Boeing's Global Business Management Strategy in China's Economy

This case study examines Boeing's global business management strategy in the context of China's emerging economy. It identifies the opportunities and challenges Boeing faces in the Chinese market, particularly concerning competition from existing players like Gulfstream and regulatory hurdles. The analysis explores Boeing's resources and capabilities, highlighting its technological advancements and strategic fit. The study further delves into the market opportunities presented by China's growing aviation sector, including general and commercial aviation. Boeing's market entry strategies, including adapting the 737 for business jet use and considering exportation and joint ventures, are discussed, along with the importance of corporate social responsibility. Finally, the case study assesses potential market risks and threats to Boeing's strategy in China. Desklib provides access to similar case studies and solved assignments for students.

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

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Table of Content
1. Background of Boeing...........................................................................................................2
2. Problem Identification............................................................................................................2
3. Problem analysis....................................................................................................................3
3.1 Exploring resource and capabilities of Boeing....................................................................3
4. Market opportunity derived from emerging Chinese economy.............................................4
Some basic and specified opportunities:................................................................................6
5. Strategy adopted by Boeing to pursue the emerging economy in China...............................7
Market Entry Strategy............................................................................................................8
Corporate Social Responsibility...........................................................................................10
6. Estimated market risk from the adoption of the strategy.....................................................11
Market threats.......................................................................................................................12
References................................................................................................................................13

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1. Background of Boeing
It is widely known that Boeing presently has become largest aerospace company as
well as leading manufacturer of aerospace and security system. As US’s biggest
manufacturing exporter, Boeing provides airline services to US and allied government
customers in more than 150 nations. On the other side, Boeing Global Services provides a
complete, cost competitive services for commercial defense as well as space customers
(Boeing.com 2018). With the help of engineering, digital analytics, training support spanning
and supply chain across both government and commercial service deals, Boeing is
exclusively positioned to deliver world class services to customers. Furthermore, the service
offering of Boeing is not limited here, as in the field of Boeing Defense, Space and Security,
Boeing remains as the only aerospace manufacturer that provides products, which enabling
its customers to achieve mission requirements with the inclusion of sea bed and outer space.
There is no doubt that organization serves a diverse customer base but the portfolio is
particularly focused in major six market areas such as commercial Derivatives, Military
Rotocraft, Human Space Exploration and Autonomous System and Services (Boeing.com
2018). Thus, it is worth stating that when it comes to expanding the services and markets,
Boeing is never standing behind. So, China’s emerging economy is a significant market
opportunity for Boeing as the part of global expansion.
2. Problem Identification
It has been identified that the world market is widely influenced by emerging
economy of China which is particularly luring the aerospace airplane manufacturers, as
Chinese government who looks after the business jet management, had imposed stiff
provisions for business jets with respect to allowance, is now welcoming business air jets
both domestic and international (Fu et al. 2015). As the economy is flourishing, many global

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and existing aerospace manufacturers are gearing themselves up for the growing demands of
business jet services. Presently, Beech Hawker, Cessna and Gulfstream of United States are
the major and traditional competitions who are trying to deal with this growing demands
business air jets. Nonetheless, the demand is rapidly growing demands.
Even though the demands are high, acquiring China’s aerospace and business jet
market will not be an easy task, the existing competitor Gulfstream has a strong position in
the market. According to the case study, Gulfstream has tremendous record of acquiring
every order and it tends to apply market-oriented approach. Although acquiring Chinese
market seems to be difficult, observing the demand the local Chinese aerospace take the
advantages of leniency Chinese government with respect to the allowance of business air jet
(Fu, Zhang and Lei 2012). Nevertheless, it is worth stating that the demands business airline
in the Chinese market will further grow and on the basis of the scenario, Boeing should enter
the market by avoiding the possible the challenges and threats from the existing competitors.
Hence, the major market barriers for Boeing is that entering China market which is already
acquired by large global competitors and dealing with excessive tax and provisions from
Chinese government on global businesses.
3. Problem analysis
3.1 Exploring resource and capabilities of Boeing
According to the study conducted by Zhang, YangWang and Zhang (2014), it is
certain that for quantifying resources and capability as strategic, the business has to be
organized to utilize or exploit those resources and capabilities. It is observed that starting and
running an effective airline is effective as it needs extensive resources, capabilities and core
competencies. When it comes to Boeing strategic capability, it is identified that Boeing
commercial airplane segment is strategically fit as well as developed division in terms of

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enhancing and managing existing resources that guide the business to design distinctive
capabilities and core competencies. The concept of boundary of business makes complete
sense with respect to last dimension as it deals with the questions of whether the business is
supposed to design and manufacture resource itself or it commend it to a partner (Lin and Wu
2014).
Particularly, it has been identified that with a series of consideration to the newly
developed architecture for the electronic system which could affect the flight control. Till
date, aircraft delivered by Boeing has been designed by instilling federated architecture,
where computers have been allocated to a single function (Lawrence and Thornton 2017).
The recently developed architecture by Boeing called “Modular” and “Distributed” leads to
the distribution of computer technologies throughout the entire aircraft as well as support the
involvement of many functions in single computer technology (Al-Najjar et al. 2017). When
it comes to capability, the influence of architectural changes made by Boeing can call for a
strong and comprehensive implications of architect-integrators in their design. Therefore,
existing capabilities and resources indicate that Boeing has enhanced technology background.
4. Market opportunity derived from emerging Chinese economy
It is certain that economy fluctuation is a permanent scenario in each market but
globalization plays a great role in changing the market scenario. It has been particularly
identified that China’s socialist economy remains as world’s second largest economy by the
nominal growth and GDP as well as world largest economy with respect to purchasing power
parity. Tuschke, Sanders and Hernandez, (2014) has mentioned that China is a global hub for
manufacturing as well as is the largest manufacturing economy in the world. Specifically,
China has become the second biggest domestic aviation market in the globe, apart from being
the fastest developing market with 9.5% passenger traffic growth rate in the consecutive year

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(Ang, Benischke and Doh 2015). Moreover, as per Lawrence and Thornton (2017), Boeing
market analysis has forecasted that China presently should add an additional 6800 aircraft to
business commercial fleet to deal with the growing demands.
Among the vast categories of options for entering and developing business in China,
there are four significant market opportunities in the aviation sector such as General aviation,
commercial aviation, joint programs and technology providers. Particularly, in general
aviation, presently 364 GA firms in China are running their operation and almost 2185
registered GA aircrafts are there in the market along with projected 77000 GA flying hours in
2017 (De Beule, Elia and Piscitello 2014). In addition to this, there is limited barriers to
General Aviation for market entrance. It is also identified that by 2020, China plans to have
more than 500 GA aircraft as well as 500 GA airports, which is certainly a significant
opportunity for Boeing. Albu, Albu and Alexander (2014), commented that air resources
might face challenges and there is an extensive use of airspace by the military. The author of
this article has also mentioned that about 50% of registered GA pilots find business in
domestic environment, while less than 100 new GA pilots demanded annually (Jiang and
Zhang 2016). However, there is a still demand for high-skilled pilots in some particular
sector. The following figure shows the market structure and key players of commercial
business aviation in China.

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Figure 1: Commercial Aviation Market Structure in China
(Source: Chu and Song 2015)
Some basic and specified opportunities:
In spite of some significant concerns, China will still remain an extremely attractive
market several US aerospace businesses. Lei et al. (2016) mentioned that almost 90% of U.S
China Business Council member organizations respond to a USCBC survey which indicates
that their operation in China is profitable. FDI into China experienced a moderate growth in
2015, increasing 5.3% annual rate compared to the decrease of 3% in 2012 (Gaur, Kumar and
Singh 2014). According to Tuschke, Sanders and Hernandez (2014), additional inbound
capacity is rapidly growing into Chinese market which suggests that the 2022 milestone, may
actually arrive in 2021. This could trump all expectations. The article (Li and Liu 2014), also
reveal the fact that US based airlines could receive 342 new aircraft in the coming year
compared to 327 in China, which means aviation markets cold add one aircraft per day. Thus,
any new aircraft manufacturer with adequate capabilities could lead to change and plans to
provide more than twice as many aircraft as a large competitor like Gulfstream does.

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Beside Chinese market, a market trend can be observed in other Asian countries like
India. At present, India has no less than 250 jets owned by business tycoons of first rows. As
per the market prediction, India will be the owner of 1000+ private jets and aircrafts in total
in coming decades. Comparing with the developed countries India has a low growth rate as
far as this industry is concerned. The difference with the Chinese market is that in spite of the
economical imbalance China has a demand of private jets within industry. On the other hand,
being a developing country, India has overshadowed both China and Japan as far as number
of owned Private jets are concerned. However, as a market threat Boeing can face Indians
changing attitude towards buying private jets as they feel post purchase maintenance charges
of infrastructure is not convenient for them. Currently, as of now the market trend is in favour
of aircraft manufacturing companies like Boeing.
5. Strategy adopted by Boeing to pursue the emerging economy in China
Being one of the biggest aircraft manufacturing company of American origin; it has
mastered the operations of defence and aerospace. The company has a positive global image
as well. Acknowledging the favourable business environment in China Boeing has decided to
expand its territory to china’s private or business jet market. China is known as the land of
second largest billionaire after US (Fu et al. 2015). Therefore, buying power of the market in
terms of selling business jets or private jets is powerful enough. As compared to the buying
power, the number of business jets are 400, which are currently flying across virgin sky of
China. In order to explore this opportunity Boeing has decided to enter into the China’s virgin
skies. Boeing has considered a strategic approach while planning to enter into the Chinese
market as well as they have decided to handle corporate social responsibility with highest
priority as it will assist them to sustain in the market and enhance competitive edge.

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Market Entry Strategy
There are three major consideration, which must be taken while going global. Boeing
has its positive global reputation of delivering quality service. As per the description of De
Beule, Elia and Piscitello (2014), while entering into Chinese market the company will
consider Chinese political, economic, social, technological and legal orientation. According
to the current market condition, Chinese market has immense potential for jet makers
especially who deals with manufacturing of business or private jets. Before entering
into market, it is essential to look into the country’s resources. According to the provided
case study. In order to enter into the market, as described in Ang, Benischke and Doh, (2015),
Boeing has adapted 737 to offer ‘Boeing Business Jet’, which can carry up to 60 passengers.
Moreover, before establishing its individual unit the firm can consider exporting and joint
venture to avoid the extreme initial competition. Exportation of parts and collaborating with
other existing aircraft manufacturers Boeing can think of preparing a strong customer base
first to receive a warm welcome after its individual establishment. Besides, several strategies
regarding outsourcing, by performing acquisitions will be helpful too. Strategies are as
follows.
 In order to deal with a very promising foreign market, exporting the aircraft manufacturing
parts will be a wise idea to enter the market and understand the response first.
Response will come only them the product is well marketed and customers will
develop a distinct idea about it. Therefore, along with exporting parts of aircraft
manufacturing, company needs to invest on promotional activities as well following
the multinational strategy structure. As per Gao et al. (2016), exporting will help to
gain an insight of the foreign market, allows learning the risk factors associated with
the proposed plan of business extension. There are four strategic choices, which
Boeing can opt for. Replicating the products in the targeted emerging market will

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reduce cost yet there is chances of receiving less response. Using local materials to
produce products will maximize responsiveness yet the cost will be higher as effort is
being delivered in several countries. Global presence reduces local responsiveness
and increases centralised control. However, cost advantage is higher in this case.
Transactional strategy is both locally responsive and cost efficient. Innovative
strategies can be implemented towards organisational benefit yet it is difficult to
execute and critical in terms of structure.
 Joint ventures common when a company seeks for enhancement of its customer base
across the nation. Joint ventures are important in order to avoid the excessive
competition in a promising market. Gulfstream holds the biggest market share in
Chinese jet market. There are 100 jets supplied which works on board. As argued in
the words of Shi et al. (2014), collaborating with such a reputed company will create
learning atmosphere in terms of risks. Additionally, potential field of future
development will be expanded. However, joint ventures can be difficult if the
business partners’ opinion differs on point of benefits and the core company has the
central power of management. Such diversification strategies, apart from joint
ventures acquisition and merging companies within industry will be helpful to initiate
the business in a foreign land. In order to do that Ansoff Matrix framework can be
considered to plan the future business considering the Chinese market.

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As described in this framework, it has been explained that which strategies must be
adopted according to the nature of the market and product or services.
 Contract manufacturing can be measured, as a strategic approach while entering into
an emerging market. Instead of establishing own manufacturing unit first Boeing can
opt for contract manufacturing in order to save the organisation from the risk of
investing a huge amount without learning business environment. Moreover, the
expense of providing raw materials and production facilities reduces. However,
disadvantages are various including less authorization over production system. In this
due course, quality may alter, as they have to depend on other manufacturing unit.
Although, there are several disadvantages of the strategic approach yet with right research
and application the company can learn the whereabouts of new business environment of
China and reduce the initial risk factors.
Corporate Social Responsibility
Companies who comply with corporate social responsibility norms are likely to create
a positive impact on the targeted customer base. Apart from the quality of the product and
services customers tend to examine how far the company is considering ethics while

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practicing business. As argued by (Hofman and Newman 2014), a successful CSR strategy
works as one of the growth manipulating factors in terms of entering into new market. CSR
Strategy demands to focus on core organizational goals, investment in native manufacturing
units to overcome obstacles of market acceptation and access to the extensive market
information to adapt it as a business strategy. CSR deals with compliance of social and
environmental sustainability norms, which must be under ethical consideration of every
business organisation. Market position automatically goes higher as this strategy provides
huge commitment towards society by executing both the short and long-term projects.
However, if Boeing considers integrating their organisational goal and decides to serve
community issues of China the firm will receive a prosperous entry undoubtedly.
6. Estimated market risk from the adoption of the strategy
China has been detected as promising market for Jet makers. However, without
learning the necessary details about the emerging market it would be foolishness to establish
individual manufacturing unit. Therefore, Boeing needs to consider exportation, joint venture
and contract manufacturing first in order to enter into the Chinese market.
Exportation of aircraft manufacturing parts, is wise until the company realises there is
no opportunity of attracting the customers attention in the first place. The core company will
be highlighted in the market with highest priority. Secondly, as far as the joint venture is
concerned the control of the business will be on hands of the native company mostly.
Differences of opinion is a common point of dissatisfaction while working on a venture like
this. Although, both the strategies are good with mitigating risk factors and handling the
competitors. Contract manufacturing reduces the authorization over the produced material
and quality of the product is differing from the original American Boeing.