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Boeing-- How to Build a Global Power

By Edited Nov 13, 2013 0 0

Boeing began as one man’s vision to build and design his own aircraft and has become one of the most important business’s not only in the United States, but in the entire world, shuttling millions of passengers to and from destinations around the globe. Currently, Boeing employees more than 170,000 men and women in the United States as well as 70 different countries, making Boeing a truly global company.

                The Boeing Company was founded in 1916 in Puget Sound of Washington state by William E. Boeing. It was here that he bought a shipyard that later became his first airplane factory. The company quickly became a leader in the field of producing military and commercial aircraft. The company has come very far since its humble beginnings in 1916, and large part of the success of the Boeing has been the series of acquisitions and mergers that they have undergone to become the world’s largest aerospace company. Boeing also boasts that they are the most diversified aerospace company in the world, creating the largest amount of different products. A few of the more important acquisitions and mergers that Boeing has made are of course, McDonnell Douglas, but also North American Aviation, Rockwell International, Hughes Space and Communications, and recently Jeppersen.

                Today, Boeing creates and designs many different commercial jetliners. Commonly known to the world as the 747, and the 787, the entire 7-series of aircraft lead the industry in that field. Boeings commercial aviation services offer many different services with both passenger and freight services. You might be wondering why Boeing labels themselves Aerospace. It is because in addition to the jetliners and small aircraft, Boeing also designs and assembles satellites and other launch vehicles that are used by NASA, Boeing is NASA’s largest contractor. Boeing also has a division of the company working on support and defense systems, Boeing is the world leader in designing and manufacturing military transports, tankers, fighters, and helicopters. There is a worldwide customer base in the support system field and in addition to all that Boeing is already doing, and leading the field in, they have teams working on constant innovation and what the future customers will need.

                Boeing prides itself as a company that not only has control over what they are working on currently, but has a plan for what they are going to be working on in the future. Boeing calls this their “Vision 2016,” this is a four year prediction of where Boeing wants to be as a company in 2016. Goals such as run a healthy core business to open new frontiers, these might be broad strategies to have, but it is important to remind yourself often that you are working to “build a cathedral, not just carving stone.” (Kirk, 2012) Along with the Strategies outlined for Vision 2016, the company also has core competencies that they would like to reach, such as having detailed customer knowledge and focus, have large scale systems integration, and to have a lean enterprise. Boeing has also placed many different values that are not unlike those of Saint Leo University. Values such as leadership, integrity, quality, people working together, and good corporate citizenship.

                After all that Boeing has accomplished, they are becoming most prominent in a global business sense. With customers and customer support in approximately 150 countries, and total revenue in 2011 of $68.7 billion, Boeing has traditionally had “70 percent of its commercial airplane revenue from customers outside the United States.” (Boeing, 2012) Not only does Boeing have this very large relationship with customers worldwide they have contracts with 22,000 suppliers and partners globally. To go along with the global presence, Boeing has many different research and development centers around the world. Boeing views this growth as a mutual growth, as they grow with the countries around them, and the market as well.

How then do you operate a business that is so large that has so many different functions and aspects? Boeing is organized into two different company branches that are both managed by the same upper management, but are supported by nine different corporate functions. With Commercial Airplanes being on branch, and Defense, Space and Security being the other, they are supported by the nine corporate functions of Business Development and Strategy, Communications, Engineering Operations and Technology, Finance Services, Human Resources, International, Law, Office of Internal Governance, and finally, Government Relations.

With headquarters in Chicago, the Boeing Company is managed by CEO Jim McNerney. McNerney is a very accomplished business person, spending time at General Electric as well as 3M, which is a 20 billion dollar global technology company. McNerney has also been appointed by the President Barrack Obama as one of the chairs on the Presidents Export Council. This council oversees trade in the US and around the world. He has been a part of Boeing since 2001 and will continue to do so into the future. To go along with McNerney, the company has a plethora of great minds on its Executive Council.  These executives are all driving the will of Boeing forward and are all focused on global growth strategies which are and have always been one of Boeings greatest strengths, financial goals and performance, sharing best practice, technologies and productivity improvements. Boeing has also made a conscious effort to focus on leadership development, believing that the true success to a global business is to have the right leaders in the right places, and for those leaders to know that they in turn, are going to be expected to focus on these same issues as well as having great ethics and compliance with the companies policies.

Boeing has many different brands, but really when you think of Boeing the first thing that comes to mind are the commercial aircraft. The large airplanes at the airport that everyone has flown on, or at least seen up in the sky, the headquarters for the Boeing Commercial Airplanes is back in Puget Sound where it all began in Washington State. In 2001 the total revenue for the commercial airplane segment of the company was $36.2 billion and rounded out the year with about 79,000 employees. This segment of the company offers a “family of airplanes and a broad portfolio of aviation services for passenger and cargo carriers worldwide.” (Boeing, 2012)  An impressive statistic is that Boeing airplanes represent three quarters of the world’s airplanes, that means that even as competitive as Airbus has made itself, Boeing still has a firm grip on the majority of the market.  Boeing has approximately 12,000 airplanes in service.

The Boeing Defense, Space and Security are the other pillar of Boeing. Though you would not think it right away, but Boeing is a leader in building airplanes and helicopters for the United States military and countries around the world. With headquarters in St. Louis, MO, the Boeing program is a very impressive one. It was formed in 2002 when Boeing realized that they could integrate all of their defense, space, intelligence, and communications capabilities into one department and begin to focus on innovations and designing the best military and space craft in the world.  In 2011, total revenues were $32 billion, which is not even that far off from the Commercial Airline branch of the company, a very impressive addition to the company that Boeing can be very proud of. This segment boasts around 63,000 employees. Their motto is “Delivering the Future.”

In addition to these two major branches of the company, there are branches that though they are not as large, have had great success of their own. They Boeing Capitol Corporation for example, is head quartered in Washington state just like the Aircraft branch is, but this branch focuses on the financial subsidiary of the Boeing Company. They look into the assets that an important to the core operations of the company, while at the same time, arrange and provide financing information for the customers of Boeing. Many times when a company wants to buy Boeing products, it’s going to cost that person a lot of money, and the Finance branch is here to help the buyer along. At the end of 2011, the branch was valued at around $4.3 billion.

Technology changes every day, what once was brand new and an innovation can literally change overnight in today’s day and age. So the Boeing Company has a team dedicated to engineering, operations and technology. They were formed in 2006 and focus on Boeing’s research and development and making sure that the company is technology ready. If the company creates a new piece of technology or something that differentiates their product from other companies, this branch of Boeing is also here to protect intellectual property. They are also responsible for the testing of the products, and making sure that those tests are as safe as possible.  “Their motto is to pursue technical and functional excellence for the enterprise.” (Boeing, 2012)

Boeing has developed its own way of doing things; you would think that they would have almost been forced to do this with such a large enterprising company. They believe that if they drive their performance through growth and productivity and leadership and development that they have a perfect model for success. What this means for them is that they have certain financial objectives, they apply those objectives to growth and to productivity, and then push those new objectives combined with the financial ones and create financial performance, this will in turn lead them to the performance plan which is selling their product, and to stock price, which should go up if they complete their other goals. All of this will end with Boeing and all of its stakeholders be better off.

When it comes to leadership development, Boeing has a leadership development center in St. Louis, Mo. That will take the young leaders and the old leaders and give them lessons on the values and culture of the Boeing Company. This center focuses on business and leadership skills and believes that leaders should teach leaders. Boeing is able to use real life business scenarios to teach the students in the programs and has a state of the art center to achieve all of its goals in. The leaders in the Boeing company grow, the company also grows, investing in your current workforce rather than going out and finding new employees is often a very strong strategy and one that Boeing very much so believes in.

When a company reaches a certain size in this day and age, there are many different responsibilities that they will be taking on. These responsibilities don’t come by choice, but rather by the culture of the society, and in today’s world, if a company is doing the wrong thing, especially a company as large as Boeing; they are going to be exposed very quickly. So Boeing has a very strong corporate citizenship program.  Their programs are all based around the belief that they can make a positive impact on people and communities.  Partnering with communities around the globe, Boeing has set its focus on 5 different areas of impact, health and human services, education, arts and culture, civic awareness, and environment.  In 2011 Boeing gave back 57 million to the communities around the world. Then, attesting to the values of the company, and how they are instilled in the employees, the employees gave an additional 38 million through Boeings employees community fund, one of the largest employee-owned charities in the world. This program is funded through a company gift matching program. Another 52 million was given to event sponsorships, memberships, and business donations.

Your interaction with the environment can be just as important as your interaction with the communities around the world. Boeing has been working to create fuel-effciecnt new airplanes such as the new 787 dreamliner, the 747-8 and the 737 max. These airplanes all have significant upgrades in the size of their carbon footprint. These airplanes will also replace the less efficient models going forward. Along with these new planes, there is a constant need not just a Boeing but worldwide, for a renewable energy source. Boeing has been working tirelessly to solve this epidemic and has had some success with biofuels, fuel cells and solar cells. It is a relentless pursuit, and could also be the next huge milestone in business that Boeing takes. Biofuels are a sustainable alternative to the gas that planes are using now, and one thing that Boeing is trying to figure out is, how do you make a biofuel that you can add to a plane right now, and need to change the engines and redesign an entirely new motor. The idea here is to find out how long and how many resources you are going to have to use to create the fuel, and is that very economically viable. Boeing thinks so, people thought it would take them ten years to discover a biofuel that would work in a jet engine, and they did it in two.  Boeing also knows that if they are making changes, then the rest of the industry will follow, this is why they are setting ambitious goals of “targeting 25% cuts in greenhouse gas emissions intensity and hazardous waste and 25% increase in energy efficiency and recycling rates by 2012.” (Boeing, 2011)

Boeing knows that they have a great group of employees and this has always been one of their greatest strengths, that is partly why they have begun a new series of ads where the employees will tell the Boeing story, some 20 employees were interviewed for the add companywide, and a few were selected. The company really wants to capture the character that they believe they have and show that to the world. They want to show that even though they are this business giant, they are maintained and run by high character individuals who are committed to excellence.

In 2012, in the first financial quarter, Boeing has shocker and stunned many analysts when they came out and revealed a 58% rise in earnings from the previous year. They were expected to earn 78 cents a share but instead earned $1.22 a share. This tremendous upswing can be attributed to the upswing in Boeing’s commercial airliner business. The market rebounded and Boeing was able to deliver 137 new aircraft, this is 32% more than a year ago. The Boeing backlog has reached around 308 billion dollars; this is more than 4,000 planes. In the stock market, Boeing competes primarily with companies like Lockheed Martin, General Dynamics, and BAE systems. “All told, first quarter revenue increased 30% to $19.3 billion.” (Brown, 2012)

The 747-8 and the 787 Dreamliner are a very large part of the huge jump in sales in the quarter. The airplanes represent many different milestones for the company, it is the fastest commercial airliner ever made, it’s the most fuel efficient airliner ever made, and it can boast a double digit improvement in fuel efficiency. It is a quiet aircraft that can land and take off in the same airports as the other aircraft in the fleet. The company is growing off the success of this and the thought that they could sometime in the future not have the fuel needed to fly around the world and has teamed up with NASA to create a craft called the blended wing and body, or the BWB. The plane is a cross between a regular airplane and a flying wing, the plane is designed to use less fuel. The plane looks almost like a wedge. The Dreamliner, the BWB and the 747-8 are all perfect examples of what Boeing is all about and why they continue to be the leader in all of their major fields of work and will continue to have success in the future.

When Boeing decided that they were going to outsource the majority of the labor, around 70% of the Boeing 787 aircraft, they were making a crucial decision that, in their eyes at the time seemed like the most advantageous way to go about contrasting this aircraft. The rewards seemed too far outweigh the risks. Just the amount that they would save in costs alone was enough to want to go forward with the outsourcing plan, but they saw more than just saving money, Boeing had a truly global market theory. Boeing thought that if they were to use more international companies help to build the aircraft, this would forge stronger partnerships in the future when they were selling the aircraft. For example, after producing some parts in Italy, Boeing was hoping that the Italian people would take a sense of pride in having part of the plane built there.  In the future, this could increase sales. Boeing also had work for their aircraft done in Japan, and Canada, as well as various parts of the United States. All in all, there are “some 17 partners in 10 countries,” that are producing major parts of the airplane.

The benefits did outweigh the risks when it came to the Boeing 787. The problem didn’t lie in having too many parts outsourced; the problem was that when Boeing went around the world and asked all of these companies to produce parts for them, they were not strict or specific enough with the chosen companies on both quality of work and timeliness of the work. With more control over the companies, the only risk that Boeing would have taken on was all risk that was completely out of their hands, freak accidents. Another option that Boeing had when they were starting out was to push back their deadline, it is unclear of how much of a buffer zone the deadline had, but it was clearly not enough when you consider that they had to pay an additional 2 billion dollars throughout the development process because of being so behind schedule. Another risk that Boeing did not foresee being a problem, but resulted because they did not properly manage their outsourcing was that some of the parts were coming in unassembled, and could not be assembled by US Boeing engineers because the directions were in another language. You would really think that a company doing outsourced labor would have a better grasp of the big picture and what Boeing was trying to accomplish than that. At the same time, you would think that Boeing would have a better understanding of who they were outsourcing to, and would already know the quality of work that they do.

The well publicized issues that Boeing ran into with regard to is management of its globally dispersed supply chain are well founded concerns and there are many things that Boeing can do in the future to avoid these problems. As far as the problem of having poor globally supply management, It appears evident that Boeing was not doing enough research into their global suppliers in the first place. It is paramount, especially for a company that is creating such an important product as far as safety is concerned, that the standards of the supplier is just as high as your own, and that the supplier actually has the time and skill to create the exact product you need and with the same high standards. As a company you are going to take criticism, and deserve the criticism you get if you outsource work to a supplier, and they in turn, without asking you outsource that same work to another company. It is a wonder why Boeing did not have specific contractual regulations on having their suppliers outsource work that Boeing had contracted them to do. This all stems from the top though, and if Boeing’s management team had been paying more attention in the first place this would not have been a problem.

To make sure there are no problems in the future, Boeing needs to have more regulations in their contracts, and their upper management needs to be more involved in the management of the companies supplier and there does need to be a more flexible deadline in the Boeing contracts with their customers. Getting a more flexible deadline could end up costing Boeing a lot of money, but if they factor in that they lost 2 billion because of late deadlines, cutting out half of that would be a great start.

The critics that claimed that Boeing is outsourcing American jobs overseas are always going to exist. The facts are that Boeing is a global company, one of the world’s first, servicing people around the world. They cannot afford to just sit in the United States and worry about who gets what jobs. Their initial strategy with outsourcing the work was just as much to build relationships as it was to save money. In today’s market, those relationships could help make Boeing billions of dollars and win over European aircraft manufacturers customers. The company should respond to the criticism by explaining just that they serve the world, not just the united states, and that by forging these relationships with other countries, Boeing is showing business in other markets that you can outsource your labor and get the job done at a cheaper price without losing any quality and gaining relationships. So in a sense, what goes around comes around, and where Boeing is outsourcing American jobs today, there will be more foreign direct investment in the United States in the future because Boeing is paving the road.

Boeing-- How to Build a Global Power
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