OPS303 Boeing Management of Technology

Boeing : 

Boeing Rikk Beemer OP 303, FA 10

Background : 

Background Leading manufacturer of commercial aircraft in the world. Provider of aerospace, space, security and defense systems and technologies.

Background Continued : 

Background Continued Employees – 159,000 Educated employees – 80% Advanced degrees – 20% Competency leveraged from education.

Description : 

Description Boeing Commercial Airplanes Boeing Defense, Space and Security Boeing Capital Corporation Boeing Engineering, Operations and Technology

Description continued : 

Description continued Acquisition of knowledge and competencies. Multiple mergers and acquisitions throughout it’s history. Largest transaction was a merger with McDonnel Douglas completed in 1997.

Segment : 

Segment Producer of large commercial aircraft. Large commercial aircraft = 100 passengers or more.

Performance Trends : 

Performance Trends Downstream demand by aggregating demand for scheduled air transportation. Federal funding. Trade weighted index (TWI) or value of the US dollar compared to the Euro. Investments in industry systems technology.

Value Proposition : 

Value Proposition “People working together as a global enterprise for aerospace leadership”.

Strategies for Value Proposition : 

Strategies for Value Proposition Run healthy core businesses. Leverage strengths into new products and services. Opening frontiers.

Competencies for Value Prop. : 

Competencies for Value Prop. Detailed customer knowledge and focus. Large-scale systems integration. Lean enterprise.

Value Chain : 

Value Chain 94 year old company was once vertically integrated. Now Boeing utilizes competencies and services of over 2,300 suppliers worldwide.

Value Net : 

Value Net Ability to source cheaper materials and deliver better products at a cheaper cost than it’s rivals.

Core Values : 

Core Values Leadership Integrity Quality Customer Satisfaction People working together A diverse and involved team Good corporate citizenship Enhancing shareholder value

Business Model : 

Business Model Corporation. Multiple plants across North America. Global supply-base. Global customer base.

Operations Management Model : 

Operations Management Model

Industry Analysis – Porter’s Model : 

Industry Analysis – Porter’s Model Barriers to entry - HIGH Supplier power - WEAK Buyer power - MIXED Threat of substitutes - LOW Rivalry - WEAK

Complementor’s Force Element : 

Complementor’s Force Element Strong relationship with U.S. military. Business travel and tourism.

Competition : 

Competition AirBus Conglomerate funded by various countries throughout Europe. Producer of the AB380.

Competition cont. : 

Competition cont. Specs for the AB380 Range with maximum passengers - 8,200 nautical miles Maximum passengers – 525 Engine thrust – 70,000 lbs slst Max operating mach speed - 0.89 mo

Industrial Resource Based View : 

Industrial Resource Based View Materials sourced from all over the world. Labor is also incorporated in up-stream value offerings. Use of auctions and exchanges to leverage price.

Strategic Intent : 

Strategic Intent Boeing plans to distance itself from the competition by leveraging competencies driven by education and innovation along with value adding supply-chain tactics to deliver cutting edge products that are order winners.

Strategic Intent cont. : 

Strategic Intent cont. Boeing wants to make commercial aircraft that are safer, fly longer, incorporate more technology and are priced from a total cost perspective to add economic value to customers.

Value Migration : 

Value Migration Was once concerned with management of expedition of delivery. World War Strategy. Now concerned with management of resources and technology. Global Competition / Supply-Chain Strategy.

Product Life Cycles : 

Product Life Cycles Boeing 727 – 1960’s Boeing 737 – 1960’s, re-introduced in the 1990’s and 2000’s as B737 Next Generation Boeing 747 – 1970’s Boeing 757 – 1970’s, re-introduced in 2000’s Boeing 767 – 1980’s Boeing 777 – 1990’s, re-introduced in 2000’s Boeing 787 – set to be released in 2011?

Product Life Cycle cont. : 

Product Life Cycle cont. B727 – significant decline B737 – Growth, Marketing B747 – Decline, Marketing B757 – Mature B767 - Mature B777 - Growth B787 - Marketing

Business Strategy : 

Business Strategy Resource management. Cutting edge technology incorporation and development. Industrial Organizational Design.

Industrial Organizational Design : 

Industrial Organizational Design

Game Theory : 

Game Theory What if the United States enters into a 3rd Middle Eastern conflict with Iran over nuclear energy? What if the AirBus 380 becomes problematic and loses traction within established markets? What if the United States suffers another terrorist attack and commercial aircraft orders shrink by more than 10%? What if within the next 5 years, a composite is discovered that is 10% lighter and 30% more durable than the existing composite material on the 787? What if significant economic declines are realized within the EU and revenue pressures force AirBus to contract it’s business model? What is China or Russia decide to invest nationally in an aerospace firm?

Black Swan Perspective : 

Black Swan Perspective Culture change during the development of the B777 Space Shuttle

Inflows for R&D : 

Inflows for R&D “Boeing’s new product development spending has not exceeded 6% of sales for more than 10 years. It has ramped up in the past two years to meet 787 and 747-800 development needs, but given a rising (and highly lucrative) widebody revenue base, the company is very well positioned for future product development. It can easily meet existing product development needs, and develop a 737 narrow-body successor, with an average IR&D level of less than 5% of sales. In fact, if the company can maintain that 5% level, it will be able to introduce a major 777 upgrade, or an all-new 777 replacement using composite structures, just after the A350XWB arrives.” – Richard Albalfia (2010) Aerospace America.

Innovative Capabilities Of The FIrm : 

Innovative Capabilities Of The FIrm Robust Cutting edge of technology

Management Capabilities : 

Management Capabilities Desire to learn from others. Willing to change culture. Willing to mitigate risk. Foster environment of collaboration. Personally rewarded for economic profit of the firm.

Opportunities : 

Opportunities Russia – plenty of energy and capital. India – plenty of education. China – plenty of volume. All three lack transparency and stability in government, but need access to aircraft production to continue to ensure economic growth.

SWOT Analysis : 

SWOT Analysis Strength - Boeing is able to bring to market complex products and systems for use in the commercial aircraft and aerospace industries. Use diverse supplier networks to leverage low material and labor costs into low product or systems costs for the end-user. Others see Boeing's strength as a leader in cutting edge technology design and application in products and system.

SWOT Analysis : 

SWOT Analysis Weaknesses - The firm is leveraged to orders by the United States government and the air line industry's market and appetite for passenger and cargo aircraft. Any type of political instability or continued economic downturns could result in demand for the firm's products being truncated. In response to reduction in demands, airlines could learn to live with older technology, trade-off declining energy prices for advances in technology or simply move to smaller capacity conveyances in the form of regional aircraft.

SWOT Analysis : 

SWOT Analysis Opportunities - Emerging markets are generating enough capital and interest to speed their economies along and eventually have significant demand for commercial aircraft and aerospace products. Advances in technologies, specifically materials composites are leading to lighter and cheaper inputs. Eventually, emerging markets will want access to the commercial aircraft and aerospace industry to spur their respective economies. When that time comes, being able to deliver the latest cutting edge technology at order winning prices will be a key determinant of future success.

SWOT Analysis : 

SWOT Analysis Threats - Some airlines have decided to employ smaller capacity yielding aircraft such as regional jets produced by firms other than Boeing. As the cost of fuel decreases, there is a point where fuel costs are offset by increased unit demands and requisite labor to operate. In short, sometimes the airline market is favorable based on economic indicators to regional jets, a product that Boeing currently does not make. As China, Russia and India continue to grow economically, it should be assumed that each will want to create it's own type of commercial aircraft and aerospace production. In doing so, this will put pressure on Boeing globally for it's products and systems.

Marketing Strategy : 

Marketing Strategy Price through Total Cost Analysis

Strategy Recommendation : 

Strategy Recommendation Current strategies are sound. Should hedge against backwards integration by continuing to invest in R&D with the intent to bring to market smaller aircraft to compete with smaller regional aircraft makers. This new product offering could be marketed in emerging markets such as China, India, and Russia.