Best Commercial Report on The Boeing Airplanes
Best Commercial Report On The Boeing Airplanes – A Comprehensive Guide
Project Report 2018 On Boeing
Submitted By:
Muhammad Asif Malik
Sheeraz Opal
Shahzain Khan
1st semester MBA
(1.5) (eve)
Submitted to:
Ghulam Sarver
Dedicated To My
Loving Parents and Respected Teachers
Whose love, affection and Prayers have been a source of inspiration and encouragement for me.
TABLE OF CONTENTS
1.Introduction —————————————————————01
2.Mission &Vision Statement ——————————————–01
3.Components of mission Statement———————————–02
4.ManagementHierarchy———————————————— 04
5.Product s line—————————————————————06
6.Target Market————————————————————–07
7.Strategies used by company——————————————–08
8.S.W.O.TAnalysis———————————————————–10
9.Porter Model and its impact on Boeing ——————————12
10.P.E.S.T.E.LAnalysis——————————————————–15
11.Ratio Analysis—————————————————————18
12.Competitive Profile Matrix (CPM)————————————–24
13.Internal Factor Evaluation Matrix (IFE)——————————–25
14.External Factor Evolution (EFE)——————————————26
15.S.W.O.T Matrix————————————————————–
16.B.C.GMatrix—————————————————————–
17.Internal External Matrix—————————————————
18.Qualitative Strategic Planning Matrix ———————————
19.Conclusion——————————————————————–
20.Recommendations———————————————————-
Introduction
The Boeing Company is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, and satellites worldwide. The company also provides leasing and product support services. Boeing is among the largest global aircraft manufacturers; it is the second-largest defense contractor in the world based on 2015 revenue, and is the largest exporter in the United States by dollar value.
The Boeing Company’s corporate headquarters are located in Chicago and the company is led by President and CEO Dennis Muilenburg. Boeing is organized into five primary divisions:
ü Boeing Commercial Airplanes (BCA)
ü Boeing Defense, Space & Security (BDS)
ü Engineering, Operations & Technology
ü Boeing Shared Services Group
ü Boeing Capital
Mission & Vision Statement
Mission Statement
Connect, Protect, Explore and Inspire the World through Aerospace Innovation.
Vision Statement
Over the past century, generations of talented Boeing employees helped build the world’s largest aerospace company—and shaped the course of history along the way. The Boeing Vision is an expression of our company’s purpose and values, designed to inspire and focus all employees on a shared future and to reaffirm that, together, we can meet the challenges that lie ahead.
Components of mission Statement
“Connect, Protect, Explore and Inspire the World through Aerospace Innovation”
In this mission statement there are 4 components:
ü Connect
Products or services: The Boeing major services is to connect people’s.
ü Protect
Philosophy: Boeing basic beliefs, core values, aspirations and philosophical priorities of the firm.
ü Explore
Survival, growth: Boeing commitment towards economic objectives.
ü Inspire
Self-concept: Boeing major strengths and competitive advantage.
Management Hierarchy
Dennis A. Muilenburg (born 1964) is an American Businessman, and the president, chairman, an chief executive officer of Boeing Company, a role he assumed on July 1, 2015.
Boeing Commercial Airplanes Products line
Boeing has been the premier manufacturer of commercial jetliners for decades. Today, the company manufactures the 737, 747, 767, 777 and 787 families of airplanes and the Boeing Business Jet range. New product development efforts include the Boeing 787-10 Dream liner, the 737 MAX, and the 777X. More than 10,000 Boeing-built commercial jetliners are in service worldwide, which is almost half the world fleet. The company also offers the most complete family of freighters, and about 90 percent of the world’s cargo is carried on board Boeing planes.
Target Market of Boeing
Over the next 20 years, Boeing is forecasting a need for over 39,600 airplanes valued at more than $5.9 trillion. Aviation is becoming more diverse, with approximately 38 percent of all new airplanes being delivered to airlines based in the Asia region. An additional 40 percent will be delivered to airlines in Europe and North America, with the remaining 22 percent to be delivered to the Middle East, Latin America, the Common wealth of Independent States, and Africa.
Airplanes command the largest share of new deliveries, with airlines needing over 28,100. These new airplanes will continue to stimulate growth for low-cost carriers and will provide required replacements for older, less-efficient airplanes. In addition, 9,100 new wide body airplanes will be delivered, which will allow airlines to serve new markets more efficiently than in the past.
Strategies used by Boeing
Segmentation A company’s segmentation of their customers is done mainly through geographic regions. Boeing Company believes that Europe and North America will keep on ordering most airplanes with their full-grown economies. The company believes that aircraft passage within Asia pacific will go up by six per cent yearly in the next twenty years. The market share of flying within Latin America will enlarge from two to four per cent. Single aisle airlines are also factored in since they are popular in the internal short routes of Boeing’s ability to segment geographically allowing the company to determine demand patterns. For instance in established economies such as Europe and North America, the company can forecast an increase in the demand for regional jets as travelers in the stated regions are demanding non-stop flights on thinner routes. Geographical segmenting enables the company to assemble other probabilities that help it in its promotion.
Positioning
There are many criteria that apply to buying a new plane from Boeing. The main two criteria chosen are capacity and distance. These are related to Boeing’s business buyers. This is because for today’s airline businesses, the option is whether or not to manage a short or a long distance services and whether or not to have high or low capacity flights.
Short distance and low capacity: Many
As can be seen the company believe that most of Boeing’s business airplane buyers will require planes that are extra effective at flying small distances with a low capacity. The rationale for choosing this position is that, first we can note down from the major products and services section that Boeing Company has mostly delivered to date is its 737 family, with deliveries of more than 4500 planes (Galloway, 1996).
Second reason why the company decided that this segment was where Boeing’s clients are because if we look at today’s airline business from September 11th, we do note that most airline operators are bankrupt and that the successful airlines are mainly low-cost airlines. They do operate from one point to another on a short space low competence strategy. The company believes that nonexistent clients may be one or two who use short distance operators who use high power planes.
Targeting
Boeing’s targeting is rather partial. Unlike Buyer to customer, in Buyer to buyer, there is very seldom a mass market and no airline industry is an exception to the rule. The company’s target is its accessible customers and the revenue margins are within the knowledge of these well well-informed customers because they are professionals who have information on the cost of production. Boeing Company has since been forced to offer certain trade discounts and also other considerable benefits to its customer with whom the company has developed a strong relationship.
The existing targeting strategy for Boeing as mentioned above is aimed at its regular clients. They are the company’s corporate customer and they include governments and governmental agencies, commercial airline companies and other non-governmental organizations such as private companies. The most valuable target for Boeing Company is the commercial airline companies that it mostly serves.
Pricing strategy
Boeing pricing strategy is associated to the analysis of an environment. Saving money is very important for success as well as receptiveness to the needs of the customer. Boeing is determined to realize economies of scale from its procurement, design and manufacturing processes making one of its main missions to influence prospects of economies of scale
S.W.O.T Analysis of Boeing
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Using a SWOT analysis, we are able to analyze the factors affecting a company’s future. Strengths and weakness are internal factors within an organization’s control, and opportunities and threats (or risks) are external factors that are outside the control of the organization.
Strengths
Strengths are usually built by a company over time, giving it an edge over other players in the industry. Boeing has several strengths:
· Boeing has a strong presence in the domestic market. It is the US government’s second largest defense contractor, which ensures ongoing business.
·It has a wide array of commercial jetliner families, predominantly the 717, 737, 747, 757, 767, and 777 families, 787 Dream liner, and Boeing Business Jet. These aircraft can meet a wide variety of customer needs in various markets and niche segments.
· Boeing maintains strong relationships with its customers and suppliers, helping it develop and build global partnerships to develop technologies and design concepts.
· The company focuses on developing technically advanced systems to gain an advantage over its competitors.
Boeing’s strengths typically stem from having a first-mover advantage in the industry.
Opportunities Opportunities present a company with the prospects of growth and the potential to increase its revenues.
- Boeing’s strong order growth in 2014 is expected to continue in 2015 and beyond. Boeing expects to see ongoing demand for 22,000 aircraft in the next 20 years.
- Boeing has a strong backlog, which should keep it busy in the coming years. It 2014 backlog is $502 billion.
- The aerospace industry sees growing opportunities in the Asia-Pacific, Middle East, and African regions.
- Rising international tensions would create a demand for defense and security products.
- The rise in satellite demand creates opportunities for the company.
Boeing has rich opportunities available to it, but we need to see how many of these opportunities it can cash in.
Threats
Threats, or business risks, represent external factors beyond the company’s direct control that can negatively impact its prospects.
- The company faces stiff competition from global competitors such as Airbus, Bombardier, and Embraer (ERJ) in different segments of the market.
- Boeing’s competition in the regional market is intensifying.
- Further reductions in the US government’s defense budgets due to sequestration could subdue the performance of Boeing’s defense segment.
Although Boeing still enjoys dominance in the commercial aircraft market, these threats show that the company will have to up its game to stay on top of the aerospace market.
Weaknesses
Weaknesses stem from the company’s own actions, largely due to inefficient handling of its operations.
- Production delays, cost overruns, and technical problems in Boeing’s 787 Dream liner project has drained a lot of cash out of the company’s projected estimates. This project has yet to generate positive cash flow for the company.
The majority of these problems stem from Boeing’s partial adaptation of Toyota’s outsourcing model.
Porter Model and its impact on Boeing
Summary
ü Boeing is a well-positioned company, given Porter’s 5 forces.
ü The company is trading at an attractive valuation.
ü The dividend is very attractive to income investors with the potential for capital appreciation.
The airlines were at the mercy of companies like Boeing. Let’s take a look and see if Boeing is actually a good business to hold, according to Porter’s 5 forces which are:
1. Bargaining power of buyers
2. Threat of new entrants
3. Threat of substitutes
4. Bargaining power of suppliers
5. Intensity of competitive rivals
Porter Model and its impact on Boeing
Bargaining power of suppliers:
Boeing’s suppliers are several well known companies like General Electric, Honeywell, UTC Aerospace, Rolls Royce, Triumph Group and so on. It depends heavily on its suppliers for the raw material required to produce the world class and technologically the finest aircrafts. Most important raw materials it needs for aircrafts’ production includes aluminum, titanium and composite material. Most of its suppliers are large technology firms that supply raw material and technology for its aircrafts. However, Boeing is also a large firm that only selects the suppliers that can accountably supply raw material and care for all the aspects of quality and performance as highlighted in Boeing’s supplier guidelines. The overall bargaining power of suppliers is moderate because of Boeing’s size and its financial clout. Its ability to pay is the biggest factor giving it an upper hand and higher bargaining strength than its suppliers.
Bargaining power of Buyer:
In any industry the power has shifted into the hands of the customers. Now businesses are devoting themselves to delivering superior value to the customers and other stakeholders. The customers of Boeing include several major and minor airlines brands around the world including delta airlines, Lufthansa and FedEx. Government, military and space agencies are also customers of Boeing. The bargaining power of customer becomes high for several reasons but in case of Airlines industry where the level of technological innovation matters and switching costs can be high, it remains moderate. Every airlines brand wants the best aircraft at the best price. They want aircrafts that are technologically advanced, light, low on fuel consumption and high in terms of traveler convenience. The brands that provide value as per the expectations of these airlines brands are winners and Boeing is among them. Another factor that proves the bargaining strength of Boeing is the high backlog worth $500 billion. This means that it is loaded with orders and its customers believe in the quality of the products it sells. Overall, the bargaining strength of Boeing’s customers is moderate.
Porter Model and its impact on Boeing
Threat of substitutes
The threat of substitutes before Boeing is low because there are pretty few substitutes for aircrafts and then the number of commercial plane makers is also not very high. There are few competitors who can provide matching quality like Airbus or bombardier. In this way, the threat of substitute products remains low. Moreover, due to its quality and the level of technological innovation, Boeing is loaded with orders. The overall threat remains low.
Threat of new entrants:
The threat of new entrants is low in the airlines industry. The barriers to entry are very high. While there is a very large investment in operations, supply chain and other things, you also need skilled Human Resources. To deliver great quality, you need to invest in technological innovation. While the barriers to entry are high, the barriers to exit are also high. All these factors along with the regulatory environment and the high level of legal regulation add to compliance costs and make entry difficult. This all just means that the threat of new entrants is very low.
Level of competitive rivalry in the industry: The level of competitive rivalry in the industry is high. It is because every brand is trying to push the line of quality and innovation higher. The major players include Boeing, Airbus, Bombardier and Embracer. Boeing and Airbus are the market leaders with the largest market share. The other brands too are pushing the line of quality and innovation. The only factor that slightly moderates the intensity of competitive rivalry is the quality and image of Boeing. Its technology and financial strength also make it highly competitive. These factors lend it competitive strength but yet the overall level of competition is high.
Boeing PESTEL analysis
Boeing is one of the most well-known and powerful players in the aviation industry. It has acquired several critical capabilities and due to its technologically innovative models, the demand for Boeing’s aircrafts has increased sharply. However, its business is affected by a wide range of factors that vary in nature. From political factors to economic and technological, all of them can have a direct and big impact on Boeing’s business. Even after the deregulation in US market, there are several nations where the aviation market is still regulated heavily. If Boeing has accumulated a heavy backlog then it is because of technological innovation and its other competitive advantages.
Apart from government and economy, other forces affect its business and profitability. This PESTEL analysis explains how these various forces in its macro-environment affect its business.
Political:
The political factors have an important role in the aviation industry and these factors can differ from nation to nation. The political and regulatory environment is not the same across all the nations. The regulatory restrictions were eased in US in 1978 only. However, in the world market, there are several areas where aviation is still highly regulated. These regulations affect the sales and business of Boeing. While air travel has grown in popularity, the level of regulation in some countries is still a hindrance to profitable business. The more profits the airlines companies earn, the higher is Boeing’s revenue since it can sell more aircrafts. Boeing’s aircrafts and cargo aircrafts are known for their excellence. However, until the relationship between the governments and the industry is very friendly, the hurdles would remain. As per a report by ‘Open Secrets’ Boeing’s lobbying expenditure in 2016 was $3,980,000. All these facts indicate towards the remarkable importance of the political factors in case of Boeing
Economical:
Economic factors are very important to be considered in terms of the aviation industry. The condition of the global economy and the purchasing power of the individual customers and aviation companies, has an important bearing on the revenue and profits of Boeing. The revenue and profits of the airlines companies had fallen sharply during the recession. However, the industry responded with price cuts and by raising the service standards. The results have been positive and now that the recession has passed, Airlines companies are again enjoying better profits and revenue. The condition of world economy is much better and this is some good news for the world’s top manufacturer of commercial airplanes. These economic trends have led to a surge in demand for air travel and with it for new and technologically improved aircrafts. The industry expects consistent growth in the coming years and this means Boeing can expect faster growth owing to better economic conditions globally.
Social:
Socially, the acceptance of air travel has increased. Now, more and more people are using air travel for tourism and professional travelling. It is being considered safer. The credit goes to the manufacturers who make excellent airplanes that are better in terms of fuel consumption. This has helped the airlines companies drop prices and make air travel affordable for the masses. Moreover, air travel is the preferred mode of transportation for the millennial generation. In the developed nations particularly, its demand is very high which is very good for Boeing. Apart from Western, in the Eastern and Mid-Eastern cultures too, the demand and acceptance of air travel has kept rising in the 21st century. Apart from the convenience it provides safety and affordability are also the reason behind its popularity. This demand is expected to rise further in future based on increased reliance on airlines and because of the social value such companies create. They generate employment and provide a kind of convenience that any other mode of travel cannot afford. However, whenever there is some bad news like terrorist attacks or plane disasters it affects the entire society and in turn also the airlines companies and manufacturers.
Technological:
Technology has become central to growth in the airlines industry. Boeing’s aircraft models have excellent technological capabilities. Its 787s are in demand because of the great inbuilt capabilities they have. They are better than other crafts in terms of fuel efficiency as well as range. Boeing produces a wide variety of models which are better than the competing crafts in terms of technology as well as design. Apart from that, Boeing spends a lot on research and development to make its aircrafts safer and better in terms of fuel efficiency and other features. The main reason that Boeing is ahead of all is its ability of technological innovation. It conducts a lot of research before developing its mind blowing models. In the 21st century, technology has acquired a central role in transportation. Faster planes that are low on fuel consumption and environmental impact will continue to remain in demand. Technology will continue to decide the winner in the defense and aerospace sector too.
Environmental:
Environmental concerns are just as important for Boeing and the aerospace industry as the other industries. Boeing is also committed to the protection of the environment and the planet. It has invested in several areas related to environment and fuel efficiency. It is developing and testing new technologies that can bring greater fuel efficiency. It also sets environmental performance targets for its facilities and works to meet them. Boeing notes, “From researching bio fuels, fuel cells and hybrid electric propulsion to improving air traffic management, finding sustainable composite materials and exploring new chemical coatings that resist corrosion, our team of technicians, technologists, engineers and scientists collaborate with research and development partners around the world to solve today and tomorrow’s environmental challenges” (Boeing, Environment, 2017). As a part of its remediation program, Boeing is taking innovative approaches in clean up efforts to protect human health and the environment.
Legal:
There is a complex web of laws and regulations that affects Boeing. As a manufacturer of commercial airplanes, it is also a big employer. From labor laws to environmental laws and other laws related to air travel and passenger safety, there are several that apply to its business. There are several risk related areas including U.S. Defense Department procurement rules, proper handling of sensitive information and anti-corruption. The managers are responsible for compliance in the areas that they oversee. Boeing also provides training to its employees and managers regarding ethics and compliance. In 2005, it has faced some serious legal problems over a rocket launch program. Apart from that labor related cases had also troubled Boeing in 2011. Due to these factors Boeing has instituted an internal team called Compliance Risk Management Board that handles the legal risks.
Ratio Analysis
Profitability Ratios:
Gross profit margin=85%
An indication of the total margin available to cover operating expenses and yield a profit.
Operating profit margin=5.8%
An indication of the firm’s profitability from current operations without regard to the interest charges accruing from the capital structure.
Net Profit margin=5.1%
Shows after-tax profits per dollar of sales. Subpar profit margins indicate that the firm’s relatively low, its costs are relatively high, or both.
Liquidity Ratios:
Current Ratio=124%
Indicates the extent to which the claims of short-term creditors are covered by assets that are expected to be converted to cash in a period roughly corresponding to the maturity of the liabilities.
Quick Ratio=99%
A measure of the firm’s ability to pay off short-term obligations without relying on the sale of its inventories.
Cash Ratio=103%
An indicator of how long the company can go without further inflow of funds.
Debt Ratio:
Debt Ratio=42%
Measures the extent to which borrowed funds have been used to finance the firm’s operations.
Activity ratios:
Fixed-assets turnover=334%
A measure of the sales productivity and utilization of plant and equipment
Total-assets turnover=105%
A measure of the utilization of all the firm’s assets; a ratio below the industry average indicates the company is not generating a sufficient volume of business given the size of its asset investment.
Average collection period=34 Days
Indicates the average length of time the fi rm must wait after making a sale before it receives payment.
Solution of Ratios
*(Dollars in millions, except per share data)
Profitability Ratios:
Gross profit margin = Sales Cost of goods sold / Sales
$80731/94571=0.85
Operating profit margin = Profits before taxes and before interest / Sales
$5568/94571=0.058
Net Profit margin = Profits after taxes / Sales
$4895/94571=0.051
Liquidity Ratios:
Current Ratio = Current Assets/ Current Liabilities
$62,488/50134 = 1.24
Quick Ratio = Current Assets-Inventory/ Current liabilities
$62,488-12807/50134 = 0.99
Cash ratio = Cash & Marketable securities / Current liabilities
$8,801+43,199/50134 = 1.03
Debt Ratio:
Debt Ratio = Total debt / Total Assets
$38,054/89,997=0.42
Activity ratios:
Fixed-assets turnover = Sales/ Fixed assets
$94571/27,509=3.43
Total-assets turnover = Sales/ Total assets
$94,571/89,997=1.05
Average collection period = Accounts receivable / Total sales/365
$8832/94571/365days
$8832/259.09=34
Competitive Profile Matrix (CPM)
Rating Means
1. Major Weakness
2. Minor Weakness
3. Minor Strength
4. Major Strength
We compare the company internal position to is competitor Weakness and Strength in Competitive Profile Matrix.
Internal Factor Evaluation Matrix
External Factor Evaluation Matrix
