I. CASE ABSTRACT
The Boeing Commercial Airplanes Group was the core business of the Boeing Company of Chicago, Illinois. Achieving its first success in the 1920s with the B-9 bomber, Boeing had a successful history of designing and producing large aircraft for both military and civilian markets. During the 1980s and 1990s the aircraft industry consolidated, with Boeing as the sole surviving American manufacturer of large aircrafts. Paradoxically, a European start-up consortium named Airbus Industrie competed for market share with Boeing. After 20 years, using state-of-the-art technology, Airbus had garnered a market share of nearly 50 percent.
Although Fortune magazine once printed that Boeing had a license "to print money," their position was weakening, particularly with Airbus' challenge to Boeing's sole ownership of the jumbo-jet market. The Boeing 747-700 had been the world's standard for intercontinental transport and with no competitive equal, Boeing's profits were buoyed by this design. Following extensive market research, Airbus Industrie decided to create a super jumbo-jet, which it labeled the A-380.
Boeing's equally intensive market research led them to conclude the market would be too small to justify commercialization of a super-jumbo. However, Boeing had the potential to up-size the 747-400 into a 747-X, about half way between the size of an A-380 and a 747-400. The development cost would only be about one third of the A-380's development cost.
Boeing was faced with the decision of whether to proceed with the 747-X or wait and watch to see whether Airbus' A-380 was a success.
Decision Date: 2001 2000 Sales:$51,321,000,000
2000 Net Earnings: $ 2,128,000,000
Note: Commercial Airplane sales and earnings in 2000 were:
II. CASE ISSUES AND SUBJECTS
Strategic Business Units (SBU)Sonic Cruiser
Geopolitical IssuesFinancial Management
Super-Jumbo JetsCorporate Governance
Boeing's Acquisition of McDonnell DouglasMarketing Strategy Competitive Strategy
Core CompetencyGrowth Strategy
Distinctive CompetencyGlobal Markets
Technology StrategiesIndustry Analysis
Consortium/OwnershipIssue of Antitrust
AcquisitionsBoeing 747-X Dropped
IV. CASE GOALS / OBJECTIVES
1. To discuss the competition between Boeing and Airbus for global airline dominance
2. To discuss Porter's industry analysis in the airframe industry with two manufacturers (suppliers) of aircraft and over 200 airlines as customers
3. To discuss what core competencies Boeing has, if any
4. To discuss what distinctive competency Boeing has, if any
5. To discuss the merger of Boeing and McDonnell Douglas
To discuss the benefits and impact on Boeing
To discuss the impact on Airbus
6. To discuss what strategies Boeing must develop and implement to remain number one
7. To discuss the risks to Boeing to develop a super-jumbo jet, and the risks not to develop a super-jumbo jet
8. To discuss how Boeing can improve its profit situation in the future
VI. DISSCUSSION QUESTIONS
1. What are the strengths and weaknesses facing Boeing?
2. What are the opportunities and threats facing Boeing?
3. What are the strategic factors facing Boeing?
1.Does Boeing have any core competencies? If yes, what are they? 2.Does Boeing have any distinctive competency? If yes, what is it? 6. Discuss Porter's industry analysis forces and how each force pertains to Boeing.
1.Can the industry allow for both Boeing and Airbus to "build" their strategic positions at the same time?
Airbus successfully developed the A-300 design as a niche design in the industry. Then, they turned to replicate Boeing's different functional aircraft designs (i.e. A-300 to compete against the...