1.

0 INTRODUCTION
1.1 Company Background

Figure 1.1: The Boeing Logo. (Source:

http://www.boeing.com/resources/boeingdotcom/company/key_orgs/images/boeing_logo_30
0x119.jpg)
Boeing was established by its founder, William E. Boeing in 1916 in Seattle, Washington
(Boeing, 2015). During its early years, the company only business is manufacturing seaplanes
for the United States government when the country entered into World War 1 (Hartley and
Appel, 2008).
Now Boeing has become one of the largest aerospace company in the world and one of the
leading manufacturer of commercial airplanes and defence. The company is also the leading
manufacturer of system used in space and security industry. As one of the major exporter in
the United States, the company supports airlines industry and government customers from
150 countries. Boeing has offered vast variety of products to the global market includes
commercial and military airplanes, satellites and military weapons. Other products provided
by the company are the advanced information and communication systems, electronic
system, defence and launch system. Besides products, Boeing also provides services such as
performance-based logistics and training (Boeing, 2015).
Since 1st July 2005, the company has been under the stewardship of W. James McNerney Jr.,
the chairman, president and Chief Executive Officer of The Boeing Company (Denning,
2013). With the Boeings current corporate offices in Chicago, the company employs more
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than 160,000 employees in United States and 65 other countries around the globe. The
company is organised into two different business units namely Boeing Commercial Airplanes
and Boeing Defence, Space & Security.

1.2 Business Units

1.2.1 Boeing Commercial Airplanes
Since Boeing and United States first commercial airplane, the 707-120, began its maiden
flight in December 1957, the company has manufacturer many different series of commercial
airplanes. Currently, the airplanes series still manufactured by Boeing is the 737, 747, 767,
777 and 787. There is more than 10,000 commercial airplanes built by Boeing that are in
service around the world. This accounts to approximately 48 percent of the world commercial
fleet. The company also provides air cargo airplanes which currently transporting 90 percent
of the worlds air cargo (Boeing, 2015).

Figure 1.2: Boeings 787 Dreamliner (Sources:

http://images.franchiseherald.com/data/images/full/3042/boeing-787-dreamliner.jpg)
Boeing through its Commercial Aviation Services provides engineering, modifications,
logistics, maintenance, repair, overhaul facilities and information services to their global
customers. The company also provides training for maintenance and flight crews from 100
seats and above airlines market (Bloomberg, 2015). This is done through its Boeing Training
and Flight Services, the largest airline training provider in the world (Boeing, 2015).
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1.2.2 Boeing Defence, Space and Security

Since the involvement in manufacturing military seacraft for United States during the World
War 1, the Boeing Defence, Space and Security has become one of the largest and most
experienced company in the market. The company provides state of the art solutions for
design, production, and modification of aircraft, rotorcraft, weapons and satellite systems.
Some of the Boeings military airplanes portfolio includes designs that are based on their
commercial airplanes such as KC-46 aerial refuelling aircraft which is based on 767
commercial airplane and p-8 anti-submarine/surface warfare aircraft which is based on the
737 commercial airplane (Boeing, 2015).
This business units also involved space product with the manufacturing of the Lunar Roving
Vehicle and solar powered satellite system for the National Aeronautics and Space
Administration, NASA (Williams, 2014).

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2.0 Analysis
2.1 PEST Analysis
PEST analysis refers to the political, economic, social and technology factors of an external
environment. In other words, it is an analytical tool to examine the impact of these factor
towards an organisation (Omran and Khorshid, 2014). PEST analysis shown in figure 2.1 can
be used to identify the external factor and its impact towards Boeing.

Political Factor
General Agreement on Tariff and

Trade
Diplomatic relationship between

countries
Social Factor
Public perception

Economy Factor
Economy downturn
Fuel price

Technological Factor
New technology available

Figure 2.1: PEST Analysis on 787 Dreamliner.

2.1.1 Political Factor
Political factor in PEST analysis refers to the stability of a government and its policies and
regulations within the country (Mangram, 2013). The role of a government and its actions
will impact Boeing as introduction or removal of policies by the government can affect their
business operations. The relationship between two countries will also affect the demand for
Boeings 787 Dreamliner.
The introduction of General Agreement on Tariffs and Trade, GATT, has an impact on the
Boeings 787 Dreamliner. This allows Boeing to outsource components of the 787
Dreamliner from other manufacturers around the world (Frischling, 1994). This will allow
Boeing to purchase the available components from the markets instead of spending time and
money in designing and manufacturing the components. The trade agreement also causes the
European Union to restrict its financial subsidies for the Airbus which is the main competitor
for the Boeing.
The diplomatic relationship between United States and other countries do impact the demand
for the 787 Dreamliner in the oversea markets. In the case of United States and China, their
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diplomatic relationship allows business to be conducted between the two countries. The
Hainan Airlines, Chinas fourth largest carrier has planned to order 30 787 Dreamliner from
Boeing which the transaction estimated to be US$257 million for each airplane (Jiang, 2015).
On the contrary, bad relationship between United States and other countries will reduce
potential market for Boeing.
2.1.2 Economic Factor
Economic factor refers to the inflations, exchange rates or economy situation that affect an
organisation (Boddy, 2010). This factor will have an influence on the Boeings operational
cost.
Economy situation will have an impact on the demand for 787 Dreamliner. Economic
downturn will force airliners to close routes and cut spending (Goyal and Negi, 2014). As a
result, the demand for 787 Dreamliner decline and many airliners postponed the delivery of
the airplanes.
Fuel price also a factor that can impact the competitiveness of 787 Dreamliner. With the
volatile fuel prices, many airplane buyer are looking for airplane that have lower fuel
consumption rate. The design of the 787s nacelle lower the drag during flight thus reduces
fuel usage. According to Boeing (2015), the 787 Dreamliner consume 20% less fuel than
other similar airplanes. This allows 787 to have competitive advantage over other competing
companies.
2.1.3 Social Factor
Social factor refers to the cultural and demographic impact towards the organisations
(Johnson, Scholes and Whittington, 2007). Since the two incidents happened to Malaysia
Airlines, public began to have fear and doubts towards long distance air transportation (CBC
News, 2014). Many airlines have begun to see the consequences of these incident especially
on their international flights. This will have an influence towards the competitiveness of 787
Dreamliner as the airplane are mainly used for long distance flight.
2.1.4 Technological Factor
This factor refers to the innovations and technological advancement that can influence the
competitiveness of an organisations (Friend and Zehle, 2004). Technological factor is the
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most important factor to Boeings 787 Dreamliner as technology advancement can cause it to
be obsolete.
One of the selling point for 787 Dreamliner is the lower costs to operate due to the
technological advancement. According to Boeing (2015), the 787 Dreamliner reduces
operating cost by 15% while it cost 30% less to maintain the airplane. Plus with the lower
fuel consumption rate, the technology within the airplane allows more airliners to operate the
airplane at lower cost. Newer technology allows 787 to take advantage of the use of
composites and removal of pneumatic systems thus increases the airplane reliability and
maintainability (Hale, 2008).

2.2 Opportunity and Threats Analysis

Opportunity
Low-cost carrier market
Fuel price and airlines operation

Threats
Chinas entry into aerospace market

cost
Figure 2.2: opportunity and threat analysis on 787 Dreamliner.
2.2.1 Opportunity
The low-cost carrier market has been on upward trajectory. These market provides
opportunity for bigger demand for 787 Dreamliner due to its fuel efficiency and lower
operating cost.
Increasing fuel price and airlines operations cost has pushed up the demand for more efficient
airplanes. This will further push the demand for 787 Dreamliner for longer term.
2.2.2 Threats
Chinas plan to develop a home grown aerospace industry and the introduction of C919
airplane will provide new challenges for Boeing. Chinas efficient use of resources will
introduce a new threat of quality airplane at much lower price. This will eat into the already
competitive market thus further reduces Boeings market share (Liu, 2010).

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3.0 787 Dreamliner Business Model

3.1 Differentiation Strategy Business Model
Boeing adopts diversification business model for their overall business operations. This is
apparent with variety of products ranging from commercial airplanes to military weapons and
security systems. But in 787 Dreamliner, Boeing has adapted the differentiation strategy as
the business model. Differentiation strategy is an approach which a company develop unique
product to cater to different market segments. This strategy is used to when the goal of the
product is to make it unique compare to their competitor and makes it harder to the
competitors to imitate (Banker, Mashruwala and Tripathy, 2014)
The 787 Dreamliner was designed to be a midsize airplane, a different approach compared to
Airbus A380 which are design to be a large size jumbo airplane. This is because the
company want to create a new super-efficient midsize airplane that focus on passengers
comfortability and unique experience during flight while still cost-efficient for airlines
(Boeing, 2015).
Some of the unique design of 787 Dreamliner that make it different than other airplanes are
the electric architecture, aerodynamics and composite materials. 787 Dreamliner uses electric
architecture that eliminates the engine bleed air system and pneumatic system that are
available in conventional airplane. Boeing also implemented Smooth Wing Technology,
Advance Fly-By-Wire and Laminar Flow Nacelle which highly improves lift to drag
characteristics thus reduces fuel consumption and costs. The technologies also involves fewer
parts that assists in reducing maintenance, lighter weight and simpler high lift system without
compromising performance (Boeing, 2015). 787 Dreamliner also uses composites materials
that are difficult to be imitate by competitors. These composite materials allows a light,
simpler structure and does not have fatigue or corrode issues. This reduces fuel consumption,
weight based maintenance and schedule maintenance while increases productive time and
resistance to impacts.
Another unique character of 787 Dreamliner is the focus on passenger experience. Dynamic
LED lighting and special large windows is new designs that are available in the airplane. The
LED lighting gently simulate a full flying day, gradually changes through a spectrum of
colours from day to night. The windows in 787 Dreamliner does not have conventional
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shades that are available in other airplanes. Instead, the airplane have dimmable windows in
which passenger can adjust the amount of light coming through their windows with a touch
of a button.

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3.2 Advantage and Disadvantages of Differentiation

Strategy
One of the advantages of differentiation strategy in 787 Dreamliner is the ability charge
premium prices to their customers. This because there is a lack of substitute product in the
market. Airliners who want to provide the best experiences for their customers will be very
attracted to the package in 787 Dreamliner.
One of the disadvantages of this business model is the competitors imitating the unique
characteristics of 787 Dreamliner. With the advancement of technologies, competitors can
now easily imitate the products from Boeing. The high cost of implementing differentiation
strategy can be a huge drawback if Boeing did not manage to recover their investment before
their competitors produce a product similar to them.

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4.1 787 Dreamliner Strategic Alliances

Figure 4.1: Major parts suppliers for Boeing 787 Dreamliner. (Source:
http://787updates.newairplane.com/Boeing787Updates/media/Boeing787Updates/Aviation
%20Experts/supplier-graphic-large_1.jpg)
Strategic alliance refers to the agreement between two or more independent companies to
focus resources on beneficial objectives (Owen and Yawson, 2015). To produce 787
Dreamliner, Boeing has developed strategic alliance with many companies around the world.
These companies supplies high quality airplane parts according to the specification required
by Boeing. Through strategic alliance, a company can improve their competitiveness and also
share the risks and cost of developing major projects (Genc, Alayoglu and Lyigun, 2012).
As shown in figure 4.1, there are many parts in 787 Dreamliner manufactured by different
companies around the world. The tail fin, aft fuselage and body fairing landing gear doors are
manufactured by Boeing themselves but through different divisions United States, Australia
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and Canada. The forward fuselage from Spirit and Nacelles from Goodrich are manufactured
in United States. The state of the art engine for 787 Dreamliner are manufactured through the
co-operation between General Electrics from United States and Rolls Royce from United
Kingdom.
In Japan, the centre wing box and the airplanes wing and manufactured by Fuji and
Mitsubishi respectively. The Kawasaki also from Japan, are in-charge of manufacturing 3
components such as the fixed trailing edge, the main landing gear wheel well and the mid
forward fuselage. The KAL-ASD company is involved in manufacturing the wing tips and
another part of aft fuselage in their assemble plant in Busan, Korea.
Latecoere from France are in-charge of manufacturing the passenger entry doors while Saab
from Sweden manufactured the cargo access doors. The largest single part in 787 Dreamliner,
the centre fuselage, are manufactured by a company called Alenia from Italy. The company
also supplies horizontal stabiliser for Boeing.

4.2 Pros and Cons of 787 Dreamliner Strategic Alliances

The advantage of 787 Dreamliner strategic alliances is the removing the cost of Boeing
manufacturing every components and parts. This also covers the design, testing, and labour
cost involves in the parts manufacturing process. This is because some of parts are already
exist in the market in large thus purchasing the parts is cheaper and manufacturing it. The
strategic alliances with the suppliers also allows Boeing to request for customisation of any
parts which can assist in making more unique component of the airplane. Strategic alliances
also assist Boeing in covering the area where they may lack expertise. Some suppliers has
been in the industry for very long period thus may have more expertise and technologies in
areas which Boeing lacks.
The disadvantage of the strategic alliances is Boeing may not be able to fully test the parts
before purchasing it. For example, the lithium-ion batteries which are normally safe, has been
found to be the source of fire after the 787 Dreamliner was assembled and delivered to the
customers. It was later found that the batteries has never been tested on airplanes (Wilson,
2015). Another disadvantage is the late delivery of a single part may cause the whole
assembly of 787 Dreamliner to come to a halt. This issue happen in late 2014, when the
Zodiac Aerospace failed to deliver premium seats to Boeing on time. This causes assembly
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delays and also delayed the handover of the first two 787 Dreamliner to the customer
(Johnsson and Schangenstein, 2015).

5.1 Recommendation on 787 Dreamliner Strategy

The 787 Dreamliner is experiencing a situation where the demand exceeding supply. Boeing
has received more than 1,100 orders for the 787 Dreamliner but the company has manage to
deliver only 266 so far (Reed, 2015).
This provides opportunities for Boeing to relook into their strategic alliance policy. With the
large backlog, it is recommended to temporary implement a mixture of differentiation and
low-cost strategy (Hill, 1988). Boeing can open tender for parts manufacturer who can
provide large amount of quality components and parts. This offer can be very attractive for
parts manufacturer. With bulk purchasing, the cost of certain component can be reduced. This
cost saving can be transferred to customer via lower Dreamliner price.
Having more than one manufacturer of non-unique parts will also reduce the impact of late
parts delivery.

6.0 Conclusion
As a conclusion, the external environments plays a role that can impact the operations and
competitiveness of Boeings 787 Dreamliner. Most of the external factors are events which is
beyond Boeings control. The strategic alliances between Boeing and their global partner is
what makes the 787 Dreamliner efficient and unique. The business model currently adopted
for 787 Dreamliner is sufficient but there is room for improvement.

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