0 | P a g e

MASTER OF BUSINESS ADMINISTRATION

MGT 6798

CASE METHODOLOGY:

An Individual Assignment

Submitted to:

Mr. Ayub bin Hj. Khalid

Submitted by:

Fakhrul Anour bin Abdullah G1136857

1 | P a g e

CONTENTS

1- ABSTRACTS Page 02

2- INTRODUCTION Page 03

3- PROBLEM STATEMENT Page 07

4- SWOT ANALYSIS Page 09

5- CONCLUSION Page 10

6- RECOMMENDATION Page 12

7- OTHER REFERENCES Page 14

2 | P a g e

ABSTRACT

Airline industry is an aviation business that consumed high cost with expected marginal

return not less that million in order to survive its products and services maintenances. The history

of BOEING® started as a hobby by a man who had made his fortune in lumber business with

Greenwood Timber Company. Thus there’s no cheap entry for the industry but it is not an easy

exit too, when considering the market share supply and also stakeholders’ demand along with

government responsible of societal need—sustaining is another strategy with no ending plan!

“In a year filled with big events and changes,

one of the biggest was this; we stopped

thinking of ourselves as just an aerospace

manufacturer and began to think of ourselves

in a much broader way as a provider of

integrated products and services to all of our

customers.”

— Phil Condit, 1999 (President & CEO)

B&W, first plane created and built by William Boeing seen here harbored at Roanoke

Hanger, Lake Union in 1916. Government of New Zealand was the first customer used the

B&W for airmail and pilot training.

3 | P a g e

INTRODUCTION

Since BOEING®

was founded in 1916 by William Boeing;

it has become the world’s largest aerospace company, and

for decades had dominated the world’s commercial

aviation market. But as the industry matured, the position

as the market leader shifted down when for the first time of

its existence, a rival, Airbus based in Europe outsold

BOEING® in year 1999. By year 2003, the Airbus

Company delivered more airplanes and that had given

more pressure to BOEING®. With high competition of

Airbus against BOEING®, the pressure of being challenged

continued with business strategy of product differentiation between the airplane producers. Then

the pressure continued with the terrorist attacks of September 11, 2001, which translated into

rescheduled airplane orders.

As respond to the pressure, new strategy, ‘e-Enabled’ was unveiled in June 2003 and by

2004, its leadership assembled a team at the BOEING®

’s commercial airplanes division. Chris

Kettering was appointed as the Program Director by Lou Mancini, Vice President of Commercial

Aviation Services which then added another key player, and Scott Carson who was vice

president of the Connexion by Boeing™ business unit at the time.

William Boeing (1881-1956)

►

Conrad Westervelt (1879-1956), Navy engineer that

assisted the hobby of William Boeing in building

planes that then became a successful aviation business.

4 | P a g e

BOEING® sales performance against Airbus throughout the years:

When Frank Shrontz retired as CEO of BOEING® in 1996, it was succeeded by Phil

Condit who had 30 years of experience with the company and was president since 1992. During

his tenure, he introduced ‘Vision 2016’ in 1996 annual report that called for BOEING® to

become an integrated aerospace company and a global enterprise, designing, producing, and

supporting commercial airplanes, defense and civil space systems by the 100th

anniversary in

2016. The vision strategy was centered on three initiatives; run a healthy core business, leverage

strengths into new products and new services, and open new frontiers.

Year 1999 - Airbus outsells Boeing for the first time. While back in 1994, during Frank Shrontz as

President and CEO, it was called BOEING®’s ‘annus horribilis’ (horrible year!) by Fortune magazine

where earning shrank by nearly half, to $856 million, and slashed 9,300 employees from its payroll of

126,000. It was not the first slash when back in 1968, Thorton ‘T’ Wilson (the BOEING®’s president

during that time) had to cut workforce from 105,000 to 38,000 accordance to ‘impending disaster’ after

U.S. Congress cancelled the development funding of Super Sonic Transport (which would have been the

country’s first supersonic commercial jetliner) with the closedown of Apollo project.

“We saw some pockets of need and how to fill those pockets.

But there was no systemic, holistic view of how to add them

together. (Our task) is to take these building blocks and allow

them to work together to further increase efficiency.”

— Chris Kettering, 2005 (Director of e-Enabled program)

5 | P a g e

Operati

Purchasing

Maintenan

H

Ai

But the impact of employment downsizing during the Shrontz’s leadership has given hard

time for Condit to measure the right tune with his vision when in 1997 it faltered with a failure to

meet supply with demand. Production delays caused BOEING® to take a loss of $178 million

with a 90% drop of profits for the first quarter of 1998—that was the first red ink in 50 years.

Then in June 2003 (under new open frontiers of Vision 2016), e-Enabled Advantage was

introduced at the Paris Air Show where its strategy is to help airline cut costs, improve dispatch

reliability, reduce delays and cancellations, improve passenger service, enhance aviation security

and provide real-time situational awareness for both flight crew and airline operations centers.

FAA (U.S.)

DCA (MY)

CAA (U.K)

Operations Centre Purchasing and

Warehouse

Maintenance Engineering

Hangars

Real-time connectivity in every aspect of airline operations; flight schedule, maintenance, human resource,

and regulatory agencies.

e-Enabled Advantage

“To be effective, we have to take a consultative

approach. We have to ask, what are an airline’s

areas of pain or need, and what we do to help

solve that? It can’t be, ‘I come bearing a gift of

technology’, but ‘I’m helping you to examine

what you need to become more efficient.”

— Tim Mooney, 2005 (Senior Strategist)

6 | P a g e

With ‘e-Enabled’ Advantage and Environment attached to the company long-term

strategy along with the ‘Vision 2016’, sponsored by the leaders of BOEING® Commercial

Airplanes (BCS) and housed within the Commercial Aviation Services (CAS), the program was

activated with Chris Kettering on board as the director in February 2004.

With the two main strategy implemented, new model approached to heighten the profit

making of the company to sustain its long run business. With services were given priority to

sustain its products credibility, BOEING® was looking ahead with ‘silver bullet’ effectiveness—

a direct and effortless solution to a problem.

Our vision of the future of flight is fundamentally linked

with technology, services, and keeping customers flying.

We believe BOEING®

and its subsidiaries will take a

network-centric approach to flight operations and aircraft

maintenance, to enhance airlines’ productivity.

►

Lou Mancini, 2005

(Vice President of CAS)

7 | P a g e

PROBLEM STATEMENT

In the past, the airline industry was at least partly government owned. This is true when in 1916;

BOEING®

‘s first customer was Government of New Zealand to utilized its first airplane (B&W)

for airmail and pilot training. Then in 1919, BOEING®

received order for 53 B-1 seaplanes as

the United States entered World War I. Within World War I and World War II, BOEING® grew

to be one of the largest aircraft manufacturers in the world.

The government owned entity of aviation is still true in many countries, but in the United

States all major airlines have come to be privately held.1

This was explained by how BOEING®

successfully entered the commercial aviation market with the Boeing 707 in year 1954. It was

the United States' first production jet airliner, and the aircraft with which the US first gained the

lead in commercial jet manufacture.2

As the market matured, the airline industry exists in competitively intense market. In

recent years, there has been an industry-wide shakedown, which will have far-reaching effects on

the industry's trend towards expanding domestic and international services.1

►

The first production airplane of the Boeing

707 commercial jet series made its maiden

flight on 20th

December 1957, with Pan

American World Airways putting the airplane

into transoceanic service on 26th

October 1958,

and American Airlines following with

transcontinental service on 25th

January 1959.

“We’re asking people at BOEING®

and in the industry to

do things differently. The biggest risks aren’t technical,

they’re cultural.”

— Scott Carson, 2005 (Vice President of Sales)

8 | P a g e

With the strategy implementation of Vision 2016 and e-Enabled program, most of the

group meetings were usually about how to bear the challenge of putting ideas into practice. The

main objective of Lou Mancini (Vice President of CAS) was to continue running a profitable

business while integrating each business unit with the strategy. Chris Kettering (Program

Director of e-Enabled) was tasked with coordinating the entire effort. While the main concern of

Scott Carson was to break down the silos of communication among the different business units.

Thus the statements of problem appointed with the case were given not based on the relation

among the board of directors and management but how the new strategy may affect the long run

sustainability of the company in decades ahead.

1) Could e-Enabling create the kind of sustainable advantage that the airplanes used to

provide?

2) Would the advantage be able to withstand the competition so close at hand?

3) Would BOEING®’s transition into services prove to be the silver bullet—the solution

to the airlines’ financial woes and to BOEING®

’s aggressive competition with Airbus?

This model is a part of the e-Enabled Environment program as a consultative approaches because the value of

this program was not about the airplane; rather it is about improving the performance of people in the airline.

“Getting e-Enabled operations to work in an organization

involves personalities, it involves careers and culture.”

— Chris Kettering (Program Director)

9 | P a g e

SWOT ANALYSIS

STRENGTHS 1) World’s largest aerospace

company

2) Wide product and service

range

3) More complete e-Enabled

system

4) Strong focus on R&D

5) Strong product in the form

of e-Enabled services

6) Healthy financial

performance

WEAKNESSES 1) Uncompetitive pricing of e-

Enabled services

2) Communication silos lack

of effectiveness

3) Overly dependent on U.S.

government contracts

4) Product differentiation

against competitors

5) Labor issues

W-O

Internal weaknesses of

BOEING® most likely

based on management

issues that can be

overturned with incoming

opportunities to evaluate

improvement. With more

expenditure offers, labor

issues can be solved.

S-O

As the internet has become

widely used by people

around the world, the IT

consumption will

strengthen the e-Enabled

strategy that BOEING®

has implemented. Along

with other global factors,

the need of airline services

has increased.

OPPORTUNITES 1) Air travel growing

in popularity in

Asia and Latin

America

2) Increasing defense

expenditure

3) Strengthen e-

Enabled suite

4) Invest in developing

efficient aircrafts

THREATS 1) Increased

competition

2) Slowdown in the

U.S. and European

aviation market

3) Volatile energy

markets

4) Cyclical nature of

aviation industry

W-T

The market competition is

highly defined when

compared to the

uncompetitive pricing of its

services. Thus BOEING®

needs to improve its

communication stability by

taking more global

contracts to expand value.

S-T

Competition has become a

major factor to BOEING®,

yet as pioneer of aviation

services and long-standing

experience may benefit the

company at certain level of

business certainty. With

strong R&D, BOEING®

can overcome threats with

ongoing growth planning.

“Whatever we do in e-

Enabling will never be the

sole reason that people buy

BOEING®

airplanes. But it

will certainly help create a

preference for BOEING®

airplanes in the

marketplace.”

— Scott Carson, 2005

10 | P a g e

CONCLUSION

Though BOEING® has gone through quite a remarkable journey since its existence in 1916, the

propelling factor for the airline company is the demand force for transportation services that can

cut cost through time with exceeding revenue against supply. That factor incurs high intensive on

continuous strategies that will increase leverage to strengthen its sustainable comparative

advantage.

Through acquisitions, BOEING® has increased the value of its e-Enabled program by

holdings companies that offered different advantages to support its IT credibility of the airline

system and established a consumer-friendly website to increase airline technical awareness.

Preston Aviation Solutions (acquired in 1998)

A comprehensive suite of IT

solutions to meet the needs of

aviation customers.

Continental Data

Graphics Corp. (acquired in 2000)

Customized information

and documentation to

airlines including

illustrating and editing

materials.

Hughes Electronics Corp. (acquired in 2000)

Recognized as the world

leader in space-based

communications,

reconnaissance, surveillance,

and imaging systems.

Jeppesen Sanderson Inc. (acquired in 2000)

Provides a full range of print

and electronic flight

information services.

SBS International (acquired in 2001)

Provides powerful and flexible

tools to manage crew

scheduling in both regulated

and deregulated environments.

MyBoeingFleet.com (acquired in 2001)

Provides powerful and

flexible tools to manage

crew scheduling in both

regulated and deregulated

environments.

11 | P a g e

After the acquisition, the company further expanded its IT-based strategy with e-Enabled

to reach customers on feedback of how to improve the operational quality of BOEING® services

by introducing ValSim in 2004. The Valuation Simulation program is a visual model of its

customer's business structure using Microsoft Visio to demonstrate how the CAS software

portfolio adds value to customer operations. 3

Increasing operational efficiencies was seen as a key for the major airlines’ survival.

With the e-Enabled Advantage, many within BOEING®

believed that it is the ‘silver bullet’ to

deal with the pressures of cost against revenue on demand over supply and aviation competitive

market. Also by looking at its e-Enabled Environment, the objective to ensure integrated

solutions to services and products will be realized from time to time. As forecasted by analysts,

BOEING® will have an average ~5% growth in passenger volume over the next two decades.

Thus looking at financial position and e-Enabled performance integrated with the Vision

2016, BOEING® has proved a strategy that might not rapidly increase production of new

aircrafts anytime soon, but it may sustain competitive advantage in the airline industry especially

to differ against the Airbus.

►

Still Picture from a

ValSim Video Simulation

of Airport Activity.3

ValSim Solution — modeled on the Customer Engagement Process, the ValSim interface is both familiar

and easy for the sales force to use. Users can also easily connect their laptops to the server to securely

download/upload shareable customer data. Now, when CAS sales representatives perform customer-

engagement work, they're doing more than making a sale: They're adding to the knowledge base of

customer information – and making Boeing that much better at serving its customers.3

12 | P a g e

RECOMMENDATION

By approaching the network based strategy via capability of internet in IT solutions, BOEING®

has been considered as one of the airline companies that respond aggressively to the

technological aspect of a business operations that will increase supply and at the same time may

increase demand.

The confident level of company’s strategy on such approved has proven effetive by

introducing the fully e-Enabled airplane, BOEING® 787 Dreamliner. Though on the weaknesses

part that this airplane may have issues on safety, but the problem was easily traced to be

countered through the effectiveness of e-Enabled Advantage Components.

13 | P a g e

Thus to advice the future endeavours of BOEING®’s e-Enabled programs and any

other perspectives to venture ahead, analysis of this case has come out with this five factors of

recommendation:-

1) Maintain and develop the integrated suite of e-Enabled solution as there more can be

done to improve its existing components, especially on the e-Link, Core Network and

Airplane Health Management to further improve the performance quality of airplanes like

the Dreamliner.

2) While operating as a commercial aircraft manufacturer and defense contractor,

BOEING® should start positioning itself as a solutions provider as well. It is because as a

pioneer for the aviation industry, the experience garnered by this company has marked its

potential to be main consultant on airline sustaining power for other aircrafts provider.

3) Offer certain features and software on a free trial or discounted fee to allow airline

operators understand the advantages and scope of e-Enabled services. The awareness and

widespread of understanding may need to be improved through not only websites but also

other source of medias.

4) Strengthen the consultative sales approach – adopt a more proactive strategy to inform

airline operators of the e-Enabled advantage.

5) Streamline aircraft variants by reducing certain type of airplanes by increasing another in

order to reduce cost maintenance and upgrade job effeciency of flight technical aspects.

Last but not least, ny looking at the financial statements of BOEING®, it has volatile

sales to generate positive net income and operating cash flow with increasing total assets every

year since 1999. It is consider a healthy balance to the company’s progress in sustaining profit

against loss. But to be precise of future performance, the company should look ahead to improve

on its investment and financing activities by having more inflows instead of outflows.

14 | P a g e

OTHER REFERENCES

1 http://www.investopedia.com/features/industryhandbook/airline.asp

2 http://www.707sim.com/707history.html

3 http://www.aeroinfo.com/documents/ValSim%20success%20story%20PDF.pdf

4 http://siteresources.worldbank.org/INTTRADERESEARCH/Images/Boeing787.jpg

“We can increase BOEING®

value to our

customers by offering services in addition to

airplanes, we need to get involved with our

customers and know where they’re going,

where they are in their business models,

and how we can help them be successful.”

— Scott Carson, 2005