Introduction
Strategic analysis is important in business. It allows companies to analyze their competitive environment, define their position in the market, create competitive advantages over their opponents, and determine threats, weaknesses, and setbacks that may reduce their effectiveness in the face of new corporate and competitive challenges. This paper is dedicated to analyzing Boeing’s corporate governance, competition, value chain, and general strategy, and offering recommendations to ensure the company’s competitive sustainability.
The Basics
Strategic management is a set of actions and decisions that determines a company’s long-term performance. Strategic management is the highest stage of management evolution for companies that managed to advance through the first three phases of strategic management. These stages are short-term financial planning, long-term forecast-based planning, and externally-oriented planning (Casadesus-Massanel & Ricart, 2011). Strategic management suggests the integration of managerial staff at all levels in order to strive for the company’s primary objectives. It emphasizes long-term performance and adaptation not only to the existing realities of the market, but also prediction and preemptive adaptation to any foreseeable challenges and problems in the future. The strategic management model is the end destination and a requirement for all large companies and corporations that wish to be able to perform in the dynamic market and sustain their positions in the long run.
Boeing implements strategic management in its business practices. One of the best examples of strategic management is that Boeing’s global business has been one for a very long time. The company managed to integrate itself into many international markets and has been maintaining a powerful presence ever since. Strategic management is required for keeping track of international developments and local market rules and regulations, in order to sustain a competitive advantage (Saeed, 2017).
Another example of Boeing implementing strategic management is in its brand promotion strategy. Although the company has strong competitors in Europe like the Airbus, its name is used as a common noun for the word “plane.” The company’s branding strategy has ensured a loyal and large user audience. Boeing training is integrated into many flight schools around the world, which will ensure its strong competitive positioning in the long run (Saeed, 2017).
Lastly, the company has shown attention to innovation in order to provide a better user experience. Boeing’s innovation teams are constantly working to improve the existing airplane models and create better ones. The company focuses on innovation to improve safety, resource consumption rates, upkeep costs, and ecological impact of their manufacturing processes and products. These three points prove that Boeing implements strategic management and pursues long-term development goals (Saeed, 2017).
Boeing’s long-term goals include becoming the number one aerospace company in the world and among the premier industrial concerns in terms of quality, profitability, and growth. In 2017, the company means to focus on the execution today and into the future. Other goals include market leadership, top-quartile performance and returns, productivity and growth, focus on corporate citizenship, accelerated innovation, and promotion of talent and leadership (“A foundation of innovation,” 2017).
Corporate Governance
The role of the director board is tri-fold. The board is expected to oversee management processes in the company, look out for the interests of shareholders in order to ensure they are not being trotted upon and to ensure the overall health of the company by eliminating unhealthy practices and promoting positive management and leadership. In practice, however, that is rarely the case. Boeing has many problems with its corporate governance strategy. According to the Seattle Times, Boeing directorial board remains too close to management and share the same worldviews, which does not promote diversity and encourages malevolent business practices (Talton, 2013). The board repeatedly approves executive compensation plans that reward inactivity and do not impose any financial or administrative penalties for failure to perform. James McNerney, for example, never suffered any penalties for his failure in properly outsourcing a revolutionary new jet plane. These repetitive failures of the directorial board have cost the company millions of dollars (Talton, 2013).
However, Boeing shows to have made some steps towards making its directorial board truly independent, in order to rectify the issues. James McNerney left his post in 2016, replaced by Dennis Muilenburg, who worked for Boeing since 1985 and has plenty of experience in the field of engineering and operations. The company also set up an independent board in order to evaluate its products and avoid the fiasco of the Boeing 787 model.
Despite the problems with the development of its newest Boeing jet, the company puts significant efforts into major philanthropic initiatives, which correlates with its goals of corporate citizenship. For example, the company significantly improved fuel consumption. Boeing Jets now use 70% less fuel when compared to 25 years ago (Saeed, 2017). This is a significant improvement in many ways. Low fuel consumption makes their products more attractive to potential buyers while at the same time greatly reduces carbon emissions.
On Competition
Boeing has several core advantages that help it remain in business. We will use the VRIO framework in order to analyze Boeing’s core competencies (Casadesus-Massanel & Ricart, 2011):
- Value. Boeing has competitive value as it is one of the very few major aircraft companies that provide large commercial and cargo jets worldwide.
- Rareness. While several direct competitors that provide similar products exist, neither of them has the production power to quickly occupy Boeing’s market share, which helped the company remain in business even after the famous 787 model fiasco (Saeed, 2017).
- Imitability. The jet aircraft industry is notorious for being a very expensive market to enter. China has been attempting to promote its own brand of jet aircraft for about a decade, to no success. Thus, the imitability level of Boeing’s product is low.
- Organization. Boeing has a vast and elaborate network of suppliers, inventors, and producers put together in a cohesive production chain. In terms of organizational strength Boeing is powerful (Saeed, 2017).
In order to further evaluate Boeing and its competitive standing, we can employ Porter’s Five Forces Model planning, including the relative power of other stakeholders, proposed by Wheelen and Hunger (Casadesus-Massanel & Ricart, 2011):
- The threat of new entrants – low. As it was mentioned, jet aircraft production is a very costly business. Chinese companies cannot penetrate it for decades, even with government support.
- Bargaining power of buyers – medium to low. Depending on the region, Boeing has near-monopoly on jet aircraft production. Protectionist policies in the USA ensure that Boeing will always have a market where it can dictate buying and selling conditions (Saeed, 2017).
- The threat of substitute products/services – medium. Boeing has one main competitor, which is Airbus. So far, two companies remain in balance, and it is unlikely for one of them to quickly lose the majority of its buyers to another.
- Bargaining power of suppliers – Medium to low. Large companies such as Boeing tend to differentiate their suppliers to ensure neither of them has too much weight in the overall production cycle (Saeed, 2017).
- Rivalry among existing competitors – nonexistent. Boeing and Airbus are the only major commercial jet manufacturers in the world. Other competitors such as Bombardier and Tupolev are currently in no condition to pose any significant threat to Boeing (Saeed, 2017).
- The relative power of other stakeholders – low. Due to an inefficient corporate strategy for the last 6 years, Boeing changed from emphasis on all stakeholders to a model where there are one super-stakeholder and an array of sub-stakeholders. The dominant stakeholder exerts its power over other stakeholders, which is not healthy for business (Sorscher, 2014).
According to the Blue Ocean strategy, one of the ways of sustaining a competitive advantage is to make competition irrelevant (Kim & Maubourgne, 2014). Right now, Boeing is rivaling Airbus in its sphere of influence, meaning that the current market of jet aircraft is a red ocean, rather than blue. In order to adhere to the Blue Ocean strategy, Boeing has to invent something new and innovative. Considering recent developments in aerospace programs, such a product could be a commercial spacecraft.
Value Chain
Boeing’s business model for many years had been the “Low-cost carrier business model.” It focuses on providing customers with relatively inexpensive yet high-quality commercial jets, parts, and accessories. Thus, the company focused on generating revenue through a high number of sales rather than high prices for their products and equipment.
Analysis of Boeing corporate value chain planning (Casadesus-Massanel & Ricart, 2011):
- Inbound Logistics. Boeing has a vast chain of transports, warehouses, and storage facilities in order to move and store its products, parts, instruments, and technology.
- Operations. The company offers its customers complete commercial jets, parts, and maintenance expertise.
- Outbound Logistics. Boeing manages its outbound logistics either on its own or in partnership with major transportation companies.
- Marketing and Sales. Boeing relies on low-cost aircraft and its brand name in order to maintain its hold on the market and remain attractive to customers.
- Services. Boeing’s services are creation, modification, and maintenance of commercial jet aircraft.
- Human Resources. Boeing’s greatest and most distinctive strength has always been its human resources policy. It cultivated talent and promoted innovation. With the stakeholder policy changing towards Super-stakeholder vs. Sub-stakeholders, the company risks losing its valuable HR advantage.
- Profit Margin. Boeing’s gross profit margin varies between 13 -15% (Saeed, 2017).
General Strategy
As it stands, Boeing Company is in a state of decline due to poor decisions made in its corporate and business strategies. The corruption of the directorial board ended up in several failed projects and large financial losses (Talton, 2013). It tries to compensate for this by employing the Super-stakeholder strategy, which involves milking the sub-stakeholders such as worker unions, suppliers, and other powerless elements out of any advantage they can get out of this relationship. While this generates revenue, it also negatively affects the quality of work and has the potential to be Boeing’s downfall. Marketing and Sales strategy is solid, as low-cost carriers will always be popular, especially considering that many commercial jets currently in employ are 20-30 years old and will need to be replaced soon. In order for Boeing to maintain a sustainable competitive advantage, it must resolve its troubles with the directorial board and adopt the problem-solving strategy, which focused on stakeholders being equals rather than subordinates – something that Boeing used to be well-known for in the past (Sorscher,2014).
References
A foundation of innovation. (2017). Web.
Casadesus-Massanel, R., & Ricart, J.E. (2011). From strategy to business models and to tactics. Web.
Kim, W.C., & Maubourgne, R. (2014). Blue Ocean Strategy. Web.
Saeed, M. (2017). Boeing strategic analysis. Web.
Sorscher, S. (2014). Not everyone shares in Boeing’s success. Web.
Talton, J. (2013). Boeing board of directors, where are you? Web.