Case Study

The Boeing Company

737 Programs and Renton Wash. Site – A Strategic Analysis

Presented By: Group 4

Sajjad Gul, Precious K. Horvidalla, Lowell John J. Fetizanan, Marj, Christopher

Presented to: Dr. Tabassam Raza

Policy Management - MBA

Introduction:
Boeing is the world's largest aerospace company and leading manufacturer of commercial
jetliners and defense, space and security systems. A top U.S. exporter, the company
supports airlines and U.S. and allied government customers in more than 90 countries.
Boeing products and tailored services include commercial and military aircraft, satellites,
weapons, electronic and defense systems, launch systems, advanced information and
communication systems, and performance-based logistics and training.

Boeing has a long tradition of aerospace leadership and innovation. The company
continues to expand its product line and services to meet emerging customer needs. Its
broad range of capabilities includes creating new, more efficient members of its
commercial airplane family; integrating military platforms, defense systems and the war
fighter through network-enabled solutions; creating advanced technology solutions; and
arranging innovative customer-financing options.

With corporate offices in Chicago, Boeing employs more than 159,000 people across the
United States and in 70 countries. This represents one of the most diverse, talented and
innovative workforces anywhere. More than 123,000 employees hold college degrees --
including nearly 32,000 advanced degrees -- in virtually every business and technical field
from approximately 2,700 colleges and universities worldwide. Our enterprise also
leverages the talents of hundreds of thousands more skilled people working for Boeing
suppliers worldwide.

Boeing is organized into two business units: Boeing Commercial Airplanes and Boeing
Defense, Space & Security. Supporting these units are Boeing Capital Corporation, a
global provider of financing solutions; the Shared Services Group, which provides a broad
range of services to Boeing worldwide; and Boeing Engineering, Operations & Technology,
which helps develop, acquire, apply and protect innovative technologies and processes.

Boeing Commercial Airplanes has been the premier manufacturer of commercial

jetliners for more than 40 years. With the merger of Boeing and McDonnell Douglas in
1997, Boeing's leadership in commercial jets, joined with the lineage of Douglas airplanes,
gives the combined company a 70-year heritage of leadership in commercial aviation.
Today, the main commercial products are the 737, 747, 767 and 777 families of airplanes
and the Boeing Business Jet. New product development efforts are focused on the Boeing
787 Dreamliner, and the 747-8. The company has nearly 12,000 commercial jetliners in
service worldwide, which is roughly 75 percent of the world fleet. Through Boeing
Commercial Aviation Services, the company provides unsurpassed, around-the-clock
technical support to help operators maintain their airplanes in peak operating condition.
Commercial Aviation Services offers a full range of world-class engineering, modification,
logistics and information services to its global customer base, which includes the world's
passenger and cargo airlines, as well as maintenance, repair and overhaul facilities. Boeing
also trains maintenance and flight crews in the 100-seat-and-above airliner market through
Boeing Training & Flight Services, the world's largest and most comprehensive provider of
airline training.

Boeing Defense, Space & Security (BDS) provides end-to-end services for large-scale
systems that enhance air-, land-, sea- and space-based platforms for global military,
government and commercial customers. In addition to designing, producing, modifying
and supporting fighters, bombers, transports, rotorcraft, aerial refuelers, missiles,
munitions and spacecraft for military, civil and commercial use, BDS is developing
enhanced capabilities through network-enabled solutions, communications and
intelligence, surveillance and reconnaissance technologies. BDS also supports the U.S.
government as a system integrator on several programs of national significance -- NASA's
space shuttle and International Space Station programs, the Missile Defense Agency's
Ground-Based Midcourse Defense program, the Army's Brigade Combat Team
Modernization program and SBInet, a critical component of the Secure Border Initiative
managed by the Department of Homeland Security .

Boeing Capital Corporation is a global provider of financing solutions. Working closely

with Commercial Airplanes and Defense, Space & Security, Boeing Capital Corporation
arranges, structures and provides financing to facilitate the sale and delivery of Boeing
commercial and military aircraft, satellites and launch vehicles. With a year-end 2009
portfolio of approximately $5.7 billion, Boeing Capital Corporation combines Boeing's
financial strength and global reach, detailed knowledge of Boeing customers and
equipment, and the expertise of a seasoned group of financial professionals.

Engineering Operation & Technology enhances Boeing's growth and productivity by

driving technical and functional excellence across the enterprise. Its primary objectives are
to support the company's business units by delivering high-quality, low-cost technical
services in information technology, research and technology, and test and evaluation;
integrated enterprise strategies that ensure technology is ready when needed,
competitively protected and environmentally progressive; and highly disciplined and
efficient engineering, operations and supplier management support that ensures program
success. The organization pays particular attention to ensuring the success of development
programs, and strives to attract, develop and retain a world-class technical and functional
work force.

Shared Services Group allows business units to focus on profitable growth by providing
the infrastructure services required to run their global operations. The group provides a
broad range of services worldwide, including facilities services, employee benefits and
services, staffing, recruitment, wellness programs, security, fire protection, site operations,
disaster preparedness, construction, reclamation, conservation programs, virtual
workplace, creative services, transportation, business continuity and the purchase of all
non-production goods and services. It also offers comprehensive travel services to Boeing
employees and manages the sale and acquisition of all leased and owned property for
Boeing. By integrating services, Shared Services Group delivers greater value, creates
"lean" processes and operations, leverages buying power and simplifies access to services
for all of Boeing.

The Vision

The Boeing Vision is: People working together as a global enterprise for aerospace
leadership. How will we get there?

• Run healthy core businesses

 • Leverage our strengths into new products and services

• Open new frontiers

Culture and Values

Boeing is committed to a set of core values that not only define who they are, but also
serve as guideposts to help them become the company they would like to be.

Boeing is a company of amazing people working in one of the most exciting industries in
the world. When you consider their many accomplishments -- from designing and building
the earliest biplanes to creating and supporting today's supersonic aircraft and spacecraft
-- you might think they would be content with how far they’ve gone. But a company of their
size and scope doesn't succeed by resting on its laurels; they are constantly re-examining
their capabilities and processes to ensure that their company is as strong and vital as their
heritage. In fact, their culture mirrors the heritage of aviation itself, built on a foundation of
innovation, aspiration and imagination.

Executive Council – The Boeing Company

James F. Albaugh Executive Vice President, The Boeing Company

President and Chief Executive Officer, Commercial Airplanes

James A. Bell Executive Vice President, The Boeing Company

Corporate President and Chief Financial Officer, The Boeing
Company

Wanda K. Denson- Senior Vice President, Office of Internal Governance, The Boeing
Low Company

Thomas J. Downey Senior Vice President Communications, The Boeing Company

Shephard W. Hill President, Boeing International

Senior Vice President, Business Development and Strategy, The
Boeing Company

Timothy Keating Senior Vice President, Government Operations, The Boeing

Company

J. Michael Luttig Executive Vice President, General Counsel, The Boeing Company

Dennis A. Executive Vice President, The Boeing Company

Muilenburg President and Chief Executive Officer, Boeing Defense, Space &
Security
Richard Stephens Senior Vice President, Human Resources and Administration, The
Boeing Company

John J. Tracy Chief Technology Officer, The Boeing Company

Senior Vice President, Engineering, Operations & Technology

Analyzing the Situation and Problems

The magnitude 6.8 earthquake that struck the Seattle area in February 2001 rattled peoples' nerves—and
shook the status quo at Boeing's Renton, Wash., site. And the aftershocks are still being felt.

That earthquake gave then site leaders Carolyn Corvi and Pat Shanahan the impetus to act on an idea they'd
been kicking around for some time—a vision of a streamlined production system where product designers and
support employees work side-by-side with product builders.

"The earthquake pretty much destroyed our 10-85 building," said Corvi, now 737/757 programs vice president
and general manager for Boeing Commercial Airplanes. "We couldn't reoccupy it, so literally over a weekend we
moved 1,250 employees into new work spaces in and adjacent to the site, and had them up and running.
Afterward, we realized that if we could do that, we could certainly move everyone out into the factory and
make the most out of that space."

Commercial Airplanes' Renton site, located at the south end of Lake Washington, is the birthplace of the jet
age, where Boeing has built the 707, 727, 737 and 757 in record numbers. In recent years, Lean
manufacturing principles and a moving 737 production line have improved productivity, which in turn has cut
the need for inventory and freed up floor space throughout the cavernous Final Assembly buildings. Indeed,
Corvi said the Renton team has reduced the amount of square footage to support airplane production by more
than 40 percent.

Corvi and Shanahan decided to convert unused factory space into office space to bring the people who really
need to be near the airplanes as close as possible to the products they design, build or support, instead of
being scattered around the nearly 300-acre campus.

Thus a project dubbed "Move to the Lake" was born. The initiative not only represents a more efficient use of
assets such as land and inventory, but it creates a new way to work. "This isn't intended to be just a facilities
move," Corvi said. "Move to the Lake is an opportunity for us to do things differently. We want to change the
way we work together, to create a linkage between builders and designers, and get people to connect in ways
that will help us better communicate, operate more efficiently and become even more competitive."

The first groups made the move in January. By the end of 2004, more than 2,500 employees from engineering,
finance, program management and other groups will be relocated from remote buildings into the Final
Assembly buildings. Others will move into soon-to-be-refurbished buildings nearby.

Before employees could begin their move, a lot of work needed to be done. Boeing recruited three partners to
help: NBBJ, the architectural firm that designed Safeco Field, Seattle's heralded baseball stadium; Turner
Construction, one of the largest construction firms in the United States; and Steelcase/BarclayDean, an office
furniture firm that provides product solutions that promote employees' working-together relationships.
"We knew going in that we wanted to create something totally unique to Boeing," said Mark Garvin, program
manager for the Move to the Lake project. "We wanted to intentionally design it to be flexible, mobile,
technologically advanced and set up to foster a culture of collaboration, communication, efficiency and agility."

In 2002, Boeing and its partners conducted studies on how employees work and interact. The team then
recruited 35 engineers to participate in a 12-week Move to the Lake pilot project that required them to leave
their offices to make a temporary home in a work space in Final Assembly. The pilot team identified a number
of key issues that helped improve the design of office work spaces in a factory environment. After overcoming
some initial apprehension, the engineers found that being close to the airplanes "made it much easier for them
to get together with mechanics to discuss issues affecting quality, installation and assembly," Garvin said.

The design developed by architects at NBBJ called for office areas separated from factory space by a
translucent wall with windows, so employees in the offices can see the product at all times. Work spaces were
designed with equality and openness in mind: no hard-walled office areas for anyone, and plenty of room for
spontaneous collaboration, as the plan called for groups who need to work together to be seated near each
other.

NBBJ proposed a vibrant color palette for the building interiors, a stark contrast to the drab interior paint
dating back several decades. In fact, visitors as well as employees at Renton can identify what type of space
they're in—conference room, arrival zone, restrooms, etc.—by the color of the walls.

Another key design element intended to enhance the employee experience is something many take for
granted: windows. One of the first things Turner Construction did—with dramatic results—was install dozens of
windows along the east wall of the building.

Boeing also is taking advantage of its waterfront location to create an employee dining center with walls of
windows, which will showcase impressive views of Lake Washington, Mercer Island and the Seattle city skyline.

The Move to the Lake team also is using the latest technologies in workspace design to ensure employees have
the tools they need to accomplish their jobs. For example, the facility design incorporates areas for
collaboration, "knowledge cafés" and open meeting zones, as well as leading-edge technologies such as Voice
over Internet protocol and wireless areas. This helps create a work place that embodies the qualities desired
for people to bring to their work: flexibility, innovation, and a focus on customers and the end product—
airplanes. "The changes we're making to typical work spaces will improve everyone's ability to do his or her
job," Garvin said.

As Renton consolidates its operations, Boeing will eventually sell the older buildings it vacates. The forthcoming
end of 757 production combined with the sight of wrecking crews demolishing unoccupied buildings on the site
and have spurred speculation—inside the company and outside—about Boeing's future in Renton.

Corvi has heard the speculation but emphasizes the fact that the Move to the Lake project currently is Boeing's
largest capital improvement project in the Puget Sound region. "With more than 900 737s in backlog and
excellent sales prospects, we plan to build 737s in Renton as long as the world wants them, and we continue
improving our productivity," she said. "Move to the Lake represents a significant commitment to the Renton
site, its people and products."

SWOT Analysis of Boeing

Boeing Strengths

• The Boeing Company is the largest aerospace firm in the world

• The Company has been the world’s leading manufacturer of commercial aircraft
for the last 20 years
• The Company is the largest contractor for NASA
• The Company has two strong main business units namely; The Commercial
Aircraft and Integrated Defense Systems
• The Company is responsive and innovative when it comes to technology and
systems development and in fact has two new flagship innovations to wit:
  Connexion by Boeing; that is a dynamic breakthrough in consumer and
commercial airline service that is beginning to provide air travellers an
unparalleled array of high speed data communication services via space-
based networks.
 Air Traffic Management; that will replace the current ground program.

• The Company is a major player in the field of Military aircraft and missiles and is
leading in the development of Integrated Defense Systems
• The Space and Communication segment or business unit which is engaged in the
development of integrated battleship, missile defense, human space flight and
exploration, launch and satellite, and homeland security is the company’s new
and fast growing venture.
• The Company through its Boeing Capital Company (BBC) offers financing
arrangement by leasing and extending loans to commercial and military
customers.
• The Company’s ability to streamline its aircraft production operation has
significantly reduced its production time and ultimately reduced its production
cost and expenses.

Boeing Weaknesses

• The Company production backlog have average about $78 Billion over the past
(5) years.
• The Company Organizational Structure is too stiff and is restrictive with respect
to function and responsibility distribution
• Based on the Company’s financial information, the Company’s high debt-to-asset
ratio and high operational expenses puts the company at a risk and susceptible
to financial collapse.

Opportunities

• The Company’s innovations, particularly Connexions and Air Traffic management

provide a competitive edge over existing competitors.
• The Depletion of Worldwide supplies and inventory of aircraft, missiles and other
aerospace products as a consequence of the war “Enduring Freedom” will
increase the market demand for the Company’s products.
• The airline passenger business and air cargo business is expected to double over
the next 20 years hence, which means if the company would be able to convince
and capture future market, it has the opportunity to double its revenue.
• Increased demand for passenger non-stop travel between cities

Threats for Boeing

• Decline in orders of commercial airlines due to increase in security and safety

concerns
• High Production Cost
• Competitors: AirBus or (EADS) European Aeronotic Defense and Space Co. for
Commercial Airlines, and Lockheed Martin, the Major competitor for Boeing
Integrated Defense System
SWOT Analysis / Segment based

Business Issues Identified based on Recommendations

Units/Segment SWOT Analysis

Commercial Aircraft There was a decreasing demand on Boeing should pursue its plan to
commercial aircraft address the increasing demand for
passenger nonstop travel between
cities. Since Air Traffic Management
(ATM) system is relatively
inexpensive, the company should
implement this to increase revenue
and be able to compete with other
aerospace players.

Integrated Defense There was an increase in To expedite the production, Boeing

Systems Contractual back-log of orders for should hire additional staff that is
four consecutive years competent to produce the quota of
equipment assigned to per staff.

Boeing should produce IDS

Lockheed Martin, the major
competitor of Boeing IDS, also
produces military aircraft, rocket
launchers, and other space
equipment.
equipment that is of high quality and
competitive price to be able to cope
with its competitors.

Space and Increased in contractual back-log of Increase workforce to expedite

Communications orders production

Boeing Capital High interest rates could possibly Boeing should factor-in a competitive
Corporation-Capital make the segment having a low rate on their capital financing to
Financing profit. engage more customers which
 consequently make the segment
profitable

Comparative Production Analysis

2003 2002 2001 2000

Backlog of orders $63.9b $75.9b $89.8b
Undelivered jetcraft units 1083 1598
Expected jet transport deliveries 381 489
Orders 178

Analysis: As shown in the above table, there was a reduction in backlogs of production
delays by rapidly ramping-up the production process which resulted to decreasing the
number of undelivered jetcraft units.

A. Internal Analysis of Boeing

Boeing has many strong competitive advantages, and internal resources that help define
its core value. The main source of Boeing’s competitive advantages is its core
competencies, which help develop Boeing’s resources into strong competitive advantages
in the airline manufacturing industry. Boeing also has `operational strength internally,
which allow them to better manage and sustain their competitive advantage in the market.
Boeing has a strong set of competitive advantages at which it uses to market share and the
airline industry, as we will analyze Boeing’s unique competitive advantages in the airline
industry

Core Competencies are unique, in that way the retain value is expensive to imitate, and
cannot be substituted.

 Repeated effort to meet the customer demands and needs (Core competencies-
Boeing.com) Boeing commits to understanding and responding to what its customers
would like in an aircraft; and designing and implementing specific needs or
demands. One of Boeing’s unique business structures is to design the product
according to customer wants, and has it waiting for them to buy. This builds a strong
competitive advantage, as it notifies the customers that Boeing will design aircrafts
according to their needs, and allows them to build stronger relationships with their
customers.

 Ability to implement large-scale implementation systems (Core competencies-

Boeing.com). Boeings extensive research and development is a strong core
competency, with its unique knowledge of wing technology and new lightweight
composites being one of its stronger manufacturing core competencies. Boeing has
begun to build stronger bonds with its suppliers, as they are beginning to research
with their suppliers to integrate and design better aircrafts. With some of their
research and development being done outside the company, they are able to design
and build better aircrafts.

 Unique contracts and agreements with both NASA, and The United States Air Force.
The strategic partnership with both of these two organizations allowed Boeing to
become the world’s largest space and Communications Company, as well as helped
it become a large leader in the aircraft manufacturing market. These two
 partnerships allow for Boeing to grow into the aerospace industry, and allow Boeing
to have a wider range of products for a wider range of customers.

Competitive Advantages

 Boeing has a long list of competitive advantages that it uses to gain an advantage
over its competitors, mainly Airbus. One aspect of the airline industry that is highly
regarded is market share, which Boeing has consistently had an advantage of. One
of the main reasons Boeing has most of the airline manufacturing industry market
share is due to its long history of excellence in designing aircrafts for over 90 years

 Boeings strong name and brand allows for a strong hold on the airline manufacturing
industry, which has now become a duopoly between Boeing and Airbus. As one can
see, the culmination of both Boeings core competencies and operational strengths
allow it to build upon different competitive advantages in the airline industry.

 One of Boeings greatest competitive advantages is its unique strategy to work more
with both its customers and suppliers, to design and build the best aircrafts on the
market.

 One of Boeings largest competitive advantages include its unique research and
development departments which are able to design and implement better aircrafts
without incurring large amounts of costs. This would allow the company to produce
better aircrafts more efficiently with fewer costs than the competition, giving Boeing
a strong competitive advantage over its competition.

Strong global network

The company has strong international operations with customers in around 145 countries,
employees in more than 60countries and operations in 26 states.

 Worldwide, Boeing and its subsidiaries employ close to 188,000 people with major
operations in Washington State; Southern California; Wichita, Kansas; and St. Louis,
Missouri. Boeing enjoys the ownership of a brand with good and far reaching
awareness on a global scale. Strong relationships with business partners

 Boeing enjoys many strong alliances with many other globally powerful companies.
In defense projects Boeing works closely with Northrop Grumman in programs such
as the joint common missile program.

 Boeing is also a 50-50 partner with Lockheed Martin in the United Space alliance.
Boeing also works with many other organizations such as NASA in close
relationships, which strengthen the company’s position in other markets.

Broad product line that covers most major market niches / R&D development

Boeing Company offers a wide range of product lines. For main commercial product such as
aircraft, Boeing has 717, 737, 747, 757, 767, and 777 families of jetliners and the Boeing.
The company has more than 14,000 commercial jetliners in service worldwide, which is
roughly 75% of the world fleet. Its product line is continuing to expand, creating new
versions of its family of commercial airplanes. This pioneering technology development
helps ensure Boeing stay a leader in the industry. To remain competitive, Boeing must
invest in developing the latest technologies. Thanks to its strong R& D, Boeing has been on
winning side in the head-to-head competition with Airbus so far. Total research and
development expense in 2003 was $1.7 billion. The company expects research and
development expenses to be between 3.25% and 3.75% of revenue in 2004 and between
3.5% and 4.0% in 2005 as spending increases on the 7E7 program.

Good Customer Service

Regional World centers provide proactive, value-added maintenance, parts and training,
and provide ready access to parts and training using the web and ED-ROM technologies.

MyBoeingfleet.com- website; Information on parts, maintenance, engineering and

operational data are provided for customer.

Strong economies of scale

 Boeing Capital Corporation (BCC)

 Connexxion by Boeing

Operations
Boeings operational strengths include its unique level of management, as the managers
are able to allow the company to run smoothly. Boeing is able to implement a strong
management force with its unique and strong culture (Core competencies- Boeing.com).

B. External Analysis of Boeing

Slowdown in the commercial jet market; No industry was hit harder than airline
industry after the 11th Sept. Boeing and Airbus as well have to suffer big losses in
revenues from 2001. Recently, there are some good signals recently for both of the
companies with the increase of order number. The demand for international tourism and
delivery is increasing. However, it still does not reach the level before the terrorism event.

New aircraft to gain market share; with the impressive show of Airbus A380
recently, Boeing also plans to release its powerful weapon in the competition with Airbus.
The new version Boeing 787 which inherits the most advanced technologies and
advantages of the previous models is hoped to be a big hit to the airline industries. At the
moment, Boeing has received a number of orders for Boeing 787-

Increase demand for point to point routes; this is related to the booming market
of low-cost airline. All the low-cost airline companies use point to point routes in order to
reduce the costs substantially. Fortunately, this is suitable with the strategy of Boeing as
mentioned in the previous parts. Airbus A380 is still unsure about its future because most
of the big airline companies at the moment are not gaining profit.

Extremely Competitive Rivalry between Existing Players; Low cost airlines in

Europe and Asia

 Airbus- commercial jet- focus on A380 to get market share of super jumbo liners
 Lockhed Martin- Integrated Defense systems
 Increase pressure to reduce price of products

Strategic Plan Frame Work

 Goals
To provide a more secure, safer
& environmental friendly (fuel-
efficient) commercial and cargo
airlines
To take advantage of the
increased demand for
Integrated Defense System
To go one step ahead in
innovating future aerospace
and military products
Strategy
Strengthen Management Core
Competencies
Innovate Security and Safety
Systems and Protocols
Outsource Technology Information
and Skills
Aggressive customer based security
and safety campaign and advocacy
Aggressive Strategy as to
development and production of
Military and defense products
Competitive pricing and low
production of Military and war
supplies
Strengthen Management Core
Competencies
Focus on Research & Development
of new and innovative concepts and
(frontiers) products
Outsource Technology Information
and Skills
Increase Networking of knowledge
Activity
Restructure the Organizational and
create additional department such
as Public Policy & Safety Standards
Compliance Departments
Develop and produce systems that
will ensure passenger safety such
as early detection device, anti-hi-
jacking device and protocols, etc.
Improve customer relation and
information
Conduct Safety Trainings and
programs
Develop responsive and innovative
aircrafts and military missiles
Conduct Research as to the needs
and demands of Military related
activities
Conduct of Trainings and Programs
Employment of maverick scientists
and researchers
Develop new products appropriate
to future supplies and resources
Finance education of employees
Fund experiments and researches
To decrease backlogs and Streamlining of production operation Development of machines and
reduce production cost systems which will reduce
production time

Outsourcing
Outsourcing labour and assembly
of materials and parts

Conduct of Trainings and

educational programs

Analysis and Conclusion

The Forc vbmjbgymh ntuitous event such as the terrorist attack which triggered “War
Enduring Freedom” definitely has strong impact on the airline industry.

Fortunately, Boeing Company’s diversified business, being engaged in the development

and production of Commercial Aircraft and Integrated Defense Systems, help cushioned the
prejudicial consequences of such tragic event to the company.

Withstanding the raising temporary concerns on passenger safety by sceptics that brought
about the reduction of Commercial Airlines Production demands, the worldwide declaration
of war against terrorism paved way to a massive opportunity for Boeing to develop,
produce and market its Integrated Defense System product lines.