Expanded SWOT

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This is a paper you did for me previously.... The SWOT and TOWS sections need to be expanded with actual paragraphs that talk about the Strengths, Weaknesses, etc. (with references cited). Draft comment from teacher: "although you have a table/chart for EFAS, you also need to write a paper with sections such as: opportunities, threats, etc. In addition to paragraphs in these sections you may also want to have a summary table/chart that lists the opportunities and threats (short version) before you get to the EFAS section. You also need to cite references both within the text and on a separate reference page in APA format."

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Executive Summary The financial performance and position of Boeing, the largest aerospace company in the world, has been deteriorated in 2016. The revenue, net income, year ending cash balance, total assets, and total shareholders’ equity of the company have been decreased substantially. The achievement of vision - ‘To be the best in Aerospace and enduring global industrial champion’ has been hampered. The existing functional level, business level, corporate level, and global strategies have fail to provide the company a competitive edge and good position in the market. The highlight-able strengths of the Boeing are strong brand image, high innovative skill, strong and asset base. Internal weaknesses of the company that require special recovery attention are high leverage in capital structure, and high focus and dependency on government contract. Boeing has opportunity to capitalize on increasing demand for commercial airplanes, horizontal acquisition to specialized components suppliers, and international market expansion. Significant threats which are confronted by the Boeing include intense market competition, and high risk in new products development. Based on the review of internal strengths and weaknesses possessed by the company, and opportunities and threats offered by the external business environment, the new suggested turnaround strategies which can be suggested for the company are market penetration on commercial airplanes market, market expansion in foreign market, adopting calculated risk taking culture, pursuing acquisition of specialized components suppliers and through stock issue in the market. Introduction When a company fails to attain its goals, turnaround strategies are required to adopt (David, 2013). For finding turnaround strategy for a company it is required to review its financial performance and position, internal business structure, existing strategies, and internal and external factors affecting the market (Hitt, Ireland, & Hoskisson, 2014). This papers aims at conducing a thorough analysis on the mission & vision, exciting key strategies and internal and external business factors of Boeing Company, and suggesting turnaround strategic plans for the Boeing Company. Strategic Planning of Boeing Company History of the Company Boeing is the largest aerospace company in the world. The company was established in 15th July 1916 by William Boeing. The head office of it is located in Washington, United States. Currently, nearly about 141322 employees are working in the Boeing. Currently, Boeing is the largest aircraft manufacturer and second largest defense contractor in the world, and largest exporter company in USA. The company belongs 24th position in the Fortune 500 list (Fortune 500, 2018). Boeing is enlisted in the New York Stock Exchange (NYSE). The current market capitalization of the company is USD 201.305 billion (Yahoo Finance, 2018). Boeing engages in designing, manufacturing, and selling of airplanes, rockets, and satellites in worldwide (Boeing, 2017). Besides this, the company engages in leasing and product support services. The operation of Boeing is conducted with five divisions including ‘Boeing Commercial Airplanes’, ‘Boeing Defense, Space & Security’, ‘Boeing capital’, ‘Engineering, Operations & Technology’, and ‘Boeing Shared Services Group’ (Encyclopedia, 2018). The main competitor of the Boeing is Airbus. Other competitors include Bombardier, Lockheed Martin, Daimler-Benz, and Thiokol (Encyclopedia, 2018). Since inception in 1916, Boeing has already passed 100 years. The important achievements and milestones of the company during this period are shown in two phases- first 50 years and next 50 years. PERIOD ACHIEVEMENTS First 50 Years First incorporated as "Pacific Aero Products Co" in 1916 in Washington state by William Boeing Renamed as "Boeing Airline Company" in Engaged in production of fighter for US Air Army Service in 1923 Boeing 247, the first truly modern airline, introduced 1933 Completed the work of Model 307 Statelier, the first pressurized cabin transport aircraft in the world, in 1938 Started production of military jet in 1950 Completed the work of MB-707, the first commercial jet airline of the world, in 1958 Next 50 Years Acquired Vertol Aircraft Corporation in 1960 Replaced B-707 with B-676 in 1985 Launched two-engine B-777 (with capacity of 300-370 passengers) in 1994 Acquired aerospace and defence units of Rockwell in 1996 Merger with McDonnell Douglas as result of $13 billion stock swap in 1997 Launched 777 Fighter for Air France in 2005 Formed joint venture named United Launch Alliance with Lockheed Martin in 2006 Acquired Fairfax in 2010 Opened a 27 acre factory in Washington state worth$1 billion in 2016 Financial Overview (a) Financial Performance Total revenue of Boeing has been decreased in 2016 from $96114 million to $94571 million even though in 2015 total revenue has been increased (From $90762 million to $96114 million) (Figure 1). The decrease of total revenue in 2016 was due to reduction of airplanes, rockets, and satellites prices for coping up with competitive market environment. Total net income of the company has been decreased from $5176 million to $4895 million (Figure 1). This decrease of net income is mainly attributed by the decreased of revenue. The EPS of it has been increased from $7.52 to $7.70 (Figure 2). But this increase of EPS is mainly due to decrease of total number of share outstanding (attributed by the share repurchase). The decline of revenue and net income implies that the financial performance of the Boeing has been deteriorated. The deterioration of the profitability of the Boeing in 2016 is also apparent from the decline of net profit margin and return on assets (ROA) of the company (Figure 3). The net profit margin helps to assess the profit generation capacity of a company on its sales after managing of the expenses. Return on assets (ROA) helps to assess the efficiency of a company to utilize its assets in generating return. Even the net profit margin and ROA of Boeing are higher than those of Airbus in 2016 (Figure 3) but these have consistently decreased from 2014. Revenue and Net Income of Boeing 150000 100000 50000 0 2014 90762 5446 Revenue Net income 2015 96114 5176 2016 94571 4895 Figure 1: Revenue and Net Income (in million) of Boeing EPS of Boeing 7.8 7.7 7.6 7.5 7.4 7.3 Earnings per share 2014 7.47 2015 7.52 Figure 2: EPS of Boeing 2016 7.7 PROFITABILITY RATIOS Net Profit Margin Return on Assets (ROA) BOEING AIRBUS 2014 2015 2016 2016 5.99% 5.38% 5.17% 1.49% 5.48% 5.48% 5.44% 0.91% Figure 3: Profitability Ratios of Boeing (b) Financial Position Total assets of the Boeing has been declined consistently after 2014 (Figure 4). The decline of the total assets can be considered as deterioration of the financial position of the company. Total shareholders’’ equity of the Boeing has been also decreased substantially in 2016 (From $6335 million to $817 million) due to high stock repurchase program (treasury stock) of the company. Total liabilities of the Boeing has been gradually increased. This means the leverage in the capital structure of the company has been increased. The issue is also apparent from the debt ratio of the company. The debt ratio represents the debt relied upon in financing the assets of the company. Even the debt ratio of the Boeing is lower than that of Airbus, but it has been consistently increased from 2014 (Figure 6). Increase of higher debt in the capital structure resulted in increase of financial risk of the company. The current ratio and quick ratio, which are measures of the short-term debts and obligations repayment capacity as well as liquidity of the company, of Boeing are higher than those of Airbus (Figure 5). But these ratios of Boeing have been decreased consistently from 2014. This means that even the overall liquidity condition of Boeing is better than Airbus, the liquidity condition of Boeing has been deteriorated over the recent period. Along with this, the times interest earned ratio of Boeing has been decreased dramatically in 2016 (Figure 5). The times interest earned ratio assess the number of times a company can repay its period interest burden with its operating income. The increase of leverage along with the decrease of times interest earned ratio is indication of the severe deterioration of the long term solvency of the Boeing. Total Assets, Total Shareholders' Equity, and Total Liabilities of Boeing 120000 100000 80000 60000 40000 20000 0 Total assets Total liabilities Total stockholders' equity 2014 99198 90533 8665 2015 94408 88073 6335 2016 89997 89180 817 Figure 4: Total Assets, Total Shareholders' Equity, and Total Liabilities (in million) of Boeing LIQUIDITY RATIOS Current Ratio Quick Ratio BOEING 2014 1.20 0.37 2015 1.35 0.42 AIRBUS 2016 1.25 0.38 2016 0.99 0.39 Figure 5: Liquidity Ratios of Boeing SOLVENCY RATIOS Debt Ratio Times Interest Earned Ratio BOEING AIRBUS 2014 91.26% 2015 93.29% 2016 99.09% 2016 96.71% 22.44 27.07 19.07 3.47 Figure 6: Solvency Ratios of Boeing (c) Cash Flow Performance and Position The cash flow performance of a company can be assessed from the analysis of its net cash generated from operating activities and free cash flow of the company. Both- net cash generated from operating activities and free cash flow of Boeing has been increased (Figure 7). This implies that the cash performance of the Boeing has been improved. The cash end of the year of Boeing has been decreased from $11330 million to $8834 million (Figure 7). The decrease of the yearn end cash balance substantially is an indication of the deterioration of cash position of the company. Net Cash Provided by Operating Activities, Ending Cash Balance, and Free Cash Flow of Boeing 14000 12000 10000 8000 6000 4000 2000 0 Net cash provided by operating activities Cash at end of period Free cash flow 2014 2015 2016 8858 9363 10499 11733 6622 11330 6913 8834 7886 Figure 7: Net Cash Provided by Operating Activities, Ending Cash Balance, and Free Cash Flow (in million) of Boeing Corporate Governance The business of the company is conducted by employees, managers, and corporate officers led by the CEO along with oversight from the board of directors (Boeing, 2018). Currently, company is now lead by Dennis Muilenburg. There are 13 members in the board of directors of the company now (Boeing, 2018). There are separate audit committee, organization and nominating committee, compensation committee, finance committee, governance committee, and special program committee. These committees are fully and properly functioning to ensure most efficient operation of the company. The leaders of the business are aspire to lead in bothcommunity and environmental stewardship (Annual Report of Boeing, 2016). The goals and aspirations of the leaders are bold. The name of the board of directors along with their tenure, and membership in to committees are pointed out below. NAME Robert A. Bradway TENURE Since 2017 David L. Calhoun Arthur D. Collings Since 2009 Since 2007 Kenneth M. Durberstein Admiral Edmund P. Giambastiani Lynn J. Good Lawrence W. Kellner Caroline B. Kennedy Edward M. Liddy Dennis A. Muilenburg Since 1997 Susan C. Schwab Since 2010 Ronald A. Williams Since 2010 Mike S. Zafirovski Since 2004 Since 2009 Since 2015 Since 2011 Since 2017 Since 2010 Since 2015 MEMBERSHIP Audit Committee, Finance Committee Organization and Nominating Committee, Compensation Committee Organization and Nominating Committee Compensation Committee, Organization and Nominating Committee Finance Committee, Special Programs Committee Audit Committee, Finance Committee Audit Committee, Finance Committee Audit Committee, Finance Committee Compensation Committee Special Programs Committee Audit Committee, Special Programs Committee Audit Committee, Special Programs Committee Compensation Committee, Organization and Nominating Committee The corporate governance structure of the Boeing is very strong. The corporate governance principles and current practices are periodically reviewed by the ‘Organization and Nominating Committee’. The board has adopted ‘code of ethical business conduct’ to provide guidance to the employees, managers, and corporate officers. These code of ethical business conduct serve guidelines in the workplace and outside conduct (Boeing, 2018). Ethical business practices is the top priority of the business leaders of the company. The board of directors of the company believes in develop the business with sustainable practices which require creation of a culture of honesty, high accountability and transparency. The board and corporate officers always try to recognize the long term interests of the company, and balance up the interests of all stakeholders including employees, customers, shareholders, suppliers, government, communities etc. (Boeing, 2018). Vision and Mission Statements The vision and mission statement of the company are the anchor point of strategic plans (Hitt, Ireland, & Hoskisson, 2014). Every words of the vision and mission statement are essential for business, brand, and bottom line of the company (Ireland, Hoskisson, & Hitt, 2012). The hope and operational approach of the company are communicated through vision and mission statement of it. A vision statements is an aspirational declaration of an organization’s long term desired position (Hitt, Ireland, & Hoskisson, 2014). A mission statement is a statement of the purpose, scope of operation, philosophies of business, and competitive advantages of the organization (Ireland, Hoskisson, & Hitt, 2012). The vision Statement of Boeing: ‘To be the best in Aerospace and enduring global industrial champion’. Mission statement of Boeing: ‘To connect, protect, explore, and inspire the world with aerospace innovation’. The vision and mission statement of Boeing are carefully drafted. The vision statement is clearing indicating the long term desired change to the employees. It is intended to guide the employees in the internal decision making. The mission statement of the Boeing is clearly communicating the employees what the Boeing is and what is trying to achieve. It is valuing leadership, integrity, innovation, customer satisfaction, and teamwork. From both, the vision and mission statements are communication and expectation from the employees are very clear. These are designed to inspire and reaffirm the employees that with a shared future the company together with employees will be able to meet challenges of future (Boeing, 2018). Both of these are highly inspirational. The employees of the company are clear what they have to do to be the leader in airline industry. Thus, there is no need to modify or change the vision and mission statements of the Boeing. Analysis of Key Strategies The strategies of a company can be undertaken at different level including functional, business, corporate, and global level (David, 2013). Even through these are game plans for different purposes but these collectively supports the reaching of organization goal (Hitt, Ireland, & Hoskisson, 2014). Current Functional Level Strategies The functional strategies refers to the plans adopted for the various functional areas or units of the organization (Hitt, Ireland, & Hoskisson, 2014). The functional strategies supports the successful completion of normal operation of the company (David, 2013). The functional level strategies of the Boeing are pointed out below. • Seeking economies of scale in production: Boeing is determined to realize achieving economies of scale in design, procurement, and manufacturing process (Annual Report of Boeing, 2016). • Flat organizational structure and autonomous working environment: Boeing follows flat organizational structure1 and ensures autonomous working environment in the functional level to smoothly manage the business operation (Annual Report of Boeing, 2015). The management believes in informal, trusting, and non- bureaucratic environment to successfully complete the 1 Flat organizational structure: Flat organizational structure, also termed as horizontal business structure, is an organization structure with few middle level managers in between executives and staffs (Ireland, Hoskisson, & Hitt, 2012). operation. The company tries to foster a collaborative workplace with active engagement and collaboration of employees for finding best solutions for the customers (Boeing, 2018). • Focus on continuous improvement of business process: Boeing is committed to improve business with constant improvement of internal business processes (Annual Report of Boeing, 2016). The company believes that steady and long term perfection of the operational process is key of success. The streamline business processes (administrative, manufacturing and support) are supported with strong and updated technological infrastructure (Boeing, 2018). • Developing talented and skilled employees: Boeing seeks to leverage on the talents and expertise of skilled people (Annual Report of Boeing, 2016). Human resource is considered as a significant resource of Boeing by its business leaders. The company extensively focuses on improving the productivity and quality of the employees with continuous leadership, and training and development program to meet its long term goals (Annual Report of Boeing, 2016). Current Business Level strategies Business level strategies, also termed as market competitive strategies, refer to the game plans to successfully compete in the market (David, 2013). Business level strategies point out how the company will approach the market and face the competitive pressure (Hitt, Ireland, & Hoskisson, 2014). The business level strategies of the Boeing are pointed out below. • Following market oriented pricing strategy: Even though Boeing operates in oligopoly market, the pricing of the company is based on the analysis of market environment (Annual Report of Boeing, 2015). • Board differentiation strategy: Boeing approaches the market with broad differentiation strategy. The focus of the company is to serve worldwide with innovative and customers oriented products design. The differentiation slogan of Boeing is ‘Direct point-to-to point-traffic’. • Balanced organic and acquisition growth strategy: Boeing seeks to develop and expand business with balanced organic and acquisition growth strategy. The company expands huge funds in internal research and development. Technological innovation, large scale system integration capacity, and best solution generation (which are the core competitive advantage to expand the market) are outcome of extensive research and development initiative. Beside this, the company has already conducted a number of strategic mergers and acquisitions to become the leading aerospace company in the world. Current Corporate Level Strategies Corporate strategies, also termed as enterprise strategy, are the overall game plans to manage various business works and operations to achieve the particular goals (Hitt, Ireland, & Hoskisson, 2014). Corporate strategies are adopted to drive the entire organization to a specific direction (David, 2013). The current corporate level strategies of the Boeing are pointed out below. • Following sustainable business practices: Boeing seeks to expand business with sustainable business practices. As a part of this, the company tries to offer green business (environment friendly products), ensure best usages of limited resources, balance up the interests of all stakeholders, and involve in community development work. • Following and fostering learning environment: Boeing seeks continuous internal development with the culture of ‘learning environment’ (Annual Report of Boeing, 2016). The employees within the organization are highly encouraged to generate and share the ideas. Well ideas and thinking of the employees are respected and appraised. • Building strength on strengths: Boeing strongly focused to sharpen streamline key enterprise growth and productivity efforts for continual growth of the business (Annual Report of Boeing, 2015). • Sharpening and accelerating to win: Boeing strongly focused to improve manufacturing and design technologies, and create global scale and depth for growing presence around the world (Annual Report of Boeing, 2015). Current Global Strategies Global strategies, also termed international market strategies, refer to the game plans to enter and compete in the international market (Hitt, Ireland, & Hoskisson, 2014). Global strategies are considered as guide for globalization to the company (David, 2013). The global strategies of the Boeing are pointed out below. • Market entry with own subsidiary: Boeing adopts the strategy of ‘establishment of own subsidiary’ as market entry to foreign market. The majority of the operation in foreign counties (now in 64 countries besides USA) are managed with own direct operation (Annual Report of Boeing, 2016). • Following ‘Product Adaptation Strategy’: Boeing follows ‘product adaptation strategy’ in doing business in international market. The products (commercial & military aircrafts, satellites, electronic and defense systems) of the company are designed based on customer needs and specifications (Annual Report of Boeing, 2016). • Approaching with ‘Operating as One Boeing’ strategy: Boeing strategy to approach global market expansion with ‘Operating as One Boeing’ strategy (Annual Report of Boeing, 2016). The focal of the strategy is to cut the cost through integration of operation and increase market share in international market (Sweetman, 2013). SWOT Analysis IFAS Table Analysis The IFAS table analysis for strengths and weaknesses of Boeing is as follows. IFAS Table (Strengths & Weaknesses) Strenths & Weaknesses Weight Rating Weighted Strenths Comment Strong brand image: Boeing has already developed it's brand as the largest aerospace company in the world. It has successfully expanded it's business on commercial & military aircrafts, satellites, weapons, electronic and defense systems, and advanced information and communication systems market. 0.10 5.0 0.50 (a) High difficulty to intimate brand image. (b) Active presence in the mind of customers. Strong leadership: Boeing is led by highly skilled and experienced leaders and executives. The company always seeks to capitalize on the skills and talents of the employees (as the skills and talents are key to innovation). 0.10 5.0 0.50 (a) Valuable asset to operate the company efficiently and beat the market. 0.80 (a) High difficulty to intimate. (b) Ensuring continuous improvement of the quality of products. High innovative skill: Boeing is a highly innovative company. The company is included in the list of top 100 global innovative companies published by Forbes (Forbes, 2018). With innovation skills, the company is creating breakthroughs and expanding the opportunities. Strong Asset Base: Boeing has a strong asset base. At the end of 2016, total assets of the company was $89997 bil. Environmentally friendly technologies: The manufacturing system of Boeing is environment friendly. The production process entails less energy emission and environmental pollution. 0.20 4.0 0.10 3.0 0.30 (a) A solid base to support business expansion in the future. 0.10 4.0 0.40 (a) Good image and acceptance to customers. (b) Social responsibility. Weaknesses High leverage: Boeing is a highly leveraged company. High leverage causes high volatility to the earnings of the company. High focus and dependency on government contracts: The majority of the revenue of Boeing derives from government contracts. However, long term governemnt contracts are subject to various political and economic factors. More bargaining power of the suppliers: In procurement of some specialized raw materials and integrated components, Boeing depends on some specific suppliers. This provides high bargaining power to these suppliers Labor issues: The labor union, which includes 38% of the total workforce of Boeing, has stopped working from time to time. Total 0.10 1.0 0.10 (a) High financial risk. (b) Possible problem in obtaining loans and advances in the future. 0.10 2.0 0.20 (a) High business risk exposure of the company. 0.10 1.0 0.10 (a) Negative impact to price paid and profitability. 0.10 1.0 0.10 (a) Negative impact on the productivity and reputation of the company. 1.00 3.00 Boeing obtained 2.80 out of 5.00 in IFAS model. Thus, it can said that the capacity of the Boeing to deal with the most significant strengths and weaknesses is good (Rating score of 3.00 4.00: Good Rating). EFAS Table Analysis The EFAS table analysis of the opportunities and threats of Boeing is as follows. IFAS Table (Opportunities & Threats) Opportunities & Threats Weight Rating Weighted Comment Opportunities Increasing demand for commercial airplanes: Due to (a) Scope to increasing of globalization, the capitalize on market air travel of the people is 0.20 5.0 1.00 growth and recover increasing. Thus, Boeing has sales decline (in last scope to capitalize on year). commerical airplane market. Horizontal integration: Boeing has scope to acquire the specialized raw materials and integrated components suppliers to reduce cost of supply. International market expansion: The aerospace and defense market is growing globally. From 2015-2018, aerospace and defense is expected to grow by CAGR of 3% Threats Intense market competition: The competition in all the market segments (in which Boeing operates) have been increased Fixed price contract: The majority proportion of the revenue of Boeing is derived from BDS business. BDS business follows fixed price contract. High risk in new products development: There is high risk in new product development due to involvement of high capital expenditure and time commitment. Cylical industry nature: The aerospace market is a cyclical industry by nature. During the time of economic recession, the demand for product is decreased. Total 0.10 0.20 5.0 4.0 0.50 (a) Reduction of bargaining power of suppliers. (b) Improve profitability. 0.80 (a) Extension of product life cycle. (b) Diversification of geographic business area. 0.10 4.0 0.40 (a) Possibility of losing market share. (b) Negative impact on profitability. 0.20 2.0 0.40 (a) Negative impact on profitability. 0.10 3.0 0.30 (a) Hampering business expansion efforts. 0.20 (a) Negative impact on profitability during bad economic condition. 0.10 1.00 2.0 3.60 Boeing obtained 3.60 out of 5.00 in EFAS model. Thus, it can said that the capacity of the Boeing to deal with the most important opportunities and threats in the external environment is good (Rating score of 3.00 - 4.00: Good Rating). SFAS Table Analysis The SFAS table analysis for Boeing is as follows. SFAS Table Analysis Factors S1: Strong brand image S3: High innovative skill S4: Strong assets base W1: High leverage W2: High focus & dependency on government contract O1: Increasing demand for commercial airplanes O2: Horizontal integration O3: International market expansion T1: Intense market competition T3: High risk in new products development Total Weight Rating Assigned Weighted Assigned (Out of 5 scale) Rating 0.10 0.10 0.10 0.10 5 4 3 1 0.5 0.4 0.3 0.1 0.10 2 0.2 0.10 0.10 5 5 0.5 0.5 0.10 4 0.4 0.10 4 0.4 0.10 1 3 0.3 3.6 Boeing obtained 3.60 out of 5.00 in SFAS model. Thus, it can said that the capacity of the Boeing to deal with the internal and external business environment to capture external market opportunities or confront threats successfully is good (Rating score of 3.00 - 4.00: Good Rating). TOWS Analysis SO Strategic Alternatives Strengths S1: Strong brand image S3: High innovative skill S4: Strong Assets Base Opportunities O1: Increasing demand for commercial airplanes O2: Horizontal integration O3: International market expansion Strategic Alternative 1: Market penetration on commercial airplanes market. The existing assets base and brand image of the company will provide good support to this. This will help to increase the market share and revenue. Strategic Alternative 2: Market expansion in foreign market. The existing assets base and brand image of the company will provide good support to this. From this, the life cycle of the products will be extended and total revenue will be increased. ST Strategic alternatives Strengths S1: Strong brand image S3: High innovative skill S4: Strong Assets Base Threats T1: Intense market competition T3: High risk in new products development Strategic Alternative 1: Adopting calculated risk taking culture. Only highly innovative and feasible projects will be found out for pursuing. WO strategic alternatives from the TOWS Matrix Weaknesses W1: High leverage W2: High focus and dependency on government contract Opportunities O1: Increasing demand for commercial airplanes O2: Horizontal integration O3: International market expansion Strategic Alternative 1: Market penetration on commercial airplanes market. This will reduce the dependency on the government contract for revenue. Strategic Alternative 2: Pursuing acquisition of suppliers through stock issue in the market. This will enable the company to reduce the supply cost and leverage on capital structure. WT Strategic Alternatives Weaknesses W1: High leverage W2: High focus and dependency on government contract Threats T1: Intense market competition T3: High risk in new products development Strategic Alternative 1: Expanding operation to foreign market with stock issue (in the local bourse). This will provide the company entry to a new market for reduction of competition. Also, the leverage on the capital structure will be decreased. Conclusion Boeing has experienced deterioration of financial performance and position in the last financial year. The revenue and net income of the company decreased substantially in the last financial year. Total assets size, shareholders’ equity, and year end cash balance were also decreased. The existing strategies at functional level, corporate level, business level, and global level of the company have failed to support it in fulfilling its mission and vision. Thus, turnaround strategies are necessary to support it in recovering its financial performance and position. At a glance, the internal strengths of the Boeing are strong brand image, high innovative skill, strong and asset base, and the internal weaknesses are highly leveraged capital structure and high dependency on government contract in revenue generation. The graspable market opportunities are rising demand of commercial airplanes, acquisition to specialized components suppliers for cost reduction and international market expansion, and market threats confronted now are fierce market competition and involvement of high risk in new products development. The new suggested turnaround strategies for the company include market penetration on commercial airplanes market, market expansion in foreign market, adopting calculated risk taking culture, pursuing acquisition of specialized components suppliers and through stock issue in the market. These strategies are recommended in consideration of utilizing internal strengths to capture external opportunities, utilizing internal strengths to meet adverse effect of external threats, capturing external opportunities to recover internal weaknesses, and recovering internal weaknesses to face external threats successfully. The implementation of these suggested strategies will provide the Boeing a new competitive edge in the market and recover its financial performance and position depressed in last financial year. References Boeing. (2015). Annual Report (2015). The Boeing Company . Boeing. (2016). Annual Report (2016). The Boeing Company . Boeing. (2017). Retrieved January 20, 2018, from Resources: http://www.boeing.com/resources/boeingdotcom/company/general_info/pdf/boeing_over view.pdf Boeing. (2018). Retrieved January 18, 2018, from Corporate Governance: http://www.boeing.com/company/general-info/corporate-governance.page Boeing. (2018). 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Retrieved January 20, 2018, from The Boeing Company (BA): Summary: https://finance.yahoo.com/quote/BA/ Appendices Appendix 01: Financial Statements of Boeing Boeing Co Income Statement (All figures are in USD and in million) Revenue Cost of revenue Gross profit Operating expenses Research and development Sales, General and administrative Other operating expenses Total operating expenses Operating income Interest Expense Other income (expense) Income before taxes Provision for income taxes Net income from continuing operations Net income from discontinuing ops Net income Preferred dividend Net income available to common shareholders Earnings per share Basic Diluted Weighted average shares outstanding 2014 2015 90762 76752 14010 96114 82088 14026 2016 94571 80790 13781 3047 3767 -277 6537 7473 333 -3 7137 1691 5446 3331 3525 -273 6583 7443 275 -13 7155 1979 5176 4627 3616 -296 7947 5834 306 40 5568 673 4895 5446 6 5440 5176 4 5172 4895 3 4892 7.47 7.38 7.52 7.44 7.7 7.61 Basic Diluted 728 737 687 695 636 643 Boeing Co Balance Sheet (All figures are in USD and in million) Assets Current assets Cash Cash and cash equivalents Short-term investments Total cash Receivables Inventories Deferred income taxes Other current assets Total current assets Non-current assets Property, plant and equipment Gross property, plant and equipment Accumulated Depreciation Net property, plant and equipment Equity and other investments Goodwill Intangible assets Deferred income taxes Other long-term assets Total non-current assets Total assets 2014 2015 2016 11733 1359 13092 7729 46756 18 190 67785 11302 750 12052 8003 47257 8801 1228 10029 7804 43199 922 68234 1456 62488 26696 -15689 11007 1154 5119 2869 6576 4688 31413 99198 28362 -16286 12076 1284 5126 2657 265 4766 26174 94408 29690 -16883 12807 1317 5324 2540 332 5189 27509 89997 Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt Capital leases Accounts payable Deferred income taxes Taxes payable Accrued liabilities Deferred revenues Other current liabilities Total current liabilities Non-current liabilities Long-term debt Capital leases Deferred taxes liabilities Accrued liabilities Pensions and other benefits Minority interest Other long-term liabilities Total non-current liabilities Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity 929 1181 53 10800 327 57 11190 12706 262 13031 89 13736 23812 56717 25085 50412 24735 50134 8141 8730 23984 125 1566 33816 90533 2392 6616 17783 62 2078 37661 88073 9487 81 1338 5916 19943 60 2221 39046 89180 5061 4625 36180 -23298 -13903 8665 99198 5061 4834 38756 -29568 -12748 6335 94408 5061 4762 40714 -36097 -13623 817 89997 10667 8603 Boeing Co Cash Flow Statement (All figures are in USD and in million) Cash Flows From Operating Activities Net income Depreciation & amortization Investment/asset impairment charges Stock based compensation Change in working capital Accounts receivable Inventory Accounts payable Accrued liabilities Other working capital Other non-cash items Net cash provided by operating activities Cash Flows From Investing Activities Investments in property, plant, and equipment Property, plant, and equipment reductions Acquisitions, net Purchases of investments Sales/Maturities of investments Purchases of intangibles Other investing activities Net cash used for investing activities Cash Flows From Financing Activities Debt issued Debt repayment 2014 2015 2016 5446 1906 229 195 897 -1328 -4330 1339 98 5118 185 8858 5176 1833 167 189 1795 -1069 -1110 -238 2 4210 203 9363 4895 1910 90 190 3045 112 3755 622 726 -2170 369 10499 -2236 34 -163 -8617 13416 -2450 42 -31 -2036 2590 -2613 38 -297 -1719 1209 33 2467 39 -1846 2 -3380 -1601 1746 -885 1325 -1359 Common stock repurchased Excess tax benefit from stock based compensation Dividend paid Other financing activities Net cash provided by (used for) financing activities Effect of exchange rate changes Net change in cash Cash at beginning of period Cash at end of period -6001 114 -2115 1010 -8593 -87 2645 9088 11733 -6751 157 -2490 303 -7920 -7001 -403 11733 11330 -2468 11302 8834 Free Cash Flow Operating cash flow Capital expenditure Free cash flow 8858 -2236 6622 9363 -2450 6913 10499 -2613 7886 -2756 204 -9587 Appendix 02: Financial Ratios of Boeing Ratios Formula 2014 Boeing 2015 2016 Airbus 2016 1.20 0.37 1.35 0.42 1.25 0.38 0.99 0.39 Liquidity Measures Current Ratio Quick Ratio Current Assets / Current Liabilities (Current Assets - Inventory) / Current Liabilities Profitability Measures Net Profit Margin Return on Assets (ROA) Net Profit / Total Revenue Net Income / Total Assets 5.99% 5.48% 5.38% 5.48% 5.17% 5.44% 1.49% 0.91% Total Liabilities / Total Assets 91.26% 93.29% 99.09% 96.71% 22.44 27.07 19.07 3.47 Solvency Measures Debt Ratio Times Interest Earned Ratio (Times) Operating Income / Interest Expense Executive Summary The financial performance and position of Boeing, the largest aerospace company in the world, has been deteriorated in 2016. The revenue, net income, year ending cash balance, total assets, and total shareholders’ equity of the company have been decreased substantially. The achievement of vision - ‘To be the best in Aerospace and enduring global industrial champion’ has been hampered. The existing functional level, business level, corporate level, and global strategies have fail to provide the company a competitive edge and good position in the market. The highlight-able strengths of the Boeing are strong brand image, high innovative skill, strong and asset base. Internal weaknesses of the company that require special recovery attention are high leverage in capital structure, and high focus and dependency on government contract. Boeing has opportunity to capitalize on increasing demand for commercial airplanes, horizontal acquisition to specialized components suppliers, and international market expansion. Significant threats which are confronted by the Boeing include intense market competition, and high risk in new products development. Based on the review of internal strengths and weaknesses possessed by the company, and opportunities and threats offered by the external business environment, the new suggested turnaround strategies which can be suggested for the company are market penetration on commercial airplanes market, market expansion in foreign market, adopting calculated risk taking culture, pursuing acquisition of specialized components suppliers and through stock issue in the market. Introduction When a company fails to attain its goals, turnaround strategies are required to adopt (David, 2013). For finding turnaround strategy for a company it is required to review its financial performance and position, internal business structure, existing strategies, and internal and external factors affecting the market (Hitt, Ireland, & Hoskisson, 2014). This papers aims at conducing a thorough analysis on the mission & vision, exciting key strategies and internal and external business factors of Boeing Company, and suggesting turnaround strategic plans for the Boeing Company. Strategic Planning of Boeing Company History of the Company Boeing is the largest aerospace company in the world. The company was established in 15th July 1916 by William Boeing. The head office of it is located in Washington, United States. Currently, nearly about 141322 employees are working in the Boeing. Currently, Boeing is the largest aircraft manufacturer and second largest defense contractor in the world, and largest exporter company in USA. The company belongs 24th position in the Fortune 500 list (Fortune 500, 2018). Boeing is enlisted in the New York Stock Exchange (NYSE). The current market capitalization of the company is USD 201.305 billion (Yahoo Finance, 2018). Boeing engages in designing, manufacturing, and selling of airplanes, rockets, and satellites in worldwide (Boeing, 2017). Besides this, the company engages in leasing and product support services. The operation of Boeing is conducted with five divisions including ‘Boeing Commercial Airplanes’, ‘Boeing Defense, Space & Security’, ‘Boeing capital’, ‘Engineering, Operations & Technology’, and ‘Boeing Shared Services Group’ (Encyclopedia, 2018). The main competitor of the Boeing is Airbus. Other competitors include Bombardier, Lockheed Martin, Daimler-Benz, and Thiokol (Encyclopedia, 2018). Since inception in 1916, Boeing has already passed 100 years. The important achievements and milestones of the company during this period are shown in two phases- first 50 years and next 50 years. PERIOD ACHIEVEMENTS First 50 Years First incorporated as "Pacific Aero Products Co" in 1916 in Washington state by William Boeing Renamed as "Boeing Airline Company" in Engaged in production of fighter for US Air Army Service in 1923 Boeing 247, the first truly modern airline, introduced 1933 Completed the work of Model 307 Statelier, the first pressurized cabin transport aircraft in the world, in 1938 Started production of military jet in 1950 Completed the work of MB-707, the first commercial jet airline of the world, in 1958 Next 50 Years Acquired Vertol Aircraft Corporation in 1960 Replaced B-707 with B-676 in 1985 Launched two-engine B-777 (with capacity of 300-370 passengers) in 1994 Acquired aerospace and defence units of Rockwell in 1996 Merger with McDonnell Douglas as result of $13 billion stock swap in 1997 Launched 777 Fighter for Air France in 2005 Formed joint venture named United Launch Alliance with Lockheed Martin in 2006 Acquired Fairfax in 2010 Opened a 27 acre factory in Washington state worth$1 billion in 2016 Financial Overview (a) Financial Performance Total revenue of Boeing has been decreased in 2016 from $96114 million to $94571 million even though in 2015 total revenue has been increased (From $90762 million to $96114 million) (Figure 1). The decrease of total revenue in 2016 was due to reduction of airplanes, rockets, and satellites prices for coping up with competitive market environment. Total net income of the company has been decreased from $5176 million to $4895 million (Figure 1). This decrease of net income is mainly attributed by the decreased of revenue. The EPS of it has been increased from $7.52 to $7.70 (Figure 2). But this increase of EPS is mainly due to decrease of total number of share outstanding (attributed by the share repurchase). The decline of revenue and net income implies that the financial performance of the Boeing has been deteriorated. The deterioration of the profitability of the Boeing in 2016 is also apparent from the decline of net profit margin and return on assets (ROA) of the company (Figure 3). The net profit margin helps to assess the profit generation capacity of a company on its sales after managing of the expenses. Return on assets (ROA) helps to assess the efficiency of a company to utilize its assets in generating return. Even the net profit margin and ROA of Boeing are higher than those of Airbus in 2016 (Figure 3) but these have consistently decreased from 2014. Revenue and Net Income of Boeing 150000 100000 50000 0 2014 90762 5446 Revenue Net income 2015 96114 5176 2016 94571 4895 Figure 1: Revenue and Net Income (in million) of Boeing EPS of Boeing 7.8 7.7 7.6 7.5 7.4 7.3 Earnings per share 2014 7.47 2015 7.52 Figure 2: EPS of Boeing 2016 7.7 PROFITABILITY RATIOS Net Profit Margin Return on Assets (ROA) BOEING AIRBUS 2014 2015 2016 2016 5.99% 5.38% 5.17% 1.49% 5.48% 5.48% 5.44% 0.91% Figure 3: Profitability Ratios of Boeing (b) Financial Position Total assets of the Boeing has been declined consistently after 2014 (Figure 4). The decline of the total assets can be considered as deterioration of the financial position of the company. Total shareholders’’ equity of the Boeing has been also decreased substantially in 2016 (From $6335 million to $817 million) due to high stock repurchase program (treasury stock) of the company. Total liabilities of the Boeing has been gradually increased. This means the leverage in the capital structure of the company has been increased. The issue is also apparent from the debt ratio of the company. The debt ratio represents the debt relied upon in financing the assets of the company. Even the debt ratio of the Boeing is lower than that of Airbus, but it has been consistently increased from 2014 (Figure 6). Increase of higher debt in the capital structure resulted in increase of financial risk of the company. The current ratio and quick ratio, which are measures of the short-term debts and obligations repayment capacity as well as liquidity of the company, of Boeing are higher than those of Airbus (Figure 5). But these ratios of Boeing have been decreased consistently from 2014. This means that even the overall liquidity condition of Boeing is better than Airbus, the liquidity condition of Boeing has been deteriorated over the recent period. Along with this, the times interest earned ratio of Boeing has been decreased dramatically in 2016 (Figure 5). The times interest earned ratio assess the number of times a company can repay its period interest burden with its operating income. The increase of leverage along with the decrease of times interest earned ratio is indication of the severe deterioration of the long term solvency of the Boeing. Total Assets, Total Shareholders' Equity, and Total Liabilities of Boeing 120000 100000 80000 60000 40000 20000 0 Total assets Total liabilities Total stockholders' equity 2014 99198 90533 8665 2015 94408 88073 6335 2016 89997 89180 817 Figure 4: Total Assets, Total Shareholders' Equity, and Total Liabilities (in million) of Boeing LIQUIDITY RATIOS Current Ratio Quick Ratio BOEING 2014 1.20 0.37 2015 1.35 0.42 AIRBUS 2016 1.25 0.38 2016 0.99 0.39 Figure 5: Liquidity Ratios of Boeing SOLVENCY RATIOS Debt Ratio Times Interest Earned Ratio BOEING AIRBUS 2014 91.26% 2015 93.29% 2016 99.09% 2016 96.71% 22.44 27.07 19.07 3.47 Figure 6: Solvency Ratios of Boeing (c) Cash Flow Performance and Position The cash flow performance of a company can be assessed from the analysis of its net cash generated from operating activities and free cash flow of the company. Both- net cash generated from operating activities and free cash flow of Boeing has been increased (Figure 7). This implies that the cash performance of the Boeing has been improved. The cash end of the year of Boeing has been decreased from $11330 million to $8834 million (Figure 7). The decrease of the yearn end cash balance substantially is an indication of the deterioration of cash position of the company. Net Cash Provided by Operating Activities, Ending Cash Balance, and Free Cash Flow of Boeing 14000 12000 10000 8000 6000 4000 2000 0 Net cash provided by operating activities Cash at end of period Free cash flow 2014 2015 2016 8858 9363 10499 11733 6622 11330 6913 8834 7886 Figure 7: Net Cash Provided by Operating Activities, Ending Cash Balance, and Free Cash Flow (in million) of Boeing Corporate Governance The business of the company is conducted by employees, managers, and corporate officers led by the CEO along with oversight from the board of directors (Boeing, 2018). Currently, company is now lead by Dennis Muilenburg. There are 13 members in the board of directors of the company now (Boeing, 2018). There are separate audit committee, organization and nominating committee, compensation committee, finance committee, governance committee, and special program committee. These committees are fully and properly functioning to ensure most efficient operation of the company. The leaders of the business are aspire to lead in bothcommunity and environmental stewardship (Annual Report of Boeing, 2016). The goals and aspirations of the leaders are bold. The name of the board of directors along with their tenure, and membership in to committees are pointed out below. NAME Robert A. Bradway TENURE Since 2017 David L. Calhoun Arthur D. Collings Since 2009 Since 2007 Kenneth M. Durberstein Admiral Edmund P. Giambastiani Lynn J. Good Lawrence W. Kellner Caroline B. Kennedy Edward M. Liddy Dennis A. Muilenburg Since 1997 Susan C. Schwab Since 2010 Ronald A. Williams Since 2010 Mike S. Zafirovski Since 2004 Since 2009 Since 2015 Since 2011 Since 2017 Since 2010 Since 2015 MEMBERSHIP Audit Committee, Finance Committee Organization and Nominating Committee, Compensation Committee Organization and Nominating Committee Compensation Committee, Organization and Nominating Committee Finance Committee, Special Programs Committee Audit Committee, Finance Committee Audit Committee, Finance Committee Audit Committee, Finance Committee Compensation Committee Special Programs Committee Audit Committee, Special Programs Committee Audit Committee, Special Programs Committee Compensation Committee, Organization and Nominating Committee The corporate governance structure of the Boeing is very strong. The corporate governance principles and current practices are periodically reviewed by the ‘Organization and Nominating Committee’. The board has adopted ‘code of ethical business conduct’ to provide guidance to the employees, managers, and corporate officers. These code of ethical business conduct serve guidelines in the workplace and outside conduct (Boeing, 2018). Ethical business practices is the top priority of the business leaders of the company. The board of directors of the company believes in develop the business with sustainable practices which require creation of a culture of honesty, high accountability and transparency. The board and corporate officers always try to recognize the long term interests of the company, and balance up the interests of all stakeholders including employees, customers, shareholders, suppliers, government, communities etc. (Boeing, 2018). Vision and Mission Statements The vision and mission statement of the company are the anchor point of strategic plans (Hitt, Ireland, & Hoskisson, 2014). Every words of the vision and mission statement are essential for business, brand, and bottom line of the company (Ireland, Hoskisson, & Hitt, 2012). The hope and operational approach of the company are communicated through vision and mission statement of it. A vision statements is an aspirational declaration of an organization’s long term desired position (Hitt, Ireland, & Hoskisson, 2014). A mission statement is a statement of the purpose, scope of operation, philosophies of business, and competitive advantages of the organization (Ireland, Hoskisson, & Hitt, 2012). The vision Statement of Boeing: ‘To be the best in Aerospace and enduring global industrial champion’. Mission statement of Boeing: ‘To connect, protect, explore, and inspire the world with aerospace innovation’. The vision and mission statement of Boeing are carefully drafted. The vision statement is clearing indicating the long term desired change to the employees. It is intended to guide the employees in the internal decision making. The mission statement of the Boeing is clearly communicating the employees what the Boeing is and what is trying to achieve. It is valuing leadership, integrity, innovation, customer satisfaction, and teamwork. From both, the vision and mission statements are communication and expectation from the employees are very clear. These are designed to inspire and reaffirm the employees that with a shared future the company together with employees will be able to meet challenges of future (Boeing, 2018). Both of these are highly inspirational. The employees of the company are clear what they have to do to be the leader in airline industry. Thus, there is no need to modify or change the vision and mission statements of the Boeing. Analysis of Key Strategies The strategies of a company can be undertaken at different level including functional, business, corporate, and global level (David, 2013). Even through these are game plans for different purposes but these collectively supports the reaching of organization goal (Hitt, Ireland, & Hoskisson, 2014). Current Functional Level Strategies The functional strategies refers to the plans adopted for the various functional areas or units of the organization (Hitt, Ireland, & Hoskisson, 2014). The functional strategies supports the successful completion of normal operation of the company (David, 2013). The functional level strategies of the Boeing are pointed out below. • Seeking economies of scale in production: Boeing is determined to realize achieving economies of scale in design, procurement, and manufacturing process (Annual Report of Boeing, 2016). • Flat organizational structure and autonomous working environment: Boeing follows flat organizational structure1 and ensures autonomous working environment in the functional level to smoothly manage the business operation (Annual Report of Boeing, 2015). The management believes in informal, trusting, and non- bureaucratic environment to successfully complete the 1 Flat organizational structure: Flat organizational structure, also termed as horizontal business structure, is an organization structure with few middle level managers in between executives and staffs (Ireland, Hoskisson, & Hitt, 2012). operation. The company tries to foster a collaborative workplace with active engagement and collaboration of employees for finding best solutions for the customers (Boeing, 2018). • Focus on continuous improvement of business process: Boeing is committed to improve business with constant improvement of internal business processes (Annual Report of Boeing, 2016). The company believes that steady and long term perfection of the operational process is key of success. The streamline business processes (administrative, manufacturing and support) are supported with strong and updated technological infrastructure (Boeing, 2018). • Developing talented and skilled employees: Boeing seeks to leverage on the talents and expertise of skilled people (Annual Report of Boeing, 2016). Human resource is considered as a significant resource of Boeing by its business leaders. The company extensively focuses on improving the productivity and quality of the employees with continuous leadership, and training and development program to meet its long term goals (Annual Report of Boeing, 2016). Current Business Level strategies Business level strategies, also termed as market competitive strategies, refer to the game plans to successfully compete in the market (David, 2013). Business level strategies point out how the company will approach the market and face the competitive pressure (Hitt, Ireland, & Hoskisson, 2014). The business level strategies of the Boeing are pointed out below. • Following market oriented pricing strategy: Even though Boeing operates in oligopoly market, the pricing of the company is based on the analysis of market environment (Annual Report of Boeing, 2015). • Board differentiation strategy: Boeing approaches the market with broad differentiation strategy. The focus of the company is to serve worldwide with innovative and customers oriented products design. The differentiation slogan of Boeing is ‘Direct point-to-to point-traffic’. • Balanced organic and acquisition growth strategy: Boeing seeks to develop and expand business with balanced organic and acquisition growth strategy. The company expands huge funds in internal research and development. Technological innovation, large scale system integration capacity, and best solution generation (which are the core competitive advantage to expand the market) are outcome of extensive research and development initiative. Beside this, the company has already conducted a number of strategic mergers and acquisitions to become the leading aerospace company in the world. Current Corporate Level Strategies Corporate strategies, also termed as enterprise strategy, are the overall game plans to manage various business works and operations to achieve the particular goals (Hitt, Ireland, & Hoskisson, 2014). Corporate strategies are adopted to drive the entire organization to a specific direction (David, 2013). The current corporate level strategies of the Boeing are pointed out below. • Following sustainable business practices: Boeing seeks to expand business with sustainable business practices. As a part of this, the company tries to offer green business (environment friendly products), ensure best usages of limited resources, balance up the interests of all stakeholders, and involve in community development work. • Following and fostering learning environment: Boeing seeks continuous internal development with the culture of ‘learning environment’ (Annual Report of Boeing, 2016). The employees within the organization are highly encouraged to generate and share the ideas. Well ideas and thinking of the employees are respected and appraised. • Building strength on strengths: Boeing strongly focused to sharpen streamline key enterprise growth and productivity efforts for continual growth of the business (Annual Report of Boeing, 2015). • Sharpening and accelerating to win: Boeing strongly focused to improve manufacturing and design technologies, and create global scale and depth for growing presence around the world (Annual Report of Boeing, 2015). Current Global Strategies Global strategies, also termed international market strategies, refer to the game plans to enter and compete in the international market (Hitt, Ireland, & Hoskisson, 2014). Global strategies are considered as guide for globalization to the company (David, 2013). The global strategies of the Boeing are pointed out below. • Market entry with own subsidiary: Boeing adopts the strategy of ‘establishment of own subsidiary’ as market entry to foreign market. The majority of the operation in foreign counties (now in 64 countries besides USA) are managed with own direct operation (Annual Report of Boeing, 2016). • Following ‘Product Adaptation Strategy’: Boeing follows ‘product adaptation strategy’ in doing business in international market. The products (commercial & military aircrafts, satellites, electronic and defense systems) of the company are designed based on customer needs and specifications (Annual Report of Boeing, 2016). • Approaching with ‘Operating as One Boeing’ strategy: Boeing strategy to approach global market expansion with ‘Operating as One Boeing’ strategy (Annual Report of Boeing, 2016). The focal of the strategy is to cut the cost through integration of operation and increase market share in international market (Sweetman, 2013). SWOT Analysis IFAS Table Analysis The IFAS table analysis for strengths and weaknesses of Boeing is as follows. IFAS Table (Strengths & Weaknesses) Strenths & Weaknesses Weight Rating Weighted Strenths Comment Strong brand image: Boeing has already developed it's brand as the largest aerospace company in the world. It has successfully expanded it's business on commercial & military aircrafts, satellites, weapons, electronic and defense systems, and advanced information and communication systems market. 0.10 5.0 0.50 (a) High difficulty to intimate brand image. (b) Active presence in the mind of customers. Strong leadership: Boeing is led by highly skilled and experienced leaders and executives. The company always seeks to capitalize on the skills and talents of the employees (as the skills and talents are key to innovation). 0.10 5.0 0.50 (a) Valuable asset to operate the company efficiently and beat the market. 0.80 (a) High difficulty to intimate. (b) Ensuring continuous improvement of the quality of products. High innovative skill: Boeing is a highly innovative company. The company is included in the list of top 100 global innovative companies published by Forbes (Forbes, 2018). With innovation skills, the company is creating breakthroughs and expanding the opportunities. Strong Asset Base: Boeing has a strong asset base. At the end of 2016, total assets of the company was $89997 bil. Environmentally friendly technologies: The manufacturing system of Boeing is environment friendly. The production process entails less energy emission and environmental pollution. 0.20 4.0 0.10 3.0 0.30 (a) A solid base to support business expansion in the future. 0.10 4.0 0.40 (a) Good image and acceptance to customers. (b) Social responsibility. Weaknesses High leverage: Boeing is a highly leveraged company. High leverage causes high volatility to the earnings of the company. High focus and dependency on government contracts: The majority of the revenue of Boeing derives from government contracts. However, long term governemnt contracts are subject to various political and economic factors. More bargaining power of the suppliers: In procurement of some specialized raw materials and integrated components, Boeing depends on some specific suppliers. This provides high bargaining power to these suppliers Labor issues: The labor union, which includes 38% of the total workforce of Boeing, has stopped working from time to time. Total 0.10 1.0 0.10 (a) High financial risk. (b) Possible problem in obtaining loans and advances in the future. 0.10 2.0 0.20 (a) High business risk exposure of the company. 0.10 1.0 0.10 (a) Negative impact to price paid and profitability. 0.10 1.0 0.10 (a) Negative impact on the productivity and reputation of the company. 1.00 3.00 Boeing obtained 2.80 out of 5.00 in IFAS model. Thus, it can said that the capacity of the Boeing to deal with the most significant strengths and weaknesses is good (Rating score of 3.00 4.00: Good Rating). EFAS Table Analysis The EFAS table analysis of the opportunities and threats of Boeing is as follows. IFAS Table (Opportunities & Threats) Opportunities & Threats Weight Rating Weighted Comment Opportunities Increasing demand for commercial airplanes: Due to (a) Scope to increasing of globalization, the capitalize on market air travel of the people is 0.20 5.0 1.00 growth and recover increasing. Thus, Boeing has sales decline (in last scope to capitalize on year). commerical airplane market. Horizontal integration: Boeing has scope to acquire the specialized raw materials and integrated components suppliers to reduce cost of supply. International market expansion: The aerospace and defense market is growing globally. From 2015-2018, aerospace and defense is expected to grow by CAGR of 3% Threats Intense market competition: The competition in all the market segments (in which Boeing operates) have been increased Fixed price contract: The majority proportion of the revenue of Boeing is derived from BDS business. BDS business follows fixed price contract. High risk in new products development: There is high risk in new product development due to involvement of high capital expenditure and time commitment. Cylical industry nature: The aerospace market is a cyclical industry by nature. During the time of economic recession, the demand for product is decreased. Total 0.10 0.20 5.0 4.0 0.50 (a) Reduction of bargaining power of suppliers. (b) Improve profitability. 0.80 (a) Extension of product life cycle. (b) Diversification of geographic business area. 0.10 4.0 0.40 (a) Possibility of losing market share. (b) Negative impact on profitability. 0.20 2.0 0.40 (a) Negative impact on profitability. 0.10 3.0 0.30 (a) Hampering business expansion efforts. 0.20 (a) Negative impact on profitability during bad economic condition. 0.10 1.00 2.0 3.60 Boeing obtained 3.60 out of 5.00 in EFAS model. Thus, it can said that the capacity of the Boeing to deal with the most important opportunities and threats in the external environment is good (Rating score of 3.00 - 4.00: Good Rating). SFAS Table Analysis The SFAS table analysis for Boeing is as follows. SFAS Table Analysis Factors S1: Strong brand image S3: High innovative skill S4: Strong assets base W1: High leverage W2: High focus & dependency on government contract O1: Increasing demand for commercial airplanes O2: Horizontal integration O3: International market expansion T1: Intense market competition T3: High risk in new products development Total Weight Rating Assigned Weighted Assigned (Out of 5 scale) Rating 0.10 0.10 0.10 0.10 5 4 3 1 0.5 0.4 0.3 0.1 0.10 2 0.2 0.10 0.10 5 5 0.5 0.5 0.10 4 0.4 0.10 4 0.4 0.10 1 3 0.3 3.6 Boeing obtained 3.60 out of 5.00 in SFAS model. Thus, it can said that the capacity of the Boeing to deal with the internal and external business environment to capture external market opportunities or confront threats successfully is good (Rating score of 3.00 - 4.00: Good Rating). TOWS Analysis SO Strategic Alternatives Strengths S1: Strong brand image S3: High innovative skill S4: Strong Assets Base Opportunities O1: Increasing demand for commercial airplanes O2: Horizontal integration O3: International market expansion Strategic Alternative 1: Market penetration on commercial airplanes market. The existing assets base and brand image of the company will provide good support to this. This will help to increase the market share and revenue. Strategic Alternative 2: Market expansion in foreign market. The existing assets base and brand image of the company will provide good support to this. From this, the life cycle of the products will be extended and total revenue will be increased. ST Strategic alternatives Strengths S1: Strong brand image S3: High innovative skill S4: Strong Assets Base Threats T1: Intense market competition T3: High risk in new products development Strategic Alternative 1: Adopting calculated risk taking culture. Only highly innovative and feasible projects will be found out for pursuing. WO strategic alternatives from the TOWS Matrix Weaknesses W1: High leverage W2: High focus and dependency on government contract Opportunities O1: Increasing demand for commercial airplanes O2: Horizontal integration O3: International market expansion Strategic Alternative 1: Market penetration on commercial airplanes market. This will reduce the dependency on the government contract for revenue. Strategic Alternative 2: Pursuing acquisition of suppliers through stock issue in the market. This will enable the company to reduce the supply cost and leverage on capital structure. WT Strategic Alternatives Weaknesses W1: High leverage W2: High focus and dependency on government contract Threats T1: Intense market competition T3: High risk in new products development Strategic Alternative 1: Expanding operation to foreign market with stock issue (in the local bourse). This will provide the company entry to a new market for reduction of competition. Also, the leverage on the capital structure will be decreased. Conclusion Boeing has experienced deterioration of financial performance and position in the last financial year. The revenue and net income of the company decreased substantially in the last financial year. Total assets size, shareholders’ equity, and year end cash balance were also decreased. The existing strategies at functional level, corporate level, business level, and global level of the company have failed to support it in fulfilling its mission and vision. Thus, turnaround strategies are necessary to support it in recovering its financial performance and position. At a glance, the internal strengths of the Boeing are strong brand image, high innovative skill, strong and asset base, and the internal weaknesses are highly leveraged capital structure and high dependency on government contract in revenue generation. The graspable market opportunities are rising demand of commercial airplanes, acquisition to specialized components suppliers for cost reduction and international market expansion, and market threats confronted now are fierce market competition and involvement of high risk in new products development. The new suggested turnaround strategies for the company include market penetration on commercial airplanes market, market expansion in foreign market, adopting calculated risk taking culture, pursuing acquisition of specialized components suppliers and through stock issue in the market. These strategies are recommended in consideration of utilizing internal strengths to capture external opportunities, utilizing internal strengths to meet adverse effect of external threats, capturing external opportunities to recover internal weaknesses, and recovering internal weaknesses to face external threats successfully. The implementation of these suggested strategies will provide the Boeing a new competitive edge in the market and recover its financial performance and position depressed in last financial year. References Boeing. (2015). Annual Report (2015). The Boeing Company . Boeing. (2016). Annual Report (2016). The Boeing Company . Boeing. (2017). Retrieved January 20, 2018, from Resources: http://www.boeing.com/resources/boeingdotcom/company/general_info/pdf/boeing_over view.pdf Boeing. (2018). Retrieved January 18, 2018, from Corporate Governance: http://www.boeing.com/company/general-info/corporate-governance.page Boeing. (2018). Retrieved January 19, 2018, from Financial Report: http://investors.boeing.com/investors/financial-reports/default.aspx Boeing. (2018). Retrieved January 19, 2018, from A Foundation of Innovation: http://www.boeing.com/principles/vision.page David, F. R. (2013). Strategic Management: Concepts and Case. New York: Pearson Edition. Encyclopedia. (2018). Retrieved January 19, 2018, from Boeing Company : http://www.encyclopedia.com/history/united-states-and-canada/us-history/boeingcompany Forbes. (2018). Retrieved January 20, 2018, from The World's Most Innovative Companies: https://www.forbes.com/innovative-companies/list/#tab:rank Fortune 500. (2018). Retrieved January 20, 2018, from Full List: http://fortune.com/fortune500/list/ Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2014). Strategic Management: Concepts: Competitiveness and Globalization. South California: South-Western College Publication. Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2012). Strategic Management Concepts. New York: McGraw-Hill Education. Morningstar. (2018). Retrieved January 20, 2018, from Boeing Co (BA): Balance Sheet: http://financials.morningstar.com/balance-sheet/bs.html?t=BA®ion=usa&culture=enUS Morningstar. (2018). Retrieved January 19, 2018, from Boeing Co (BA): Cash Flow Statement: http://financials.morningstar.com/cash-flow/cf.html?t=BA®ion=usa&culture=en-US Morningstar. (2018). Retrieved January 19, 2018, from Boeing Co (BA): Income Statement: http://financials.morningstar.com/incomestatement/is.html?t=BA®ion=usa&culture=en-US Morningstar. (2018). Retrieved January 18, 2018, from Airbus SE (AIR): Key Ratios: http://financials.morningstar.com/ratios/r.html?t=AIR®ion=fra&culture=en-US Sweetman, B. (2013, June 13). Aviation Week. Retrieved January 21, 2018, from Boeing Building On ‘One Boeing’ Strategy: http://aviationweek.com/awin/boeing-building-oneboeing-strategy Yahoo Finance. (2018). Retrieved January 20, 2018, from The Boeing Company (BA): Summary: https://finance.yahoo.com/quote/BA/ Appendices Appendix 01: Financial Statements of Boeing Boeing Co Income Statement (All figures are in USD and in million) Revenue Cost of revenue Gross profit Operating expenses Research and development Sales, General and administrative Other operating expenses Total operating expenses Operating income Interest Expense Other income (expense) Income before taxes Provision for income taxes Net income from continuing operations Net income from discontinuing ops Net income Preferred dividend Net income available to common shareholders Earnings per share Basic Diluted Weighted average shares outstanding 2014 2015 90762 76752 14010 96114 82088 14026 2016 94571 80790 13781 3047 3767 -277 6537 7473 333 -3 7137 1691 5446 3331 3525 -273 6583 7443 275 -13 7155 1979 5176 4627 3616 -296 7947 5834 306 40 5568 673 4895 5446 6 5440 5176 4 5172 4895 3 4892 7.47 7.38 7.52 7.44 7.7 7.61 Basic Diluted 728 737 687 695 636 643 Boeing Co Balance Sheet (All figures are in USD and in million) Assets Current assets Cash Cash and cash equivalents Short-term investments Total cash Receivables Inventories Deferred income taxes Other current assets Total current assets Non-current assets Property, plant and equipment Gross property, plant and equipment Accumulated Depreciation Net property, plant and equipment Equity and other investments Goodwill Intangible assets Deferred income taxes Other long-term assets Total non-current assets Total assets 2014 2015 2016 11733 1359 13092 7729 46756 18 190 67785 11302 750 12052 8003 47257 8801 1228 10029 7804 43199 922 68234 1456 62488 26696 -15689 11007 1154 5119 2869 6576 4688 31413 99198 28362 -16286 12076 1284 5126 2657 265 4766 26174 94408 29690 -16883 12807 1317 5324 2540 332 5189 27509 89997 Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt Capital leases Accounts payable Deferred income taxes Taxes payable Accrued liabilities Deferred revenues Other current liabilities Total current liabilities Non-current liabilities Long-term debt Capital leases Deferred taxes liabilities Accrued liabilities Pensions and other benefits Minority interest Other long-term liabilities Total non-current liabilities Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity 929 1181 53 10800 327 57 11190 12706 262 13031 89 13736 23812 56717 25085 50412 24735 50134 8141 8730 23984 125 1566 33816 90533 2392 6616 17783 62 2078 37661 88073 9487 81 1338 5916 19943 60 2221 39046 89180 5061 4625 36180 -23298 -13903 8665 99198 5061 4834 38756 -29568 -12748 6335 94408 5061 4762 40714 -36097 -13623 817 89997 10667 8603 Boeing Co Cash Flow Statement (All figures are in USD and in million) Cash Flows From Operating Activities Net income Depreciation & amortization Investment/asset impairment charges Stock based compensation Change in working capital Accounts receivable Inventory Accounts payable Accrued liabilities Other working capital Other non-cash items Net cash provided by operating activities Cash Flows From Investing Activities Investments in property, plant, and equipment Property, plant, and equipment reductions Acquisitions, net Purchases of investments Sales/Maturities of investments Purchases of intangibles Other investing activities Net cash used for investing activities Cash Flows From Financing Activities Debt issued Debt repayment 2014 2015 2016 5446 1906 229 195 897 -1328 -4330 1339 98 5118 185 8858 5176 1833 167 189 1795 -1069 -1110 -238 2 4210 203 9363 4895 1910 90 190 3045 112 3755 622 726 -2170 369 10499 -2236 34 -163 -8617 13416 -2450 42 -31 -2036 2590 -2613 38 -297 -1719 1209 33 2467 39 -1846 2 -3380 -1601 1746 -885 1325 -1359 Common stock repurchased Excess tax benefit from stock based compensation Dividend paid Other financing activities Net cash provided by (used for) financing activities Effect of exchange rate changes Net change in cash Cash at beginning of period Cash at end of period -6001 114 -2115 1010 -8593 -87 2645 9088 11733 -6751 157 -2490 303 -7920 -7001 -403 11733 11330 -2468 11302 8834 Free Cash Flow Operating cash flow Capital expenditure Free cash flow 8858 -2236 6622 9363 -2450 6913 10499 -2613 7886 -2756 204 -9587 Appendix 02: Financial Ratios of Boeing Ratios Formula 2014 Boeing 2015 2016 Airbus 2016 1.20 0.37 1.35 0.42 1.25 0.38 0.99 0.39 Liquidity Measures Current Ratio Quick Ratio Current Assets / Current Liabilities (Current Assets - Inventory) / Current Liabilities Profitability Measures Net Profit Margin Return on Assets (ROA) Net Profit / Total Revenue Net Income / Total Assets 5.99% 5.48% 5.38% 5.48% 5.17% 5.44% 1.49% 0.91% Total Liabilities / Total Assets 91.26% 93.29% 99.09% 96.71% 22.44 27.07 19.07 3.47 Solvency Measures Debt Ratio Times Interest Earned Ratio (Times) Operating Income / Interest Expense
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Executive Summary
The financial performance and position of Boeing, the largest aerospace company in the
world, has been deteriorated in 2016. The revenue, net income, year ending cash balance, total
assets, and total shareholders’ equity of the company have been decreased substantially. The
achievement of vision - ‘To be the best in Aerospace and enduring global industrial champion’
has been hampered. The existing functional level, business level, corporate level, and global
strategies have fail to provide the company a competitive edge and good position in the market.
The highlight-able strengths of the Boeing are strong brand image, high innovative skill,
strong and asset base. Internal weaknesses of the company that require special recovery attention
are high leverage in capital structure, and high focus and dependency on government contract.
Boeing has opportunity to capitalize on increasing demand for commercial airplanes, horizontal
acquisition to specialized components suppliers, and international market expansion. Significant
threats which are confronted by the Boeing include intense market competition, and high risk in
new products development.
Based on the review of internal strengths and weaknesses possessed by the company, and
opportunities and threats offered by the external business environment, the new suggested
turnaround strategies which can be suggested for the company are market penetration on
commercial airplanes market, market expansion in foreign market, adopting calculated risk
taking culture, pursuing acquisition of specialized components suppliers and through stock issue
in the market.

Introduction
When a company fails to attain its goals, turnaround strategies are required to adopt
(David, 2013). For finding turnaround strategy for a company it is required to review its financial
performance and position, internal business structure, existing strategies, and internal and
external factors affecting the market (Hitt, Ireland, & Hoskisson, 2014).
This papers aims at conducing a thorough analysis on the mission & vision, exciting key
strategies and internal and external business factors of Boeing Company, and suggesting
turnaround strategic plans for the Boeing Company.
Strategic Planning of Boeing Company
History of the Company
Boeing is the largest aerospace company in the world. The company was established in
15th July 1916 by William Boeing. The head office of it is located in Washington, United States.
Currently, nearly about 141322 employees are working in the Boeing.
Currently, Boeing is the largest aircraft manufacturer and second largest defense
contractor in the world, and largest exporter company in USA. The company belongs 24th
position in the Fortune 500 list (Fortune 500, 2018). Boeing is enlisted in the New York Stock
Exchange (NYSE). The current market capitalization of the company is USD 201.305 billion
(Yahoo Finance, 2018).
Boeing engages in designing, manufacturing, and selling of airplanes, rockets, and
satellites in worldwide (Boeing, 2017). Besides this, the company engages in leasing and product
support services. The operation of Boeing is conducted with five divisions including ‘Boeing
Commercial Airplanes’, ‘Boeing Defense, Space & Security’, ‘Boeing capital’, ‘Engineering,
Operations & Technology’, and ‘Boeing Shared Services Group’ (Encyclopedia, 2018). The

main competitor of the Boeing is Airbus. Other competitors include Bombardier, Lockheed
Martin, Daimler-Benz, and Thiokol (Encyclopedia, 2018).
Since inception in 1916, Boeing has already passed 100 years. The important
achievements and milestones of the company during this period are shown in two phases- first 50
years and next 50 years.

Financial Overview
(a) Financial Performance
Total revenue of Boeing has been decreased in 2016 from $96114 million to $94571
million even though in 2015 total revenue has been increased (From $90762 million to $96114
million) (Figure 1). The decrease of total revenue in 2016 was due to reduction of airplanes,
rockets, and satellites prices for coping up with competitive market environment. Total net
income of the company has been decreased from $5176 million to $4895 million (Figure 1). This

decrease of net income is mainly attributed by the decreased of revenue. The EPS of it has been
increased from $7.52 to $7.70 (Figure 2). But this increase of EPS is mainly due to decrease of
total number of share outstanding (attributed by the share repurchase). The decline of revenue
and net income implies that the financial performance of the Boeing has been deteriorated.
The deterioration of the profitability of the Boeing in 2016 is also apparent from the
decline of net profit margin and return on assets (ROA) of the company (Figure 3). The net profit
margin helps to assess the profit generation capacity of a company on its sales after managing of
the expenses. Return on assets (ROA) helps to assess the efficiency of a company to utilize its
assets in generating return. Even the net profit margin and ROA of Boeing are higher than those
of Airbus in 2016 (Figure 3) but these have consistently decreased from 2014.
Revenue and Net Income of Boeing
150000
100000
50000
0

2014
90762
5446

Revenue
Net income

2015
96114
5176

2016
94571
4895

Figure 1: Revenue and Net Income (in million) of Boeing
EPS of Boeing
7.8
7.7
7.6
7.5
7.4
7.3
Earnings per share

2014
7.47

2015
7.52

Figure 2: EPS of Boeing

2016
7.7

PROFITABILITY
RATIOS
Net Profit Margin
Return on Assets
(ROA)

BOEING

AIRBUS

2014

2015

2016

2016

5.99%

5.38%

5.17%

1.49%

5.48%

5.48%

5.44%

0.91%

Figure 3: Profitability Ratios of Boeing
(b) Financial Position
Total assets of the Boeing has been declined consistently after 2014 (Figure 4). The
decline of the total assets can be considered as deterioration of the financial position of the
company. Total shareholders’’ equity of the Boeing has been also decreased substantially in
2016 (From $6335 million to $817 million) due to high stock repurchase program (treasury
stock) of the company. Total liabilities of the Boeing has been gradually increased. This means
the leverage in the capital structure of the company has been increased. The issue is also
apparent from the debt ratio of the company. The debt ratio represents the debt relied upon in
financing the assets of the company. Even the debt ratio of the Boeing is lower than that of
Airbus, but it has been consistently increased from 2014 (Figure 6). Increase of higher debt in the
capital structure resulted in increase of financial risk of the company.
The current ratio and quick ratio, which are measures of the short-term debts and
obligations repayment capacity as well as liquidity of the company, of Boeing are higher than
those of Airbus (Figure 5). But these ratios of Boeing have been decreased consistently from
2014. This means that even the overall liquidity condition of Boeing is better than Airbus, the
liquidity condition of Boeing has been deteriorated over the recent period. Along with this, the
times interest earned ratio of Boeing has been decreased dramatically in 2016 (Figure 5). The
times interest earned ratio assess the number of times a company can repay its period interest
burden with its operating income. The increase of leve...


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