Boeing's Competitive Advantage Analysis

This assignment examines Boeing's competitive advantage by applying Porter's Five Forces framework. It analyzes the influence of factors such as suppliers, competitors, substitute products, buyer power, and threat of new entrants on Boeing's position in the industry. The analysis also delves into internal aspects like supplier relationships (highlighted by long-standing partnerships), human resource management practices focused on employee skills and productivity, and Boeing's emphasis on quality control throughout its supply chain.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of Student:
Name of University:
Author’s Note:

1STRATEGIC MANAGEMENT
Table of Contents
Introduction......................................................................................................................................2
1. Financial Analysis...................................................................................................................3
3. Internal analysis of the firm...................................................................................................14
4. Identification of the strategic problems that the firm is facing..............................................18
5. Recommendation...................................................................................................................18
Conclusion.....................................................................................................................................19
Reference List................................................................................................................................20
1.

2STRATEGIC MANAGEMENT
Introduction
Boeing is considered as one of the largest aerospace organization and leader in terms of
manufacturing of commercial jetliners for defense, security systems and space. The company is
further identified as one of the top exporters in US for supporting airline and allied government
customers across 150 countries. The products of the airline company are seen to be tailored for
services including “military aircraft, satellites, weapons, electronic appliances, defense systems,
launch systems, advanced information and communication systems. The operations of the
company are based on performance-based logistics and training”1.
The report has aimed to discuss the financial analysis, which includes the variations in
the financials and comparison of the same with the closest competitor. The discourse of the study
has identified the financial health of the firm and compared the same with the closest competitor.
The external analysis of the study has been conducted with “Porter’s five forces model” and
identification of the opportunities and threats using the “SWOT analysis”. The “value chain
analysis” of the firm is able to depict the areas of operations which adds to the value of the firm.
This is done in terms of understanding the cost position and identification of the multiple means
that might be used to facilitate implementation of a chosen business-level strategy. The important
discussion in the value chain analysis has depicted the primary activities and support activities.
The competitor company for Boeing is Airbus. Airbus is considered as a “European
multinational corporation” which “designs, manufactures and sells civil and military aeronautical
products worldwide”2.
1 "Boeing: The Boeing Company: General Information." Boeing.com. N. p., 2018. Web. 30 Jan. 2018.
2 "About Airbus." Airbus. N. p., 2018. Web. 30 Jan. 2018.

3STRATEGIC MANAGEMENT
1. Financial Analysis
Change in Financials and comparison with the closest competitor
Comparison of Consolidated Income Statements
Particulars
Boeing
2016
Boeing
2015
Boeing
Percentage
Airbus
2016
Airbus
2015
Airbus
Percentage
Revenues 94571 96114 98% 66581 64450 103%
Profit for the
Period 5834 7443 78% 1000 2698 37%
Boeing Percentage Airbus Percentage
0%
20%
40%
60%
80%
100%
120%
98% 103%
78%
37%
Comparison of Income Statements
Revenues Profit for the Period
Financial health of the firm and comparison with the closest competitor for 2016 and 2015

4STRATEGIC MANAGEMENT
Comparison of Statement of Financial Position
Particulars
Boeing
2016
Boeing
2015
Boeing
Percentage
Airbus
2016
Airbus
2015
Airbus
Percentage
Total Assets 89997 94408 95% 111133 105782 105%
Capital
Expenditure 2613 2450 107% 3060 2924 105%
3
Boeing Percentage Airbus Percentage
88%
90%
92%
94%
96%
98%
100%
102%
104%
106%
108%
95%
105%
107%
105%
Comparison of Statement of Financial
Position
Total Assets Capital Expenditure
Financial Ratios for Case firm and closest competitor for 2016 and 2015
Profitability Ratio Analysis: -
3 Vogel, Harold L. Entertainment industry economics: A guide for financial analysis. Cambridge University Press,
2014.

5STRATEGIC MANAGEMENT
Boeing Airbus
Particulars 2016 2015 2016 2015
Revenue (A) 94571 96114 66581 64450
Net Profit/Loss after Tax (D) 5834 7443 1000 2698
Ordinary Equity(H) 8770 63970 3652 5973
Total Assets (G) 89997 94408 111133 105782
Gross Margin (I) 13781 14026 5264 8851
Net Profit Margin (D/A) 6.17% 7.74% 1.50% 4.19%
Return on Equity (A/H))
66.52
% 11.64% 27% 45%
Return on Assets (G/D) 6% 8% 1% 3%
Gross Profit Margin (I/A) 15% 15% 8% 14%
2016 2015 2016 2015
0%
2%
4%
6%
8%
10%
12%
14%
16% 15% 15%
8%
14%
Gross Profit Margin
Boeing
Airbus

6STRATEGIC MANAGEMENT
2016 2015 2016 2015
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00% 66.52%
11.64%
27%
45%
Return on Equity
Boeing
Airbus
2016 2015
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
6.17%
7.74%
1.50%
4.19%
Net Profit Margin
Boeing
Airbus

7STRATEGIC MANAGEMENT
2016 2015 2016 2015
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
6%
8%
1%
3%
Return on Assets
Boeing
Airbus
Efficiency Ratio Analysis
Boeing Airbus
Particulars 2016 2015 2016 2015
Cost of Goods Sold(A) 80790 82088 61317 55599
Inventory (H) 43199 47257 42800 7500
Revenue (A) 94571 96114 66581 64450
Total Assets (G) 89997 94408 111133 105782
Inventory Turnover Ratio (A/H)) 1.87 1.74 1.43 7.41
Total Asset Turnover Ratio (A/G) 1.05 1.02 0.60 0.61

8STRATEGIC MANAGEMENT
2016 2015 2016 2015
0.00
0.20
0.40
0.60
0.80
1.00
1.20 1.05 1.02
0.60 0.61
Total Asset Turnover Ratio
Boeing
Airbus
2016 2015 2016 2015
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
1.87 1.74
1.43
7.41
Inventory Turnover Ratio
Boeing
Airbus

9STRATEGIC MANAGEMENT
Short-Term Liquidity Ratio Analysis: -
Boeing Airbus
2016 2015 2016 2015
Total Current Assets (A) 62488 68234 54948 50565
Receivables (D) 8832 8713 8101 7877
Cash and equivalents (B) 8801 11302 10143 6590
Total Current Liabilities
(F) 50134 50412 55701 52878
Current Ratio (A/F) 1.25 1.35 0.99 0.96
Quick Ratio [(B+D)/F) 0.35 0.40 0.33 0.27
2016 2015
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
0.99 0.96
1.25 1.35
Current Ratio
Airbus Boeing
2016 2015
0.00
0.20
0.40
0.60
0.35 0.40
0.33 0.27
Quick Ratio
Boeing Airbus

10STRATEGIC MANAGEMENT
Debt Equity Ratio
Boeing Airbus
2016 2015 2016 2015
Total Liabilities (A)
8912
0 88011 107481 99809
Total Assets (B)
8999
7 94408 111133 105782
Total Equity ©
8770
0 639700 36520 59730
Debt-to-total Assets Ratio (A/B) 0.99 0.93 0.97 0.94
Debt to Equity Ratio (A/C) 1.02 0.14 2.94 1.67
2016 2015
0.90
0.91
0.92
0.93
0.94
0.95
0.96
0.97
0.98
0.99
1.00 0.99
0.93
0.97
0.94
Debt-to-total Assets Ratio
Boeing Airbus

11STRATEGIC MANAGEMENT
2016 2015
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1.02
0.14
2.94
1.67
Debt Equity Ratio
Boeing Airbus
2. External Analysis
The analysis of Boeing with the Michael Porter's 5 Forces is identified below as follows:
Threat of New Entrants: Low
It is discerned that threat of new entrants for Boeing is considerably low due to the
factors such as huge capital investment required at an extensive level such as Research &
Development along with massive level of technologies and budget constraint. Due to the
presence of the high entrance barriers there is a low threat of the new entrants. The companies
operating in the regional level to produce the Boeing parts are facing considerably low threat of
entrance4.
4 E. Dobbs, Michael. "Guidelines for applying Porter's five forces framework: a set of industry analysis
templates." Competitiveness Review 24.1 (2014): 32-45.

12STRATEGIC MANAGEMENT
Threat of Substitute: Mild
The substitute of Boeing is discerned to be considerably low, as people prefer the airline
carrier largely with the time factor. The advancement in the bullet trains will be be having an
effect on the manufacturing of Boeing parts in future5.
Bargaining power of Buyers: Mild
The overall determination of the bargaining power of the buyers is seen to be mild. In
terms of the buyers purchasing power the buyers are seen to be facing high bargaining power.
The high capital investment for the buyers is depicted for purchasing of the aircraft. The buyers
are seen to be involving in the long-term contract with the seller6.
Bargaining power of Suppliers: Low
The depiction of the case for aircraft manufacturing has stated that the company is
involved in the outsourcing operations throughout the globe. This is evident with more than 100
firms supplying the parts of aircraft. Boeing is seen to be having the power to negotiate for the
price with the suppliers for the presence of economies of scale7.
Competitive Rivalry: High
5 Yunna, Wu, and Yang Yisheng. "The competition situation analysis of shale gas industry in China: Applying
Porter’s five forces and scenario model." Renewable and Sustainable Energy Reviews 40 (2014): 798-805.
6 Mathooko, Francis M., and Martin Ogutu. "Porter’s five competitive forces framework and other factors that
influence the choice of response strategies adopted by public universities in Kenya." International Journal of
Educational Management 29.3 (2015): 334-354.
7 Moreno-Izquierdo, Luis, Ana B. Ramón-Rodríguez, and José Francisco Perles-Ribes. "Pricing strategies of the
European low-cost carriers explained using Porter's Five Forces Model." Tourism Economics 22.2 (2016): 293-310.

13STRATEGIC MANAGEMENT
The sluggish industry growth is not seen to be clear with the market leader and
undifferentiated strategies, high bargaining power and existence of barrier to exit. The sluggish
growth is further able to drive for the “competitive rivalry among the existing players of the
industry”. In addition to this, the market is largely discerned to be duopoly which has resulted in
a low profit margin in the airline industry8.
Identification of opportunities and threats faced by the firm using SWOT analysis:
Opportunities
Boeing is identified to be having an increased opportunity in defense. Some of the other
areas of opportunities for the company are discerned with demand for satellites and weapon
systems in the space and security markets. The company may further decide to ramp up the
commercial airplanes production9.
Threats
Some of the prominent threats of the company is determined with increased competitive
pressures. The other threats for Boeing is identified with factors such as regulatory pressures,
Risks associated to directing business in additional countries and commercial interruption. In
addition to this, the situation of Boeing operates with full of unique risks and threats. Some of
the more prominent threat is seen with the increase in the competitive pressure by other airline
operators such as Airbus. Moreover, the international competitors desire to increase the market
share can create a significant pressure on the company10.
8 Porter, Michael E., and James E. Heppelmann. "How smart, connected products are transforming
competition." Harvard Business Review 92.11 (2014): 64-88.
9 Becker, Stephen P., et al. "The internal, external, and diagnostic validity of sluggish cognitive tempo: A meta-
analysis and critical review." Journal of the American Academy of Child & Adolescent Psychiatry 55.3 (2016): 163-
178.
10 Gao, Wei, et al. "Fully integrated wearable sensor arrays for multiplexed in situ perspiration
analysis." Nature 529.7587 (2016): 509.

14STRATEGIC MANAGEMENT
3. Internal analysis of the firm
The determination of the internal analysis is conducted with strength and weakness
analysis by showing SWOT:
Strength
The main strength of the company is considered with “global presence, large market
share, financial performance and having Airplane models with strong fuel efficiency”. Some of
the wide variety of the availability of Commercial aircrafts to military aircrafts is seen as one of
the major strength of the company.
Weakness
High amount of expenditure on research and development is considered as one of the
main weakness of the company. The high expenditure on the post-retirement benefits and
expenditures on pension is also considered as weakening factors for the company. The
operational issues are further seen to be some of the other factors responsible for slow growth of
the company11.
The illustration of the value chain analysis for Boeing is identified with the discussion of
primary value chain analysis and support value chain:
Primary Value Chain
11 Becker, Stephen P., et al. "The internal, external, and diagnostic validity of sluggish cognitive tempo: A meta-
analysis and critical review." Journal of the American Academy of Child & Adolescent Psychiatry 55.3 (2016): 163-
178.

15STRATEGIC MANAGEMENT
Inbound Logistics
The revolutionary logistics characteristics for Boeing is observed to be revolutionized
with the use of “Cribmaster inventory management system”. The inventory system allows the
company to track the employees for which purchase order need to be issued as per certain
material. In addition to this, the company is involved in a long-term relationship with most of the
suppliers. This is evident with the presence of suppliers such as “Goodrich Corporation” which
has working experience with Boeing for the past 50 years. The airline company is further seen to
operate as per just-in-time strategy and other Lean principles to keep costs down. In the recent
times, Boeing has jointly developed their products to lead a more efficient inbound logistics
system. Boeing simply helps the suppliers to create these inputs for providing greater value for
the company12.
Operations
The Boeing Company is seen to take several input materials to create a commercial
aircraft. Some of the innovations of the company is discerned from the long line of value
creating activities which makes Boeing operations to be vital in nature. The main operations are
based on moving assembly line approach13.
Outbound Logistics
12 Gereffi, Gary, and Karina Fernandez-Stark. "Global value chain analysis: a primer." (2016).
13 Jaligot, Remi, et al. "Applying value chain analysis to informal sector recycling: A case study of the
Zabaleen." Resources, Conservation and Recycling 114 (2016): 80-91.

16STRATEGIC MANAGEMENT
The strategy for outbound logistics will be able to show how the planes will be delivered
to the companies. Boeing is seen to be capable enough to ship it products on its own. Post
purchase, the airline is provided with the keys to fly the plane in the desired destination.
Marketing & Sales
The different marketing activities of the airline company has focused more on marketing
and sales more than any other company. Boeing serves a specific clientele of mostly commercial
airlines and postal services. The marketing strategy is not based on a mass advertisement to the
public, it is more based on trying to procure new contracts with specific customers. At times, the
airlines approach for negotiation related to contracts which may take years due to the future
economic conditions which must be based on forecast, manufacturing and backlogging.
Service
Boeing has collaborated with British Airways to initiate the service of Global Airline
Inventory Network. This network is seen to be conducive for managing the supply chain of the
spare parts of Boeing’s fleet. Due of this, British Airways was forced to take care of the own
spare parts inventory. This has allowed the company to maintain better relationship with the
airline to take care of the plane in the first place14.
Support Value Chain
Procurement
14 Kovacevic, Raimund M., Georg Ch Pflug, and Maria Teresa Vespucci. Handbook of risk management in energy
production and trading. Springer, 2016.
s

17STRATEGIC MANAGEMENT
Boeing is seen to govern the purchase of resources of the right quality, in the “right
quantity and at the right time”. The emphasis of the competitive bidding is considered to be a
good business practice. This is considered with the factors such as “ability, capacity, integrity,
financial status, geographical locations, performance, reliability, quality of product, delivery and
overall customer-supplier relations”. This is important in assessing a possible supplier from
beforehand and during a purchase contract.
Technology
The technological innovations will ensure that the companies utilise the resources in a
more efficient manner. The Airplane manufacturers has used robots to achieve the same. The
company has achieved several successes in winning “head-to-head competition with Airbus”.
The total research and development is considered for making the planes faster.
Human Resource Management
The HRM is considered with the combating of “skills, training, communications,
environment, and leadership”. Boeing believes in employees needing the gains in productivity
and quality to meet the goals. The employment of the technical and HRM policies are considered
with optimum efficiency which is done by carefully achieving of the long-term goals.
Firm Infrastructure
The main ability of the company is able to determine the segment’s demand pattern. For
instance, the established economies like “North America and Europe” can predict the increase in
demand for regional jets as air travellers in these regions are seen to request non-stop flights on
thinner routes.

18STRATEGIC MANAGEMENT
4. Identification of the strategic problems that the firm is facing
The company has faced several problems such as overheating batteries for the 787s—
which is depicted to be operating on lithium ion batteries. Even with the use of proven
technology the outsourcing of the parts often doesn’t fit together when the plane is being
assembled. In some cases, it is discerned that the prime contractor to provide on-site quality,
“supplier-management” is not able to provide technical support. There is no evidence found
which can support that Boeing planned for such on-site support to the suppliers. The
innovation risk for 787 was always involved with the aircraft carrier. This is considered with
the outsourcing of the known technology. The risk was implied in a greater way by Boeing in
the development and manufacturing process of the aircraft. There have been several instances
where the airline carrier is seen to depict a relatively lesser amount of the expertise for the
products. This is main seen in the areas of engines and avionics.
Boeing has aggravated the risk factors with the outsourcing model with the
increasing cost and timeliness. Toyota works closely with the suppliers and responds with the
appropriate concern with the integrity and mutual respect for Boeing.
5. Recommendation
The buying decisions made by the company needs to be taken into consideration with the
complete assessment of all the costs. This is considered with the fact that “make-buy
decisions should not be made until after the product has been defined and the relative costs
established.” The outsourcing decisions of the company should be considered with the up-
front effort in planning to evade additional situation to include the major sub-assemblies
which is considered with the saving the increasing cost by orders of magnitude. The supply

19STRATEGIC MANAGEMENT
chain implemented by the company needs to be based on the outsourcing model which was
not implemented at Boeing in the traditional approach. The company needs to take the better
approach towards the labour relations, which will be able to increase the quality of the
operations of Boeing.
Conclusion
The financial interpretations of the company have depicted that Boeing is in a better
position in terms of the “Profitability Ratio Analysis, Efficiency Ratio Analysis, Short-Term
Liquidity Ratio Analysis and Solvency ratio analysis”. There is several evidences which shows
that threat of new entrants for Boeing is considerably low due to the factors such as huge capital
investment required at an extensive level such as Research & Development, massive level of
technologies and budget constraint. Due to the presence of the high entrance barriers there is a
low threat of the new entrants. The overall determination of the bargaining power of the buyers
is seen to be mild. In terms of the buyers purchasing power the buyers are seen to be facing high
negotiating power. In addition to this, the company is involved in a long-term relationship with
most of the suppliers. This is evident with the presence of suppliers such as “Goodrich
Corporation” which has working experience with Boeing for the past 50 years. Boeing is seen to
govern the purchase of materials of the right quality, in the right quantity and at the right time.
The emphasis of the competitive bidding is considered to be a good business practice. The HRM
is considered with the combating the “skills, training, communications, environment, and
leadership”. Boeing have faith in in employees needing the gains in productivity and quality to
meet the goals.

20STRATEGIC MANAGEMENT
Reference List
"About Airbus." Airbus. N. p., 2018. Web. 30 Jan. 2018.
"Boeing: The Boeing Company: General Information." Boeing.com. N. p., 2018. Web. 30 Jan.
2018.
Becker, Stephen P., et al. "The internal, external, and diagnostic validity of sluggish cognitive
tempo: A meta-analysis and critical review." Journal of the American Academy of Child &
Adolescent Psychiatry 55.3 (2016): 163-178.
Becker, Stephen P., et al. "The internal, external, and diagnostic validity of sluggish cognitive
tempo: A meta-analysis and critical review." Journal of the American Academy of Child &
Adolescent Psychiatry 55.3 (2016): 163-178.
E. Dobbs, Michael. "Guidelines for applying Porter's five forces framework: a set of industry
analysis templates." Competitiveness Review 24.1 (2014): 32-45.
Gao, Wei, et al. "Fully integrated wearable sensor arrays for multiplexed in situ perspiration
analysis." Nature 529.7587 (2016): 509.
Gereffi, Gary, and Karina Fernandez-Stark. "Global value chain analysis: a primer." (2016).
Jaligot, Remi, et al. "Applying value chain analysis to informal sector recycling: A case study of
the Zabaleen." Resources, Conservation and Recycling 114 (2016): 80-91.
Kovacevic, Raimund M., Georg Ch Pflug, and Maria Teresa Vespucci. Handbook of risk
management in energy production and trading. Springer, 2016.

21STRATEGIC MANAGEMENT
Mathooko, Francis M., and Martin Ogutu. "Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya." International Journal of Educational Management 29.3 (2015): 334-354.
Moreno-Izquierdo, Luis, Ana B. Ramón-Rodríguez, and José Francisco Perles-Ribes. "Pricing
strategies of the European low-cost carriers explained using Porter's Five Forces
Model." Tourism Economics 22.2 (2016): 293-310.
Porter, Michael E., and James E. Heppelmann. "How smart, connected products are transforming
competition." Harvard Business Review 92.11 (2014): 64-88.
Vogel, Harold L. Entertainment industry economics: A guide for financial analysis. Cambridge
University Press, 2014.
Yunna, Wu, and Yang Yisheng. "The competition situation analysis of shale gas industry in
China: Applying Porter’s five forces and scenario model." Renewable and Sustainable Energy
Reviews 40 (2014): 798-805.