Examining Growth Strategies of Boeing in Emerging Economy of China

This case study analysis examines the growth strategies adopted by Boeing to pursue internal growth opportunity to the emerging economy of China. It discusses the potential market opportunity in China and the strategies that can be implemented to adopt the emerging economy opportunity. The study also identifies the firm's current strategic background, resource and capabilities of Boeing, and the problem identification. The subject is Global Business Management and the course code is not mentioned. The college/university is not mentioned.

Running head: GLOBAL BUSINESS MANAGEMENT
Global Business Management
Name of the Student
Name of the University
Author Note

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Total words- 3000
Topic- Examination of the growth strategies adopted by the organization to pursue
internal growth opportunity to an emerging economy opportunity
Organization: Boeing
1. Introduction
The case study analysis is particularly based on the emerging economy in China
providing potential business opportunities to both local and international airlines. The case
study analysis includes business and marketing approaches of Boeing- aircraft manufacturing
company. Boeing is determined to incorporate multi-national business approaches to use the
growth opportunity provided by emerging economy in China. The major purpose of the study
is to examine the business growth strategies adopted by Boeing to pursue internal growth
opportunity to the emerging economy of China. The case study implies that due to the
economic stability in the recent time in China, the both international and local airline
organizations are planning to keep their footstep in China. Initially, processing the airline
services in China was difficult as airline services in China are usually controlled by military
and there are several taxes and duties that are imposed on such businesses.
2. Firm’s current strategic background
Boeing is known as world’s largest aerospace manufacturing of commercial jetliners,
space and security systems. The organization also provides aftermarket services. It has been
identified that Boeing is America’s largest manufacturing exporter, the organization supports
airlines and United State as well as allied government customers in more than 150 nations. It
has been identified that Boeing products as well as tailored services which involves
commercial as well as military aircrafts, electronic and defence system. The major marketing
stand taken by Boeing is development of a broad range of products and services for multiple

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customer groups. When it comes to acquiring a new market, Boeing particularly pay heed to
a diverse categories of services. On the other side Taneja (2016) commented that Boeing
prefers to operate in critical businesses with the help of its mainline businesses. It has been
identified that the business has extensive presence in commercial security in the capital
services for supporting customer purchases. The major competition, Boeing faces in the
segments such as commercial jet aircraft as well as airline sector. When it comes to analysing
customers, Boeing uses a large range from different organizations from different aviation
sector, government of different nations, space and research settings who have diverse as well
as differentiated needs. As China is economically a potential market, this range or group of
customers may change or increase in the airline sector of China.
3. Problem identification
Even though China has potential business opportunities and observed a rise in the
economy, all major airline service providers from the global market are trying to extend their
focus on the virgin skies of China. Nonetheless, the market has institution-based condition
controlling the airline services and flight through a complicated process due to the
enforcement of tax and burdensome duties. In addition, particularly the business air jets are
only entitled to two take-off slots an hour, which is making a difficult scenario for the
services providers when dealing with the mass-crowd of international visitors (Wu and Maher
2016). On the contrary, the government has become little stiffer with respect to the allowance
of state-owned service providers. For example, it is found in the case study that President of
China ordered special provisions which causing a shift in the existing services of the
organizations in China. State owned enterprises used to make u almost 15% of business jet
market in China but the percentage now went down to 5%.
(Analysis)

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Although the airline service providers are supposed to deal with compliance and trade
regulations, due to the economic stability, Chinese government has offered a glimmer of hope
for airline trades as a significant stand has been taken for the establishment of non-airline
aviation and businesses jets are entitled to little more space. However, this opportunity also
attracts the other global airlines from Europe and America (Morrison and Gillen 2017).
Taneja (2016) commented that complying with the newly developed policy will not be an
easy choice of implementation, as entry of other airline agencies could generate another
cumbersome process. Moreover, accessing the China market may also be a difficult
challenge, as using the back-up of resources and capabilities, each business jet market is
trying to beat each other and excel. Particularly, the major jet maker such as Beech Hawker,
Cessna and Gulfstream of United State, Dassault Falcon of France are the conventional
competitors. Currey (2017) also commented that it is quite difficult for any business jet
maker irrespective of being local and international as China’s jet market is vastly acquired by
Gulfstream and the organization has the biggest market share. Gulfstream has been able to
strengthen its market share as all of its approaches are market-oriented and China
governments are in favour of market oriented efforts. Thus, when accessing the China
market, Boeing needs to consider the market oriented efforts which might help to gain
governmental backup.
4. Resource and capabilities of Boeing
It has been identified that Boeing’s resource and capabilities are developed to aligned
with a set of objectives that include continuous improvement, extremely skilled as well as
motivated staff and technological excellence, financial strength as well as commitment to
future integrity. According to Nason and Wiklund (2018), the competitive advantage is
gained on the basis of utilizing the bundle of unique internal resources that lead to advanced
and developed distinctive capabilities as well as the core competencies. Pearson, Pitfield and

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Ryley (2015) commented that there could be two types of internal resources –tangible and
intangible. Here, Pearson, Pitfield and Ryley (2015) mentioned that efficient integration of
business’s internal resource often lead to competitive capabilities to complete a
comprehensive series of interrelated business activities. Starting and initiating a successful
airline is extremely difficult as it often requires extensive resources capabilities and core
competencies. The commercial segments of airplanes of Boeing is strategically well-prepared
and enriched divisions with respect to enhancing new as well as managing existing resources
that help business to build distinctive capabilities as well as the core competencies. As
mentioned by Teece (2017), the resources and capabilities of Boeing include Airport
Technology, Boeing Capital Corporation, Commercial Aviation Services and Fuel
Conversation Services.
5. Potential market opportunity in the emerging economy of China
Globalization has changed the market scenario in th3 remerging countries and
emerging economies are growing at a faster rate to compete with the global super powers
(Popova 2014). China is the most attractive market for the past five years and foreign direct
investment has been flowing in due its potential capabilities.

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Figure 1: Market attractiveness
(Source: Lapickii 2018)
The market potential of China is huge in terms of the MPI index denoting the eight
dimensions. The enormous size of the market and growth in the market is one of the key
factors of attractiveness. Even though the growth is cooling down in the market, it is among
the top 10 fastest emerging economy all over the world. The real GPD of China has grown by
7.2 % every year in the past five years (Lapickii 2018). However, the market respectability
and low internet access are two factors that act as a weakness for the economy. There are
restrictions on the economy and constraints have hampered the flow of capital investment.
Moreover, the financial sectors is fully dependent and susceptible to the control of the
government. The openness of the market is low which affects foreign trade and share of
GDP is at the bottom of the group. The perception income of the population is also quite
even though the country is progressing at a rapid rate (Wijeratne, Oberoi and Tripathi 2017).
China is one of the key examples of globalization and majority of the companies are
still looking for investing in China as its potential capabilities have not been fully utilized in
the market. However, in the recent years, doubts have risen about the economic model of the
country due to the increase in cost of the labours and shortage of talents (Hsbcnet.com 2018).
The country is going through a transition from being an export based economy to consumer
based economy which could reduce the growth of the GDP and China may not experience the
growth in double figures which they have enjoyed so long. However, the airline industry in
China has been booming in China and growth rate in the airline industry is quite high.
(Industry Characteristics)
The growth in the low cost carrier category is dynamic in nature and is expected that
the local airlines to increase the number of their carriers. The reformation of the Chinese

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economy has made changes to the airline industry where the Chinese airline industry has
become a global force in the market. The year of 1982 marked less than 4 million passengers
travelling to China and the number has grown ten folds where in the year of 2016, the
population travelling to and from China were 487 million (Nunlist 2017).
Figure 2: Growth in China’s Air Traffic
Source: (Nunlist 2017)
The above figure shows the growth of the airline traffic in China and the graph shows
that steep growth in the disposable income and airline traffic. The intercontinental routes
opened up by China in the year of 2006 with just 6 carriers have grown to more than 50
carriers in the industry. The forecast of the market shows that by the end of 2029, China will
take over United States as the largest growing market over United States. Moreover, the
number of flights scheduled from China to USA is more than the vice versa and they have
been operating 10% more flights (Nunlist 2017). The change in disposable income of the
population is made thing within the reach of the people which were out of their reach. The
journey from being a luxury to being successful is evidence of the success story of the

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Chinese airline industry. However, this has led to dramatic increase in air traffic but the
Chinese airlines are unable to keep up with it due to their infrastructural incapabilities. These
problems with capacity are not restricted to domestic airlines and international flights have
been affected similarly. The progress of the Chinese industry is thus enormous in terms of
safety measures and quality of flights. However, even though the Chinese airlines have more
number of flights but none of the Chinese airlines have come even close in terms of revenue
generation. This shows that the airline industry can grow even further.
6. Developing growth strategies to adopt emerging economy opportunity
The companies making an expansion in the global market always face a void which
dealing with the issues in the emerging market. In majority of the cases, the lack of
specialised intermediaries, mechanisms for contract enforcing and regulatory systems are the
causes for the institutionalised void. The role of soft infrastructure has been taken lightly by
majority of the companies from developed nations (Marquis and Raynard 2015). The soft
infrastructure plays a great role in executing the business model in the home environment.
However, the soft infrastructure is underdeveloped or absent in most of the emerging nations.
Therefore, it is difficult for companies to identify skilled market research firms that will
provide the in depth analysis of the needs and wants of the consumers so that the organization
can customize their offerings based on it (Helm and Gritsch 2014).
This is the basic reason that there are large number of companies performing poorly in
developing countries. It has been seen that majority of the United States companies fare well
in their home market than in the emerging market. Moreover, there are companies that move
away from the remerging nation instead of moving closer to them (Prajogo 2016). The
companies that are successful develop strategies for performing business sin the emerging
market due to the increase that are quite different from the strategies implemented at home.
Moreover, they develop innovative ways of implementing them.

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The three major strategies implemented by the global companies for maintaining
competitive advantage are increasing operational efficiency (Helm and Gritsch 2014). The
business strategies developed should be flexible and short term. The supply chain has to be
effective by developing strong local partnership and technology. The footprint have to be
optimized for revaluation of the manufacturing presence. Innovation is the next key aspect of
gaining success in developing markets (Chen et al. 2014). The organization will have to
identify new ways of reaching the untapped markets and innovation process has to be
continuous and stepwise. The products have to be developed as per the needs of the
consumers so has to be localised. Go-to market has to be used effectively in order to
develop presence at all price points and across diverse channels. There has to be cross share
between the local and global practices for developing a string local presence.
(Market entry strategies)
Boeing is the one of the largest supplier of aircrafts all over the world but in China
Airbus has taken a lead over them. Airbus was the first to make Greenfield investment in
China and Boeing is setting up their facilities by developing an offshore factory in China. The
commercial aircraft purchasing is controlled by the Chinese companies so in order to gain
competitive advantage being in the market is necessary for foreign companies. However, the
cost of investment is this strategy is highest and comes with very high amount of risk in the
market. Another strategy that Boeing can implement is joint venture which will result in the
formation of a new third party company combing of the local company and the foreign
company. This will help Boeing to gain the knowledge about the local market with the help
of effective transfer of knowledge from the local company (Jiang 2016). This means that they
will be able to develop their expertise based on the needs of the local market and compete
with the companies in the local market to become the market leader.

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Partnership is another way of entering the foreign market where Boeing can form
strategic alliance in manufacturing of their products. The culture in China is quite different
than in other countries so it can be used to gain market knowledge. However, partnership is
different from joint ventures where there is no formation of a different entity. Direct
exporting is another option for Boeing where they can directly sell off their products into the
foreign market. However, gaining competitive advantage is tough as the cost of operations in
increased due to export strategies and due to the restriction in China, the overall cost of the
aircraft increases. Boeing would also be unable to increase their level of the expertise as they
would be able to gain any knowledge about of the needs of the clients without being in the
market due to the lack of good market research companies.
(Justifying the strategy)
The best strategy to be implemented in the market is joint ventures which means that
production joint ventures are encouraged by the Chinese government as the government is
looking to upgrade the workforce in the aviation industry so that they can compete with the
aircraft makers in the Western market with its own company Comac and Avic. Cessna, the
lightweight aircraft maker from United States and Embraer, the Brazilian business jet maker
have enjoyed majority of the share in the Chinese Market but initiating the manufacturing of
Avic units in China. This shows that Cessna and Embraer are the major leader in the Chinese
market due to the expertise and establishment of operations within the Chinese market.
Boeing has to follow the same route if they want to gain competitive advantage in the market.
Therefore, it is essential for Boeing to entering into joint ventures with the companies in the
local market to effective establish their command in the Chinese market.

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7. Potential market risk derived from the selected strategies
There has been significant growth in the Chinese airline industry but investment in the
airline industry comes with many risk factors. The international business dealings are linked
with ramifications that are in numerous consisting of issues such as international business
laws, immigration law, intellectual property laws, litigations and appeals and intellectual
laws. These laws are reason for binding the companies and increasing the level of risk factor.
Joint venture, being the safest potion of Boeing for entering into the Chinese market comes
with many risk factors (Henisz and Zelner 2015). Joint venture can be risky in cases when
the company forms a relationship with a local company whose resource capabilities are not
matched with that of Boeing. The business will falter when the objective of the business is
not clear and the goals of the joint venture lacks clarity. The business will also falter when
both parties have different objectives and gaols to fulfil. The problem may also arise when
different partners bring in diverse levels of investments, assets and expertise. Moreover, two
companies having different cultural background will have a tough time in developing a joint
venture as developing an appropriate organizational culture will be difficult.
8. Conclusion
The conclusion that can be drawn from the study is the fact that China is one of the
potential markets which can be capitalised and in terms of the emerging economies it still has
the highest market attractiveness. Boeing is one of the aircraft manufacturing companies
originating in America have been trying their way to get in to the Chinese market. However,
it has been seen that majority of the United States companies have faced difficulties in
sustaining in the emerging countries due to their lack of customization of their business
policies as per the needs of the country. However, as the market entry strategy, joint venture
seems the most fruitful strategy as the aircraft industry is controlled and regulated by the
Chinese government and they have been promoting joint ventures to meet the demands of the

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airline industry in China. Therefore, Boeing will have to develop their own centre of
manufacturing and operations to compete with other multinational companies.

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