What challenges and opportunities did Boeing face in the late 1990s?
Challenges
Boeing Company is a global enterprise that was founded in 1916 by William Boeing. The company is considered the world’s largest producer of both military and commercial aircraft. Despite being a leading company in terms of revenue production, it faced several challenges in the close of the 1990s.
To start with, Boeing experienced a travel cost competition. The US administration reduced air travel restrictions in 1977. By 1999, more airlines were offering the same services at competitive prices. The aircraft production also faced technical issues, which saw a decline in the number of customers using Boeing airline following the witnessed air travel postponement that was caused by technical errors it experienced at that time.
Boeing also faced the challenge of deciding the best strategy to use to remain at the top of the competition. It had run short of its market shares to the Airbus Company, which was supported by the US administration. This situation forced it to review its industrial competition strategies. It had to decide on whether to adopt a strategy that reduced the cost of traveling or one that raised revenue by creating value of the offered services.
Technological risk stood as a challenge to this company. Boeing decided to develop the ‘787 Dreamliner’, which was to deliver its passengers straight to their destination at a reduced fuel cost and minimal stopovers. To achieve this goal, the airplane was to be made of 50% carbon fiber-reinforced plastics, 12 % titanium, and a reduction of 85 % for aluminum that was used in the old plane structural components. Lithium-ion batteries, which it was planning to use, were known to overheat to the extent of producing fire. This technological innovation had not been confirmed as effective in an airplane. Therefore, many people had fears about project failure. Boeing had to perform various tests, which imposed additional costs to determine its project feasibility level before continuing with the project.
The poor strategic management technique that was adopted by Boeing was a big risk. Initially, after the company adopted outsourcing, the management department embraced the whole idea without critically looking at the problems associated with this supply chain. Moreover, the company did not hire supply chain expertise that would do a critical analysis of the outsourcing to determine the problems that are associated with outsourcing in an effort to determine the best way to deal with them. This situation led to the crumbling down of the project.
The company faced coordination risk. The fact that different suppliers around the globe produced most of the body parts of the 787 Dreamliner, the company faced the problem of the body parts not interlocking with those produced by other companies. This case led to the product being returned to the supplier for reproduction. This experience was costly and time-consuming for the company. The problem occurred because of poor strategic management that had been adopted by this company.
Opportunities
Boeing merging with McDonnell Douglas Corporation in 1996 was a great opportunity for its economic improvement. It had experienced a harsh economic environment, which saw it reduce the number of its employees with the aim of reaching the top of its competition. The merging led to a revenue boost to 48 billion dollars. This opportunity helped in terms of meeting its demand for more aircrafts production and advanced specialization.
Expertise from different suppliers was an opportunity that the company exploited successfully. There was an increase in the number of jet body producers. Based on a keen analysis of suppliers, the company was in a position to adopt the best suppliers of jet products in an attempt to come up with an effective jet. This new and redesigned approach would have been productive with the rational management body in this company.
What is the e-Enabled advantage? How did it link to the company’s strategy?
An E-Enabled advantage is a form of information technology that contains small subsystems that relay information from these other subsystems to the area where the information is most useful. In the aircraft industry, this system collects information from airport and air traffic managers, pilots, airline operations centers, and weather information centers for the benefit of the flight crew, system performance, and the entire air travel industry. The Boeing Company invented this technology as a ladder to raise its competition level (Carson, 2005). It was an exciting advancement in commercial aviation. The adoption of this technology has seen improved safety and operational efficiency. These outcomes have led to customer satisfaction.
Boeing had seen and experienced a competitive market from both European and American aircraft manufacturers. This rivalry made it come up with a variety of strategies that ranged from winning mergers to boost its revenue to creating an aircraft 737 Dreamliner, which adopted questionable advanced technology in terms of its effectiveness in airplanes.787 Dreamliner’s supply chain was meant to reduce the cost of production and/or travel for its customers. The project involved decentralization of the aircraft production process to its suppliers. However, this project was affected by management failure, where no supervision was done at the production level. This case posed delays, which led to its breakdown. The company opted to reduce workers by half the number (Yosef, 2005).
After a period of revenue struggle, Boeing merged with McDonnell Douglas Corporation in 1996, which raised its revenue. This strategy assisted in the completion of the aircraft construction, which had an increase in demand. The company had recovered adequate revenue to advance its competitiveness. Its experience and an increase in the number of customers from 240 million to 640 million in the early 2000s saw the adoption of the ‘e-enabled advantage’ (Carson, 2005). This system was to be used in the 787 Dreamliner to improve operational efficiency (Yosef, 2005). It was an innovative transformation for this company, which saw the adoption of cost-effective and customer-focused aircraft. This technology has seen the development of other sectors, such as cars and ship navigation.
What advantages would such an approach give Boeing?
Having settled on a strategy that focused on value creation in 2003, Boeing benefited from the adoption of the e-enabled advantage in the air travel industry. This system ensured the availability of customer-focused services. The cabin crews had detailed information on the various needs of its variety of customers around the globe. The information also ensured that the airline kept good control of the stock in the catering and the drinks bay.
It also created a value proposition by providing Boeing customers with the benefit of the doubt that the company was always informed and ready to handle any misfortune that might have occurred in its service delivery. It ensured that the company was always ahead of the disruptions that may have occurred by providing a backup plan. Customers were guaranteed security and timely delivery of services. This approach acted as a planning guide. The information that was collected from other air traffic managers, and the weather forecast team assisted in planning for any expected flight disruption (Carson, 2005).
This strategy ensured that passengers received the information earlier before boarding the flight to avoid inconveniencing them. The approach also ensured Boeing service differentiation from its competitors. This system provided an all-round solution to the company. It offered services such as a quick fix by the maintenance crew, fast and real-time connectivity, which enhanced customer pleasure during the whole journey, and prediction of the expected travel disruption that found an alternative to the affected customers.
E- Enabled advantage awakened the 787 Dreamliner project. With the advancement in communication between the aircraft and the station, the company was only left with the option of restructuring the aircraft body to meet its initial intended needs. The completion of this project saw Boeing rise above its competitors with its innovation. The aircraft ensured an operational, efficient, and customer-focused company that attracted more customers. The adoption of this approach also encouraged the electronic distribution of software that was used in an airplane (Carson, 2005).
This strategy reduced the load by having different discs that were used to carry different software and/or gadgets that were replaced by electronic and online-managed software. Implementation of this e-Enabled equipment in the 787 Dreamliner improved maintenance efficiency. The system encouraged safeguarding of the aircraft by adopting wireless network. The preservation crew gathered information about a certain problem by use of remote networks without contacting the plane.
Reference List
Carson, S. (2005). Boeing’s E-Enabled Advantage. Harvard: Harvard Business School. Web.
Yosef, E. (2005). The evolution of the US airline industry theory, strategy and policy. Dordrecht: Springer. Web.