|Name||The Boeing Company (BA)|
|Headquarters||Chicago, Illinois, US|
|Revenue||USD 58.16 billion (2020)|
|Profit||USD -12 billion ( Loss)|
The Boeing Company was established in 1916 by William Boeing and currently operates globally employing more than 160,000 people in 2020. It’s one of the market leaders in the aerospace, aviation, defense, and technologies sector. Boeing provides products and services to the commercial airline industry as well as to governments in over 150 countries. Their product line includes military and commercial aircraft, defense systems, satellites, launch systems, performance-based training and logistics, and information systems. A key marketing point for the company is the fact that the US presidential airplane is manufactured and serviced by Boeing. Let’s now go over the company’s detailed SWOT Analysis.
Table of Contents
Boeing Strengths 2021:
- Global product innovation and leadership.
Boeing has a strong reputation for product innovation and leadership in the aerospace and defence industry. In 2020, the company invested $2.5 Billion in research and development for continuous improvement in products and services. For example, the product innovation and leadership at Boeing include ‘next-generation 737’, ‘Global SATCOM systems’ and ‘unmanned aircraft systems (Boeing, 2021).
- Diversified portfolio.
Boeing portfolio includes commercial, defence and space and global services segments to meet the needs of customers from private jets to warfare planes. Reuters (2021) pointed out that Boeing defence and space revenues are estimated at $2.6 Trillion and service revenues are $3.2 Trillion.
- Large investments in research and development (R&D).
LATHOS In 2016 the company invested about USD 4.6 billion in R&D which declined in the next three years to USD 3.2 billion but still targeting the same amount in 2020 in crisis environment.
- Solid defense and space order book.
Since 2018, the Boeing defense division has reported $26 Billion in revenues every year. In 2020, 82% of the annual revenues came from the US defense department. Hemmerdinger (2021) pointed out that the company has received defense and space orders from UAE for EA-18G Growler electronic warfare planes, the Australian Navy ordered P-8 maritime surveillance aircraft as well as a $23 billion contract to Air Force One F-15EX fighters.
- Global supply chain.
In Boeing airplanes, there are 3 million parts and this requires global partnership and network of suppliers for successful product and service delivery. Schmuck, (2021) evaluated those Boeing partnerships and network span across multiple continents for sourcing and supplying materials and parts as shown in the diagram below. Boeing maintains robust supply chain through strong relationships with stakeholders who help to design and develop technologies and agile to deliver timely product and services.
Boeing Weaknesses 2021:
- Soaring debt levels.
Herkert, Borenstein, and Miller (2020) stated that with two crashes above the Java Sea and 346 deaths, Max 737 was grounded by authorities and customers’ deliveries were halted. There is a continuous delay in regulatory approval for Max 737, pandemic and large 737 inventories have soared Boeing debts from $10 billion in 2018 to $82 billion in 2020.
- Production challenges.
In June 2021, Boeing has to shut its production line because of production-related structured defects. Johnson (2021) pointed that Boeing has a second shut down in less than six months that halted customers’ deliveries. Boeing backlog has increased to 4,166 aircraft from the previous of 4,100 aircraft.
- Strategic drift.
Boeing’s focus has shifted from the commercial sector to defense and space. Previously, Boeing’s success was based on the commercial airline segment competing against Airbus. However, Boeing depends on contracts from the US government with 27% of its revenue generated through US government contracts (Forbes, 2021).
- Corporate image and reputation.
Cramer (2021) stated that Boeing has lost its position as a great American manufacturer. The challenges for Boeing are software malfunction, production challenges, and the discovery of two empty liquor bottles inside the Air Force One plane. However, Boeing focuses on fixing the image rather than trying to fix its products and services (Kuhn, 2021).
Boeing Opportunities 2021:
- China aerospace demand.
According to McCoy (2021), Boeing estimates that the aerospace market in China over the next 20 years will be $1.5 trillion. The company estimates that China would need 8700 new airplanes in the next two decades.
- Next-generation 737.
Boeing Next-Generation 737 provides ample opportunity to overcome Max chaos and deliver customers fuel efficiency, superior reliability, and better returns in today’s fast-paced business world. The Next-Generation 737 will provide quality, innovation, and a high level of performance (Boeing, 2021).
- $ 9 Trillion – Global Serviceable Available Market.
Boeing’s market outlook report shows that the company’s new addressable market will be $9 trillion in commercial, defense, and service segments. This includes Europe, Asia-Pacific, and North America each account for 20% of new airplanes and the remaining 20% going to emerging markets (Boeing, 2021).
- The United States Space Force (USSF).
Trump’s launch of USSF as the 6th independent military branch for space presents a new opportunity to capture contracts in the defense and space segment. The opportunity is vital to generate positive cash flow for the company (Szondy, 2020).
Boeing Threats 2021:
- Revenues and share price.
In 2021, the company revenues were $58 Billion, a drop from $76 Billion in 2019 and $101 Billion in 2018. With the pandemic and Max incident, the share price has collapsed from the previous high of $400 in 2019.
- Uncertainties with Max future.
Boeing 737 and 787 Max have a lot of uncertainty with their prospects. The federal aviation administration has not approved Max deliveries and China has not recertified the Max for commercial flights. Root (2021) pointed that many airlines have cancelled or partially cancelled the 737 Max orders. For example, flydubai has agreed to take one-third of 737 Max over the actual delivery of 65.
- Operational risks.
With technical production problems, design flaw, cost overruns with Boeing Dreamliner project has drained a lot of cashflows. Moreover, Mohanchandran (2020) stated that the pandemic has hammered 80% of commercial revenues for Boeing and many airlines cancelled scheduled Max deliveries affecting profits and future plans.
- Grounded global aircraft fleets.
Brashear (2020) stated that half of the global 26,000 commercial aircraft are out-of-service due to Covid-19. The demand drop has knocked out $672 million in revenues from the second quarter.
Boeing SWOT Analysis Conclusion:
Boeing’s biggest strengths are product innovation and leadership as well as a diversified product portfolio. However, the company needs to manage the strategic drift for long-term growth and address production challenges for successful product delivery. Boeing has the knowledge and resources to exploit new market opportunities and have greater success in the aerospace industry through overcoming threats.
Bloomberg (2021) Boeing Co/ The.
Boeing (2021) Commercial Market Outlook 2021.
Boeing (2021) Investing in the future of innovation.
Brashear, S. (2020) Boeing’s maintenance division, which helped carry it through the 737 Max disaster, reports a massive loss as airlines ground their fleets.
Forbes (2021) Boeing (BA).
Forbes (2021) How Much Of Boeing’s Revenues Comes From The U.S. Government?.
Hemmerdinger, J. (2021) Boeing’s orders, and deliveries bump higher in June as recovery continues.
Herkert, J., Borenstein, J. and Miller, K. (2020) ‘The Boeing 737 MAX: Lessons for engineering ethics’, Science and engineering ethics, vol. 26, no. 6, pp. 2957-2974.
Kuhn, D. (2021) Jim Cramer Says Boeing Is No Longer the Greatest American Manufacturer.
Mohanchandran, V. (2020) Grounding the 737 Max: Monitoring Risk for Boeing.
Reuters (2021) Factbox: Boeing’s latest commercial jet market forecast.
Root, A. (2021) Boeing Stock Still Has Too Many Problems for This Analyst.
Schmuck, R. (2021) ‘Global supply chain quality integration strategies and the case of the Boeing 787 Dreamliner development’, Procedia Manufacturing, vol. 54, pp. 99-94.
SyncForce (2021) Boeing.
Szondy, D. (2020) Boeing and US Space Force developing advanced communication satellites.