Boeing Internal Analysis Purpose This report discussed the components of internal analysis, competitive advantage, and strategic competitiveness of Boeing Company. This is done by analyzing the tangible & intangible resources, capabilities, and core competencies in order to clarify Boeing’s strengths and weaknesses. Resources Exhibit 1 Tangible| Intangible| Manufacturing plants| Boeing’s digital design software| Composite and metal materials| Dynamic assembly line| Headquarters building| “Moonshine teams” strategy|
Machinery used for lean production| Boeing’s brand name| Financing/ Launch aid from NASA | | Boeing’s newest jet, the 787, is made out of composite plastics and carbon fiber in order to be more efficient and comfortable. The new materials allow the plane to be pressurized at a lower elevation, which results in less jet lag. Also, the cabin humidity can be raised to around 20% because these materials do not corrode like metals. Through the use of lean productions, Boeing significantly reduced the cost of machinery used for manufacturing, along with inventory costs.
For financial resources, Boeing received $12 billion from NASA to develop technology. They also received $1 billion in loans from Mitsubishi, Kawasaki, and Fuji for the development of the 787. Furthermore, Boeing had received launch aid from U. S. Government subsidies. Boeing has a reputation as one of the best manufacturers of commercial and military jets. Its strong brand and name represents the position in the aerospace industry. Boeing has encountered some scandals in upper management, however they are trying to restructure its reputation and make a comeback.
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Capabilities Exhibit 2 Capability| Valuable| Rare| Costly to imitate| Non-substitutable| Dynamic Assembly| Yes| Yes| Yes| Yes| Lean Production| Yes| Yes| Yes| Yes| Composite Materials| Yes| Yes| Yes| Yes| Lean production at Boeing was a very important and effective decision. They were able to design equipment that cost amazingly less and was much more efficient than the machines they were using at the time. A router was built for 0. 2% cost of their larger one and a drill machine was built for 5% cost of the previous model.
They used a hay loader to put the seats into the planes, rather than using a crane, which reduced production time from twelve hours down to only two hours. Production of landing gear components took 32 moves over 10 months, but with the lean production strategy it only took 3 moves and the time p was reduced to 25 days. Dynamic assembly was an important change at Boeing as well. Before, planes had to be jacked into position at one station, worked on, down-jacked from the station, and moved with a power cart to the next station.
This process could take up to two, ten hour shifts. By using a sled that drags the plane two inches per minute, Boeing reduced production time in half. Core Competencies One of Boeing’s core competencies would be utilizing composite plastics in the manufacturing of their jets. This is valuable because it allows them to build a jet that can travel faster, farther, and with more comfort than on previous jets. It can be considered costly to imitate because when Airbus built a model to compete, the A350, its performance was unable to compare to that of Boeing’s 787.
The composite materials are non-substitutable because it is currently the highest grade technology jet manufacturing industry. It is rare because only Boeing and Airbus are in the commercial jet industry, and Airbus’s model cannot compare. Another core competency would be Boeing’s ability to use lean production. This is valuable because it allowed Boeing to free up 1. 3 million square feet of space and sell seven buildings by switching to a “just-in-time” inventory. Also, they were able to reduce costs of equipment and speed up the manufacturing process drastically.
It is socially complex because it uses numerous different strategies to create one finished product. There are no substitutes that compare to lean production as far as time and money savings, and it is rare because Airbus and Boeing are the commercial jet companies to use it. The third core competency is Boeing’s dynamic assembly line. This was a valuable change to Boeing because it reduced assembly time by 50%, or from 22 days down to 11 days. The planes move 80 feet every shift and lights determine the status of the assembly line.
Dynamic assembly lines are costly to imitate and rare due to the size of the plant and the components used in order to pull such a large craft throughout the building. The only substitute of a dynamic assembly line is a static assembly line, and the dynamic one performs much more efficiently. Weaknesses * Ineffective top management Boeing was recently faced with the scandals which hurt the reputation of Boeing. The top management recognized the problem and tried to figure it out by effective management strategies. * Outsourcing In 1997, Boeing lost $1. billion against their earnings due to problems with the supply of critical components. They had to halt the production of the 737 and the 747. In 2006, suppliers for Boeing’s 787 fell behind schedule which resulted in a delay of production. Value Chain Analysis The industry value chain is the process from the suppliers of the raw material to the end customers who demand the service of transportation. Boeing found itself in the crucial situation of having lost market share to Airbus. Boeing had to act in response by enhancing customer benefits to recapture an advantage over its competitors.
The fundamental idea was an innovative renovation in the supply chain process, which would redefine Boeing’s role as a coordinator and integrator rather than simply the manufacturer. At the heart of the supply chain transformation process was the strategy to outsource more than 70% of the 787’s production. Boeing introduced new project management techniques by sharing risk with partners. The companies sharing risk transformed the entire 787 program. The risk shared by partners in investing their own capital in the 787 program cut approximately 55% of Boeing’s development cost required for the program, which was $6 billion.
Boeing’s outsourcing process has dramatically reduced the manufacturing time from roughly two weeks to as little as three days. Saving such significant time greatly decreases labor and inventory costs for the company as outsourced components reach the assembly site with pre-fitted sub-systems. This approach streamlines and adds efficiencies to the assembly process. (Boeing value chain report, 2010) Competitive Advantage * Works more with both its customers and suppliers to design and build the best aircrafts on the market. R&D departments which are able to design and implement better aircrafts which reduce the costs and make more efficiency. * Flexible work schedules for the employees. * Boeing’s name and brand bring a strong competitive advantage between Boeing and Airbus. Exhibit 3 Profitability ratios| Boeing| Airbus| Net profit margin| 3. 6%| 0. 3%| Gross profit margin| 18. 02%| 11. 95%| Asset turnover| 1. 1| 0. 55| Return on assets| 6. 16%| 1. 07%| The profitability ratios show that Boeing had a moderate and good profitability compare with other company (such as Airbus).
The return of assets of over 6 % shows an overall strong earning power of Boeing’s total assets. Strategic Competitiveness Boeing has implemented outsourcing to build better and more efficient airplanes by using portions of other companies’ knowledge and research with their own. This has helped them produce airplanes at a much lower cost. Boeing's strategy was to develop the 787 at a very low cost. By doing this, Boeing believes it can compete with Airbus' new Super Jumbo project. Boeing focused on medium capacity aircraft which can hold 250 people, whereas Airbus focused on super jumbo jets, which contain 550 people.
Overall Boeing has achieved higher quality and efficiency. Boeing pins its hope on a different strategy and does not take the hub-and-spoke concept as a given. The Boeing 787 is the solution for non-stop, point-to-point flights between secondary cities. Conclusion Boeing’s ability to develop lean production, use of composite materials, and dynamic assembly methods are their strengths. Their weaknesses include poor upper management and unreliable outsourcing. In the future, Boeing needs to find higher quality upper management and more reliable suppliers.
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