Table of Contents
General environment of a company affects its inner capacity and external opportunities for the prospective growth. The segments of the business environment of the Boeing Company change its competitiveness and wear properties for stable beneficial position in the industry. The business environment of the Boeing Company determines its internal potential and external promoting circumstances. The paper analyzes the segments of the general environment, forces of competition, threats and opportunities, strengths and weaknesses, and business administration that formulates the inner potential of the resources, capabilities, and core competencies relating to the Boeing Company.
Segments of the General Environment
The Boeing Company functions in the business environment as the synchronous combination of external and internal factors influencing the ultimate outcomes of the corporation. Segmented environment of the corporation reflects versatile influence of external factors inherent in the functioning of the corporate specifics, the diversity of its external relations, and the industry in which the company operates. These factors are largely under the control and influence of the business and can have both positive and negative effects on it.
One of the most important segments of the environment influencing the Boeing Company and its industry is the economic environment. The corporation functions in several economic segments and is a large economic entity in this way. Thus, the corporation is present in aerospace and defense, construction and engineering, and financials industries. Nevertheless, the primary and immediate origin of the corporation is the aerospace and defense industry that indicated the basic destination and direction of all activities of the Boeing Company. Therefore, economic patterns and peculiarities of this industry determine the emergence of external opportunities and treats guiding the corporate decisions and resource potential.
The aerospace industry has a fast growing rate in the U.S. military-industrial complex. It experienced almost $ 71 billion of the most successful trade surplus among other industries in 2013, while the record revenue of the corporation was more than $86 billion in 2014 (The Boeing Company, 2014). Thus, it holds the first place by the volume and scope of production, development and implementation of advanced technologies, and the quantitative characteristics of the workforce. As the company competes with Airbus as another large U.S. manufacturer of the aircrafts, the Boeing Company faced with certain difficulties in capturing the aerospace market by the volumes of the production and the scope of activities. Although the economic potential of the industry is huge and advantageous, the corporation is permanently challenged by domestic oligopolistic competition. Thus, both the industry and the corporation are experienced in certain market distribution guided by different price levels and marketing efforts. Concerning international competitors, the Boeing Company faces their aggressive marketing activity. Among them are Bombardier, Embraer, and the entrants from Japan, China, and Russia (United States Securities and Exchange Commission, 2014). In addition, there are still many local competitors such as subindustries in the countries that could be potential customers for the Boeing Company. Therefore, the world aerospace and defense industry is fulfilled with diversified jet products and related items. The prices of such economic actors are dependent on the manufacturing costs and the brand name and have high level declaring appropriate quality. Therefore, the corporation chooses appropriate price strategy to provide quality products by moderate and competitive prices. As a result, such obstacles influence stable demand at an international level of the industry.
High demand for the products of the company with a long and successful history and industry by itself makes them attractive for foreign investment in the short and medium term. Furthermore, the highly developed infrastructure of this industry has a positive effect on the high level of aircraft production. Significant economic contribution to the national demand is provided by large-scale public contracts. Thus, the economic segment influences significantly the success of the industry and the company through economic mechanisms.
The depth and strength of economic segment are intertwined with the political segment of the external environment of the company. As the U.S. policy significantly focuses on the production and use of a military aircraft, the company and the industry provide a wide range of applications in the military operations of various scales through its aerospace products.
Political contribution of the aerospace industry and the company’s performance are rather essential. Permanent connection with U.S. government entities and agencies include collaboration with NASA, all units of the U.S. military forces, the FAA, and the Department of National Security. These connections implement regular programs of development in the aerospace industry. In addition, international business of the corporation includes the similar collaboration with government authorities of other countries. On the other hand, political instability, the changeable provisions of the foreign and homeland policy, and legal framework generate special position of the corporation in the national political and economic system of the U.S. Hence, political segment is a vital driver of this industry and the leading Boeing Company.
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Forces of Competition
The most challenging forces of competition are the intra-branch competition and the threat of invasion of new market actors. Rivalry of aerospace companies among the existing competitors of the Boeing Company triggers aspiration to improve their position in the market by any means and to win the consumer market. Intense competition in the aerospace and defense industry of the U.S. leads to price competition, improvement of product quality, increased costs of sales promotion, and increased investment in new developments of the corporation.
The intensity level of competition is high due to the presence of following conditions in the industry:
- A small number of players and approximate equality in their sales;
- Permanent redistribution of the market and the capturing of a market share from each other;
- Standardization of products in the industry that creates an infinite number of alternatives to the consumers, leading to a constant switch in consumers from one player to another and provision of a high level of instability of future revenues and profits.
However, despite this fact, the industry creates high barriers to entry due to the long existence of the stable and experienced large competing companies, including the Boeing Company. Local market actors with low profitability create excess capacity in the market. To handle the intensified competition within the U.S. industry, especially a duopoly with Airbus, the Boeing Company develops a contractual relationship with Japanese suppliers, uses improved technology and composite materials of the aircraft structures, and provides a wide choice of engines.
New market actors from Japan and China bring new facilities, technology, resources to this market that shock the US industry, change non-governmental consumer behavior, and set new standards for the corporation performance in the market. The significance of the impact of these new entrants is dependent on entry barriers in the industry and speed of influence on the success of the company’s market activity. As the barriers to entry in the aerospace industry and the level of counter of the existing companies in the industry are high, the impact of new applicants on profits in the industry is minimal. However, the aerospace industry in Japan and China has significant scientific potential, which affects the new distribution of power in the international market. The corporation addressed this force by the issue of aerospace innovations (economically beneficial civil jets, new metal composition, manufactured long-haul aircrafts, etc.) and acquisition of its main competitor McDonnell Douglas in 1997.
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To improve its ability to address these forces in the near future, the Boeing Company is able to reduce international competition in the Japanese market due to the change of contractual relations with international suppliers and full control over them. Thus, the corporation can acquire their power and increase its production capacity in that country. As a result, such actions will help corporate business to improve the barriers to entry into the industry to new competitors in the Asian region. Forming orders worldwide, the Boeing Company may use its strategic advantage to influence the supply chain and distribution channels.
In the future, the intensity of competition with Airbus may be changed due to the use of corporate nature of the business. As Airbus is only a consortium of manufacturers, the Boeing Company can quickly acquire and enhance its corporate opportunities around the world. Advantages in creating stronger compositional materials and functional features of the aircrafts have to be developed through cooperation with the advanced world developers. Implementation of the advancements in information technology will strengthen the U.S. cluster capabilities and demonstrate a significant competitive advantage over potential new and existing national and international competitors.
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External Threats and Opportunities
Regarding active international political and economic activity of the U.S., the performance and reputation of the Boeing Company is affected by the external threat of hijacking. Terrorist acts damaged several Boeings in 2001 that caused essential loss for the aircraft company since common panic and distrust of the consumers caused significant market reduction (Hellman, 2013). Therefore, the provision of best quality of all civil and military aircrafts drives the main portion of governmental and public attention. Despite the intensified competition, the Boeing Company should focus on the system of security and communication of jets. Among other threatening factors, there are the reduction of defense spending in the U.S. that may cut governmental orders and the intensified competition with its closest competitors Airbus and Bombardier that would increase internal costs for the permanent improvements.
This threat can be easily and timely removed by further promotion and enrichment of the reliable image of the Boeing Company as its opportunity. As the committed hijacking acts were due to human factor, namely the behavior of the terrorists, the aircrafts of the corporation made a good showing that is confirmed by the continuous growth of the market share. Production of new qualitative products that possess revolutionary innovative peculiarities boosts excellent performance for the customers appreciated these improvements worldwide (The Boeing Company, 2015). Another advantageous peculiarity of the Boeing Company functioning in the external environment are active application of the industry’s recovery, promising benefits and profits, and progressive technologies in information and communication sector.
Strengths and Weaknesses
External environment changes the functional mode of the corporation and improves the operational performance. In spite of the striving to lead in the industry, the Boeing Company has strengths and weaknesses.
The most significant strengths are the development of special programs demonstrating its business power in the defense segment, strong financial sustainability, and reliance of the shareholders. As the company is a publicly traded entity, the loyalty of the shareholders is among the promising drivers of the business that increases the demand and business opportunities of the corporation. Therefore, the Boeing Company should implement the strategy of social focus on additional issue of Prefs or privileged shares for legal entities to attract more interested people into the team.
Profitability of the aircraft manufacturer borders with the aspiration to increase R&D costs in order to handle intensified competition and low pensions costs. In fact, this spending can overstrain financial prosperity corporations and jeopardize social dissatisfaction. The most significant spending article is R&D that should be overestimated and refocused on the basic and essential lines of the aircraft production. The company strives to advance its competitors within the industry due to permanent improvements, but the commercial focus should be on the conceptual and business objectives.
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Resources, Capabilities, Core Competencies, and Value Chain
The company explores different physical and chemical properties of metal alloys that originate different regions of the world. Information and communication technology, financial resources and other capacities are used due to involvement of the local and outsourcing resources. Various parts for aircrafts are delivered from leading automotive companies of primarily national market. Capabilities of the company are realized due to powerful R&D and operational performance. The variety of activities performed by the Boeing Company includes the manufacturing military and civil aircraft, the conducting military and space programs and financial operations, and the implementing innovative aviation technologies. The corporate plants are presented in almost 70 countries, while its distribution channels sell the products in more than 140 countries. The core competencies of the corporation are the manufacturing aerospace techniques and fulfillment of financial and design functions related to this activity.
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The value of chain is significant. Regarding wide network with its more than 5,000 suppliers all over the world, including domestic entities, the Boeing Company applies significant R&D and production potential. The chain of the corporation includes the most prosperous suppliers and distributors that reflect on long-term and advantageous collaboration.
To summarize, the performance of the Boeing Company is distinguished by significant impact of external economic and political segments of external environment. It leads to the emergence of certain threats and market opportunities. They drive the corporate strengths and weaknesses. The Boeing Company possesses expensive and well-developed basis of resources, capabilities, and core competences that add value to the company.