Porter’s five forces of competition were used to assess the competitive environment surrounding boeing.
Threats of new entrants: Embraer has made use of an opportunity to make its way into the airliner market by incorporating elements of speed, technology, comfort and reliability into smaller aeroplanes with lower costs of operation. This has led to the emergence of Embraer as a leading manufacturer of small commercial jets taking over an opportunity in the market that Boeing should have anticipated and taken advantage of. Another new entrant to the aeroplane market is Bombardier Inc. which is a Canadian based manufacturer of Airplanes competing with Embraer for the spot of the third largest manufacturer of smaller capacity aeroplanes after Boeing and Airbus. Moreover, a fresh dynamic is expected to be introduced into the market after the Chinese government is plan to launch a line of Commercial Airplanes in 2020 comes to fruition (Dillow, 2010).
Supplier bargaining power: Boeing has failed to maintain effective control over its suppliers who in most instances have contributed enormously to the delays in aircraft supplies such as that witnessed with the 737 Dreamliner. Suppliers, therefore, have high bargaining power over Boeing and have affected Boeing’s reputation negatively due to product delays (Economist, 2011).
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Customer bargaining power: Low customer bargaining power is expected to increase slightly due to new entrants. However, customers often have to choose between Boeing and Airbus and cannot switch between the two options due to the high cost of training that would be incurred as the two companies make aircraft with increasingly diverse methods of operation.
The rivalry between competitors: Boeing’s has shared an intense rivalry with its main competitor Airbus and this competition will continue to be of great significance in the coming years and influence major decisions in the company. For instance, after the unveiling of the Airbus A320neo as a response to market demands for fuel efficiency, Boeing went ahead to revamp its existing 737 jetliners as a retaliation. The company employed engineering tactics that extended the nose landing gear and added aerodynamics winglets to make room for new engines that were able to offer the fuel efficiency that the A320nep offered. The result was the creation of the potential for a catastrophic scenario where in certain conditions, the plane would be prone to entering a nose-up aerodynamic stall that would reduce its capability to create enough lift from the airflow over its wings. Boeing tried to fix this problem by installing MCAS software for stability by bringing the nose up but this system failed and seems to be implicated in the Ethiopian Airline disaster where the Boeing 737 max 8 crashed after takeoff and killed all 157 people on board.
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Boeing enjoys a favourable treatment from the United States government since it is the largest contributor to United States trade exports nationally. For instance, the sale of commercial aeroplanes is tariff-free in the United States (GATT, 1994). Moreover, the United States open skies policy with other countries greatly favours Boeing. The rising cost of labour is a major consideration that the company has to consider. This has led to the necessity to outsource services to foreign countries such as Asia and Europe for manufacturing and maintain its labour force in Seattle for the sole purpose of assembly (Economist, 2008).
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This has contributed to the numerous and prolonged strikes of assembly workers that have grounded assembly of products and led to massive delays which have led to losses in billions of dollars for the company in addition to the tainted reputation in the eyes of the consumer due to product delays. Boeing will also have to deal with the changing consumer needs in the commercial airline industry due to globalization and diversity, changing trends of travelling especially in Asia. Moreover, social perceptions of the airline industry are changing as a result of environmental awareness and Boeing should be taking steps to provide innovation that increases the environmental-friendliness of its products to respond to this need.
According to the PESTLE analysis carried out earlier, the airline industry is in a constant state of technological advancement and more innovative methods are discovered to reduce the rate of human error in planes in order to make flying as safe as can be. Technological advancements such as the use of lightweight materials and equipment for efficient utilization of resources (Hoskin & Baker, 1984) and the efficient utilization of fuel have formed avenues for innovation for Boeing and market competitors for decades and will continue to.
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Boeing Competitive advantage Evaluation using SCORE Analysis
The competitive advantage posed by Boeing will be evaluated using a SCORE analysis.
Boeing continues to enjoy a favourable treatment from the United States government which has an incentive to keep the company afloat due to the significant earnings in export that the company contributes to the economy. Boeing also maintains strong relations with other companies including its competitors. This has enabled the company to partner with companies such as Lockheed Martin in the United Space Alliance and Northup Grumman in a joint common missile program (Market Realist, 2014). Boeing has a strong International presence with sales spanning over 140 countries worldwide and boasts of a diverse product line that is able to cater to the needs of this diverse clientele. This strong presence in the global market is evidenced by the fact that over three-quarters of the world’s airline fleet are Boeing commercial jetliners. Boeing also provides on-demand inventory information and prompt spare part delivery to its global clientele through its advanced digital system which is linked to its global distribution network (Schleh, 1999).
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Boeing also has lucrative relations with motor vehicle companies in Asian countries such as Japan which provide an avenue to develop technologies and design concepts that have enabled the company to all but dominate the Japanese commercial Jet markets. The company has also proven to be incredibly adaptable to the airline industry which is in a constant state of flux. For instance, there was a time during the Nixon administration when the demand for commercial jetliners collapsed and the company had to downsize to half its workforce. The fact that the company is still in operation to date is a testament to its strength and its capacity to survive in a turbulent industry (Forbes, 2019)
Challenges: The Company has been faulted for product delays that arise from its ineffective control over its suppliers. Moreover, the company has also had a history of employee strikes due that have been especially aggravated by the shift towards outsourcing as a strategy to reduce the cost of labour. Its intense rivalry with Airbus has contributed to many of the company’s strategic failures such as the revamping of the 737 jetliners that have had catastrophic consequences for the company in recent times (Forbes, 2019). Impeding threats from the Chinese launch of commercial aircraft in 2020 as well as the decision by the government to cut its defence budget in the coming years might be a great blow Boeing considering how lucrative its defence contracts have been in the past years. Moreover, the ever frequent product delay due to ineffective control over suppliers is also a challenge that Boeing needs to deal with conclusively.
Options: The demand for commercial space launches will be a great option for Boeing’s Space and Security division. Moreover, at home outsourcing, though a sinister method of dealing with the increasing cost of labour might be a lucrative option to cut back on these costs and maximize production as well as avoid the unnecessary product delay that comes about when assembly workers go on strike (Economist, 2008).
Responses: Boeing’s response to the high cost of labour was to employ outsourced labour from Asia and Europe. Boeing is also trying to tweak its current outsourcing strategy so as to regain control over its suppliers. It is yet to be seen what Boeing’s strategy to deal with the 737 max will be but the company is asking for patience from the consumers to allow to conclusion of investigations before taking their business elsewhere.
Effectiveness: Boeing’s outsourcing strategy has often left them with a strike on their hands which they could not curtail even with hefty pay increases. Workers at Boeing do not feel that their jobs are secure.
What could Boeing have done to be more competitive initially And would it have helped the customers and other stakeholders of the commercial aircraft industry?
To answer this question, I will refer to Porter’s five elements of competition that were discussed earlier with reference to Boeing. It appears that the need to keep up with its main rival, Airbus may have led Boeing to make an error that would cost consumers and stakeholders in the commercial aircraft industry. According to Forbes (2019), American Airlines had struck a deal to replace its existing short-haul fleet with the newly launched A320neo which demonstrated incredible capability for fuel conservation. This led to the rushed revamp of the 737 through quick work engineering witchcraft that led to potentially fatal flaws that have been implicated in the recent Ethiopian Airline crash (Forbes, 2019). To further exacerbate the condition, Boeing failed to notify pilots and the FAA that the changes it was making to the plane would affect the way the plane functions and were nor merely changes to the cosmetic design. Thus, the 737 max was unveiled shortly after the A320neo with an added benefit, removal of the need for pilot training to appease the needs of the consumer and the price that the end consumers, the passengers have had to pay the ultimate price for these misguided decisions.
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It appears that to remain competitive, Boeing should not have sacrificed its core values in order to retain customers. Once the A320neo was unveiled, Boeing should have taken this new development as a challenge to its mission for innovation and designed a plane that was even more fuel efficient. Even if a revamp of an existing model seemed feasible, a few months was hardly enough time to guarantee that the aircraft was safe for commercial use. Boeing could have maintained its competitive edge by ensuring that it did not break the trust of its consumers to deliver products that are safe and stand behind its core values that emphasize the need to take the high road and practice the highest possible ethical standards (Forbes, 2019).
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Standing behind its standards may have had better outcomes for the consumer and stakeholders. Boeing has proven itself as a leader in innovation in the airline industry, there would no doubt be an aircraft unrivalled in fuel efficiency in the market by now if the company had taken steps to develop one instead of doing a quick revamp. Customers who had switched to Airbus would no doubt be flowing back in and the company would have avoided the negative organization event it is witnessing presently and the questions that stakeholders in the airline industry such as the FAA have had to answer for approving such a potentially dangerous aircraft in the first place.
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What kind of corporate-level strategy is Boeing pursuing?
According to Mintzberg (1998), a corporate level strategy is supposed to act as a mediating force between an organization and its external environment and reflects a pattern of decisions that the organization will continually employ to respond to the changes in its environment. Boeing hopes to maintain its position as a global leader in the military and civil sector by maintaining balance in this sector Boeing is sure to be secure in case one of its sections is affected by a crisis (Boeing, 2006a). In its inception, Boeing has responded to the changes in its external environment through diversification. Once the 1st world war was over and the company could no longer train flight instructors for the army, the company moved in to air mail transport. After the Kelly Airmail act, the company made acquisitions and established a holding company that dealt with the manufacturing of aircraft and transportation. After Congress declared that airlines and manufacturers had to be separate entities Boeing established itself as a leading manufacturer of Aircraft. When space exploration was in its initial stage the company took part in the Saturn v Apollo rocket project which helped launch Apollo 8.
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The nature of Boeing’s Business-level Strategy
A business-level strategy is aimed at providing value to the customer and gaining a competitive advantage over other market players by exploiting core competencies in specific markets. Boeing’s business-level strategy is to enhance efficiency quality and innovation and improve customer responsiveness (Boeing, 2006a). To do this, Boeing is constantly improving processes and continuing efforts to reduce the cost of their products while at the same time providing customers with a greater value for their products. The company’s business-level strategy is, therefore, one of differentiation concentrated on market and niche. Boeing’s products are specific and the innovation applied to them is meant to respond directly to the needs .of the consumer. For commercial jetliners aimed at providing transportation, Boeing focuses its innovation on technologies that will improve fuel efficiency, reduce environmental drawbacks associated with flying, improve cosmetic appearance to keep up with modern requirements for comfort and aesthetics, increasing the carrying capacity of the airplane and increasing the reliability of the aircraft by implementing technologies that minimize the effects of human error.
Boeing case analysis revealed key issues in control over suppliers, product delays and strategic issues in the management of competitive forces such as Airbus. Boeing should implement an effective strategy to gain control over its supplier and improve perceptions among its assembly line employees in order to reduce the ever frequent product delays that customers experience when suppliers put their employees on shorter hours, fall many months behind schedule and cannot be made accountable for the billions of dollars lost as a result. The strategy that Boeing pursues to deal with its most fierce competitor Airbus whose goal to create a product that rivals each of Airbus’ has the potential to create long lasting problems for Boeing. However, Boeing has incredible strengths that have been demonstrated by its capacity to survive brutal market forces as can be witnessed from the various strategic measures the company has taken to deal with the effects of changes in the airline industry, legislation and even the political environment over its many years of operation. The company has established itself as a leader in innovation in the airline sector against many odds is sure to survive long after the challenges that it faces currently have taken their toll.
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