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
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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