Strategy Analysis and Recommendations: The Boeing Company

Strategic Business Analysis and Recommendations:

The Boeing Company

Strategy Analysis and Recommendations: The Boeing Company

Historical Strategies

In 2007, one of Boeing's fastest-growing and most profitable business areas was their commercial aircraft division. The fastest-selling new airplane in history was the 787 Dreamliner. After the unveiling in July of 2007, Boeing received a record 369 orders, bringing the total orders at that time to 677. The Dreamliner illustrates the company's strategy for the past 5-10 years - expanding their core business.

Boeing needed a plane to replace the aging 727's and 737's, and also to remain competitive with Airbus, their major competitor. In 2001, Boeing first proposed the Sonic Cruiser as their new aircraft in development, but airlines generally preferred lower operating costs over higher speed. "By listening to (the customer), we discovered that the real value they were seeking was efficiency, range, overall economics and environmental performance," McNerney said. Wisely, Boeing ended the Sonic Cruiser project in December 2002 in favor of the slower but more fuel-efficient 787.

Much of the research from the Sonic Cruiser was applied to the 787, including carbon fiber reinforced plastic for the fuselage and wings, bleedless engines, cockpit and avionics design. (Wallace, 2007). The Dreamliner could fly 25 percent farther, had less emissions, and better cabin pressure - all of which would better please both the passenger and the airline. There were significant delays between the initial roll-out and the scheduled delivery due to composites manufacturing, but eventually the first plane was delivered in late September 2011 and entered commercial service on October 26, 2011.

Current Strategies

Since 1999, when Airbus first outsold Boeing, the story of Boeing has become the story of Boeing vs. Airbus. Airbus and Boeing are the primary manufacturers of commercial aircraft. Currently Airbus has 48% of future orders in terms of value and 51% percent of orders in terms of total aircraft. Airbus' deliveries have steadily grown over the past 20 years, while Boeing has had significant delivery completion issues.

Boeing continues to focus on the Boeing 787 Dreamliner as the vehicle for complete fleet updating. The 787's success and potential customers' requests led Airbus to revise the design of its A350. Another set of planes, The Boeing 747-8 and the Airbus A380, have been advertised as competitors on various occasions.

Airbus' redesigned A320, the A320neo, provides a small gain in fuel efficiency, but Boeing initially decided in 2010 not to product a version of their 737 to compete. They did not believe airlines would be willing to pay 10% more for only a small increase in fuel efficiency. They felt airlines would want a larger increase - a 30% fuel savings - and would want to wait for the next major redesign. However, the company faced airline pressure to offer a competing solution to the A320neo. They did not want to wait 20 years for a new model and would rather choose Airbus than wait. Finally, to keep their contract with American, Boeing agreed to put a different engine in the 737, which launched the re-designed 737 effort for Boeing. The re-engine of the 737 is more expensive for Boeing than it was for Airbus A320 due to the 737's design. However the decision to commit to the redesign was likely a good one in light of the danger Boeing has of losing more sales to Airbus.

The 2011 Air Show, Boeing managed to book orders and commitments for 396 planes worth $37 billion, more than twice of its rival Airbus. Still, the orders for Airbus are significantly higher in 2011, even though they had been remaining nearly the same for the past few years.

According to the New Your Times:

The single-aisle segment is the most hotly contested for both Boeing and Airbus, which each claim about 50 percent of the market. But the two companies are expected to begin to face competition at the beginning of the next decade when other manufacturers -- including Bombardier of Canada and Embraer of Brazil -- are expected to start deliveries of jets that can seat similar numbers of passengers. (Clark, 2011)

Financially, Boeing has not been able to reach its profitability level from 2007. However, Boeing has been more profitable than Airbus. In 2011, its net profit in commercial planes was 9.7% vs. 1.7% at Airbus. This contrast