BOEING

Boeing

Boeing

Boeing is the world market leader in the aviation industry. Its business includes manufacture of commercial aircrafts, defence and space equipments. Its commercial aircraft business has been enjoying the biggest market share since the past few decades and the merger with McDonnell Douglas in 1997 made the new Boeing the world largest producer of military aircrafts. The major competitor of Boeing in commercial airplane market is the European based Airbus industrie which has been increasing their market share aggressively during the last decade, and now becomes a big threat to the commercial aircraft business of Boeing. Lockheed Martin and Raytheon are Boeing's major competitors in defence and space segment.

Boeing's 777 is found quite popular in the commercial aircraft market. It beats Airbus' A330-300 and A340 successfully. By the end of 2000, Boeing obtained 113 orders for 777, which created a record for single model sales in a year (Velocci Jr. 2000). The 777 aircrafts enjoy Boeing's most advanced design, with bigger interior space and fuel saving twin jets, carrying less people than 747 but being able to take long-range flights (Wilhelm 2000b). According to Randy Baseler (n.d.,cited in Wilhelm 2000b) the vice president of marketing for Boeing Commercial Airplane Group, the long range 777 is 15% to 18% more efficient than their competitor A340 models. The climbing speed and bigger interior room are also favorable features. A poll conducted to airlines in 2000 proves Baseler's argument- Boeing's 777-200 and -300 were found to be top performers among wide body aircrafts (Whyte 2000).

The same survey mentioned above also indicates there is increasing market demand for longer-range aircraft because the hubs are getting more and more crowded (Whyte 2000). In order to get more market share and to compete with Boeing's 777, Airbus plans to develop their own long range aircrafts which are more fuel-efficient and with the advanced high technological design such as a newer flight management system and liquid crystal displays (Velocci Jr. 2000). However, it takes time and money to develop a new airplane. For example, Airbus started to design their A380 in 1994 and the first airplane is only expected to be delivered to customers in 2006 (Mango 2006). This model will cost the company $10.7 billion to develop (Reinhardt, Rossant & Balfour 2000). Therefore, during the coming years, Boeing should be able to enjoy the competitive position of their 777 aircrafts, but a good marketing strategy should be implemented to further increase the sales.

McDonnell Douglas held the second largest contract from the US Defence Department which amounted to $22.5 billion. This contract automatically fell in Boeing's hands when they merged McDonnell Douglas in 1997. The production of this contract had started in the same year and is expected to continue till 2010 (Boeing 1997; 'Fortune' 1997, cited in Hill, Jones & Galvin 2004). Since the military aircrafts are much more profitable than commercial aircrafts for Boeing, this contract is going to bring the company significant earnings. According to their 1997 operating profit margin: 7%- 9% (Cohen ...