Boeing Bets the Company - Term Paper Example

Boeing Bets the Company Boeing in 2004 was the market leader in the manufacturing of commercial and military aircrafts. The company was facing issues due to the fact that its closest competitor, European Aeronautic & Space Company (AEDS), was taking a lot of market share away from Boeing in the commercial sector of the industry. Boeing made some key acquisitions to improve its position in the military market, but as a consequence they loss track of the importance of the commercial airplane sector.

The market share of the company decreased from 70% in 1996 to less than half that by 2003. The company faced a major threat to its business because AEDS developed a new airplane that made Boeing’s 747 aircraft virtually obsolete. The new A380 aircraft was an industry shaker due to the fact that the airplane is the largest production aircraft in the industry. The plane had the capacity to seat 481 passengers, while at the same time having an operating cost per passenger 15 to 20% lower than the 747 aircraft.

The executive management team of Boeing decided it was time to bring a new aircraft to the market in order to compete with AEDS. It is important to introduce new products that people desire; otherwise the product will fail (Buchheit, 2008). The firm decided that going large was not the best strategy. The strategy Boeing used was to introduce a midrange aircraft that had superior performance than the competition. Due to the rising costs of the industry Boeing visualized airlines targeting midrange planes that had lower operating costs.

The 787 aircraft had the capacity to carry 220 to 250 passengers, but it consumed 20% less fuel and 10% lower operating costs than the competition. Rising fuel prices continue to dent the profits of many airlines (Bbc, 2011). Boeing believes that the fuel efficiency and lower operating costs of its 787 airplane model will attract a lot of buyers. The company did a great job of designing a new airplane in order to increase its market share. When the competition comes out with a new product, the best way to counter attack the move is to introduce a new product yourself.

Boeing estimates that the 787 aircraft has a potential market of 1,500 planes in the coming years. If the company is able to meet its sales target the firm will ensure its leadership in the industry. Boeing also realizes that in order to attract new customers the firm has to offer better prices to its clients. The only way the company will be able to provide better prices is by lowering its production costs. The firm plans to outsource 70% of its manufacturing, lower its assembly time, and utilize a composite material instead of aluminum.

The strategy the company selected was a smart one because if the firm had not reacted to the introduction of the A380 aircraft the company would continue to lose market share to AEDS and other competitors. Innovation and product quality are attributes that help increase the market share of a company (Hellofs & Jacobson, 1999). Blood Bananas Chiquita Brands is one of the largest food companies in the world. The company operates in an industry that generates millions of jobs and billions of dollars each year.

The company was having problems with its Columbian subsidiary, Banadex. The firm received an offer from a paramilitary group called the United Self Defense Force of Columbia (AUC) for protection. The offer in reality was more of a threat due to the fact that Banadex would be paying so that the AUC does not become their enemy. The AUC illegal activities included kidnapping, murders, and drug trafficking. The company was facing a tough strategic decision and ethical dilemma that could change their future.

One of the first options the company had was to leave the country. An exit strategy would really hurt the Columbian economy due to the fact that the business activities of the company generated about $70 million for the local economy. The firm also employed directly and indirectly over 12,000 people. The company also had a long history of business success in this country since they had established a market presence in Columbia for over 100 years. An exit strategy would cost the company millions of dollars due to the fact that the firm has a business infrastructure set up in Columbia.

The company should disregard this option due to the losses the firm would incur and because of the importance of the firm’s operation for the local economy. The second strategic option Banadex had was to disregard the offer from AUC and continue doing business in Columbia. This option is extremely risky because disregarding the offer made by AUC would put the lives of its workers in danger. The AUC is a paramilitary group that has over 8,000 soldiers. The group is so strong that not even the Columbian government is willing to fight against them.

The option of not accepting the offer from AUC should not be considered. The last option for the company is to accept the offer from the UAC leader. Despite the fact that the move might be unethical the company has to accept the offer since in reality the firm would only be giving the paramilitary group a few thousand dollars a month. The monetary figure is insignificant for a company that generated over $4.5 billion worldwide. References Bbc.co.uk (2012). Lala cuts airline profit forecast as fuel prices rise.

Retrieved March 9, 2012 from http://www.bbc.co.uk/news/business-13660170 Buchheit, P. (2008). The most important thing to understand about new products and startups. Retrieved March 9, 2012 from http://www.ask.com/web?q=2004+airline+industry+revenues&search=&qsrc=0&o=15788&l=dis Hellofs, L., Jacobson, R. (1999). Market Share and Customers’ Perception of Quality: When Can Firms Grow Their Way to Higher Versus Lower Quality? Journal of Marketing, 63(1). p16-25. Retrieved March 9, 2012 from http://www.jstor.org/discover/10.

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