Executive Summary –
Environmental scanning is required for an organization’s immediate and future strategic forecasting. For an effective change management process, business owners and leaders must collect and analyze information / trends about their internal and external environment to predict the impact of identified forces on their business activities for sustainability purposes. This analyzes also helps to reveal the capabilities which the business owners can take advantage of to drive change and success in their organizations.
This report will focus on analyzing the internal and external business environment of the BOEING company. Using the SWOTT (Strength & Weaknesses) and stakeholder mapping tools to analyze Boeing’s internal business environment, this report will uncover those resources that are within and under the control of Boeing Management. These resources include but not limited to the human resources, financial resources, material resources, structures & systems, policies & procedures, leadership & management, intangible assets, culture etc. The purpose of analyzing the internal environment is to enable a clearer understanding of the competencies available to Boeing that can be capitalized on and areas of weakness that requires further improvement which could impede either on the change process or on business sustainability.
Using the PESTLE (political, economic, socio-cultural, technological, legal and environmental) and SWOTT (Opportunities, Threats & Trends) tools to analyze Boeing’s external business environment, this report will evaluate those factors that are not under the direct control of Boeing Management but however has a direct influence / impact on Boeing’s business activities. Factors in the external environment can affect Boeing’s current and future business activities and change processes, hence this report will explore the effects of those forces, how and why it should be tackled and also investigate Boeing’s readiness to implement a change process. This report will conclude by providing recommendations and action plans for the Boeing company based on analysis of internal and external environmental forces identified.
Purpose of Environmental Scanning
Conducting an internal environment scanning on Boeing will enable us to achieve clearer comprehensions into what the present-day issues are, what resources (competencies) are obtainable internally to resolve the issues and how to go about the solution. Understanding Boeing’s strength and weaknesses will enable the management to capitalize on their asset (competencies & capabilities) to resolve their current issues.
The purpose of an external environment scanning on Boeing is to explore the external factors that can favorably or unfavorably impact on Boeing’s business activities cum change management process. Understanding these factors will enable the Boeing management to exploit the opportunities and prepare in advance for the identified threats and risk.
Rationale for Environmental Scanning
The Boeing Company is a leading producer of commercial and military aircrafts and provides support services to airlines in over 150 countries (Boeing, 2020). Precisely on the 28th October 2018, a Boeing 737 Max 8 operated by the Indonesian Airline, Lion Air crashed after departing Indonesia, causing the death of 189 passengers on board (BBC News, 2020). Similarly, on the 10th March 2019, a Boeing 737 Max 8 operated by Ethiopian Airlines crashed shortly after leaving Addis-Ababa also causing the death of 157 passengers (BBC News, 2020).
Recent reports on the two Boeing 737 Max aircraft crashes described in the paragraph above asserted that it was as a result of flawed technical expectations by the Boeing Engineers and lack of openness from Boeing management (NBC News, 2020). These identified issues have necessitated the need to ascertain the impact of internal and external forces on the Boeing Company, its business activities, sustainability, and change management processes.
SWOT – Ripan
SWOTT Analysis of Boeing
Boeing has a strong position in the aerospace industry since it is a major aerospace company in the world. Also, the company manufactures security, space, and defense systems as well as commercial airplanes. A strong position in the market enables Boeing to enjoy economies of scale and also boosts the company’s brand image. Also, Boeing has a high revenue growth and operating income majorly due to the delivery of airplanes. Additionally, the company has highly invested in research and development activities which highly boost its engineering activities as well as technology and innovation activities. Boeing has also enhanced the 787 Dreamliner’s engine by using engine inlets that are acoustically treated thus resulting in a reduction of noise pollution during landings and take-offs. The exceptional treatments of the 787 Dreamliner engine ensure a sixty percent noise reduction as compared to other airplanes of the same size (Al-Najjar et al., 2017).
Boeing’s communication is dependent on technology through the use of Exostar system to communicate and coordinate with suppliers. However, the web-based system requires timely and accurate information from suppliers hence resulting in delays in various operational stages due to differences in geography and culture. Boeing also experiences labor issues since most of the company’s employees are registered in a labor union thus drastically affecting the consistency of work due to work stoppages. Productivity is therefore affected resulting in poor delivery of services. Boeing is also highly dependent on contracts by the United States government, with the contracts affecting the operations of Boeing due to economic and political factors. Additionally, suppliers have high bargaining power since the company is highly dependent on some of its major product suppliers (Denning, 2013).
Research conducted by Sarlioglu and Morris (2015) shows that Boeing has the opportunity to increase its revenue due to the increasing demand for airplanes. The increase in globalization has resulted in countries demanding better and safer ways of travel and transport, with air transport becoming the most preferred transportation system. Therefore, Boeing is in a position to gain more revenue due to the high demand for airplanes for use in commercial purposes thus increasing the company’s sales. Also, the growth of the defense and aerospace market presents a great opportunity for Boeing to increase its sales. Besides, Boeing can strategically expand its operations to cover the global market. Additionally, Boeing has an innovation advantage as it is was the first aerospace organization in airline history to make use of the composite material. Furthermore, Boeing’s efficient use of fuel and the reduction of emissions gives the company an added advantage in environmental sustainability thus becoming a benchmark for other aerospace companies.
Boeing faces stiff competition in all its operational categories in regards to production schedules, operating cost and price due to the availability of global competitors. Also, about 72% of Boeing’s profits are made from fixed-price contracts thus resulting in risks of lower margins for the company and negative effects on the company’s financials (Petrescu et al., 2017). However, fixed-price contracts reduce costs to the company and also improve its efficiency. The change in geopolitical and economic tides also pose a threat to Boeing. Regulatory pressures in the aerospace division have also posed challenges for the company in its operations. Additionally, the airline industry is uncertain and dynamic hence Boeing cannot ascertain its opportunities in the short and long term. Also, the global and nationwide economic conditions are poor thus being a disadvantage for the company. Furthermore, Boeing faces a high risk in the development of new products since outsourcing a new airplane model which has never been tried before is risky. Moreover, the company faces issues in terms of safety since composite material provides the risk of lightning strikes for wings made of composite material since it’s easy for the lightning bolt to travel through the material fastening the wing.
Recently, the aerospace industry is focused on the Asia-Pacific region which has continuously re-evaluated most of its defense and aerospace needs and especially on future strategies and resources. The aspect has resulted in high attention on the market from organizations based in Europe and the United States. The increase in modernization for aerospace organizations has also been a major trend in the aerospace industry since most of the systems that have been in use have been outdated. Additionally, research conducted by Armellini, Beaudry and Kaminski (2016) shows that technological innovations have also positively impacted the aerospace industry, with airplane manufacturers saving money and time due to developments in manufacturing technologies and enhanced on-demand production capabilities. The development of electric and hybrid engines is also expected to reduce emissions hence resulting in minimal pollution of the environment as well as the reduction of flight costs. Moreover, other technologies such as the research on 3D printing can provide a positive impact on the aerospace industry.
PESTLE – Deepak / Shadi
Macro-environment conditions changes affect the Aerospace goods and services industry directly which Boeing is a part of. These changes also influence the company’s strategy and competitive edge over its rivals and even the company or industry’s profitability (Fernfortuniversity, 2020).
In the aviation industry, political factors play an essential role, and these variables can vary from nation to nation. Across all countries, the political and regulatory climate is not the same. Only in 1978 were the regulatory constraints relaxed in the U.S (Pratap, 2018). There are many places in the global market where aviation is still heavily regulated. These regulations impact Boeing’s sales and business. Although air travel has increased in popularity, the law degree is still a hindrance to a profitable business. In some countries, the airlines gain the higher Boeing’s revenue, as more aircrafts can be sold. For their excellence, Boeing’s airplane and cargo aircraft are renowned. However, the obstacles will remain until the relationship between the governments and the industry is enjoyable. In 2016, Boeing’s lobbying budget was $3,980,000, according to a report by ‘Open Secrets.’ All these facts demonstrate that the political considerations in the case of Boeing are of extraordinary importance (Pratap, 2018).
Flying is inherently risky, but commercial airlines have become remarkably safe due to several decades of intense attention to safety. There were several commercial aircraft accidents back in the 1920s: 24 in 1926 and 1927, 16 in 1928, and 51 in 1929 (Denning, 2019). By comparison, there have been zero crashes on large scheduled commercial airlines in the U.S. for the last nine years (Denning, 2019). This success story is the product of a systematic and analytical approach to recognizing and rectifying the proof of problems. It has kept politics and finance out of the frame. The overarching concern has been protection, taking precedence over finance and political considerations. Until now, in creating this record of achievement, the United States has been in the lead. But in the absence of a permanent F.A.A. Administrator, there is a possibility of jeopardizing this exceptional achievement record (Denning, 2019).
Boeing has funneled millions of dollars into politicians’ campaign accounts from both political parties through the political action committee (Denning, 2019). A list of political expenditures worth a year on the Boeing website expands to 14 pages, detailing campaign donations to politicians ranging from a South Carolina city council member to California Representative Nancy Pelosi (Denning, 2019). A network of outside experts, known as F.A.A. designees, has been used by the F.A.A. for decades to certify that aircraft meet safety requirements (Denning, 2019). In 2005, the regulator changed its policy to how it allocated authority outside the agency, introducing a new initiative by which aircraft manufacturers such as Boeing could select their employees to be the designees and help certify their aircraft (Denning, 2019). The program aims to help the F.A.A. extend its limited resources while also helping aircraft manufacturers avoid delays in the certification process (Denning, 2019).
The macro and micro environmental factors affect the company’s performance and its competitive advantage in the industry. The country’s economic factors such as the inflation rate, the unemployment rate, the GDP growth, the economic stability, the cost of labor and discretionary income are important for the Boeing company to consider. Moreover, the company needs to take into account the host country’s economic status as well. For instance, the exchange rate and the host country’s currency and economic stability are important (Fernfortuniversity, 2020).
As All Answers Ltd, (2018) claims, the economic recession has affected the number of air travelers negatively which has led to fewer services and products being provided by Boeing. According to Pratap (2018), the company reacted to the changes in revenue caused by a reduction in customer purchasing power through a price-cutting strategy and improving the services standards. These strategies worked positively for the company and resulted in more profitability after the recession.
Nowadays in the pandemic era, while borders are being closed, air travels have had huge changes and reductions (Barakaat Consulting, 2020). Therefore, Boeing has to take further actions according to new shifts as well as get prepared for the future when the travels are allowed and safe. The company has to implement strategies to be able to respond to high demands and to foresee the new services needed then.
Adamkasi (2015) describes that on one hand, the emerging markets such as India and China have economic growth leading to an increase in the number of passengers that increase the demand for flights by the company. On the other, the increase in fuel price and security equipment costs decreases the flights and product orders. Hence the company needs to implement strategies that consider all factors and are flexible enough to adapt to changes in the situation in different countries.
As Fernfortuniversity (2020) explains the culture of society has an impact on the organization. The marketers of Boeing need to understand the needs of the customers according to their values, beliefs and attitudes to design the products based on and communicate with their target market accordingly. Hence Boeing company studies the demographic of that country, the education level, the culture, the power structure, the leisure activities and society’s attitudes in order to implement relevant factors in their services. For instance, the level of education can determine how much the staff need to be educated and if air traveling is one of the leisure activities in that country, there is a bigger demand for Boeing commercials.
The company is operating globally and needs to study the different cultures in order to be able to respond properly to the changes in demand and supply.
According to IATA research explained by Barakaat Consulting (2020), the number of air travel passengers is going to double and reach 7.2 billion in 2035 which increases the aircraft service by 20,000 more in the same period.
Adamski (2015) explains how the number of passengers has increased as people travel more for different reasons such as work or spending holidays and occasions with their families in different places. And while the number of flights increases in some seasons such as Christmas, the company needs to provide aircrafts having more seats that can satisfy the demands.
As Pratap (2018) explains, the companies that provide more affordability, reliability and convenience for their customers, are adapting to the increase in the number of passengers while implementing strategies leading to more increase in the future.
The COVID-19 pandemic has brought changes in the air travel industry that results in a new set of services that the Boeing company needs to consider and implement such as the social distancing procedures and equipment that help prevent the virus spread such as masks and shields and some emergency precautions. Hence the company needs to prioritize the current need of customers for staying safe and healthy rather than offering affordable prices.
President Trump suggested that the Boeing 737 MAX tragedy may have contributed to a complicated technology (Ghilarducci, 2019). The corporation invested so much capital and finance into the model, with the sole objective of making profits and money (Ghilarducci, 2019). Experts would review whether the 737 MAX was made too difficult to fly by unnecessary technology and increased the risk of disastrous air crashes (Ghilarducci, 2019). Technology makes airlines safer, leading to an even lower number of accidents, according to other experts (Ghilarducci, 2019). However, both points of view are skewed, and an essential element of technology is misunderstood. Technology is not seen as a separate issue by economists from corporate profit-making and cost-reducing strategies (Ghilarducci, 2019). Technology may improve the safety of airlines, but it is embraced to make money (Ghilarducci, 2019). The relationship between labor and technology is driven by costs and corporate strategies, according to Rich McGahey. an American economist (Ghilarducci, 2019). It would make total practical and economic sense for aircraft makers and airline service providers to continually seek profits by implementing technology by adding value – making a safer and better product – and extracting value by saving on labor costs (Ghilarducci, 2019).
Technology also replaces what businesses deem too expensive and insufficient human labor (Ghilarducci, 2019). The increase of pilot salaries pressures because of so-called pilot shortages means that businesses can minimize pilot costs wherever possible, including design for potential jetliner businesses requiring only one pilot (Ghilarducci, 2019). It is too early to say if there is a lack of preparation and pilot experience to partly blame the 737 MAX crashes. In terms of prices, labor management, how people and technology communicate in the workplace, the technological environment must be evaluated and understood with utmost clarity. Training, fair pay and working conditions, autonomous government control, and voice for protection for staff and customers — such as ALPA, International Air Line Pilots Association are some of the actions that are recommended (Ghilarducci, 2019). Security and reliability come through education. Eventually, it offers essential compensatory leverage against corporations’ relentless push for lower prices, perhaps even at the risk of protection for workers and consumers – and their lives (Ghilarducci, 2019).
Boeing earned one of its most significant lobbying victories with a few short paragraphs tucked into 463 pages of legislation last year: a law that undercuts the government’s role in authorizing the design of new aircraft (Kitroeff & Gelles, 2020). For years, the government has given manufacturers more accountability as a way of reducing bureaucracy. The paragraphs, therefore, centralized the control of the sector, making it impossible for the government to take over the authority of the companies to challenge regulators in the sense of security conflicts. A Boeing 737 Max jet crashed off the Indonesian coast, killing everyone on board, weeks after the law was passed (Kitroeff & Gelles, 2020). Less than five months later, a second Max crashed in Ethiopia, and the plane was grounded.
In the aftermath, in a regulatory system that cedes power to industry, policymakers have grasped upon vulnerabilities. The F.A.A. an automated device known as MCAS was never entirely evaluated, although Boeing played down its risks (Kitroeff & Gelles, 2020). Boeing made the device more proactive late in the aircraft’s production, improvements that were not sent to the agency in a safety evaluation. Previously, agency officials, depending on the importance of a system or safety issues, may determine whether to assign regulation to the organization or retain power. The agency must approve nearly all aspects of new planes at the start of the production process. If the F.A.A. officials decide on a method that may jeopardize safety, the new regulations mandate that they perform an audit or an inspection before retaking controls (Kitroeff & Gelles, 2020). If the officials pose questions, request changes, or otherwise meet certification deadlines, any problems are immediately elevated to managers at the department and the organization by statute. The law also establishes a committee of mainly aerospace executives to ensure that the regulator follows industry-specific metrics (Kitroeff & Gelles, 2020). The law requires businesses to make suggestions on F.A.A. employee pay. The lobbying campaign barely registered in the country’s vast political machine when the legislation was hashed out (Kitroeff & Gelles, 2020). Amid the deregulatory drive by many firms, Boeing’s movement and industry terminology in the critical paragraphs were typical. The bill centered much of its attention on a failed Republican attempt to privatize the air traffic control system (Kitroeff & Gelles, 2020).
The law has raised questions in Washington after the two fatal incidents about whether the regulations promoted by Boeing make company deadlines a priority over passenger safety. The manufacturer aided the author of a study used as a guide by congressional aides when drafting the legislation, borrowing words and concepts that Boeing had long used (Kitroeff & Gelles, 2020). The law has raised questions in Washington after the two fatal incidents about whether the regulations promoted by Boeing make company deadlines a priority over passenger safety. The manufacturer aided the author of a study used as a guide by congressional aides when drafting the legislation, borrowing words and concepts that Boeing had long used. Starting in 2014, Boeing and its trade groups clarified that streamlining certification would make American aerospace companies more competitive with overseas competitors by enabling them to produce aircraft more effectively (Kitroeff & Gelles, 2020). They argued that F.A.A. workers interpreted the regulations in apparently arbitrary ways and slowed down the process of production (Kitroeff & Gelles, 2020). The General Aviation Manufacturers Association, which represents Boeing’s business jet unit, urged policymakers to “fully introduce” the so-called delegation framework in a 2015 memo sent to congressional staff members that were reviewed by The Times (Kitroeff & Gelles, 2020). The trade group called for ‘automatic escalation acceptable to F.A.A. and business management’ if conflicts caused delays so that problems did not languish.
According to Fernfortuniversity (2020), the companies need to study environmental standards in different markets because there are various environmental laws and regulations in different countries. For example, there are different liability clauses for Florida and Texas in case of environmental disasters or some governments support the businesses that operate by renewable energy by tax breaks. Hence Boeing has to study the entering or existing markets’ environmental factors that affect the business such as climate change, weather, pollution regulations for air and water, waste management, recycling and approaches toward renewable energy and green products.
All Answers Ltd (2018) describes how the Boeing company has been the best aircraft company in reducing the carbon emission by 15% and the energy consumption by 32% ten years ago and has taken successful and impactful steps toward consuming biofuels and reporting about climate change. Moreover, the European emission trading scheme has set limits for aviation emissions that Boeing has to adapt to and produce aircrafts meeting the standards required. As Pratap (2018) claims the company is the pioneer of the industry in taking actions towards protecting the health of humans and the environment with the R&D practices combining science, technology, and engineering.
The report sheds lights upon the internal and external factors by taking each environmental element under risk rating score from the matrix (constructed below):
I. Internal & External environmental elements:
|Table 1. The Boeing Company Internal environment risk rating (Very low 22.214.171.124.5 Very high)|
|Culture rating||Structure rating||Systems rating||Climate rating||Actions rating|
|Issues in brief||Issues in brief||Issues in brief||Issues in brief||Issues in brief|
It appears there are many internal issues within Boeing. Boeing has a broken culture (New York Times, 2020). Senior members have less regard for regulators, customers, and even co-workers. (New York Times, 2020). 130,000 employees are working under Boeing under 50 states. (New York Times, 2020)
Boeing comprises three business units: Commercial Airplanes; Defense, Space & Security; and Boeing Global Services. There is substantial financial support by Boeing Capital Corporation (a global provider of financing solutions.) (Boeing, 2020)
Boeing’s communication is dependent on technology using the Exostar system to communicate and coordinate with suppliers. However, the web-based system requires timely and accurate information from suppliers, resulting in delays in various operational stages due to differences in geography and culture.
Boeing is laying off close to 7,000 employees due to the coronavirus pandemic hurting demand. The pandemic has reduced the demand for air travel, resulting in layoff Also, the layoff process will continue if the situation remains the same (Josephs, 2020)
There are 43 cancellations in planes demand, and no new order has been confirmed—lower production targets for 787 and 737 (for 737 max cancellations were from aircraft leasing companies). The pandemic has also brought catastrophe in demand, due to which resulted in halt/ cancellations. Boeing netted adverse 836 orders for the plane. (Josephs, 2020)
Average rating: 4.2/5 (Source: Eli Sopow Ph.D., 2020)
· There is a lack of a healthy environment within the organization’s internal culture.
· Trust issues among employees.
· Lack of leadership qualities among senior management and members.
|Table 2. The Boeing Company External environment risk rating (Very low 126.96.36.199.5 Very high)|
|Competitors||Economy||Demography||Legal & Political||Science & Technology||News & Social media|
|Issues in brief||Issues in brief||Issues in brief||Issues in brief||Issues in brief||Issues in brief|
|-The commercial airline industry faces heavy competition not only the domestic market but international too; even the Boeing’s defense system faces (BDS) faces humongous competition (Aeroweb, 2020).
-Airbus (acquired CSeries program – now A220 – from Bombardier) and Embracer) and, to some extent, from entrants from Russia (Irkut – United Aircraft Corporation), China (COMAC), and Japan (Mitsubishi Aircraft)
|-The massive pandemic crisis has affected many nations. Strung from their GDP has affected the demand power. Since airline decision results in altering the infrastructure of a country. Thus, it has resulted in low demand (Fernfortuniversity, 2020).
-The economic recession has affected the number of air travelers negatively, which has led to fewer services and products being provided by Boeing. (All Answers Ltd, 2018).
-The COVID – 19 pandemics has brought catastrophe to the economy
|-Boeing fixing the 737 Max is not the only challenge it faces. Boeing also needs to target on next generation of passenger planes. The orders have plunged by 71% in the last 46 years. (Isidore, 2020). Boeing deals in manufacturing and providing B2B aircraft, aerospace products.
-Due to the 737 Max crash. Boeing faces a longer-term threat that is even more important to overcome. (Isidore, 2020)
|-Boeing faces a civil lawsuit over a 737 MAX air crash. There is a $60 Bn loss in the market value (Root, 2020). Airlines ranging in size have reached a compensation agreement with Boeing. However, Boeing is responsible for minimal compensation. (Horton,2019).
-Traveling restrictions due to pandemic that has halted the demand for aircraft in the aviation industry.
.-In 2016, Boeing’s lobbying budget was $3,980,000, according to a report …