CALVIN DIANAPIMSAIBLAKE

Agenda

• The Boeing Company

– Background/Five Forces Analysis

• Boeing in the 1990’s

• The e-Enabled Advantage

• Analysis

• Recommendations

Background

• Founded in 1916, Boeing’s first customer was the government of New Zealand

• George Conrad Westervelt and William Boeing built planes as a hobby

• The first plane, named the B&W Seaplane was used for pilot and airmail

• Boeing became the largest aircraft manufacturer

in the US during WWI

and WWII

Background

• In 1954, Boeing successfully entered commercial aviation with the Boeing 707

• Unfortunately, 1968 brought crisis to the aviation industry and the company was forced to lay off 60,000 employees

• In the 1970’s Boeing regained profit by releasing several new 7-series models and becoming an industry leader

Brand Evolution

Porter’s Five Forces for the Airline Industry

Threat of Entry

Low – New entrants need to invest tremendously as a substantial amount of money is needed for the production of commercial airplanes.

Buyers

Low – For many years Boeing has been one of the leading aviation manufacturers in the worldwide commercial airline industry.

Suppliers

Rivalry

High - The commercial airplane marketplace is a duopoly market, largely Airbus and Boeing, resulting in low profit margins in the airline industry.

Substitutes

High – The passenger airplane can be substituted with a train, a ship, a car, a helicopter or a private jet.

Low –The company has the power to negotiate the price of supplies due to global economies of scale.

Case Questions

1. As case background, discuss the challenges and opportunities that Boeing faced in the late 1990s.

2. What steps did Boeing take in its journey to build its e-Enabled Advantage?

3. Is the e-Enabled advantage a sustainable advantage and, if so, for how long?

4. What recommendations do you have for Scott Carson, leader of the company’s e-Enabled Advantage initiatives?

Boeing in the 1990’s

• Boeing enjoyed great success through the 1980’s– Virtually unrivaled

• Boeing > McDonnell Douglas & Airbus– Broke its own sales record six years in a row

• Challenges arose for Boeing in the 1990’s– Gulf War– Economic downturn

• Boeing’s production: inefficient model caused orders to plunge

– Earnings shrank by nearly half– 9,300 of 126,000 employees were laid off

Challenges & Opportunities

• Boeing released the 777 in 1995– United Airlines flew the first 777

• Onboard local area network (OLAN)• Onboard server

• Boeing spent years advertising these new systems– The airlines did not know what to do

with all the data– Boeing did not have a good answer– The technology was ahead of its time

Challenges & Opportunities

• Phil M. Condit: CEO from 1996-2003– “Boeing will not be able to survive on selling

airplanes alone”• Transformation

– Agile– Geographically diverse– Broadly based company– Less dependent on the highly cyclical

commercial jetliner market

Challenges Opportunities

1997: Boeing experienced a production delay which resulted in a lost of $178 million and a

reported 90% profit drop Q1 1998

August 1996: Boeing became “one of the world’s strongest

aerospace

1999: Airbus outsold Boeing for the first time

Mid-1990s Boeing dominated commercial aviation and signed

military and space contracts

1998: Production reform – adopted simpler procedures for configuring aircraft to customer specifications, scheduling and ordering parts, and managing

inventory

Competition from Airbus

# of orders(1999) 355 476

# of deliveries(2003) 281 305

Vision 2016

• “An integrated aerospace company and a global enterprise, designing, producing, and supporting commercial airplanes, defense systems, and cival space systems.”– Run a healthy core business– Leverage strengths into new products and new

services– Open new frontiers

1. Maintenance performance toolbox

2. Airplane health management (AHM)

3. Electronic Flight Bag (EFB)

4. Electronic Log Book

5. My Boeing Fleet

6. Connexion by Boeing

7. Solutions Consulting

Steps to e-Enabled

1. Problem with differentiation from Airbus

2. Management strategy formulation

3. Communication of new changes across the company

4. Strategies communicated to individuals business units

5. Intelligent acquisitions

6. CAS (Commercial Airlines Services)

7. OLAN (Online Local Area Network)

Analysis of the e-Enabled Advantage

• Will serve as a sustainable advantage– Strategic positioning– Innovation ability

• Provides stakeholders with resources to reduce costs– By increasing operational efficiencies, Boeing can

develop a virtuous cycle

IT Utilization

• IT will serve as the main driver of Boeing’s sustainable advantage– Employ highly competent IT leaders– Institute a lean, yet agile infrastructure

• Embed IT into existing products/newly launched services– Will drive revenue growth– Creates high switching costs

Sustainable Advantage

• Provides information-enabled products and services– Information is easily customized

• Drives asset efficiency, cost savings, and revenue growth

• Unpredictable lifespan – As long as Boeing maintains innovation

capabilities and leads technology growth

Recommendations

1. Boeing must implement the consultative selling approach and provide services that move toward a partnership relationship with customers. This involves altering the business plan to fit the demands of the environment.

2. Boeing needs to emphasize the importance of communicating the value of e-Enabling to their customers.

3. Boeing must utilize large scale system integration to equip all products with the IT capabilities associated with e-Enabling.

“It’s going to happen, and the mindset is, if Boeing doesn’t do it first, someone else will.”

“Right now, it’s sort of like a very pre-emptive chess game. The e-Enabled environment is going to happen, and the

question is, are we going to be following or leading?”

Any Questions?