Boeing's Entry into China's Aviation Market: Opportunities and Challenges

This article explores the challenges and opportunities faced by Boeing as it enters China's aviation market. It covers topics such as strategic alliances, corporate social responsibility, and managing competitive dynamics in a global context. The article also discusses the potential of the Chinese market for Boeing and the importance of developing local talent. Course code and college/university are not mentioned.

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Boeing
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Table of Contents
1.0 Introduction...........................................................................................................................................3
2.0 Problem Identification........................................................................................................................3
3.0 Problems analysis................................................................................................................................5
3.1 Strategic alliances and networks....................................................................................................7
3.2 Strategizing with corporate social responsibility...........................................................................8
3.3 Managing competitive dynamics in a global context...................................................................10
3.3.1 Cooperation and signaling.......................................................................................................10
3.3.2 Dodgers....................................................................................................................................10
3.4 Cross border structuring, innovation and learning....................................................................10
3.4.1 International division................................................................................................................10
3.5 Governance in a global context.....................................................................................................11
3.5.1 Industry based considerations..................................................................................................11
4.0 Conclusion..........................................................................................................................................11
References.................................................................................................................................................13

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1.0 Introduction
The massive manufacturing of China classified as low grade has made it possible for
China to be elevated from poverty and can now boast as a developed economy. However, the big
question is whether high-tech can play a substantial role in raising China’s economy to the skies.
China has been reported to be on a mission of upgrading its firms a vision that entails the long-
held objective of manufacturing passenger aircraft.
The China market has been dominated by Airbus SE and Boeing Co. for decades and the
incumbent state manufacturer Comac with Comac wanting to surprise its competitors in three
years to come by producing its C919 jet. There are many business opportunities, and China
wants to dominate the market and become the leading market for airplanes and passengers. Thus,
the heavyweights of the aviation industry such as Europe and North America have a point to
worry. The big question to ask is how travelers both at domestic and internationally are prepared
to accept aircraft made in China.
2.0 Problem Identification
Following two years of constant postponements, the C919 completed successfully the
scheduled first test that took place in May 2017. It is only in less than a year that Comac, a
Chinese corporation dealing with commercial aircraft that it already has more than 800 airplane
orders from 28 Chinese buyers. Plans are underway between the Chinese authorities and the U.S.
on obtaining agreements about the worthiness of the planes. The European regulators are also in
the plan as they will be crucial in opening way for both sales and flights that are from China. The
C919 is a flight that will have 158-168 seats and will be primarily a single-aisle jet built and will
come with customized versions as most parts are from different, for instance, the engine is from
the CFM international Inc which happens to be Franco-US based venture. Irrespective of its

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impact on Boeing, a C919 that is up for the market means a boon for Comac’s extensive network
of global suppliers spanning from General Electric company to Honeywell International.
However, production on a large scale can be said to be several years behind and can be
hardly guaranteed. The initial attempt to venture into the aviation market by producing the
ARJ21 which was a 90-seat jet took eight years to become a commercial activity from the first
flight in 2016 (Clark, 2018). The executives from Comac have made announcements that the
C919 will get to the market faster than anticipated and the China Eastern Airlines corporation
will be the first to receive the first batch of consignment at around 2021. Comac has plans
underway to forge an alliance with Russia’s United Aircraft Corporation to design and produce a
jet that is twin-aisle that will be flying from Beijing to New York.
Background
The early bids by China to producer passenger jets failed. For instance, the Y-10 took
decades to move from first design to initial flight tests in the 1980s. However, the state’s interest
faded as aviation business from the West opened up. The MD-82 was developed as a product of
a joint venture that soon collapsed following the acquisition of McDonnell Douglas, a Chinese
partner in 1997. China’s president, Xi Jinping’s agenda for a manufacturing sector that is
complex referred to as made in China by 2025, has led to renewed impetus as the strategy
impedes on projects such as the airplanes. For instance, the first aircraft in China got launched
immediately before testing the C919 (Jiang, 2016).
William Boeing, the founder of Boeing, manufacture his first plan back in 1916 in Seattle
dominated the market for passenger jet sales, and it was until the amalgamation of aerospace
bodies in the European region in 1960 that opened up doors for Airbus which commanded a
substantial market share between the 1980s and 1990s (Tieman, 2017). The two companies that

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are Boeing and Airbus split the market and account for 97 percent of the international market for
the single-aisle jet as per 2017. The same is also true for the Chinese market as the two again
share the market equally where it is estimated that sales arising from passenger aircraft will
amount to more than $1 trillion by 2035 as per Boeing (Clark, 2018). Regarding the number of
passengers, China has been projected to surpass the U.S. in becoming the largest markets
regarding air travel before 2022.
According to many analysts, getting into the same class as Airbus and Boeing are may
take decades as most airlines prefer planes that have a proven track of record that demonstrates
the reliability of such airplanes and safety (Clark, 2018). There is more gest to it than just
manufacturing a reliable aircraft. Comac will have to face giants in the aviation industry such as
other aspects such as the after-sales service for both repair and maintenance. A significant
challenge lies ahead regarding being accepted in Europe and the U.S., and a good illustration is
when a high-speed train killed 40 people in one of the fatal accidents reported and made Chinese
consumers sour. There are allegations by the critics that Comac is replicating some of the jets
that are outdated versions instead of developing state of the art jets.
On the other hand, the industry watchers are of the view that the C919 is purported not to
become the best single-aisle aircraft regarding sales but rather a stepping stone for Comac to
develop and manufacture something better with the Chinese technology (Anselmo & Mecham,
2011). Whichever the mode, a company with China’s origin backed by the state is better
positioned to command a substantial share of the market from established players in the domestic
market.
3.0 Problems analysis
The strategy adopted by a firm to pursue an emerging economy opportunity

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The demand for private jets in the airline industry is giving signs of hope following
several years of difficulty (Thompson, 2015). The shifting global prosperity and geopolitics seem
to have diverted the much-needed wave among the buyers of private planes. However, Boeing
made sales that accounted for 16 business jets in 2017, and this was considered as the best sales
ever since 2008 while its counterpart Airbus only sold twenty-five.
The Chinese have sought ways to help them soar the skies for many years now with the
onset of the world known kites that dated more than 2000 years ago. However, the history of
China reveals that by the 13th century, the military leaders in China were already using rockets.
The dawning of flight age in the 20th century led to individuals such as Feng-Ru a Chinese gain
regional recognition in the United States by having a powered plane tested in 1909 right after the
Wright Brothers had their powered flight. In Bill Boeing’s attempts to hire the first aeronautical
engineer in 1916, he enlisted Wong Tsoo who led in designing the Model C seaplane that later
became the first plane for Boeing’s production.
Based on that archived history, the aerospace industry in China and the airlines are
developing fast towards the future and Boeing is anticipated to yield more airplanes, abilities in
the manufacturing and sound quality in the aviation services. Prominent leaders of the past such
as the retired president Hu Jintao branded Boeing a household name in China and asserted that it
ought to remain the same amidst stiff competition in the aviation industry.
David Wang who served as the president of Boeing in China said that one of the
strategies used by Boeing is to make sure that even though China is acquainted with Boeing
practices and the need for the legacy of cooperation, the spirit of working in unity and
partnership has been critical in venturing such a market.

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The potential of China market is hard to state with regards to the benefits that it can
generate to Boeing. The population figures as per China speak for themselves. China’s
population is higher than any other nation in the world. China’s economy in the past two decades
has proliferated in comparison to any other emerging economy globally. Even during the period
of recession that was witnessed across the globe, China’s economy grew by about 9%. China
presents the largest market beyond the U.S. with regards to commercial planes. The potential to
expand the demand for air travel in China as its economic growth is dwindling can be said to be
huge. Since President Richard Nixon’s visit to China since 1972, more than 800 planes have
been ordered for the Chinese airlines from Boeing, and this accounted for more than 60% of the
orders that came since 2000. For the past nine years, it has been reported that the fleet in
commercial airline has doubled to more than 1300 planes.
The number of commercial airplanes that ferry passengers has soared from 80 million to
200 million during the same duration. However, the future demand for airplanes possesses an
even greater opportunity for Boeing in the Chinese market. The Chinese airlines, for instance,
are anticipated to demand more than 3500 planes by 2028 with a projected market value of about
$400 billion based on commercial outlook by Boeing (Downey, 2009). Based on the fact that
approximately 53 percent of all commercial jetliners that fly in China are some of Boeing’s
models with only 36% coming from Airbus.
3.1 Strategic alliances and networks
Since China has a high demand for airplanes, it becomes easy to shift attention to China
as the next big potential market. Boeing and China have had lasting relationships on multiple
fronts with several supplier contracts spanning from mid-1970’s. For instance, all of Boeing’s
commercial planes ranging from 737 to 787 Dreamliner have their parts assembled in China.
Boeing on the other is a primary buyer of Chinese aviation hardware estimated to be worth $1.5

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billion and procurement of the same is expected to double in future (Downey, 2009). Boeing has
been ranked as the largest sole customer of the aviation industry in China. China is also
identified as home to the conversion facility for the model 747-400 Boeing Converted Freighter.
Also, Boeing has been involved in several Chinese joint ventures that specialize in the
production of airplane parts and services.
It is through developing local talents that Boeing has made Boeing survive amidst
competition from airplane manufacturers in China. With the production of Airbus A320 that was
assembled as a product of a joint venture plant that was located in Tianjin. Airbus, on the other
hand, has been keen on improving its orders from Chinese airlines. Also, the Chinese airline
industry is planning on how to produce commercial planes beginning with the 737 model in the
next five years (Downey, 2009). Boeing can benefit by engaging the public in talks regarding
Boeing’s value due to its presence and programs in China despite Boeing being a household
name.
3.2 Strategizing with corporate social responsibility
In ascertaining that Boeing is not just a household brand but a superior brand in China,
the marketing efforts should be focused on what distinguishes Boeing from its rivals. This entails
the biofuels initiative that has gained popularity among the media, state and airline officials.
Boeing can also differentiate itself from its rivals through its services. Apart from availing
airplanes to China, Boeing has played a crucial role in civilizing China’s commercial aviation
resources. Boeing and Boeing Training & Flight which was a subsidiary and former Alteon
played a vital role in training more than 35,000 professionals in the aviation industry in China
through an initiative by China Civil Aviation Administration (Downey, 2009). The two also
worked in harmony and helped improve the traffic of the air system due to the fact China’s
airline routes grow rapidly particularly the eastern part of China. Due to Boeing’s efforts in

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helping China through training and safety, China’s commercial airline system prides itself in
achieving a safety record that rivals that witnessed in the U.S. and Europe.
With the growth in China’s airlines and market changes, Boeing has continued to work
its way up by maintaining robust customer relationships with such customers. Xiamen airlines,
for instance, has been identified as one of the most profitable airlines and has achieved such
unapparelled success as all its fleet is Boeing and five other Chinese airlines are on the 787
teams. Thus, Chinese airlines continue being loyal customers to Boeing despite the drawbacks
associated with the Dreamliner program.
Boeing has also continued being at the forefront seat by supporting China’s evolving
aircraft financing and leasing fraternity (Downey, 2009). As China anticipates to convert its
intellectual and capital resources into profit avenues in jetliner funding, Boeing Capital
Corporation (BCC) continues to share its skills and knowledge for purposes of mutual benefit.
The BCC financing team based in Asia has worked to lure Chinese bankers to finance regional
events. With the support of China, executives have traveled to Seattle to be taught the intricacies
associated with airline planning and leasing of aircraft.
In the past years, Boeing has been involved in the active introduction of airlines that are
non-Chinese to domestic bankers aiming foreign investments. The BCC president took a step and
signed cooperative contracts with four of China’s leading banks that work in the aviation
industry. Boeing’s history with China and the extending links with the Chinese airlines, partners
in the manufacturing sector and financial entities entitle and provide Boeing with a solid
foundation from which to build. However, the intensified competition in China means that
Boeing cannot rely solely on its previous success experiences. Thus, Boeing has to continue
expanding its role both as a customer and a supplier in China.

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The Chinese suppliers are an essential part of Boeing’s aircraft production. China’s
aerospace firms produce parts of Boeing’s new airplanes, for instance, the 787 Dreamliner and
the 747-8 through the role of China as a supplier are not new. Following Boeing’s sale of its first
airplanes in the 1970s, China has become an essential supplier for Boeing’s planes (Jiang, 2016).
3.3 Managing competitive dynamics in a global context
3.3.1 Cooperation and signaling
Currently, more than 5500 jetliners from Boeing which accounts for more than 60 percent
of jetliners operating across the world are made of parts from the Chinese manufacturers
(Downey, 2009).
3.3.2 Dodgers
For instance, the 737 considered as the Next-Generation, Shanghai Aviation
manufacturing corporation is tasked with making its horizontal stabilizers, and vertical fins
originate from Xi’an Aircraft International Corporation. For the 787 model, Chengdu is tasked
with manufacturing composite rudders; Shenyang produces the 787 vertical fin that serves as the
leading edge while the Hafei Aviation Corporation produces composite panels and parts.
Chengdu produces ailerons and spoilers for the 747-8 model and Xi’an manufactures wing parts
including the model’s inboard flaps which happen to be the most significant piece of aircraft
structure purchased by Boeing from China.
3.4 Cross border structuring, innovation and learning
3.4.1 International division
Also, Boeing has a share in some joint ventures such as Boeing Tianjin Composite
company responsible for producing aircraft parts (Swanson, 2015). The partnerships developed
by Boeing are strategically developed for purposes of establishing long-term benefits for all
parties at stake. The company works on assignments that assist Chinese partners to benefit from
the technical and manufacturing experience necessary for enabling the production of aviation

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products that have superior value and of good quality. The Boeing Tianjin Composites is
undergoing an expansion that is expected to amount more than $21 million and has a long list of
clients with the inclusion of Boeing (Downey, 2009).
3.5 Governance in a global context
3.5.1 Industry based considerations
The hiring of Steven Jiang who has been valuable as an employee of Boeing China and
his experience transcends many years having worked in the aerospace industry. He has been
identified as the most knowledgeable person in Chinese culture and business operations (Bhasin,
2017). Jiang as a senior specialist provides an essential link in giving technical assistance to
airline personnel in China and also the Civil Aviation Administration of China. Jiang played a
critical role in leading Boeing team that was tasked with evaluating air carriers of China on how
they maintain mature planes.
Generally, Boeing has employed 150 employees in China and has more than 6000
workers employed in joint ventures. The numbers are still growing according to Wang, the
president of Boeing in China. Boeing has established an office in Beijing which serves the
human resource staff and programs to handle ethics, campus relations, and technology. The
communications and international global corporate citizenship programs have proliferated.
Boeing according to Wang has not only grown regarding some individuals but also in the
multiplicity of functions. The most significant thing is that the company has managed to develop
domestic employees more than the expatriates thus the Boeing in China experiences good local
leadership regionally.
4.0 Conclusion
Boeing has continued resisting the footsteps of Airbus and is now establishing its very
first offshore unit in China. However, there was no concrete decision made on the location and

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the time frame required to complete the B737 completion center following a billion order for
more than 300 Boeing airplanes (Downey, 2009). It is evident that both Boeing and Airbus have
prioritized China as the largest market and this is crucial to both companies in predicting and
determining their market share in China. Thus, having assembly lines in China is the only
powerful tool that can be used to convince the Chinese government to give orders.
Joint ventures for production purposes are encouraged by the Chinese government due to
their ability to transform and making upgrades to the aviation workforce and compete with other
Western makers and the very Comac and Avic. Light aircraft manufacturers from the US such as
Cessna and Embraer a Brazilian corporate jet manufacturer continue enjoying leading ranks in
China in the market following their initiatives of manufacturing planes in China with Avic firms.
Thus, China’s market for airplanes particularly in the field of private jets is still fresh and
should be exploited because the number of billionaires that require planes is significant.
However, impediments by the military have been affecting the private jet industry for ages
though of late some provisions seem to streamline the private jet industry and in the future in
China. Boeing has a market that it should it exploit provided that it remains relevant through
innovation and creativity programs to meet the needs of the market. For instance, customization
of planes to match the needs of the clients could make Boeing continue dominating a large share
of China's markets. However, there are other competitors in the airline industry all striving to
manufacture quality planes with the art of state facilities.

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References
Anselmo, J. & Mecham, M., 2011. Boeing And Airbus Views Of China Far Apart. [Online]
Available at: http://aviationweek.com/awin/boeing-and-airbus-views-china-far-apart
[Accessed 2 October 2018].
Bhasin, H., 2017. Marketing Strategy of Boeing – Boeing Marketing Strategy. [Online]
Available at: https://www.marketing91.com/marketing-strategy-boeing/
[Accessed 17 December 2018].

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Clark, G., 2018. China’s Jet Challenge. [Online]
Available at: https://www.bloomberg.com/quicktake/china-s-jet-challenge
[Accessed 10 October 2018].
Downey, T., 2009. Boeing in China. Boeing Frontier, 8(6), pp. 3-57.
Jiang, S., 2016. Airbus, Boeing in new battle for China market share. [Online]
Available at: https://www.scmp.com/business/companies/article/1919491/airbus-boeing-new-
battle-china-market-share
[Accessed 2 October 2018].
Swanson, A., 2015. China offers huge rewards for U.S. companies like Boeing. But it could also
take that business away.. [Online]
Available at: https://www.washingtonpost.com/news/wonk/wp/2015/09/23/china-offers-huge-
rewards-for-u-s-companies-like-boeing-but-it-could-also-take-away-their-business/?
noredirect=on&utm_term=.e3baacb0fe4c
[Accessed 23 October 2018].
Thompson, L., 2015. Boeing To Build Its First Offshore Plane Factory In China As Ex-Im Bank
Withers. [Online]
Available at: https://www.forbes.com/sites/lorenthompson/2015/09/23/boeing-to-build-its-first-
offshore-plane-factory-in-china-as-ex-im-bank-withers/#35626ed97820
[Accessed 2 October 2018].
Tieman, R., 2017. Supersize me! Boeing and Airbus report higher sales private jets. [Online]
Available at: https://www.ft.com/content/31a341d8-c567-11e7-b30e-a7c1c7c13aab
[Accessed 2 October 2018].

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