FINAL Boeing Case Study (Group 4) 26042014

Case Study Boeing Commercial Aircraft:

Comeback?

Amey Warude (EAIC)Ashok Makhijani (Hydrocarbon Upstream)Dinesh Parmar (Forging) Girish Mandhene (MMH) K Ramesh Reddy (Infra, Delhi Metro) Krishna Bathe (EWAC)

Presented by-

126.04.2014

Agenda

Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced

Future Drivers for Aviation Industry

SWOT Analysis

Corporate & Business level Strategy

Boeing’s Comeback Strategy

Team’s opinion

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Product Portfolio

Challenges Faced


SWOT Analysis



Team’s opinion

3

Agenda

Company Profile

Founded in the year 1916 in the Seattle by Mr. William Boeing.

Boeing acquired Mc Donnell Douglas in 1997, who was a major and stronger player in Military business.

Moved its corporate HQ to Chicago in 2000.

Market leader in the industry of military and commercial aircraft manufacturing.

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Core Competencies of Boeing

Proactive in meeting customer demand and needs.

Customization of aircraft and designing.

Product layout for manufacturing.

Contract and agreement with both NASA and United States Air Force.

The power of vertical integration.

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Agenda Company Profile & Core Competence of Boeing

Product Portfolio

Challenges Faced


SWOT Analysis



Team’s opinion

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COMMERCIAL AIRCRAFT PRODUCT LINE

Boeing 737 Seating Capacity – 110 to 215 Miles Range – 2000 – 5000 miles

Boeing 747 Seating Capacity – 400 to 550 Miles Range – 7700 - 8700 miles

Boeing 767 Seating Capacity – up to 400 Miles Range – up to 9000 miles

Boeing 777 Seating Capacity – up to 400 Miles Range – up to 9000 miles

Boeing 787 Seating Capacity – 200 to 300 Miles Range – up to 8500 miles


Product Portfolio

Challenges Faced


SWOT Analysis



Team’s Judgment

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Agenda

Challenges Faced

Business uncertainty

Synchronizing thousands of designs and deliveries to build

an aero plane

Maintaining supply chains while evolving business

processes and technologies

Cost over-runs

Offshore outsourcing

Tough competition by Airbus

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Product Portfolio

Challenges Faced


SWOT Analysis



Team’s Opinion

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Agenda

1. Increase/ decrease in immigration

2. Fuel cost

3. Technology up gradation improving fuel efficiency

4. Global economic growth

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Market Drivers for Aviation Industry


Product Portfolio

Challenges Faced


SWOT Analysis



Team’s Opinion

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Agenda

Market leader in military and commercial aircraft.

Broad Product Line that covers most major market niches.

R&D & Innovation.

Strong global network.

Strong supplier network.

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SWOT Analysis: Strength

A hierarchical, rigid and semi-autocratic management style, which is a product of its military heritage.

Constrains to reach break even point without reaching the projected demand.

Dependence on US government and NASA.

Labour problems.

Dependence on supplier.

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SWOT Analysis: Weakness

Good financial health of aviation industry and economy.

New aircraft to gain market share.

Airline travel pattern (point to point) changes supports Boeing Product lines.

Growth of transcontinental traffic.

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SWOT Analysis: Opportunities

Increase of jet fuel prices.

Terrorist attack effecting the number of travellers travelling.

Suppliers falling behind schedule designing for projects.

Changing Govt. politics and business partners.

High volatility.

Aggressive pricing strategy by Airbus.

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SWOT Analysis: Threats


Product Portfolio

Challenges Faced


SWOT Analysis



Team’s Opinion

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Agenda

Strategic Decision Value addition and Business outcome

1. Investments in narrow bodied 757 and wide bodied 767.

1. Investments made from the positive cash flows attained through breakeven of their earlier models.

2. Subcontracting in case of Boeing 777 (60% of the work)

2. Resulted in reduction of costs.

3. Merger between Boeing and McDonnell Douglas

3. Resulting in increase of their presence in the defense and space side of aerospace

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Corporate Level Strategy


4. Movement of corporate head quarter from Seattle to Chicago.

4. Signal to the investment community that Boeing was far more than commercial business

5. Decision to produce new low cost, right sized aircrafts

5. Resulting in increase in profit due to demand for nonstop point to point flight.

6. Launch of 787 aircraft 6. Stiff competition to Airbus A350 and A380 aircrafts.

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Corporate Level Strategy


1. Adoption of Lean Production and Six Sigma quality improvement process.

1. Better Management of warehouses in terms of inventory, space and time as well as capital, ultimately improving the value chain.

2. Introduction of moving assembly lines.

2. Reduction in time by 50% for assembly, in addition to reduction of WIP and stores inventory by 55% and 59% respectively.

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Operational Strategy


Product Portfolio

Challenges Faced


SWOT Analysis


Boeing’s Current Strategy

Team’s Opinion

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Agenda

Boeing- Current Strategy

Manufacturing of fuel efficient Airplanes

Complete product mix to meet aviation industry

requirements

R&D partnership worldwide in biofuels, manufacturing processes and robotics

Concurrent and Collaborative Manufacturing

Global Sourcing

Address & Focus Bottom of Pyramid

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Product Portfolio

Challenges Faced


SWOT Analysis



Team’s Opinion

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Agenda

Yes, Boeing can comeback*…

Become frontrunner in Innovation and New Product Development

Follow Fair Trade Practices Leverage ‘System Integration’ in two ways viz.

Suppliers contribute to the development cost Subcontractors become risk sharing partners responsible of

aircraft design Improve Supply Chain and Logistics for improving

delivery of outsourced assemblies/ parts Acceptance of other currencies (€, £, ¥) to book orders Improve on “Time to Market” of new aircraft(s) Address Safety!!

Team’s Opinion

24* Conditions apply

THANK YOU

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Composition of Launch Funding for Boeing 7e7

Courtesy: Industrial Subsidies and Politics of World Trade. Pritchard & MacPherson

The WTO SCM Agreement contains a definition of the term “subsidy”. The definitioncontains three basic elements: (i) a financial contribution (ii) by a government orany public body within the territory of a Member (iii) which confers a benefit. Allthree of these elements must be satisfied in order for a subsidy to exist (WTO, 2003A).

46% of estimated $ 13.4 bn launch funding consisted of actionable/ prohibited subsidies under both 1994 WTO-SCM Agreements & 1992 US-EU Agreement on Trade in Light Commercial Aircraft.

SCM: Subsidies & Countervailing Measures

Launch Cost of Boeing 7e7: $13.4 bn Launch Cost of A380: $10-12 bn 7e7 launch cost equivalent to A380, though

7e7 was smaller in size Given that high proportion of the launch cost was

covered by subsidies (illegal?) by its risk-sharing partners, Boeing might have looked at development of 7e7 as a profitable venture, provided WTO litigations did not take place

But Airbus would never sit back and observe

Fair Trade Practices?

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The 7e7 launch plan consisted of both foreign & domestic subsidies

Nearly 50% of the subsidies were slated to come from sources classified as actionable/ prohibited under WTO-SCM

This implies: Most of the value added on 7e7 would be earned by foreign partners rather than by Boeing or by US based suppliers

Analysis of Subsidies

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Devolution of critical tasks/ part development & mfg to foreign suppliers raise questions regarding long term viability of Boeing in production of Commercial Aircraft category

Boeing should serve its own interest by subsidizing those aspects of its aerospace business that operates with higher Boeing & US content

Remedy

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Documents

FINAL Boeing Case Study (Group 4) 26042014