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PEST & Industry Analysis By: Karim Badr. Snap shot of Boeing. Founded in 1916 by William E. Boeing in Seattle, Washington. In 1997, Boeing merged with McDonnell Douglas. The world's largest aerospace and Defense Company. Boeing has customers in more than 90 countries around the world.

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snap shot of boeing
Snap shot of Boeing
  • Founded in 1916 by William E. Boeing in Seattle, Washington.
  • In 1997, Boeing merged with McDonnell Douglas.
  • The world's largest aerospace and Defense Company.
  • Boeing has customers in more than 90 countries around the world.
  • Boeing employs more than 158,000 people across the United States and in 70 countries.
snap shot of boeing continued
Snap shot of Boeing Continued
  • Boeing operates three divisions:
    • commercial airplanes
    • Integrated Defense Systems (IDS)
    • Boeing Capital Corporation (BCC)
  • In 2009, the firm generated $60.9 billion in revenue

and $2.7 billion in net income.

  • Boeing’s newest airplane is the 787 Dreamliner.
  • Competition: Airbus industries of Europe.
boeing s industry analysis
Boeing’s Industry Analysis
  • Boeing’s Buyers
    • Airlines: Commercial aircrafts
    • US Governments: Military aircrafts, global services and support, and network and space systems.
    • Global based buyers: Customers in more than 90 countries.
  • Boeing’s Suppliers
    • Global based suppliers: Contracts with 22,000 suppliers and partners globally.
    • Engine manufacturers represent the single most significant group of suppliers:
          • General Electric, Pratt & Whitney (US), Rolls-Royce (UK), CFM International
boeing s industry analysis1
Boeing’s Industry Analysis
  • Boeing’s Competition: Airbus
    • Airbus: European aerospace company based in Blagnac, France.
    • Conglomerate funded by various countries throughout Europe
    • Airbus produces half of the world’s jet airlines and shares the market with Boeing.
    • Airline wars: Intense competition between Boeing and Airbus.
    • Producer of the AB-380.
boeing s industry analysis2
Boeing’s Industry Analysis
  • Boeing’s Competition: Embraer
    • Emerging competitor
    • Company founded in 1969 in Brazil
    • 11,000 Employees
    • Historically produces Aircrafts: seats between 30-50 passengers
    • Currently developing new jetliner family in the 70-110 seat capacity
key force high intensity of rivalry
Key Force: High Intensity of Rivalry
  • The High Intensity of Rivalry is due:
    • Two firms controlling the Aerospace industry
    • Similarity of products produced by the two firms
    • Firms adopting the same strategies
    • Regulations and policies enforced by the WTO.
  • Firms in the industry need to find ways to differentiate between their products and continue to innovate.
boeing strategies
Boeing Strategies
  • Strategies:
    • Run Healthy Core businesses
    • Leverage strengths into new products and services
    • Open new Frontiers
concluding thoughts
Concluding Thoughts
  • PEST
      • Technological opportunities are most opportunities to Boeing.
      • Political factors represent the major threats to Boeing in the form of the WTO regulations and laws
  • Aircraft Industry and Porter Five Forces
      • Low:
          • Supplier Power
          • Threat of Substitutes
concluding thoughts1
Concluding Thoughts
      • High:
          • Intensity of Rivalry
          • Barriers to Entry
          • Buyers Power
  • Key Force: Intensity of Rivalry.
  • Airbus and Boeing control the Aircraft industry, Embraer as a potential emerging competitor.

“If you don’t take care of your customers….someone else will”

segmentation of aircraft industry
Segmentation of Aircraft Industry

World Aircraft manufacturing industry

Military & Space

Commercial Aircraft

Cargo Aircraft

Passenger Aircraft

Large Civil Aircraft( LCA)

Small to Medium- sized Aircrafts

key competitors in the aerospace industry
Key Competitors in the Aerospace Industry
  • Boeing
  • Airbus
  • Bombardier
  • Embraer
key competitors in the aerospace industry boeing
Key Competitors in the Aerospace IndustryBoeing
  • Leader in the commercial jet manufacturing for decades
  • Merged with McDonnell Douglas in 1996
  • Second largest defense contractor in 2000
  • Leader in the satellite making (space industry) business as of 2001
key competitors in the aerospace industry airbus
Key Competitors in the Aerospace IndustryAirbus
  • Established in December of 1970
  • Boeing’s only competitor in commercial jet manufacturing
  • Controlled 55% of the large passenger aircraft market in 2001
key competitors in the aerospace industry bombardier
Key Competitors in the Aerospace IndustryBombardier
  • World’s largest maker of small planes in Canada
  • Make jets that seat between 25-90 passengers
  • Control 36% of the global market for business and regional jets
key competitors in the aerospace industry embraer
Key Competitors in the Aerospace IndustryEmbraer
  • Company founded in 1969 in Brazil
  • 11,000 employees
  • Historically their planes seat between 30-50 passengers
  • Currently developing new jetliner family in the 70-110 seat category
evaluation of competitors focus
Evaluation of Competitors: Focus
  • Boeing
    • Supersonic Jet
  • Airbus
    • Super-Jumbo Jet
  • Bombardier
    • Focus on Smaller Jets
  • Embraer
    • Focusing on the 70-110 seat market
how does boeing compete
How does Boeing compete
  • Products Differentiation

Boeing adopts a differentiation strategy , Faster aircrafts in the form of the supersonic

787 Dreamliner series that compete against Airbus bigger airplane the A-380 jumbo

Aircraft.

  • By Outsourcing

70% of the 787 Dreamliner was built outside the USA, that enables Boeing to lower its production costs in a very expensive industry.

  • By Technology

The 787 will be the first airliner to use composites for most of its airframe construction, that will allow for a lighter aircraft and lower fuel consumption( 20% lower)

boeing s competitive positioning
Boeing’s Competitive Positioning
  • Strong Global Network( Buyers, Suppliers)
  • Broad Product line that covers most market niches( commercial, defense and military, ammunitions, space and security)
  • R&D
aerospace growth opportunity
Aerospace Growth Opportunity
  • Global Aerospace and Defense Market has reached a value of USD 674.6 Billion in 2008 and reports forecast that this figure would go up to USD 910 billion in 2013 based on a year on year increase of 6.17%.
  • Within the aerospace and defense market the defense market accounts for almost 70% of the market value.
key trends in the aerospace industry
Key Trends in the Aerospace Industry
  • Globalization of Aerospace manufacturing

It is estimated that the amount of manufacturing outsourcing

in the aerospace industry is close to about 80% of the airplane.

  • Technical Expertise

Airplanes have got increasingly complex and it is not expected that a single company would have the technical expertise to meet the myriad requirements.

  • Outsourcing

Manufacturers are outsourcing the sub system value chain since they want to shorten development time by increased focus on higher value added portion.

key trends of aircraft development
Key Trends of Aircraft Development:

Development of LCAs is split into two markets

Consolidation

Fragmentation

Large number of smaller high speed aircraft(100-290 seats)

Large and high capacity aircraft (300-600 seats)

Boeing

787-Dreamliner

Super Sonic jet

Airbus

A-380 Super Jumbo Jet

boeing s b2b social media
Boeing’s B2B-Social Media
  • Started by Randy Baseler, Vice President, Marketing Commercial Airplanes in

January 2005.

  • Way to expand the conversation of commercial aviation to the Web.
  • In its first two years, Randy’s Journal, as the blog was named, saw more than

half million individual.

  • Randy’s blog is another communication outlet for a large public company, he

also includes transparent reflections on quarterly earnings, orders and how

the impact of results financial results on production and development of

ongoing projects.

  • From Randy’s Blog:

“We’ve just been through another tough quarter, not only for Boeing but for our industry. So, understandably our results are somewhat parallel to what’s happening in the global economy and its deep effects on the commercial airplane market. Boeing’s first-quarter earnings dropped 50%, to $610 million.”

conclusion
Conclusion

Four mains players in the aerospace industry, with Boeing and airbus

controlling the market of big size commercial aircrafts

Companies in the industry focus on differentiation due to the intensity of rivalry

  • Boeing focus: Supersonic jets- 787 Dreamliner
  • Airbus Focus: Jumbo Jets- A380 series

Companied use different strategies to compete

  • By Product
  • By Outsourcing
  • By the use of technology
conclusion cont d
Conclusion Cont’d

Key trends in the aerospace industry

    • Globalization of aerospace manufacturers
    • Outsourcing
    • Technical expertise

Key Trends of aircraft development:

    • Consolidation
    • Fragmentation

Boeing’s Positioning

    • Long distance-Medium capacity:Many
    • Short distance-High capacity: None
    • Long distance-High capacity: some
    • Long distance-Low capacity: Niche

Boeing’s social media

  • B2B social media to interact with its stakeholders( employees, buyers…etc)
boeing business model
Boeing Business Model
  • Design, assemble and support commercial jetliners
    • Boeing 7-series family of airplanes lead the industry
    • Commercial Aviation Services (CAS) offers broad range of services to passenger and freight carriers
  • Design, assemble and support defense systems
    • World’s largest designer and manufacturer of military transports, tankers, fighters and helicopters
    • Support Systems provides services to government customers worldwide
  • Design and assemble satellites and launch vehicles
    • World’s largest provider of commercial and military satellites; largest NASA contractor
  • Integrate large-scale systems; develop networking technology and network-centric solutions
  • Provide financing solutions focused on customer requirements
  • Develop advanced systems and technology to meet future customer needs
boeing performance over the past 5 years
Boeing Performance over the past 5 years

U.S dollars in millions

2006-2007: Increase in Operating margin by 3.9%

2007-2008: Decrease in Operating margin by (2.3%)

2008-2009: Decrease in Operating margin by (3.4%)

2009-2010: Increase in Operating margin by 4.6%

* Peek of Revenue & Operating margin in 2007

changes in distribution of revenues
Changes in Distribution of Revenues:

Revenues By segment

U.S dollars in millions

boeing s key assets
Boeing’s Key Assets
  • Cash
  • Accounts Receivables
  • Inventories
  • Goodwill
  • Property, Plant & Equipment
  • Other Acquired Intangibles
  • Investments

Total Assets account for: $68,565 Million Dollars

boeing s bcg matrix
Boeing’s BCG Matrix

Stars

Question Marks

HIGH MARKET SHARE:

Boeing controls the aerospace market for commercial aircrafts along with Airbus

HIGH

MARKET GROWTH RATE

High MARKET GROWTH:

Growing demand for commercial Airplanes.

LOW

Cash Cows

Dogs

HIGH

LOW

RELATIVE MARKET SHARE

boeing s strategies
Boeing’s Strategies
  • Run healthy core businesses
  • Leverage strengths into new products and services
  • Open new frontiers
  • People working together as a globalenterprise for aerospace leadership
boeing s generic strategy
Boeing’s generic Strategy
  • Generic Strategy:
    • Differentiation based-competitive advantage
  • Keys to Successful Differentiation:
    • Understanding customers needs and preferences
    • Commitment to customers
    • Knowledge of company’s capabilities
    • Innovation
boeing s generic strategy1
Boeing’s Generic Strategy

Competitive Advantage

Differentiation:

Boeing follows this strategy by developing products that offers unique attributes to customers and that are different from the competition products: the 787 Dreamliner

low Cost

High Cost

Stars

Overall Cost Leadership

Broad

Differentiation

Competitive Scope

  • Broad Scope:
  • Broad Product line that covers most market niches( commercial, defense and military, ammunitions, space and security).

Cost Focus

Differentiation Focus

Narrow

HIGH

LOW

boeing s strategy clock
Boeing’s Strategy Clock

Focused Differentiation

Hybrid

Boeing focuses on differentiating its products due to the competition.

Perceived Service Benefits

Low Price

No Frills

Strategies Destined for Failure

Price

boeing s ansoff matrix
Boeing’s Ansoff Matrix

Existing Products

New Products

Market Penetration: Boeing should keep maintaining or increasing its market share of current products.

Market Development:

Boeing can achieve this by keeping its differentiation strategy to access new geographical markets

Existing Markets

New Markets

value chain
Value chain
  • Capacity Demand Control
  • Survival

Boeing Value Chain

Competitive Position of Value Chain

boeing global markets
Boeing Global Markets
  • New Airplane deliveries for 2009-2028
  • Asia-Pacific as Boeing’s biggest market 31%
conclusions
Conclusions
  • Boeing Business Model
    • Design, assemble and support commercial jetliners
    • Design, assemble and support defense systems
    • Design and assemble satellites and launch vehicles
    • Integrate large-scale systems; develop networking technology and network-centric solutions
    • Provide financing solutions focused on customer requirements
    • Develop advanced systems and technology to meet future customer needs
  • Changes in distribution sales:
    • Small decrease in revenues
  • Boeing Generic Strategy
    • Differentiation
conclusions1
Conclusions
  • Boeing Grand Strategy
    • Drive long-term growth and value creation
    • Provide the industry's with customer-focused solutions
    • Provide financial services in support of Boeing sales
    • Pursue technical & functional excellence for the enterprise
    • Utilize advances in technology in making products more environmentally friendly
  • Boeing Strategy Clock
    • Differentiating
  • Boeing Global Markets
    • Asia-Pacific 31%
    • North America 27%
    • Europe 25%
    • Middle East 6%
    • Latin America 6%
    • CIS 3%
    • Africa 2%