...Introduction Faced with a downturn in the commercial aircraft business and reduced military spending, The Boeing Company was forced to downsize approximately 55,000 people over a five-year period. The company's management, organized labor, the local community, multiple levels of government, and community colleges collectively worked together to develop Reemployment Centers to assist in the transition of their specialized workforce into alternative forms of employment. The following is a description of how The Boeing Company successfully completed this effort at downsizing. Downsizing is thought to be an effective human resources strategy to increase global competitiveness. Labor costs, generally one of the largest costs for most organizations can be reduced through downsizing. In many cases the downsizing process includes outsourcing or subcontracting jobs previously performed within the organization. Although organizations often consider downsizing necessary in order to remain competitive, this strategy does not always result in increased organizational profitability and performance. One recent survey conducted by the Society for Human Resource Management reported that only 26% of firms reported productivity improvements while 58% said that productivity was flat or had declined after downsizing (The Washington Post, 1996). In addition, the study found that approximately 54% of companies surveyed cut jobs in 1994 but only 25% expected any further downsizing. Whatever the...
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...the center of the Boeing situation. Explain your choice. I chose the 7 S Framework and the six box organizational model. The models are most often used as a tool to assess and monitor changes in the internal situation of an organization. 7S Framework 1. Strategy- Boeings strategy was to update the technology systems, downsize their operations and reestablish relationships with their suppliers and the only chance of cutting operating cost. 2. Structure- the problem of 1994 was the Airbus ( their main rival-booked more orders). This shocked the management executives and began a series changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that reportedly changed. 3. Systems-Boeing adopted the principles of creating more value for customers with fewer resources. 4. Style-the decision was made to diversify from the traditional commercial airline industry and that many acquisitions that were made createe integration issues for the company. They were trying to add more stability to the business by entering the space industry and information services. 5. Staff-According to The CEO of Airbus( Noel Foregeard), the process of diversification was demoralizing for Boeing employees. Boeings vice-president of marketing contradicted Foregeard and said “what affects morale right now is that we are in a down cycle” (Palmer, 2009). Regardless of why the employees morale was low, Boeing had to take steps...
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...Introduction : The case traces the history of Boeing, one of the two makers of commercial aircraft. At last in the year 2006 Boeing have recovered from its multi year setback in its competitive position with its competitor Airbus industries in the commercial aircraft industry. From mid 1990 Boeing had been losing in aircraft order and profit. Airbus booked more order than Boeing in its history in the year 1999 and repeated regularly until 2005. In the first half of 2006, Boeing booked 4 times more aircraft than Airbus. In 2005 Airbus repeatedly delayed in the delivery of its newest model A380, causing embarrassment, customer had also panned Airbus smallest model A350 at the drawing board stage and requiring rework on the model. Boeing two engine long haul 787 Dreamliner, a direct competitor to A380 and A350, had received rave reviews for its technological excellence, backed by firm orders from commercial airlines and aircraft leasing companies. Commercial airlines are the customer of Boeing and Airbus, had collectively losing in the early 2000. Some times the concern people were thinking of Boeing. Did the Boeing learn its lesson and the current good fortunes reflect in the long run. Could they able to ride on Airbus due to their missteps and misfortune? Boeing showing its excellence in design, solid order book position and their efficiency and production increased. The Company is almost synonymous with commercial air travel, due to the worldwide acceptance of its product...
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...Table of Contents 1. Executive Summary 2 2. Reasons Boeing cancelled its development of the SuperJumbo 3 2.1. Boeing had an alternative to developing a new aircraft 3 2.2. Boeing already had market share 3 2.3. Boeings market analysis did not show sufficient demand 3 3. Strategic weaknesses in Airbus’s customer strategy 4 3.1. Strategic Analysis of Airbus 4 3.2. Analysing resources and capabilities of the organisation 5 3.3. Shaping the organisation through vision, mission and purpose 5 3.4. Customer strategy at Airbus 6 4. Is the Airbus strategy driven by customers? Or rather more by a sense of rivalry with Boeing? 6 5. Airbus’s demand estimates and implications for a customer driven strategy 7 6. Support for Airbus’s decision to proceed with the SuperJumbo 9 7. Conclusion 10 8. Bibliography 11 1. Executive Summary Boeing cancelled the development of the super jumbo after it had conducted a research. What informed this decision was the fact that there was no sufficient demand to justify the $7 billion investment. Instead of pursuing further the super jumbo development they decided to stretch their existing aircraft to cater for more passengers. They had no pressure to develop the super jumbo because they had the largest passenger aircratf at the time and had no competition at that segment of the market. This means that the segment of the market was monopolised by Boeing Airbus on the other hand wanted to penetrate the long range passenger...
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...1. How does e-Enabled create value for Boeing? In the “Essentials of information systems for managers”, Piccoli does not only define value creation as the genesis of worthwhile things that did not exist before (Pic, 214), but also explains the two major ways with which added value could be created (Pic, 222): either increasing customer willingness to pay by doing something of value for customers, or decreasing supplier opportunity cost by working with the firms’ suppliers on providing the needed resources for less money. The former (CWP) is defined as the maximum amount the customers are ready to spend on the firm’s product or service (Pic, 215), whereas the latter (SOC) is defined as the minimum amount of money the suppliers are willing to accept before providing the needed resources (Pic, 215). As far as Boeing is concerned, the new e-Enabled strategy focused on increasing the customer willingness to pay, and I quote from the case (LYN, 1): “Boeing unveiled a new strategy that executives believed would help its airline customers improve efficiency and profitability and also differentiate its products in the market place.” If we analyze this quoted statement, we will see that the way Boeing intended its customers to create added value from e-Enabled is twofold: First, from e-Enabled’s potential to reduce costs complexity, provide real-time situational awareness for both flight crews and airline operations centers, improve operational efficiency, enhance the travel experience...
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...Introduction In this case Boeing faces a number of challenges in determiningthe viability of bringing forth the 7E7 aircraft series. Aircraft manufacturersbringing forth a new product has to take extra care since a miss in this assessment can place a company in a position to fail the result of huge cash outflows required. Boeing faced stiff competition from French based Airbus and had not brought forth a successful new product in recent years. Since the September 11th attacks travel had taken a drop in general and Boeing was making assumptions regarding future needs and opportunities. This included the willingness of travelers to pay 5% more for efficiency and the increase of hub and spoke travel for airlines requiring flexibility in mid-sized aircraft. To assess the validity of the 7E7 series extra care will be taken to look at all the measurements to reduce the risk inherent in new product introductions in the aircraft business. Question 1 a. What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 7E7? Please use the capital asset pricing model to estimate the cost of equity. At the date of the case, the 74-year equity market risk premium (EMRP) as estimated to be (see below). Which beta and risk-free rate did you use? Why? Applying the Capital Asset Pricing Model estimate the required rate of return for Boeing equity for the last 74 years: RBA= RF+ β(RM-RF)in which: * Market Risk Premium 74 year period...
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...Boeing 777 Project Group Report Winter 2013 Group Number: 3 Participating Group Members: Chris Cardillo Jingshu Dang Shanlin Li Xun Yin Yigong Zhu Boeing 777 In October 1990, the Boeing Company announced that it was launching a new aircraft model, the 777. The company praised the superior technology of the product and the fact that it filled a gap in Boeing’s product line. Moreover, it was targeted to service routes in a critical high growth market segment. The chief objective of the analysis is to evaluate the 777 against a financial standard. The case gives internal rates of return (IRRs) for the 777 project base case and alternative forecasts. The principal analytical problem of the case is an estimation of a weighted average cost of capital (WACC) for Boeing’s commercial aircraft division in order to evaluate these IRRs. The analysis should also identify ‘key value drivers’ and distinguish, on a qualitative basis, the key gambles Boeing is making. Capital budgeting projects should promote the primary goal of the firm; therefore, the primary goal directs decision making. Frank Shrontz, Boeing’s CEO, says his mission is raising Boeing’s return on equity from the recent average of about 12 percent. Is the primary goal of Boeing improving return on equity? 1. Frank Shrontz says he wants to improve Boeing’s return on equity. How might the 777 project serve that mission? Is improving return on equity the same as maximizing shareholders’...
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...and/or Options Recommendation and Implementation Monitor and control Conclusion Executive Summary Boeing is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined, providing products and tailored services to airlines and U.S. and allied armed forces around the world. BAL’s capabilities include rotorcraft, electronic and defense systems, missiles, satellites, launch systems and advanced information and communication systems. BAL’s reach extends to customers in more than 90 countries around the world, and they are a leading U.S. exporter in terms of sales. With corporate offices in Chicago, Boeing employs more than 159,300 people in 49 American states and 70 countries. Their enterprise also leverages on talents of hundreds of thousands more people working for Boeing suppliers worldwide. BAL however faced difficulties as it sought to upgrade its procurement systems and processes to improve operations. Russell, the new National Procurement Manager on realizing the new opportunities available through e-business technology, Russell needed to decide what BAL’s next step should be, should BAL invest in new system that would simplify procurement processes; should BAL sit on the fence? I am Russell Menere, the National Procurement Manager for Boeing Australia Limited (BAL)., my decision is to recommend that BAL pursue a cost effective e-procurement system that will interface with the...
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...Executive Summary Airbus and Boeing have constituted a duopoly in the large jet airliner market since the 1990s, leading to fierce competition. Boeing is an American company while Airbus began as a consortium of European aviation. The two are presently facing issue that tarnish their political, legal, and ethical reputations. Airbus argues that Boeing has received over $16 billion from the US government in addition to help from countries like Japan. The U.S. fires back arguing that since 1992, Airbus has been receiving EU government loans. Boeing’s scandal with Lockheed and the discovery of wing cracks in the Airbus A380s have damaged both companies’ ethical reputations. The following recommendations will ensure that, while Boeing and Airbus compete in the commercial airline industry, their actions will be ethical and legal, while adapting within the current cultural and political bounds of the global market. Introduction Boeing: the world’s largest aerospace company Since its foundation in 1916 in the Puget Sound region of Washington State, Boeing has become the largest aerospace company and a leading producer of military and commercial aircraft. Boeing’s military aircraft come equipped with satellite, missiles, launch vehicles and advanced information, and communication systems. The number one U.S. exporter have about 160,000 employees across the United States and in 70 countries, making it one of the most diverse and talented companies that thrive through their innovative...
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...Case Air Bus X Boeing Analysis Developing a larger version of 747 AIRCRAFT If Boeing develops a larger version of 747, it would have to disburse a sum of U.S. $ 4 billion. When announced the decision to develop a larger version of 747, its shares fell 1.7% on the same day, giving signals to the company that it would not be accepted by its shareholders. But if Boeing uses it, it would not be worth for Airbus to launch the A3XX, because it could not raise the price and still have to divide the market. Then the NPV would be U.S. $ 650 million to a negative value close to selling $ 225 million per unit, assuming sale of 34 units (30% loss of market), with operating margin of 20%, preventing the launch. Lower the Value of 747 Aircraft If Boeing had lower the value of 747, it would have a reduction in their profit margin, and could not compete in technology, comfort and operational efficiency with the A3XX. With this decision Boeing required Airbus to reduce the value of the aircraft arriving at a price of U.S. $ 180 million per aircraft on condition of selling 48 units, with an operating margin of 20%, obtaining an NPV of U.S. $ 61 million. Accordingly the Airbus could enter the market without a high profit. Developing an Airplane Super Jumbo to compete with the A3XX Boeing brings a negative past experience, which almost led to bankruptcy. The estimated investment would be U.S. $ 13 billion for this development, and that cause the fugue of its shareholders...
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...Building the Boeing 787 1. What are the benefits to Boeing of outsourcing so much work on the 787 to foreign suppliers? What are the potential risks? Do the benefits outweigh the risk? There are many benefits of outsourcing the work on the Boeing 787, they include: 1) reducing the risks associated with technological gamble (always up-to-date with the latest designs and innovations), 2) being able to negotiate development costs from different manufacturing partners in return for a share of the work, 3) cutting down delivery costs by having access and expertise from efficient suppliers/developers, and 4) reducing product development time (from 6 years to 4 years). Potential risks may include a conflict of delivery schedules (some outsource manufacturers and/or partners may not meet Boeings due dates), loss of revenue due to penalty costs and fees caused by late delivery, and parts not being assembled or labeled correctly due to language barriers. Also, partners may outsource Boeing's technology and design to other companies who may find it hard to meet the quality standards specified by the company. Since this other company most likely reports back to Boeing’s initial manufacturing partner, it may take a longer time for the company to even hear about potential product problems. In respect to the evidence presented in the case study, the benefits of outsourcing outweigh the risks provided that Boeing enforce a strict management oversight and overhead amongst its foreign...
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...Case Summary The Boeing 767: From Concept to Production (A) By: Runit Marda (115) The case deals about the issue faced by Dean Thorton, Vice president – General Manager of the Boeing 767 program. The company had lobbied for Federal Aviation Administration (FAA) for permission to build wide body aircraft with two-person cockpits (rather than 3). Now, being granted the permission, the issue was that already 30 of the aircrafts were into various stages of production. Now, how should Thorton handle this situation? What are the options that he has? The decision had to be taken fast as the delivery dates were fast approaching. Commercial aircraft manufacturings posed various complexities as there were over 3.1 million parts to be connected by wiring over 85 miles. In 1981, three companies dominated the market: Boeing, McDonnell Douglas and Airbus. Launching a new plane was a daunting task as the manufacturing required $1.5-2 billion (which was considered to put the whole companies’ net worth on the line!!). But, any successful product was expected to lead to heavy profits and tie up the market segment for at least 15-20 years. Buyers, comprising mainly of the top 50 airliners, negotiated on price, after sales parts and service, design modifications etc. to make the task even tougher. In 1981, Boeing was the industry leader in terms of sales, having net sales of $9.2 Billion ($5.1 Billion of the aircraft manufacturing division). Boeing partnered with subcontractors on a risk-sharing...
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...Case Study – The Boeing 7E7 In early 2003, Boeing announced its “Dreamliner” plan to design and sell a new, “super-efficient” jet -- “7E7”. However, the overall market for aircrafts was negatively affected by several shock news: the United States went to war against Iraq, a deadly illness called SARS resulted in global travel warnings. These negative news made airline profits the worst seen in a generation. Michael Bair, the leader of the 7E7 project, announced that Boeing was making “excellent progress on the development of the 7E7 and continues to be on track to seek authority to offer the airplane.” on June 16, 2003, at the prestigious Paris Air Show. In order to proceed with the project, Bair sought a firm commitment from Boeing’s board of directors in early 2004. If the board approved the plan, he could start collecting orders from airlines and expect passengers to start flying on the new jets in 2008. Between now and his recommendation to the board, he would need to complete a valuation of the 7E7 project and gain the support of Boeing’s CEO, Philip Condit, and the other senior managers. Two aspects should be considered to solve the problem. The first aspect is whether this project can bring strategic advantage to the company. The second aspect is whether the cost of capital is less than the estimated rate of return. 7E7 is twin-aisle aircraft. Exhibit 4 shows aircraft distribution forecast of Boeing and Airbus (Boeing and Airbus almost occupies the global commercial aircraft...
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...have made in the RHS margin. The Boeing 7E7 Team 14 Constantine Brocoum Courtney Delia Stephanie Doherty David Dubois Radu Oprea October 15th, 2009 Contents Objectives 1 Management Summary 1 Cost of Equity 1 Equity Market Risk Premium 1 Beta 2 Risk Free Rate 2 Capital Structure Weights 2 Boeing 7E7 Project Evaluation 4 Circumstances for an economically attractive project 4 Market Demand 4 Market Share 4 Sensitivity Analysis 4 Conclusion 7 Board approval for the project? 7 Appendices 7 Appendix A 7 Objectives This report seeks to answer the following three questions about the Boeing 7E7 project: 1. What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 7E7? a. Please use the capital asset pricing model to estimate the cost of equity. b. Which equity market risk premium (EMRP) did you use? Why? c. What Beta did you use and how did you derive it? d. Which risk-free rate did you use? Why? e. Which capital-structure weights did you use? Why? 2. Judged against your WACC, how attractive is the Boeing 7E7 project? a. Under what circumstances is the project economically attractive? b. What does sensitivity analysis (your own and/or that shown in the case) reveal about the nature of Boeing’s gamble...
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...Boeing Case Study Group 2 Embry Riddle Aeronautical University Question 1 The benefits of Boeing outsourcing are; cost in manufacturing 787 parts and labor, finding experts that make specific parts, and introducing the 787 to different countries expecting to increase sales. The risks of having different manufactures to make one plane include; delays in manufacturing parts, factories having to move or close, costs of resources in different parts of the world can fluctuate, and taxes and tariffs can change during the course of manufacturing. If the company can produce the 787 cheaper by outsourcing then, yes the benefits do outweigh the risk. However, from the scenario there are several drawbacks of the foreign companies and the risk is too high. Boeing should do the work themselves. Question 2 Boeing failed to ensure that the other nations brought onboard to manufacture certain components of their aircraft were properly set up and prepared to start manufacturing. Boeing should have had more oversight of Italy’s issues with building a factory and they should have required proof that Italy already had adequate property to build the factory. Boeing also should have verified that there would be no local government interference that would hinder the ability to meet delivery deadlines. The other issue was one of their suppliers, Vought, outsourced to a different nation. Boeing should have had a clause in their contract with Vought, stating that if they outsourced...
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