The Boeing Company

Jonathan Motyl

Southern New Hampshire University

1

Executive Summary

The Boeing Company started out as a one man operation and has now grown to a

behemoth of a company. The Boeing Company is an aerospace and defense company

headquartered in Chicago, Il. that manufactures state of the art aircraft and develops aerospace

technologies for both commercial and military purposes. The Boeing Company can attribute to

its success to the sheer willpower to innovate, invest and pursue technology and opportunities.

Few companies have had the accomplishments that Boeing has had in its near one century

existence. Timing was also a very crucial element for the success of Boeing. Boeing's ability to

adapt to the ever changing global environment is why it is still a global powerhouse that it is

today.

The success Boeing has enjoyed can be attributed to essential strategic initiatives,

adjusting to the whims of the business environment and adhering to its ethos of striving to be the

greatest aircraft manufacturer on the planet. From day to day operations, to coordinating with

engineers on the other side of the planet, to achieving environmental initiatives, Boeing

continues to innovate and compete. This paper will analyze the past, present and potential future

strategic plans of Boeing while addressing mistakes and ways to correct them. This paper will

also compare and contrast Boeing with industry rivals and industry conditions.

2

Table of Contents

The Boeing Company Overview and Key Strategic Background 41.1 Characteristics 41.2 International Operations 41.3 Recent Strategic Initiatives 51.4 Domestic and International Rivals 6Strategy Tripod Part One: Industry Conditions 72.1 Top Five Foreign Markets 72.2 How the Five Forces Affect the Aircraft Manufacturing Industry 72.3 Success Factors and Competitiveness 92.4 Boeing's Strategic Fit with Industry Conditions 10Strategy Tripod Part Two: Internal Resources and Capabilities 103.1 Value, Rarity, Imitability, and Organization (VRIO) Aspects 103.2 Support of Capabilities and Resources to the Boeing's Generic Strategy Choice 123.3 Improvements and Resources for Future Global Competition 123.4 Internal Improvements 13Strategy Tripod Part Three: Institutional and Cultural Conditions 134.1 Formal and Informal Institutions 134.2 Boeings Domestic Cultural Norms Compared to Foreign Partners and Subsidiaries 144.3 Greater Concern – Cultural or Institutional Distance? 164.4. Recommendations for Boeing's future IBS to Leverage Exposure Institutions 16Entrepreneurship and Internationalizing the Firm 175.1 Five Entrepreneurial Strategies 175.2 Institutional or Industry-based Conditions Effect on Entrepreneurship Opportunities 18Internationalization: Where, When, Why, and How 186.1 Liability of Foreignness 196.2 Strategic Goals Aligning with Location Specific Advantages 196.3 Advantages and Disadvantage of Management’s Entry Mode Choices and Timing. 206.4 Diversification Strategies 20Internationalization: Strategy, Structure, and Learning 217.1 Strategy Configuration 217.2 Strategic Fit of Boeing's Strategy/Structure Configuration to IBS Goals 217.3 Knowledge Management 22Strategizing Governance and Corporate Social Responsibility 228.1 Firm-Specific Capabilities that Differentiate on Corporate Governance Dimensions 23Conclusion 23References 24Appendices 28

3

The Boeing Company Overview and Key Strategic Background

1.1 Characteristics

The Boeing Company is an aerospace and defense company that manufactures state of

the art aircraft and develops aerospace technologies for both commercial and military purposes.

William Boeing founded Pacific Aero Products Co. in 1916 after the construction of two

seaplanes in Seattle, Wa. which he piloted himself (Boeing.com, 2015). Commercial aviation

began in the early 1920s but transportation by rail still dominated the transportation industry.

The Boeing Company currently has five main strategic business units: commercial airplanes,

military aircraft, global services and support, network and space, and its capital and financial

unit.

Boeing commands an impressive share of the world market for commercial jets, with

over 10,000 in operation comprising of 48% of the world fleet (Boeing.com, 2015). Boeing also

is one of the largest providers of satellites, electronic warfare technologies and military aircraft.

Boeing has nearly 100% market share in the United States for civil aircraft. Not many companies

can make this claim in an industry. Boeing is one of the largest U.S exporters, delivering

products to 150 different countries and current annual revenues of almost $91 billion (Income

Statement, 2015). Even with intense competition from Airbus, Boeing overtook the market in

2013 to have the most net orders filled. 2015 marked another milestone for Boeing, filling over a

record breaking 700 orders (Chow, 2015). Despite the economic downturn of 2008,  the industry

was able to rapidly recover, with industry revenue expected to increase at an annualized 8.6% to

$356.3 billion in the five years to 2015, with a 2.0% jump in 2015 (IBISWorld, 2015)

1.2 .International Operations

4

The decision to become a multinational company began early due to the high demand for

aircraft because of multiple war efforts. Boeing has managed the multinational decision mostly

due to acquisitions and mergers. Because the aerospace industry has grown so rapidly, other

companies had the technological advances that complemented Boeing's manufacturing expertise.

According to Boeing Frontiers Online, "Currently some 5,300, or about 3 percent of the 174,000

employees of Boeing and its subsidiaries, are based outside the United States. They are

distributed throughout 61 countries and territories, including approximately 3,000 in Australia

with hundreds more in Britain, Germany and Russia, combined" (Beck, 2002). Currently,

Boeing's international revenues account for over 50% of its total revenues (Marketline, 2015).

1.3 Recent Strategic Initiatives

According to the Boeing website, "Over the next 20 years, we are forecasting a need for

38,050 airplanes valued at more than $5.6 trillion. Aviation is becoming more diverse, with

approximately 40 percent of all new airplanes being delivered to airlines based in the Asia

Pacific region. An additional 20 percent will be delivered to airlines in Europe and North

America, with the remaining 20 percent to be delivered to the Middle East, Latin America, the

Commonwealth of Independent States, and Africa". Boeing expects 40% of aircraft deliveries to

be in the Asian market within the next 20 years so it would be in Boeing's and Airbus' best

interest to try and further penetrate this market to keep COMAC from gaining a significant

foothold.

Boeing takes this strategic approach further by analyzing need of aircraft within the low

cost carrier business model, like Southwest Airlines and Ryanair of Europe and anticipating

needs in changes in design of aircraft (Sweetman, 2013). Additionally, Boeing anticipates the

5

need of more aircraft in hubs like Dubai, Abu Dhabi and Doha. These hubs are within 8 hours of

80% of the world population and are strategic to the aircraft manufacturing industry by proxy of

the global airline industry (Boeing, 2015). Another strategy Boeing has implemented is setting

benchmarks for international revenue, with 30% being set for 2013. Declining United States

budgets forces Boeing to take a different approach to revenue growth due to one of the industry's

weakness being reliance on domestic government contracts.

1.4 Domestic and International Rivals

Airbus Group, Boeing's main competitor, is a product of European industrial policy.

Headquartered in Tououse, France, the aim was to create a direct competitor to Boeing's

dominance. Airbus is an example of successful attempts for governments to create a legitimate

competitor in aircraft manufacturing industry (Company, 2015).

The Commercial Aircraft Corporation of China (COMAC) was created in Shang-hai in

2008. It is China's plan to enter the large passenger jet industry currently dominated by the

Boeing/Airbus duopoly. COMAC is currently completing the C919 which will directly compete

with Boeing's 737 series aircraft and Airbus' A320 series (Wilhelm, 2015).

Lockheed-Martin is the only legitimate domestic competitor that Boeing has and this is on the

aerospace and defense part of the industry. Headquartered in Bethesda, Md., Lockheed Martin is

a global security and aerospace company that employs about 112,000 people worldwide and is

principally engaged in the research, design, development, manufacture, integration and

sustainment of advanced technology systems, products and services. (Lockheed, 2015).

There are a few other competitors in the mix, with Canada's Bombardier trying to squeeze into

the market and also Russia's United Aircraft Corporation, but none of these have the financial

6

backing that COMAC does and both Airbus and Boeing see COMAC as the strongest

competitor.

Strategy Tripod Part One: Industry Conditions

2.1 Top Five Foreign Markets

Boeing has five international markets it currently serves. As of FY2013, Asia, not

including China, accounts for approximately 14.1% with China following at 12.2% and then

Europe, the Middle East, Latin American and Canada at 12.3%, 10.6%, 3.1% and 1.7%

respectively (Marketline, 2015). As mentioned previously, the Middle East is especially

important because of its most equidistant proximity to the rest of the planet's population. The

entire industry and supporting industries see this as a strategic vantage point and all want a part

of it.

2.2 How the Five Forces Affect the Aircraft Manufacturing Industry

The aircraft manufacturing industry is moderately diversified with variants such as

passenger, military, cargo and space categories. This analysis will focus on the passenger aircraft

aspect of the industry. This is where most of the competition is and the most relevant information

can be obtained and shared. Porter’s five forces measures the following: competitive strength

from buyer, competitive strength of the supplier, threat of rivalry, substitutes, and the risk of

new entrants.

Buyers of commercial aircraft are mostly airlines, with varying degrees of need of certain

design requirements. One of the current industry trends of the airline industry is the demand for

low-cost carriers such as Ryanair or Southwest airlines. These types of airlines focus on short

7

haul flights and reduced cabin services. From 2000 to 2013, narrow body aircraft were in

demand and make up about 75% of the global fleet (IATA, 2014). Boeing foresees this trend

continuing (Boeing, 2015). The aircraft manufacturers have been able to address these needs

supplying the models such as Airbus A320 and Boeing 737. However, the economy while still

showing signs of recession are making people find alternatives to flying, like high speed rail in

Europe and aircraft with lower operating costs are required to fight this trend.

The bargaining power of buyers is considered to be increasing because of the bigger

variety of options than a few decades ago. All aircraft manufacturing employ sub contractors to

complete parts of the aircraft. This is a basic strategy any company can utilize to eliminate non

core activities and focus and become more efficient at core business functions. Airplanes are

marvels of our civilization and consume very special products, such as carbon-fiber and

advanced electronics. All of these require experts to make and many times a company doesn't

have this capability. The production for the Boeing Dreamliner initially was 70% outsourced in

dollar terms and 80% in production terms (Holmes, 2006). This amount is more than previous

aircraft (about 55% production outsourced). These specialized products and resources give the

supplier increased power in addition to high switching costs, if a switch can even be found for

the highly specialized resources.

The threat of substitutes is considered to be minimal for the airline industry, thus minimal

for the aircraft manufacturing industry (IBIS, 2015). There are some alternatives to travelling,

such as rail, ocean liner or motor vehicle, but these are highly impractical for overseas travel, if

not just impossible. In fact, projections by both Boeing and the International Air Transport

Association show that air travel will increase in the future years.

8

The threat of new entrants is medium for the moment.  The International Air Transport

Association (IATA) released its first 20-year passenger growth forecast, projecting that

passenger numbers are expected to reach 7.3 billion by 2034. That represents a 4.1% average

annual growth in demand for air connectivity that will result in more than a doubling of the 3.3

billion passengers expected to travel this year (IATA, 2015) With this increase in potential

revenue and traffic, it is very attractive for new entrants like Comac and its C series aircraft.

However, there are significant entry barriers such as R&D costs and the staggering startup costs

for facilities and equipment.

The threat of rivalry is rather significant. The combination of the above forces could

provide rivals with advantages if not just "getting the foot in the door". Russia's fuel efficient

Suhkoi aircraft could poach customers from Boeing. This is the same for Comac's C series and

its low cost production strategy. The threat of rivalries is more significant more because of

Boeing and Airbus having production and delivery delays with their newest aircrafts, due to

technical difficulties.

2.3 Success Factors and Competitiveness

Boeing has a long history of being on the forefront of the aerospace industry. Boeing was

the first company to establish air to ground radio communications (Yildirim et al., 2014).

Satellite innovation has been key in the company's success, with over 50 years of experience

putting these technological gizmos into space. The latest of which was in March, 2015. Boeing

developed new satellites that run off of a xenon ion powered engine, drastically reducing weight

due to much smaller fuel tanks (Clark, 2015). Even with intense competition from Airbus,

Boeing overtook the market in 2013 to have the most net orders filled. 2015 marked another

9

milestone for Boeing, filling over a record breaking 700 orders (Chow, 2015). The 787

Dreamliner is a technological marvel and is a major driver of change for the industry. This

aircraft is made from composite material which is substantially more light weight than traditional

metal. This has reduced fuel costs by about 20%, allowing the aircraft to carry more passengers

and fly longer than its predecessors. These are but a few of the technological, environmental and

commercial successes that Boeing has enjoyed throughout its history.

2.4 Boeing's Strategic Fit with Industry Conditions

Essentially, Boeing still enjoys the first mover advantages that it has enjoyed since the

beginning of the 20th century. Despite some hiccups with the Dreamliner, Boeing still remains

competitive regarding success factors and drivers of change. Boeing is still in front of the

industry in terms of technological advances.

Strategy Tripod Part Two: Internal Resources and Capabilities

3.1 Value , Rarity, Imitability and Organizational (VRIO) Aspects

The VRIO framework measures competitiveness in terms of value, rarity, imitability, and

organization. Boeing adds value in several ways thus enhancing its competitive edge. First,

designing an aircraft with composite material instead of sheet metal reduced weight and added

longevity to aircraft performance, additional passenger space and reduced fuel consumption as a

result of a lighter aircraft. This in turn, provides airlines the opportunities to add value to their

products and services. Lean initiatives in the manufacturing process also add value to the product

by ensuring minimal waste and increasing efficiency in the manufacturing process. Boeing's

goals are "to find and apply the best, most innovative technologies and processes in the world to

improve our products and services" (Boeing Frontiers, 2005). Boeing wants to maximize the

10

yield on its technology investments, establish more common systems and processes to improve

efficiency and ensure proper skills mixture to meet long and short term business objectives.

Essentially, Boeing wants to dominate all market segments based on superior technological

advancements and the incorporation of it in the logistics processes. The willingness to invest

whatever it takes for technology is another way that Boeing adds value.

Boeing retains rarity because of its global brand awareness and it has one of the most

advanced R&D departments in the world. Boeing is one of the only manufacturers of 100+

capacity passenger jets in addition to the plethora of products ranging from both civilian and

military satellites and military aircraft. That being said, Airbus is in a statistical tie as far as

passenger jet production and Comac is on the heels of the industry to produce its own passenger

jet.

With regards to imitability, Boeing's technological advantages are apparent and difficult

to imitate. Boeing has had the first mover advantage for decades and it took another few decades

for Airbus, a company based on industry policy backed by government budgets, to just now

catch up. Imitability also applies to Boeings aerospace and defense products that few companies

are able to compete with.

Even valuable, rare, and hard-to-imitate resources and capabilities may not give a firm a

sustained competitive advantage if it is not properly organized (Peng, 74). From an

organizational viewpoint, Boeing has created a dynamic and effective corporate stronghold by

uniting and allowing streamlined information between its 5 strategic business units. For instance,

Boeings core business unit is civil aircraft manufacturing, but its complimentary asset of Boeing

11

Capital manages the sales and leasing of the aircraft. Boeing has also utilized its effective

organizational structure to be the top aircraft producer in the world.

3.2 Support of Capabilities and Resources to the Boeing's Generic Strategy Choice

Boeing's current generic strategy is differentiation strategy. We see this most recently

with the production of the Boeing 787 Dreamliner which is competing with the Airbus A380.

Differentiation strategy caters to a consumer's unique needs and what the consumer perceives as

valuable and different. The hub and spoke system is a very popular system that many airlines

utilize. Boeing doesn't think this is going to be the future of the airline travel system though..

Marty Bentrott, vice president of sales, marketing and in-service support for the 787, says that

since 1990, the number of city pairs more than 3,000 nautical miles apart served by the world’s

airlines have doubled, the number of frequencies offered by the airlines have doubled, and the

number of available seat-kilometers (seating capacity times miles flown) have doubled (Babej,

Pollak, 2006)  “Our strategy has been to design and build an airplane that will take passengers

where they want to go, when they want to go, without intermediate stops; do it efficiently while

providing the utmost comfort to passengers; and make it simple and cost-effective for airlines to

operate,” Bentrott says (Babej, Pollak, 2006). This is betting that passengers prefer point to point

travel rather than point to hub and change onto a bigger airplane type of travel. The support

capabilities of R&D, technological advances and organizational structure complement this

generic strategy by building a product that Boeing foresees to be a product people will prefer

based on predictions of a changing travel landscape.

3.3 Improvements and Resources for Future Global Competition

12

Boeing needs to reexamine the role of offshore outsourcing for its products to build its

aircraft. The Dreamliner was wrought with production delay problems, battery problems and lack

of oversight over sub contractors. The supply chain was a real issue in the building of the 787. .

Boeing incorporated a new supply chain design involving tier-1 and tier-2 suppliers. According

to The Impact of Transportation Disruptions on Supply Chain Performance, disruptions can

occur between different activities in the supply chain. The first one is between warehouses and

retailers. Another one is between tier 1 suppliers and warehouses. Of course, this will cause a

ripple effect in some way to Boeing who is in charge of final assembly. Fixing these problems

will allow Boeing to remain competitive in the future.

3.4 Internal Improvements

According to Boeing “the company made too many changes at the same time - new

technology, new design tools and a change in the supply chain - and thus outran the ability to

manage it effectively for a period of time” regarding the production of the Dreamliner (Denning,

2013). The first step to resolving a problem is identifying there is a problem and Boeing

eventually did that. Boeing should acquire, outsource, and build these resources internally.

Boeing can attribute much of its success to the plethora of acquisitions in its 100+ years of its

existence. Acquiring firms with technological advantages can be much faster than developing

those technological advances alone. Technology is one of Boeing's core competencies and it

should strive to continue doing so.

Strategy Tripod Part Three: Institutional and Cultural Conditions

4.1 Formal and Informal Institutions

13

Formal and informal institutions are essentially the 'rules of the game' pertaining to

whichever country, region or environment the firm is competing at. Formal institutions are

government regulations, legal statutes, import barriers etc. Informal institutions are cultural

norms, social norms, religion and things of that nature. Legal issues are a type of formal

institution for Boeing. Airbus, Boeings main competitor, is a product of European industrial

policy. The aim was to create a direct competitor to Boeing's dominance. Airbus is an example of

successful attempts for governments to create a legitimate competitor in an industry. In 2004,

with Airbus and Boeing building two state-of-the-art aircraft, disputes of subsidies came about

and the United States initiated the World Trade Organization (WTO) resolution process. The

United States claimed that Airbus got unfair subsidies and the European Union countered that

Boeing also received unfair subsidies (Kienstra, 2012). Finally, in 2012, the WTO concluded that

Boeing did indeed receive unfair subsidies but that the manufacture of Boeing's 777 aircraft

didn't harm Airbus' sales (Air Transport World, 2012).

Informal institutions have actually helped Boeing in the international arena. One of

Boeing's first engineers was Chinese and worked on Boeing's first bi-plane in 1916. This

engineer later went back to China and started China's aviation program. Because of that working

relationship, China has been a particularly welcoming business partner with Boeing and has

certainly helped Boeing in the Chinese market, not only in the purchasing of aircraft but also the

production of horizontal stabilizers and other aircraft products (Boeing, 2015).

4.2 Boeing's Domestic Cultural Norms Compared to Foreign Partners and Subsidiaries

14

Hofstede’s five dimensions of national culture are measurements of power distance,

individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence. The

Hofstede Center describes the dimensions as follows:

Power distance deals with the fact that all individuals in societies are not equal, and it

expresses the attitude of the culture toward these power inequalities amongst us. Individualism

is the degree of interdependence a society maintains among its members. It has to do with

whether people´s self-image is defined in terms of “I” or “We”. A high score (Masculine) on this

dimension indicates that the society will be driven by competition, achievement and success,

with success being defined by the “winner” or “best-in-the-field”. A low score (Feminine) on the

dimension means that the dominant values in society are caring for others and quality of life. The

dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that

the future can never be known: should we try to control the future or just let it happen? This

dimension describes how every society has to maintain some links with its own past while

dealing with the challenges of the present and future, and societies priorities these two existential

goals differently. One challenge that confronts humanity, now and in the past, is the degree to

which small children are socialized. Without socialization we do not become “human”.

This dimension is defined as the extent to which people try to control their desires and impulses,

based on the way they were raised. A tendency toward a relatively weak control over their

impulses is called “Indulgence”, whereas a relatively strong control over their urges is called

“Restraint”. 

Boeing currently does business in the following countries: South Korea, Spain, Turkey,

U.K., Russia, Japan, Italy, Israel, India, Germany, France, China, Canada and Australia. These

countries vary greatly from one to another. The United States ranked Highest on individualism

15

while South Korea ranked lowest. With power distance, the U.S is on the lower side at 40 with

the greatest power distance going to Russia. The U.S is on the higher side of masculinity with

South Korea again being the lowest crossing into femininity. Regarding uncertainty avoidance,

the U.S is at 46, only China and the U.K being lower at 30 and 35, respectively. Australia and the

U.S are the lowest on long-term orientation, indicating a culture enjoying instant gratification

and South Korea scoring a 100. The U.S is above average on indulgence at 68 with Israel scoring

a 0 (Figure 1). It is quite intriguing how Boeing, with some extreme domestic cultural

differences from other countries like long-term orientation and individualism, is still able to run

its operations effectively with such different cultures.

4.3 Greater Concern – Cultural or Institutional Distance?

Peng (2014), describes institutional and cultural differences as follows: “institutional

distance is the extent of similarity or dissimilarity between the regulatory, normative, and

cognitive institutions of two countries, whereas cultural distance is the difference between two

cultures along some identifiable dimensions” (p. 479-483). Institutional differences would the

greatest concern for Boeing. Institutional differences play more of a role in how business is done,

how supply chains are managed and how products are made and imported/exported. We can see

that Boeing does quite well from a cultural perspective in working with very different countries

and the distance is minimal and therefore not a large concern for the longevity and

competitiveness of the company.

4.4 Recommendations for Boeing's future IBS to leverage exposure institutions.

Most of Boeing's more recent problems involved the over reliance of off shoring. This

caused the 787 to be billions of dollars over budget and delivery delays happened over 7 times

16

with the first of them being 3 years late. Export compliance was a major issue for several key

components coming out of China, in addition to tier1-3 supply chain issues that needed to be

baby stepped the through the entire process (Tang and Zimmerman, 2009). Reducing off shoring

exposure and bringing some core, mission essential product development back domestically

would deleverage from some of these institutional issues.

Entrepreneurship and Internationalizing the Firm

5.1 Five Entrepreneurial Strategies

The five entrepreneurial strategies are factors relative to growth, innovation, network,

finance/governance, and having an effective exit strategy. Boeing's growth strategy has included

acquisitions which have allowed Boeing to add to its impressive technology arsenal, thus being

at the fore front in the aircraft manufacturing industry. Bundling its technological resources with

its organizational resources have allowed Boeing to grow internationally.

In terms of innovation, Boeing has been the industry leader in innovation, again with the

787, despite the problems associated with it. The 787 will allow a single flight to anywhere in the

world for regular passengers because of the technological innovations that were central around

the development of the aircraft.

Regarding network strategy, Boeing has a very large and respectable network with China

and Chinese producers. This has allowed Boeing to tap into a market of over a billion people,

with many of those people rising to a middle class status thus, having the ability to fly. This

demand for flying will need aircraft and Boeing has nurtured this network and will be one of the

first in line to deliver.

17

Boeing saw how rocky a startup company can be, especially one that relies on

government contracts to survive. Commercial aviation began in the early 1920s but

transportation by rail still dominated the transportation industry. After WWI, aircraft orders to

Boeing were cancelled by the government and 70,000 people were laid off. Boeing almost

ceased to be a company. But Boeing adjusted to the shift and promised those jobs back when

production of the 307 Stratoliner began in 1935. Unfortunately, a new World War began and

commercial travelling went dormant for support of the war effort. This is another time where

Boeing made history by producing 16 B-29 Superfortresses every 24 hours. At the end of WWII,

over 3,000 B-29s were manufactured. During the 1960s, Boeing created its famous 737 aircraft,

but with ever increasing commercial travel demand, Boeing needed something bigger and faster.

The 747-100 made its debut in 1969 and the 747 series has been Boeing's flagship ever since.

Essentially, it was demand for air travel why Boeing survived as a company.

5.2 Institutional or Industry-based Conditions Effect on Entrepreneurship Opportunities

It appears that it is mostly industry based conditions that effect entrepreneurial

opportunities. There is intense competition with Airbus and other competitors from China, Japan

and Russia not far behind (Marketline, 2015). Large dependence on government contracts in

addition to the intense competition in the military technological industry are a definite industry

based issue that eventually will need to be deleveraged from. Boeing almost went out of business

before WWII started. Contract work can be risky, with fixed price contracts losing their

profitability due to cost overruns. Because many of these fixed cost contracts are long term, they

make cost estimations difficult and inherently risky.

Internationalization: Where, When, Why, and How

18

6.1 Liability of Foreignness

Boeing is an American company, but its brand is truly global. The liability of foreignness

essentially does not exist for Boeing because of the worldwide brand recognition. However,

Boeing does indeed have the resources and capabilities to offset any liability of foreignness if it

exists at all. For all intents and purposes, the industry is dominated by the duopoly of Boeing and

Airbus. Some airlines might buy Airbus because they are European, others may buy Boeing

because they are American, but Boeing retains the technological resources and organizational

capabilities to make foreignness a miniscule aspect of the industry. The Dreamliner was the first

aircraft to have wings and fuselage made from carbon fiber and titanium. Very few companies

have the ability to make satellites, a capability Boeing enjoys. Foreignness wouldn't really be a

factor when it comes to advanced technological capabilities that few companies have.

6.2 Strategic Goals Aligning with Location Specific Advantages

According to the Boeing website, "With 17 regional corporate headquarters in key

markets around the world, Boeing International country and regional executives lead the

enterprise’s regional operations and help build broad and deep local stakeholder relationships"

(Presence, 2015). The Boeing Company's newsletter states "Boeing’s expansive portfolio of

global research and development partnerships includes entities from 35 nations for research in

diverse areas including biofuels, manufacturing processes, structures and robotics" (Seil, 2011).

One of Boeings strategic goals is to be the most technologically advanced company in the

industry. Russia is one country that Boeing works in with Russian engineers being one of the

best aerospace engineers on the planet. Because of this, engineers work around the clock for

19

Boeing because of the time difference between Russia and the United States. This is a very large

advantage based on location.

6.3 Advantages and Disadvantage of Management’s entry Mode Choices and Timing

Boeing's broad entry mode into the international arena was through direct exporting and

currently is more aligned with foreign direct investment (FDI). Boeing has accomplished FDI

through different avenues, including wholly owned subsidiaries and strategic alliances. For

instance, Boeing created a strategic alliance with the German company Siemens to develop

energy efficient processes for the Department of Defense. In 2010, Boeing formed a strategic

alliance with Fujitsu to form a service to increase the efficiency of aircraft maintenance. The

disadvantage to this mode of entry choice is technology must be shared and this could lead to a

loss of a competitive advantage. The competition will have an advantage that the parent firm

once had and now does not.

6.4 Diversification Strategies

Boeing incorporates several diversification strategies into its overall strategic initiatives.

First, Boeing does product diversification. It not only builds aircraft, but it also builds satellites,

missiles, parts for the international space station and many others. According to Peng (2014)

"Hundreds of studies, mostly conducted in the West, suggest that, on average (although not

always), performance may increase as firms shift from single business strategies to product-

related diversification, but performance may decrease as firms change from product-related to

product-unrelated diversification." This is important to note, considering Boeing has pretty much

stuck with product diversification strategy and hasn't wandered off into unrelated-product

diversification strategy.

20

Globalization strategy is another strategy that Boeing utilizes and this has done well for

performance. The Boeing Company's newsletter states "Boeing’s expansive portfolio of global

research and development partnerships includes entities from 35 nations for research in diverse

areas including biofuels, manufacturing processes, structures and robotics" (Seil, 2011). As

previously mentioned, Boeing has several key corporate offices in several countries. This is to

have a presence in new potential markets and increase brand awareness and foster important

networks.

Internationalization: Strategy, Structure, and Learning

7.1 Strategy Configurations

According to Peng (2014), the four configurations for multinational strategies include

home replication strategy, localization strategy, global standardization strategy and transnational

strategy. Boeing appears to utilize a transnational strategy which tries to be cost efficient and

locally responsive. Global learning flows both ways, from home country to host country and host

country to home country. An example of this is the Russian engineers in Russia. American and

Russian engineers work around the clock so to speak and ping information back and forth from

each other. Australia hosts training and test flight services for Boeing including unmanned aerial

vehicle flights via a subsidiary. China hosts many business and IT services for Boeing

7.2 Strategic Fit of Boeing's strategy/structure configuration to IBS goals.

The main element of Boeing leadership is to “focus on the execution today and into the

future” (Boeing Media, 2012). This addresses the vision of the company which says

“people working together as a global enterprise for aerospace leadership” (Boeing, 2001). The

strategic fit is apparent and is working, allowing the synergetic capabilities of international

21

locations and subsidiaries. The company's long term mission is very much future-oriented that

consists of  “to become the number one aerospace company in the world and among the

premier industrial concerns in terms of quality, profitability, and growth” (Boeing, 1995). The

commercial airplane segment is involved “in developing, producing and marketing commercial

jet aircraft and providing related support services, principally to the commercial airline industry

worldwide” (Boeing segment information, 1998). This particular strategy configuration allows

for advanced learning and increase in innovative ideas because of the back and forth flow of

information.

7.3 Knowledge Management

According to Peng (2014), knowledge management is “the structures, processes, and

systems that actively develop, leverage, and transfer knowledge”. Explicit knowledge is easily

captured, stored, and transferred whereas tacit knowledge is captured and transferred by hands-

on experience. Boeing has gained explicit knowledge through acquisitions and mergers of

companies with advanced knowledge and technology. Tacit knowledge was obtained by Boeing

through interactions with foreign subsidiaries and country specific offices working closely with

local nationals. Boeing learned the hard way during the Dreamliner supply chain headaches that

ensued. These headaches happened because Boeing was not garnering tacit knowledge for a time

and had to go to each out sourced business and learn how each country was handling their supply

chain (Denning, 2013). With a mixture of explicit and tacit knowledge, Boeing was able to

finally fix the problems and get the 787 under way once again.

Strategizing Governance and Corporate Social Responsibility

22

8.1 Firm-Specific Capabilities that Differentiate on Corporate Governance Dimensions

Peng (2014) describes corporate governance as “the relationship among various

participants in determining the direction and performance of corporations” (Peng, 2014). The

Board and the corporate officers recognize that the long-term interests of the company are

advanced when they are responsive to the concerns of communities, customers, employees,

public officials, shareholders and suppliers (Boeing, 2015). This shows that even a large

corporation sees the need in catering to those that inherently allow Boeing to survive as a

company. Boeing helped build better communities worldwide in 2014 by investing more than

$188 million as well as thousands of volunteer hours. Not only does Being invest and innovate in

its own company, but it does so with young students (Citizenship Report, 2014). Boeing tries to

take care of the people and things that take care of it. Boeing also strives for protecting the

environment, with buying and preserving over 2 million acres of land. Boeing also sponsors over

150 events in 14 different countries for earth day and other activities,

Conclusion

The Boeing company truly is an amazing company. What started out as one man building

one aircraft has turned into a giant company that revolutionized an industry. The company's

complimentary strategies have allowed it to flourish both at home and internationally. Despite

the hiccups of the 787 and the off shoring problems, Boeing has shown time and again that it can

adjust to all kinds of situations in the business environment. Boeing will continue to remain

competitive for what the future may hold for millions more people wanting to travel and will

continue to define the industry.

23

Resources

Babej, M., & Pollak, T. (2006). Boeing versus airbus. Retrieved

from http://www.forbes.com/2006/05/23/unsolicited-advice-advertising-

cx_meb_0524boeing.html

Beck, K., Proctor, P., Downey, T., & Kim, J. (2002, GOING GLOBAL 

how Boeing is changing the way it works around the world. Boeing Frontiers Online, 1

Boeing, (1995). Message to the shareholders, Boeing annual report 1995. Retrieved from

http://www.boeing.com/companyoffices/financial/finreports/annual/95annualreport/

message.htm

Boeing, (1998). Boeing Segment Information, Boeing annual report 1998. Retrieved from

http://www.boeing.com/companyoffices/financial/finreports/annual/98annualreport/

segment_info.htm

Boeing, (2001). The Boeing company 2001 annual report. Retrieved from

http://www.boeing.com/companyoffices/financial/finreports/annual/01annualreport/

BOEING2001AR_all.pdf

Boeing media, (2012). Realignment of leaders brings enhanced functional excellence, Boeing

media. Retrieved from http://boeing.mediaroom.com/index.php?s=43&item=1047

Boeing.com. (2015). Retrieved

from http://www.boeing.com/boeing/companyoffices/aboutus/brief.page

24

Boeing, Siemens form strategic alliance for DOD energy modernization. (2015). Retrieved

from http://inr.synapticdigital.com/Siemens/Boeing/

Chow, W. (2015). Boeing commercial airplanes achieves market success in 2014. Retrieved

from http://www.prnewswire.com/news-releases/boeing-commercial-airplanes-achieves-

market-success-in-2014-300019724.html

Citizenship report. (2014). Retrieved

from http://www.boeing.com/resources/boeingdotcom/principles/community-

engagement/pdf/reports/Boeing_2014_CitizenshipReport.pdf

Company. (2015). Retrieved from http://www.airbus.com/company/

Clark, S. (2015). Plasma-driven satellites launched from cape canaveral. Retrieved

from http://spaceflightnow.com/2015/03/02/plasma-driven-satellites-launched-from-cape-

canaveral/

Denning, S. (2013). What went wrong at Boeing? Retrieved

from http://www.forbes.com/sites/stevedenning/2013/01/21/what-went-wrong-at-boeing/

Holmes, S. (2006, The 787 encounters turbulence. Businessweek, 3989, 38-40.

Global commercial aircraft manufacturing. (2014). (Industry).IBISWorld.

Kienstra, J. (2012). Cleared for landing: Airbus, Boeing, and the WTO dispute over subsidies to

large civil aircraft. Northwestern Journal of International Law & Business, 32(3), 569-606.

25

Lockheed martin: Who we are. (2015). Retrieved from http://www.lockheedmartin.com/us/who-

we-are.html

Marketline. (2014). Company profile

the boeing company. (Annual No. 3A4234D6-7800-4171-ABE5-

823C05585F45).Marketline.

New IATA passenger forecast reveals fast-growing markets of the future. (2014). Retrieved

from http://www.iata.org/pressroom/pr/pages/2014-10-16-01.aspx

Peng, M. (2014). Global strategy (3rd ed.). Hoboken, New Jersey: Cengage Learning.

Seil, B. (2011, Global boeing. Boeing Frontiers, , 44-45.

Sweetman, B. (2013). Boeing building on ‘One boeing’ strategy. Retrieved

from http://aviationweek.com/awin/boeing-building-one-boeing-strategy

Tang, C., & Zimmerman, J. (2009). Managing new product development and supply chain risks:

The boeing 787 case. Supply Chain Forum: International Journal, 10(2), 74-86.

The Boeing company income statement. (2015). Retrieved from http://finance.yahoo.com/q/is?

s=BA&annual

The founding and focusing of boeing technology. (2005). Boeing Frontiers, 3(8), 3/14/2015.

The hofstede centre. (2015). Retrieved from http://geert-hofstede.com/china.html

26

Wilhelm, S. (2015). First chinese C919 jet nears completion, aspires to take on boeing 737,

airbus A320. Retrieved from http://www.bizjournals.com/seattle/news/2015/03/03/first-

chinese-c919-jet-nears-completion-aims-to.html

Wilson, M. (07/01/2007).

The impact of transportation disruptions on supply chain performance Transportation

Research. Part E, Logistics and Transportation Review, 43(4), 295.

WTO upholds Boeing subsidies ruling: Airbus & Boeing both claim victory. (2012, Air

Transport World, 49, 18.

Yildirim, E., Turan, S., & Nadiadi, Y. (2014). Enterprise architecture approach to developing a

private DBaaS cloud at boeing. ().Oracle.

27

Appendice

Figure 1. Hofstede's Country index

United St

ates

Russia

Australi

aIsr

ael

South Korea

Turke

yU.K.

Italy

Spain

China

Canad

a

Averag

e0

20

40

60

80

100

120

Power DistanceIndividualismMasculinityUncertainty AvoidanceLong-term OrientationIndulgence

28