Question

discuss and identify briefly the strategies and problem of BOEING

Answer 1

Boeing Strategy Analysis

the most significant opportunities for Boeing lies in the development of new technologies. It concerns those that can help build new environmentally friendly products. Boeing invests a lot of resources to find an alternative fuel to power its airplanes. The competition to find “a green alternative” is intense. Whoever will be the global pioneer will get a substantial competitive advantage.

Boeing’s recent strategy focuses on closing the gap between the company’s perception and production. All over the world, Boeing is seen as a manufacturer of commercial airplanes. However, it also a manufacturer of the defense system and communications. It creates space technology and military aircraft as well.

There is another Boeing’s strategy, which the company can use. It can establish extensive research on aircraft manufacturing issues. Consider the oil industry crisis and the impending increase of federal taxes. With such problems, the company requires more energy-efficient products to reach its objectives in the future. Therefore, Boeing’s strategic plan includes these points.The causes outside of the control can severely affect the Boeing company and its competitors. Terrorist attempts, natural disasters, and pandemics can mess with the companies’ plans.For instance, the attacks on 9/11 caused a lot of people to fear flying. This issue decreased the demand for aircraft products. It took some time before people were comfortable flying again.

Another thread that exists is the amount of taxes companies in the airline industry have to pay. Additionally, government regulations on the airline industry are changing very quickly. As a result, airlines are forced to take much of the cost associated with the increase in taxes to maintain the ticket prices unchanged. Some of the airlines implemented drastic measures. Extending the life of planes, which otherwise should have been replaced, is one of them.

Problems faced by BOEING

Boeing remains the world’s largest aerospace company by revenue, but its lead over number two Airbus shrank further on 23 October with a third quarter financial report riddled with challenges, among them tumbling revenue, the 737 Max crisis, 777X delays, a 787 production rate cut and unresolved KC-46A quality issues.Those challenges come as the company faces the added test of balancing a heightened focus on safety and quality with Wall Street’s ever-present profitability expectations.

“Boeing is facing the worst crisis in its 103-year history,” says Scott Hamilton, an aerospace consultant who founded Leeham News and Analysis. “The 2013 grounding of the 787 was peanuts compared to the Max in terms of scope, length and cost.”The company insists stock market expectations are secondary to safety.“Our focus on quality and safety are and always have been our highest priority,” chief financial officer Greg Smith says during Boeing’s earnings call. “We do not compromise these values for cost or schedule. Returning the Max safely to flight continues to be priority one for us.”

Company said If more issues are found with the 737 Max or the aircraft doesn’t sell well after re-certification Boeing’s leadership might have to speed up plans to replace the aircraft. That could mean a surge in research and development spending, which would hurt the company’s bottom line.In the first nine months of 2019, Boeing generated $58.7 billion in revenue, down 19% year-on-year.It’s third quarter revenue slumped 21% year-on-year to $20 billion, equating to a $1.2 billion profit, down about half.

Also the commercial airplane division lost $40 million in the quarter, with revenue tumbling 41% to $8.2 billion thanks to the Max grounding. Boeing says it still expects regulators will certificate the Max by year-end, even though some US airlines peg return to service in February.

Muilenburg says the company has not decided if it will develop a New Mid-market Airplane (NMA). Delaying the entry into service date of the 777X or NMA development could give up market share or profits to chief rival Airbus.

FIXED-PRICE DEFENCE DEALS

new commercial aircraft development and certification expenses could come as Boeing’s defence business increasingly relies on fixed-price government contracts.Boeing has won a number of such deals from the US Department of Defense in recent years with bids competitors allege are far below cost.

“The operational and technical complexities of these contracts create financial risk, which could trigger termination provisions, order cancellations or other financially significant exposure,” Boeing says in third quarter regulatory filings. “Changes to cost and revenue estimates could result in lower margins or material charges for reach-forward losses.”

For example, Boeing recorded $3.6 billion in reach-forward losses on the KC-46A tanker to-date, but could lose more money on the programme due to persistent deficiencies. Such issues include a degraded remote vision system – the camera-based technology that helps a crew guide a refuelling boom to receiving aircraft. Boeing declines to comment on changes in its manufacturing process that are supposed to have improved quality and safety for the KC-46A production line.

The company says it can maintain low engineering, manufacturing and development costs through model-based engineering, but the results of that new digital design process remain unproven.Boeing is hoping to make up for early losses on several programmes through international sales and MRO contracts. However, those profits may not come for years.

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