Challenges and Opportunities faced by Boeing in the Late 1990s
Boeing has been regarded an industry leader in the production of large aircrafts for commercial and military purposes (Boeing, 2012, p. 12). For a large part of Boeing’s history, the company has received immense support from the US government to become among the most admired companies in America (Boeing, 2012, p. 1).
This success was evident in the Second World War when Boeing built military aircrafts for the US army. Now, Boeing is considered the largest manufacturing company in the US. Since the inception of the company, Boeing has witnessed endless periods of growth and increased sales. However, recent decades have witnessed new challenges for the manufacturing giant.
Like many airline companies in the world, Boeing faced tremendous internal and external challenges in the late 1990s (Applegate, 2008). The aviation industry was increasingly faced with the challenges of a dramatic and fast-paced aviation industry that went against contemporary operational paradigms.
In this environment, Boeing was increasingly faced with new challenges in the aviation industry. Top among the challenges that faced the airline giant was the Gulf war, which posed a threat to the future sustainability of the aviation industry (Applegate, 2008).
The gulf war created many uncertainties to the future growth of airline travel because many passengers were scared to travel amid growing terrorist threats. As a result, commercial airline companies recorded a decline in airline travel. This situation dampened the prospects of commercial airline companies to acquire new aircrafts, thereby affecting Boeing’s sales.
Another challenge was the growing cost of doing business. Fuel costs reached an all-time high (especially with the gulf war in play) and Boeing had to devise new ways of coping with the business environment (Applegate, 2008). With such a turbulent environment in existence, Boeing decided to lay off close to 10,000 workers (Boeing, 2012, p. 12).
However, this move proved to be more problematic for the company after it failed to meet its production expectations. In explaining this development, Pecht (2008) explains that “Production delay cause Boeing a loss of $178 million and report 90% profit dropped in the first quarter of 1998” (p. 173). Boeing consequently failed to meet its production deadlines and lost most of its key markets to its competitors.
During the late 90s, its major competitor, Airbus, outdid Boeing in company sales. This development marked a new challenge for Boeing because it meant that the competitive environment was getting more aggressive and the company had to come up with new strategies of coping with the competition. To align the company with new competitive strategies, Pecht (2008) explains that,
“In 1996, Shrontz, former CEO, retired and was succeeded by Phil Condit. Condit realized that Boeing would not be able to survive selling airplanes alone in the stiff competition so he launched a company transformation into a more agile, geographically diverse, more broadly based company, and less dependent on the highly cyclical commercial jetliner market” (p. 25).
Alongside the challenges that Boeing faced during the late 1990s period was the fact that the company’s main market was already mature. This fact meant that Boeing’s market was almost reaching a decline period as the company’s sales exhibited a trend depicting plateau sales (Applegate, 2008).
Boeing’s management was even more fearful of the fact that competition was becoming more intense while its primary markets showed no ready signs of growth. Boeing’s main markets were commercial airline companies. The company also got military and space contracts to supplement its sales but this market was less mainstream than the commercial airline market.
The late 1990s period was also characterized by poor economic prospects in most of Boeing’s main markets. Fewer people were willing to travel at the time, in anticipation of a gloomy economic future. More so, luxury and leisure travel received the strongest decline in sales as many people shelved their holiday plans to save money for more pressing economic needs.
Though Boeing does not do business with individual travelers, the decline in economic prospects dampened the sales of commercial aircrafts as commercial airline companies also rescheduled their plans of purchasing new aircrafts.
However, the late 90s period also marked a period of new opportunities for Boeing. Top among them was acquisitions and mergers that were set to elevate the company as the best aerospace company in the world (Applegate, 2008). Some of the mergers made by Boeing were temporary but they still increased the company’s prospects of growth. For instance, Boeing entered into a contract with Locheed and General Dynamics to work together if any of them won the Advanced Tactical fighter contract (which they all bid for) (Boeing, 2012, p. 4).
Increased innovativeness also posed a strong opportunity for growth especially after Boeing launched the e-enabled Boeing 777. This aircrafts was laced with onboard LAN and servers (Boeing, 2012, p. 4). The aircraft was one among many aircrafts, which were to be developed using technologically perceptive tools and equipments.
The initiative by the company to use new technology in production was born from the realization that increased technological adoption would improve the company’s competitive advantage. The opportunities that an e-enabled advantage would provide Boeing were limitless especially with the fact that an e-enabled advantage would provide a broader integrated network for the improvement of the company’s operations (Boeing, 2012, p. 4).
E-enabled Advantage and its Link with Boeing’s Company Strategy
An e-enabled advantage is very crucial for any company that intends to keep up with the dynamic changes of the technological world. Depending on the nature of the company, an e-enabled advantage can offer many advantages to different companies but core among its functions is to integrate a company’s activities with the outside world (Boeing, 2012, p. 4).
An e-enabling advantage therefore works as an integrated information management system that seeks to merge a company’s resources/information with other stakeholders. Therefore, instead of using physical information exchanges (which are time consuming and costly) it is easier to use the integrated information management systems (Boeing, 2012, p. 12).
The success of the e-enabling advantage depends on four structural pillars. In relation to Boeing’s case, Jamshidi (2011) explains these four pillars as “the Connexion by Boeing SM broadband data and Internet services system; a central onboard network integration cabinet being developed jointly by Boeing and Rockwell Collins and the Jeppesen Electronic Flight Bag (EFB); and advanced ground-based software applications” (p. 41).
A critical component of the e-enabling advantage is the core network cabinet that acts as the main processing zone of airline data. This e-enabling advantage not only manages airplane data but also manages data, which is external to the airplane (Applegate, 2008). These factors define the nature of e-enablers for Boeing.
Conventionally, it is known that the e-enabling advantage does a lot to facilitate the realization of a company’s goals. The same observation is true for Boeing because it has realized improved organizational performance because of creating the enabling advantage. Consequently, the company has been able to meet its organizational goals. For instance, the company was able to win back its customers from Airbus after they fled from uncertainties on Boeing’s operations (Boeing, 2012, p. 4).
After the creation of the e-enabling advantage, Boeing experienced less production delays, which initially caused the company to lose its customers (after it was unable to meet its production deadlines). In addition, the e-enabled advantage helped the company to merge its operations with those of its suppliers, and other partners.
Consequently, the company experienced improved supply chain flow. Improved supplier flow also led to improved customer services. Many of the company’s customers therefore felt contended with Boeing’s services and they were able to stay loyal to the company. This development further led to the realization of a key objective for the company, which was to be a leader in the aerospace industry (Boeing, 2012, p. 4).
Boeing therefore strived to be the largest aerospace company even in the wake of increased competition. To achieve its objectives, Boeing had to be able to stay competitive, but most importantly, the company could not avoid losing its loyal customers to its competitors. The e-enabling advantage facilitated the realization of this goal because it enabled the company to remain competitive and increase its market share.
There is no limit to the nature of information that may be integrated using the e-enabled advantage. Different aspects of the company’s information are therefore included in the e-enabled advantage tool. Boeing included different aspects of the airline information system, which could be easily integrated into the e-enabled environment, thereby improving the company’s efficiency (Boeing, 2012, p. 4).
Improved efficiencies also facilitated the realization of the company’s objective (to be more efficient). From this analysis, clearly, the e-enabling advantage stands as a main facilitator for the improvement of Boeing’s key competencies. The improvement of the company’s key competencies draws the link between the e-enabling advantage and Boeing’s company goals.
Advantages of the E-enabling Advantage to Boeing
The e-enabling advantage offered Boeing immense opportunities for improving its core business services. Key among the advantages of the e-enabling advantage on Boeing was the fact that it improved the company’s value offing. Boeing’s value offing was improved by the e-enabling advantage at a time when the company needed it most (because it was operating in an already mature market) (Boeing, 2012, p. 5).
To capture the low-cost airline trend of the aviation market, it was therefore necessary for Boeing to improve its operational standards by adopting the e-enabling advantage. The e-enabling advantage provided a good platform for the synchrony of the company’s information to improve its operational efficiencies, thereby improving the company’s value offing. This fact was especially manifested in improved customer services.
Another advantage that the e-enabling advantage provided Boeing was the fact that it made it easier for the company to differentiate
itself from its competitors. The e-enabling advantage made it more difficult for customers who wanted to leave Boeing for its competitors. The IT tool therefore increased the switching costs for customer loyalty because there were only a few companies that could offer the same standards of products and services that Boeing did. Some of the services that Boeing created to differentiate itself from its competitors include the airplane health management program and the crew assistance program (Boeing, 2012, p. 12). Both programs were designed to improve the quality of flight operations.
In addition, the e-enabling advantage facilitated the expansion of Boeing’s operations to include new product portfolios. This move facilitated the proper management of operation risks because Boeing faced major business risks such as terrorism and war-related threats. Since the e-enabling advantage was able to oversee the improvement of supplier-input in the company’s operations, it was easier for Boeing to manage the supplier risk.
Supplier risk is normally associated with production delays and poor reputation because it is difficult to deliver timely products if the suppliers fail to honor their obligations. The e-enabling advantage however remedies this problem through the improvement of supplier flow (Boeing, 2012, p. 8). Improved supplier flow is just an example of how the e-enabling advantage facilitates the improvement of risk management strategies for Boeing.
Finally, the e-enabling advantage improved Boeing’s profitability because improved efficiency is associated with improved sales and improved sales leads to improved revenues. Improved revenues are therefore a product of all the advantages that Boeing enjoyed from the adoption of the e-enabling advantage. Moreover, the e-enabling advantage is nothing more than an IT-enabled tool, which has been proved to reduce operational costs, thereby improving a company’s profitability. Largely, the e-enabling advantage provided Boeing with many competitive advantages.
Applegate, L. (2008). Corporate Information Strategy and Management. London: McGraw-Hill Irwin.
Boeing. (2012). Boeing Brings the E-Enabled Advantage to the Air Transport Industry.
Jamshidi, M. (2011). System of Systems Engineering: Innovations for the Twenty-First Century. London: John Wiley and Sons.
Pecht, M. (2008). Prognostics and Health Management of Electronics. London: John Wiley & Sons.