customers, suppliers, and each other. This is a commitment to uncompromising values and conduct. It includes compliance with all laws and regulations.
BOEING SWOT ANALYSIS
Dominant producer, with over 60 percent of the market
Several mature, but still popular, models that are generating high cash flow (737 & 747)
Highly skilled engineering culture
A. STRENGTHS
BOEING SWOT ANALYSIS
Broad product line that covers most major market niches
Good sales of its two newest aircraft, the 757 & 767
The new 777 model will be introduced by mid 1995
A record-breaking and still-growing order backlog
A. STRENGTHS cont.
BOEING SWOT ANALYSIS
A hierarchical, ridged, and semiautocratic management style, which is a product of its military heritage
Overly secretive and security - conscious image
Poor vertical and horizontal communications within the company shop floor employees feel alienated from MGT.
B. WEAKNESSES
BOEING SWOT ANALYSIS
Turf battles inhibit cross-functional and cross-divisional communication
Lack of professional management skills - motivation and leadership (engineering and military culture)
Relatively inexperienced workforce (feast or famine hiring practices)
B. WEAKNESSES cont.
BOEING SWOT ANALYSIS
Labor problems - excessive overtime - 48 day strike
Failure to serve the 300 - 335 seat MKT between 7 67 - 747 aircraft (777 model will help)
Loss of technological leadership to Airbus - fly by wire avionics
B. WEAKNESSES cont.
BOEING SWOT ANALYSIS
Projected increase in total demand for jet aircraft between 1993 - 2010, forecasts = 12,000 plus units
New technological breakthroughs in computers and electronics during this time frame
C. OPPORTUNITIES
BOEING SWOT ANALYSIS
Lower prices for jet aircraft - must lower development and unit MFG. Costs
New entries still a possibility - Japan, Russia, etc.
Subsidized competition
Substitutes such as teleconferencing and high speed trains
Major geopolitical upheaval in the world
D. THREATS
1992 FINANCIAL ANALYSIS
RATIO BOEING INDUSTRY COMMENT
1. Current OK
2. Asset Turnover GOOD
3. Return on assets OK
4. Return on Equity GOOD
5. Coverage ratio (tie) GOOD
6. Return on net worth LOW
COMPETITOR ANALYSIS
Extremely high capital requirements
High risks
New product development cost are high
Long payback periods
Cyclical demand
Extremely concentrated industry
Only a few can survive
Swings through boom and bust cycles
A. CHARACTERISTICS OF THE INDUSTRY
COMPETITOR ANALYSIS
Know - how (steep learning curve)
Capital costs
Long time horizons
Risks
High fixed costs
Must have high market share
B. BARRIERS TO ENTRY
COMPETITOR ANALYSIS
Intense
Airbus
McDonnell Douglas
Almost a duopoly
Japan, Russia, etc in future
C. RIVALRY
COMPETITOR ANALYSIS
Becoming price sensitive
Deregulation
Increased competition
Lower profits
More concerned about cost structure
Buyers now playing major producers off against each other
D. POWER OF BUYER (AIRLINES)
COMPETITOR ANALYSIS
Millions of parts needed
Thousands of independent contractors
MGT of supply chain important
Individual suppliers are not in a powerful position
E. POWER OF SUPPLIERS
COMPETITOR ANALYSIS
HIGH SPEED TRAINS
REAL TIME TELECONFERENCING
F. SUBSTITUTES
STRATEGIC CHOICE
BOEING MUST CHANGE THEIR ORGANIZATION CULTURE AND STRUCTURE IN ORDER TO MAINTAIN AND BUILD ON ITS WORLDWIDE DOMINAT POSITION AS A MAJOR PRODUCER OF COMMERCIAL JET AIRCRAFT.
RECOMMENDATIONS
Boeing must lower its cost structure through increased productivity
Continue selective outsourcing
Learn from Japanese MFG. Techniques -- JIT, lean -- MFT.
Improve quality -- continuous improvement -- TQM
Always keep the customer in mind -- 777 approach
Innovative product leader -- technology
RECOMMENDATIONS
Transformation of its culture
Flatten its organization structure
Improve communications -- vertical, horizontal and diagonal
Cross functional -- cross culture teams
Professionalize its MGT. CADRE (engineering -- MBA)
Establish clear, ambitious, realistic goals and Objectives
In-house MGT development program -- managing for world class MGT. -- CASCADE approach
BOEING CASE UP-DATE
Purchased McDonnell Douglas for $16 billion in 1997.
Bought Rockwell’s aerospace and defense operations in 1996.
Largest aerospace firm in the world.
Number one military aircraft maker
Only . manufacturing of commercial aircraft
Producing 737, 747, 757, 767, and 777.
BOEING CASE UP-DATE
1996 sales $ billion.
Projected 1997 sales - $ billion.
Production bottleneck - costs up and profits down.
$384 million loss for 1997.
55% market share.
Safety issues.
BOEING CASE UP-DATE 1998
Introduced the Boeing 717 - formerly the MD-95 - production expectations + are 10 per month.
Lost British Airways contract of 249 Aircraft to Airbus Industry - A $14 billion order.
Boeing claims their recovery plan is on track.
Ron Woodard (55), President, Boeing Commercial Airplane Group was fired 9/2/98 and was replaced by Alan Mulally (53) chief of Boeing’s defense and space group.
UP- DATE 1998 CONT.
Lost $178 million in 1997 on sales of $ billion dollars.
Boeing going through a cultural revolution.
Production bottlenecks--some improvements being made.
Future layoffs expected.
Asian crisis.
Boeing 1999-2000 Update
OVERVIEW OF PAST FEW YEARS
1. Production Problems
2. Financial Losses
3. Labor Strife(40 day strike by engineers
and technical workers).
4. Poor Stock Performance
Boeing 1999-2000 Update
Air travel expected to grow by 5% per year-Boeing wants to triple that rate of growth.
Boeing sold $400 million in airplane parts over the internet last year.
Boeing was awarded an $ billion defense contract to build 222 new F/A-18 E/F jet fighters.
Boeing 1999-2000 Update
Airbus-476 planes or 55% of orders (MKT)
Boeing-620 planes delivered or 68% of MKT
Airbus-A3XX 500- pass super jumbo plane
Boeing acquired Denver based Jeppessen Sandersen for $ billion (maps,training, flight planning, computers, software, weather and maintenance services)
UP-DATE 2001
Boeing moved its corporate headquarters from Seattle to Chicago in September.
Airline Industry greatly affected by the 9/11/01 terrorists attack on .-Airlines significantly reduced flight schedules.
UP-DATE 2001 con’t
Stopped development on its 747x to focus on the smaller, faster, and longer-range 200xx which features a double delta wing and two smaller wings near the nose of the plane. It will be able to travel at mach .95.
Boeing will also begin building a larger, longer range 747-400.
UP-DATE 2001 con’t
Cancelled development of its Connexion- in flight internet service which was supposed to equip 1500 aircraft on America’s three largest airlines. Focus will shift to aviation security.
Suspended production on 737’s and 777-200LR aircraft. Production of the 737 will resume shortly after Boeing received new orders from China.
UP-DATE 2001 con’t
Boeing lost out to Lockheed Martin for Joint Strike Fighter contract worth $400 billion over 25 years- but will be a major supplier. It will replace the F-16 - each plane will cost $30-$40 each. $175 billion for overseas allies.
UP-DATE 2001 con’t
A. Space Shuttle
B. Apache Helicopter
C. C-17 Globemaster III Transport
D. Delta Family of Rockets
E. Global Positioning Systems
F. International Space Station - Prime Contractor
G. Produces various versions of the F-15 Eagle, F-18 Hornet, AV-B Harrier II, F-22 Raptor (developmental), the Harpoon Missile, the Comanche Helicopter, and the V-22 Osprey Tilt- Rotor Aircraft.
Produces the following military and space aircraft and missiles:
UP-DATE 2001 con’t
A. World’s Largest Aerospace Company
B. Number 1 MFG. Of Commercial Jets
C. Number 2 Defense contractor (Lockheed Martin is first)
UP-DATE 2001 con’t
A. Commercial airline business = 60%
B. Military aircraft and missiles = 20%
C. Space and communication systems = 20%
Boeing wants a controlled de-emphasis of its commercial airline business and put more emphasis on its military and space segments. This will require some restructuring of the organization.
