The Boeing Company operates within the highly competitive aerospace industry. Typically, this high-technology industry includes the manufacture of commercial and defense aircraft, missiles, weapons, space vehicles, and satellites.
Most companies that operate within this sector implement a transnational business strategy with a production revenue model.
The Boeing Company: An Overview
Boeing enjoys a reputation as the world’s leading aerospace company, manufacturing commercial and military aircraft, weapons, satellites, and defense systems distributed to over a hundred countries across the globe.
In addition to its immense manufacturing output, Boeing provides information and communication systems, as well as performance-based logistics and training. These offerings help to solidify Boeing’s position as an innovative market leader.
As of August 2021, The Boeing Company’s net worth is $128.37 billion. According to Boeing’s website, it employs more than 140,000 people worldwide.
Boeing’s mission statement is: “People working together as a global enterprise for aerospace industry leadership.” If you are interested in reading more about companies’ values, we have compiled a list of the most powerful and enduring mission statements.
Boeing’s Business Strategy
Boeing has maintained its competitive advantage largely through focusing on research and development (R&D) activities, ensuring high technical performance from all of its advanced aerospace products.
Since Boeing faces fierce market competition from several successful and reputable companies within the aerospace industry, it has sought to pursue a business strategy of product differentiation. Examples of this relating to its commercial aircraft include increasing seating and engine capacity.
R&D activities have allowed Boeing to differentiate from its key competitors, particularly Airbus, where distinctive competencies like creating a performance-based navigation system have given The Boeing Company a clear competitive edge.
Between 2010 and 2018, Boeing’s operating cash flow increased from $3 billion to over $15 billion. This was achieved by negotiating advanced payments from customers while delaying payments to suppliers. However, this is a precarious strategy to operate because it relies on consistently high delivery rates.
In recent years, there have been some concerns raised by Boeing’s technical community over the shift from performance- to finance-based strategy. This change in direction seeks lower costs for capacity and labor, resulting in higher short-term margins. The primary concern is that the pursuit of short-term financial performance will compromise Boeing’s ability to compete in the long term.
Boeing SWOT Analysis
A SWOT analysis assesses the strengths, weaknesses, opportunities, and threats to a business. It is cost-effective and beneficial for generating business insights.
Strengths
Diverse range of products
Boeing is one of the most innovative companies in the aerospace industry, setting high standards for others to follow. One of the company’s key innovations is fuel efficiency technology. It also manufactures everything from commercial aircraft to cybersecurity products. Boeing’s implementation of a diversification strategy has been a real success.
Strategic partners
One of the things which give The Boeing Company a competitive edge is its ability to forge successful strategic alliances. For example, in 2020, Boeing partnered with Scottish Enterprise to create the Boeing Scotland Alliance, which aims to explore opportunities in Scotland while doubling Boeing’s supply chain.
Robust supply chain
A Boeing airplane is made of more than three million parts – an astonishing number by any standard. In addition to this, the vast range of products that the company offers demands an extensive supply chain. Hence, Boeing has operational systems in place to source parts from across the world.
Weaknesses
Excessive outsourcing
The Boeing Company increasingly relies on outsourcing to procure the parts it needs to manufacture aircraft. This means that any disruptions to the supply chain will have a knock-on effect on the company and its output.
Dependence on U.S. Government
Many of Boeing’s contracts are formed with the American government, making up around a quarter of its total revenue. This puts the company at the mercy of the U.S. market and the overall political climate.
Ineffective Labor Management
In 2019 Boeing fired several employees in South Carolina in response to them forming a union. Attempting to stifle the unionization of their workforce indicates poor labor management from Boeing.
Opportunities
Tackling environmental impact
Climate change presents one of the most profound challenges humanity has ever faced, and people are becoming increasingly aware that taking action is imperative. Operating within the aerospace industry – one of the sectors critiqued the most regarding emissions – Boeing has the opportunity to take advantage of this by developing new, greener technologies for their aircraft or by switching to electric technologies.
High levels of demand
The demand for commercial air travel, in particular, is constantly growing; Boeing has the opportunity to capitalize on this, moving into new areas of the market as they develop to maintain their competitive advantage.
Threats
Public perception
This issue is unfortunately twofold for The Boeing Company.
The first problem with public perception stems from aviation accidents and malfunctions. For example, between March 2019 and December 2020, the Boeing 737 Max airliner was grounded around the world after 346 people lost their lives in two crashes. Boeing’s reputation was severely damaged by these accidents and will be difficult to recover totally.
The second problem stems from the climate crisis. Companies that are perceived by the public to be causing damage to the environment without making significant attempts to counteract pollution are often viewed negatively.
The Covid-19 pandemic
Many people have become wary of international travel since the pandemic, and extended travel bans across the globe have had a knock-on effect on the aviation industry. It may take years for a full recovery. However, Boeing’s diverse product output means that it is not totally reliant on commercial flights.
Boeing Competitor Analysis
The Boeing Company faces fierce competition within the aerospace industry, particularly from Airbus, Lockheed Martin, and Northrop Grumman, among others.
One of Boeing’s greatest successes has been its extensive brand recognition; while many of its competitors remain relatively unknown to those outside the industry, Boeing has become renowned predominantly as an aircraft manufacturer.
Below is an analysis of seven of Boeing’s primary competitors.
Airbus
Like Boeing, Airbus positions itself as a pioneer in the aerospace industry, manufacturing commercial aircraft and space and defense technologies. It is headquartered in Leiden, Netherlands.
The company can be traced back to a 1967 agreement between the German, British and French governments, which pledged to strengthen cooperation in aviation technology. However, the Airbus we know today was founded two years later, in 1969.
Together, Airbus and Boeing own around half of the global commercial airliner market. Though they are roughly matched in terms of the market share, Boeing used to be the leader.
Since its launch in 1968, Boeing has provided more than 10,000 of its famous 737s, while the Airbus A320 saw over 8,000 units sold by 2018, despite being on the market for two decades less than its counterpart. This demonstrates how quickly Airbus has become a threat to Boeing.
Airbus claims on its website ‘we aim for a better-connected, safer and more prosperous world,’ a statement which helps to clarify the direction in which the company hopes to head. It is clearly aiming to match the concerns of the 21st century by emphasizing an ongoing commitment to a set of ethical principles regarding inclusivity and environmental issues.
In this respect, Boeing will need to connect with its customers on a more personal and ethical level to continue to compete effectively.
Lockheed Martin
Lockheed Martin is headquartered in North Bethesda, Maryland, and was founded in 1955. It is aerospace, information security, defense, arms, and technology company that operates globally.
Due to the Covid-19 pandemic, Lockheed Martin recently overtook Boeing as the largest US defense and aerospace firm, closing 2020 with $65.4 billion. However, in the coming years, particularly during the Biden administration, the US is expected to decrease defense spending considerably, which will impact Lockheed Martin’s continued growth.
If the aviation industry makes a full recovery following the pandemic, this could even the playing field between the two companies as Boeing may be able to recover from its recent Covid-related issues.
One of Lockheed Martin’s current goals is to expand education access and opportunity, demonstrating a clear commitment to current and future employees. This is one area where it takes the lead ahead of Boeing who is still recovering its reputation after stifling unionization in South Carolina.
Raytheon Technologies
Raytheon Technologies (RTX) is a multinational aerospace company with three main focuses: safer, more connected flight, smarter defense systems, and intelligent space technologies. It was founded in Waltham, Massachusetts, in 2020 and resulted from a merger between United Technologies Corporation (UTC) and Raytheon Company.
Raytheon Technology has around 180,000 employees and declared revenue of $56.58 billion at the end of 2020.
Like many of its competitors, a significant portion of Raytheon’s revenue comes from US defense contracts (around two-thirds), which means RTX could see revenue drop slightly in the coming years as the government administration moves away from defense spending.
Raytheon’s most important product is the (Pratt & Whitney) geared turbofan engine on the Airbus A320 NEO. Because Boeing encountered issues with the 737 Max, which undoubtedly shook public confidence, this makes RTX’s market position comparatively safe.
Like Lockheed Martin, Raytheon has a clear focus on diversity and inclusion within its recruitment policy, and its website consolidates the idea that ‘our people and capabilities form an innovation powerhouse.’
Bombardier Inc
Bombardier Inc is an aviation company founded in 1942 in Quebec, Canada, and headquartered in Montreal.
Much smaller than many other competitors, Bombardier initially manufactured commercial jets and public transport vehicles before announcing a new strategic focus on business aviation in 2020. Within this particular niche, Bombardier is a clear market leader, worth around $5.4 billion. It has manufactured just under 5,000 aircraft.
Bombardier’s flagship aircraft, the Global 7500, is the world’s biggest, longest-range, and most advanced business jet. Due to its strategic focus within the aviation industry, it is an indirect competitor of Boeing and does not pose a significant threat.
That being said, Bombardier has a clear customer and people-centric focus, something Boeing could perhaps learn from since it has come to rely on its pre-existing reputation. There is also a significant drive towards sustainability which comes across clearly from Bombardier’s website.
General Dynamics
General Dynamics (GD) is a global company with a focus on aerospace and defense. In particular, it focuses on four areas: combat systems, aerospace, information technology, and marine systems. It was founded in 1952 and is headquartered in Reston, Virginia.
In 2020, General Dynamics reported sales of $37.9 billion with over 100,000 employees. Crucially, GD also reported first-quarter results that exceeded expectations, while Boeing stocks dropped by more than 2%.
While Boeing is at risk of supply chain shortages due to extensive outsourcing, GD is committed to supplying chain excellence and aims to achieve this by creating a Supply Chain Management Council. Members frequently meet, sharing ideas and best practices as well as leveraging resources.
Similarly, GD partners with women- and minority-owned small businesses and a range of disadvantaged small businesses; this has led to the company being recognized for its efforts to support a diverse supplier base.
GD has a balanced business model which focuses on individual ‘units’; each is responsible for the execution of its own performance and strategy.
Space Exploration Technologies Corp
Space Exploration Technologies Corp, known more commonly as SpaceX, is an American aerospace manufacturer founded in 2002 by Elon Musk. It is headquartered in Hawthorne, California.
The company’s primary mission is to reduce space transportation costs with the hope of one day colonizing Mars. It currently manufactures Falcon Heavy launch vehicles, the Falcon 9, several rocket engines, Dragon cargo, Starlink communication satellites, and crew aircraft.
SpaceX is largely an indirect competitor of Boeing since it does not manufacture commercial aircraft or defense vehicles, but it is worthwhile examining because it represents a vision of the future for the aerospace industry. Like Boeing, SpaceX also works with the government, but rather than focusing on defense, it puts satellites in orbit.
In 2006 NASA announced that SpaceX had won a contract for cargo delivery to the International Space Station. This shows that relatively new companies can rise to prominence very quickly if they have the right messaging and an exciting long-term vision that resonates with the interests of many people.
Between February and April, SpaceX raised $1.6 billion in equity funding, pushing the company’s total value up to an impressive $74 billion. Musk’s bold vision for the future of space travel has undoubtedly helped this company to grow so quickly.
Northrop Grumman
Northrop Grumman is a multinational defense and aerospace technology company headquartered in Falls Church, Virginia. It was founded in 1994 in Denver, Colorado, and in 2020 it ranked 96 on the Fortune 500 list of America’s largest corporations.
Northrop Grumman brings in annual revenue in excess of $30 billion and has over 90,000 employees.
Some of Northrop Grumman’s most notable projects include neuromorphic cameras – designed to work in the same way as the human eye – and autonomous systems such as unmanned aerial vehicles.
One of the company’s defining statements is ‘it’s only impossible – until you do it at Northrop Grumman,’ indicating their clear intention to break new ground by developing innovative technologies.
While Boeing gained its reputation for manufacturing large planes, Northrop Grumman tends to focus on aircraft built for stealth, like the B-2 Spirit.
In July 2021, Grumman was awarded a UK Ministry of Defence C2 Digital Enterprise Agreement. This shows that the company is looking for contracts and agreements which extend beyond the US government; this is one of Northrop Grumman’s strengths, given that US defense spending is predicted to decrease over the coming years.
How Boeing Stands Out
Boeing already owns around half of the global commercial airliner market and has established itself as a well-known and reputable brand. Setbacks from the 737 Max may have caused a temporary lack of trust from consumers, but with such a huge market share, the company should be able to bounce back.
While many of Boeing’s competitors are focused on the defense sector, Boeing’s range of aerospace offerings, including commercial planes, means it has the potential for extensive growth in multiple areas, particularly if the aviation industry bounces back quickly from Covid-19.
Frequently Asked Questions
Question: Which is the largest aerospace company in the world?
Answer: Lockheed Martin remains the largest aerospace and defense company in the world. The 2021 Global 2000 list saw it climb 11 spots to number 145, worth a staggering $109 billion. In the twelve months ending April 16th, Lockheed Martin made a net profit of $6.8 billion, and its stocks rose by 3.7%.
Question: What is Boeing’s competitive advantage?
Answer: The most significant competitive advantage that Boeing has is its global reach and strong international presence. Boeing’s sales and production facilities are spread across the world in over 140 countries, and, most importantly, it shares positive relationships even with many of its competitors.
Question: Who is Boeing’s biggest competitor?
Answer: There are two key competitors that might be identified as Boeing’s largest rivals; however, all of the companies listed above hold competitive positions within the industry.
Traditionally, Boeing’s largest direct competitor was Airbus; both companies operate within the commercial and defense aerospace sectors. In 2019, Airbus overtook Boeing in terms of revenue due to the grounding of 737 Max planes. The latter made $76 billion while the former made $78.9 billion.
However, Lockheed Martin was named by Forbes as the largest aerospace and defense company in the world in 2021. Whether it will retain this position remains to be seen. The international aerospace industry has seen many changes over the past two years due to Covid-19, and companies that operate within the defense sector are always at the mercy of the current political climate.
Question: How has the aerospace industry been affected by the Covid-19 pandemic?
Answer: Companies have experienced disruption due to travel bans, slowing demand, and staff shortages. Less maintenance has been required since planes have been flying less frequently, resulting in decreased demand for spare parts.
Cash flow shortages are a real problem and will continue until a full recovery has been made. Aerospace companies within both defense and commercial sectors will have an advantage as they do not rely solely on commercial aviation. However, defense spending is likely to decrease as governments battle to control expenses and reduce deficits.
Boeing, in particular, slashed its 10-year forecast for new aircraft demand by 11% in 2020.
Question: Why choose Boeing?
Answer: Boeing has been one of America’s biggest exporters for over a decade and has managed to secure its position as one of the country’s most admired brands. The reason Boeing has survived when many of its competitors failed is that it has a history of listening and responding to customers.
Conclusion
Boeing is a truly global company, and although others have overtaken it in terms of business rankings, few have managed to achieve such widespread brand recognition within the aerospace industry.
If you are interested in finding out about the strengths and weaknesses of some airline companies that use Boeing aircraft, read our SWOT analysis of Southwest Airlines.
Sources
https://studycorgi.com/boeing-strategy-analysis-business-plan-objectives/
http://www.fi-aeroweb.com/firms/Competitors/Competitors-Boeing.html
https://bstrategyhub.com/boeing-swot-analysis/
https://www.gd.com/our-businesses/combat-systems/ordnance-and-tactical-systems
http://www.fi-aeroweb.com/firms/Competitors/Competitors-Boeing.html
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