Boeing 737 Max winglet image by nickyhardinguk
Updated April 21, 2019-
Boeing, you’ll recall, vehemently denied published reports regarding its long-haul 787 alleging “shoddy production” at its North Charleston, South Carolina plant.
This, of course, follows issues surrounding its 737 Max series – 346 people killed in crashes – one last October and a second last month.
In April 2018, Boeing and Airbus sold orders for $10 billion in jets. This meant both were under pressure to increase production.
The U.S. jet manufacturer had orders extending into the next five years. In Q1 2018, Boeing delivered 184 jets to dominate Airbus in deliveries.
Ironically, fierce competition and declining orders for new aircraft forced Boeing and Airbus to lay off workers in 2017. Boeing slashed its workforce by 8 percent in 2016. Airbus laid off 1,200 employees.
Boeing had 82,500 commercial-unit jobs in 2016. Most are in Washington state.
In 2016, Boeing received 468 orders. This compares to 768 in 2015 and 1,432 in 2014.
Probably to the chagrin of the American company, Airbus has invaded Boeing’s home turf – it’s assembling 10 percent of its A320s in Alabama. And China is building jets to compete with Boeing and Airbus.
Companies can learn valuable lessons from the Boeing-Airbus competition. In terms of strategic planning, it has been quite a roller-coaster ride with no end in sight.
Have both sides done enough strategic homework? Should major manufacturers rely on government funding?
Certainly both companies haven’t been 100-percent focused.
In July, 2006, I recall writing an article suggesting that Boeing should not break out the champagne to celebrate even though Airbus was faltering.
My sense was that investors would have been impressed if Boeing employees continued to act with poise and assurance – as though they expected to win sales orders – unlike many of the flamboyant Airbus stakeholders. Their behavior was reminiscent of immature athletes taunting opponents on a football field.
Airbus sales had dropped by more than 50 percent during the first six months of 2006 compared to 2007. The company was behind schedule in landing more than 250 sales, which were needed to capitalize on its $13 billion design and production investment.
Certainly both companies haven’t been 100-percent focused.
Airbus was reeling from a buyers’ strike for several reasons:
- Delivery delays in the A-380, a super jumbo jet
- A class-action lawsuit and the threat of more litigation accusing management of hiding problems
- Astronomical fuel costs
- In-fighting by French and German executives at the parent company, EADS
- A management shakeup at Airbus
All these developments occurred before the deadly Airbus A-310 accident in Russia that killed the crew and scores of passengers. Yes, Airbus appeared rather vulnerable.
Since the 2006 article, the cost of jet fuel and the worldwide recession took a toll on air travel and cargo services, which adversely affected both airline manufacturers.
For example, Dubai-based Emirates airline stopped its using its Airbus 380s on flights to New York and replaced them with the smaller Boeing 777.
Meanwhile, Boeing lost its sales throne in suffering from fewer orders while still pinning its hopes on its new 787. But the Dreamliner’s production was postponed countless times. Finally, the first delivery of just six 787s were made in 2012. In other words, it is the most-expensive and delayed aircraft in Boeing’s rich history.
It doesn’t help that Boeing’s customers have experienced major headaches, for example:
- Strategic Planning Lessons: Why United Airlines Was Forced to Merge with Continental Airlines
- Lessons for Struggling Businesses from American Airlines’ Bankruptcy
Other Boeing challenges:
- The estimated $35 billion Air Force tanker-bid process after initially losing to Airbus
- Allegations of illegal subsidies on both sides before the World Trade Organization
- Whether to locate a second 787 assembly line outside of Washington state
- Progress of the 747-8 jumbo jet
- Production cuts because airlines are postponing jet deliveries, cutting back on new purchases and canceling orders
On the other hand, Boeing originally strategized that its highly efficient 787 Dreamliner would prove to be popular with airlines.
Airbus apparently didn’t factor whether airports worldwide would want to construct longer runways for landings and takeoffs to accommodate its huge A-380. Not to mention the increasing costs for jet fuel.
Chinese competition
Add to the competitive mix – Aviation Industry Corp. of China (AVIC) – a competitor for Airbus and Boeing. AVIC restructured again as a single company. As China’s largest aircraft manufacturer, it also has one-fifth of Comac, Commercial Aircraft Corp. of China. Comac has struggled to succeed with the ARJ21.
So, it would be intriguing to peek at the strategic plans of Boeing and Airbus to see if they did a thorough forecast of all these developments. The positive and negative events illustrate how important it is to thoroughly explore all contingencies. That includes funding. The controversy over government funding has unnecessarily cost both sides valuable resources.
How can other companies capitalize on the Boeing-Airbus case study, and maximize performance with strategic planning?
Strategic planning starts with a SWOT analysis: Analyzing your internal strengths, weaknesses along with your external opportunities and threats.
The basic categories to be evaluated in your internal operation should include:
- Management
- Product/Services
- Customer Service
- Human Resources (including likelihood of employee strikes)
- Marketing
- Operations
- Technology
- Security
- Financial
- Viewpoints of your customers
Externally, you’ll want to assess these factors:
Socio-cultural – including demographic movements, the aging baby-boomer demographic, consumer tastes, population shifts, and the trend toward healthy lifestyles.
Economic developments – consider interest rates, inflation, fluctuations in currencies, and stock market trends.
Technology – including information technology, privacy concerns, production and the Internet.
Politics – issues such as federal, state and local levels in both taxes and regulatory issues.
Industry competition – obviously, you’ll need to develop a strong awareness about your competitors.
Customer profiles – analyze your target customers’ changing characteristics, wants, and needs. Determine what you want to target in average age, income, gender, and marital status. Evaluate their buying preferences and how they feel about your industry.
Once the SWOT analysis has been completed, you can develop and implement your strategic plan.
However, many small business owners and managers fail to properly budget time for strategic planning and they fail to capitalize on the expertise of their employees. After all, employees deal with customers every day.
Involving your employees will improve their character and morale. It will also promote teamwork, which will motivate employees to higher performance. So don’t overlook their experiences and instincts, and be sure to obtain their support.
In fact, every stakeholder – from employees to customers – should be part of the comment process to help develop and implement your action plan. Identify the leaders and best thinkers in your company to help you. It will enable you to plan using your vision with goals for entering new markets and introducing new services or products, and to obtain efficiencies by developing strategies for quality.
Consider other “dos and don’ts” of strategic planning.
Dos:
- Assign a strong personality to administer the process
- Develop benchmarks for performance and results
- Anticipate how the strategic planning changes will affect your employees, processes, and culture
- Publicize the strategic plan early on and regularly
- Monitor the plan’s progress and make changes when necessary
- Reward the positive behavior of supportive employees and take appropriate action against those who fail to participate productively in the process
Don’ts:
- Don’t permit a lackadaisical attitude and employees’ resistance to change
- Don’t allow poor follow-through on initiatives
From the Coach’s Corner, many companies obsess about looking over their proverbial shoulders at the competition. That’s not advisable. Be aware of your competitors, but remember you’re in a race.
Consider the teachings of author/consultant Seena Sharp on competitive intelligence, “Competitive Intelligence Advantage: How to Minimize Risk, Avoid Surprises, and Grow Your Business in a Changing World,” (Wiley and Sons).
She recommends not focusing heavily on your competition. Here’s a link to my column: Hottest Tactics to Beat Your Competitors.
“Never look back unless you are planning to go that way.”
-Henry David Thoreau
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