Culture, Stakeholders, and Strategy

Introduction

Boeing, a leading aerospace company known for its innovation and engineering prowess, has faced numerous challenges in recent years that have significantly impacted its business operations and reputation. This case study examines some of these key challenges and the complexities of the aerospace industry.

History

Boeing was founded in 1916 by William Boeing in Seattle. Boeing started bybuilding military seaplanes and then expanded into commercial aviation, becoming one of the largest aerospace companies. The Boeing 247 was one of the first modern airliners, introduced in the 1930s. In 1970, Boeing introduced the 747, the Jumbo Jet, which has become one of the most successful commercial aircraft, bringing in the era of mass long-distance travel.

Boeing is also a major influence in defence and military aerospace, producing many military aircraft including the F22 Raptor, in partnership with Lockheed Martin. Boeing also develops and builds a range of autonomous systems, including Unmanned Aerial Vehicles (UAVs) such as the ScanEagle and the MQ-25 Stingray.

Boeing has a long history of space development, in partnership with NASA. They have supported every major U.S. space programme and is the lead contractor for NASAs Space Launch System (SLS), a super-heavy lift rocket forming part of the Artemis programme, which aims to return humans to the moon. In June 2024, Starliner, Boeings crewed spacecraft, delivered 2 astronauts to the ISS but following problems with propulsion systems, Starliner returned to earth uncrewed, leaving the two astronauts on the ISS. It is planned to return them to Earth aboard the SpaceX Dragon spacecraft later this year.

Major challenges

Boeing is currently facing a number of complex challenges:

1. Competition: Boeing is operating in an intensely competitive environment in all its areas of operation including aviation, defence and space. There are several other aerospace manufacturers, like Airbus, which has gained market share and is introducing new, innovative aircraft designs. This competitive pressure complicates Boeing's ability to maintain pricing power and attract new customers. New aircraft manufacturers are emerging around the world, threatening the Boeing Airbus duopoly. These include COMAC in China and United Aircraft Corporation in Russia.

In the defence sector, Lockheed Martin poses a significant challenge for Boeing with the F-35 programme. Boeing is a key player in the space industry and has strong ties to NASA. Boeing is developing the Starliner spacecraft for crewed missions but is facing competition from SpaceX and other space exploration companies.

Boeings ability to address competition is key to its survival and growth. A focus on innovation, strategic partnerships and improving customer relationships and trust may help them maintain their competitive edge.

2. Quality Control: The company has been criticized for lapses in quality control, particularly following the 737 MAX incidents. This scrutiny has led to increased regulatory oversight and a need for Boeing to enhance its safety and inspection protocols, which can be costly and time-consuming. It has also had a negative effect on the trust relationship with customers and the public.

To address quality control issues, Boeing is working to rebuild trust with stakeholders by demonstrating a commitment to safety, transparency and accountability. Sharing data, insights and changes to processes with regulatory bodies, such as the Federal Aviation Administration (FAA) will reassure stakeholders of Boeings commitment to safety. Boeing has also increased funding for employee training around safety and compliance in an attempt to build a better safety culture in which employees take ownership of their work. (Boeing, 2024c)

3. Aircraft Production: Boeing has experienced delays in aircraft production, particularly with the 737 MAX and 787 Dreamliner models. These delays have stemmed from both internal issues and external factors such as supply chain disruptions, leading to dissatisfaction among airlines waiting for deliveries.

The global supply chain has been disrupted by factors such as the COVID-19 pandemic, leading to shortages of critical components. Boeing's reliance on a vast network of suppliers makes it vulnerable to these disruptions, affecting production schedules and delivery timelines.

By investing in automation to speed up assembly, Boeing can address some of the delays to delivery of new aircraft. Combined with better training, this can help increase output and decrease errors.

Culture

Boeings corporate culture is characterized by a traditional, hierarchical structure, typical of legacy aerospace companies, reflecting its long history. The decision-making process tends to be slow, with multiple management layers ensuring that protocols are followed meticulously.

Boeing has a risk averse culture as historically Boeing prioritized safety and regulatory compliance over rapid innovation, especially in its commercial aviation and defence sectors. This means they are less likely to engage with high-risk ventures. Whilst Boeing was seen as an innovative company in the early days of jet aviation, it is now more likely to be seen as conservative in its approach to technology and business models. Innovation tends to be incremental rather than disruptive.

Boeing has a Unionised workforce and labour relations are a significant part of Boeings internal culture.

However, this culture has also contributed to issues, most notably the 737 MAX crisis, which highlighted internal pressures to prioritize profit over safety. Reports surfaced that Boeing's shift towards a more profit-driven mindset under certain leadership regimes led to lapses in communication, transparency, and accountability. The fallout from the crashes, coupled with pandemic-driven layoffs, damaged employee morale and trust within the organisation. (Englehardt et al., 2021)

Strategy

Boeing's strategy has historically focused on incremental innovation and long-term stability. As a legacy aerospace company, Boeing prioritizes safety, regulatory compliance, and cost-efficiency. Boeing's commercial aircraft development, for instance, tends to be conservative, focusing on upgrades to existing models like the 737 series rather than introducing disruptive new designs. Its defence contracts, particularly with the U.S. government, contribute to steady, predictable revenue streams.

However, Boeing's reliance on legacy models led to a crisis with the 737 MAX. The pressure to reduce costs and speed up development resulted in safety compromises, damaging Boeings reputation and finances. Moving forward, Boeing will need to rebuild trust, focus on operational excellence, and re-emphasize its safety-first approach while balancing the demands of a competitive market.

Boeing has a diverse portfolio with many revenue streams. It operates through three main segments: Defence, Space and Security and Global Services. Boeing claims to be one of the largest, most diversified aerospace and defence companies in the world (Boeing, 2024b).

Boeing is working on several strategies to compete in the aviation industry. Boeing is investing heavily in R&D to improve the performance and efficiency of its aircraft and introduce advanced technologies. Boeing is also seeking to diversify its product line to include new aircraft variants allowing different configurations for different markets. Boeing also hopes to capitalise on expanding services and support solutions. For example, Boeing operates a maintenance, repair and overhaul service (MRO), as well as aircraft storage, at several locations around the world. Boeing also offers aircraft leasing and fleet management solutions, pilot and crew training and advanced data analytics to optimise airline operations.

Stakeholders

Boeings key stakeholders include customers, employees, investors and regulators. Boeing has a broad focus on commercial airlines and defence, as well as space exploration. The aerospace environment for Boeing is mature market, with a long history of relationships with regulators and investors. However, competition is increasing in all of Boeings markets as new entrants emerge around the world. They are also facing increased competition from a number of newer entrants into the space industry, particularly SpaceX.

Key Stakeholders

Boeing:

1. Customers: Airlines, defence contractors, government agencies.
2. Employees: Engineers, assembly line workers, and corporate staff.
3. Investors: Shareholders who expect returns and growth.
4. Suppliers: Companies providing materials and components for aircraft and defence products.
5. Regulators: FAA, NASA, and international aviation authorities ensuring safety and compliance.
6. Community: Local communities affected by Boeings operations, including job creation and environmental impact.
7. Suppliers: Boeing's reliance on a vast network of suppliers makes it vulnerable to these disruptions, affecting production schedules and delivery timelines.

Ethics and Sustainability

Boeing operates in an environment in which ethics and sustainability are key issues. Their ability to address these issues are key to their long-term sustainability as CSR becomes more and more important to investors and stakeholders.(Boeing, 2024a)

For Boeing, aviation is one of the largest contributors of greenhouse gases (Statista, 2024)and Boeing is under pressure to reduce its environmental footprint. Boeing focuses on improving the operational efficiency of their aircraft, developing Sustainable Aviation Fuel (SAF) and investing in developing new technologies. However, the aviation industry's overall environmental impact remains a critical ethical concern, especially as air travel grows.

Statista (2024)

Another ethical concern for Boeing is around safety and compliance. Following the crashes of two Boeing 737 Max Aircraft, the fleet was grounded across the globe. The following investigations revealed some deep issues with safety culture at Boeing and how employees were being treated. There were also issues with the regulation by the Federal Aviation Authority (FAA), the body responsible for regulating aviation in the USA. Boeing was alleged to have too big a role in the certification process, with little oversight from the FAA.

These ethical issues have tarnished Boeings reputation and damaged its stakeholder relationships.

References and further reading.

Boeing. (2024a).2024 Sustainability and Social Impact Report.https://www.boeing.com/content/dam/boeing/boeingdotcom/sustainability/pdf/2024-boeing-sustainability-socialImpact-report.pdf?v=0710

Boeing. (2024b).Key Capabilities.https://www.boeing.com/defense/bd

Boeing. (2024c). Strengthening Safety and Quality.https://www.boeing.com/strengthening-safety-and-quality#introduction

Englehardt, E., Werhane, P. H., & Newton, L. H. (2021). Leadership, Engineering and Ethical Clashes at Boeing.Science and Engineering Ethics,27(1), 12.https://doi.org/10.1007/s11948-021-00285-x

Statista. (2024). Carbon dioxide emissions from international aviation worldwide from 1970 to 2023 (in million metric tons).https://www-statista-com.uoelibrary.idm.oclc.org/statistics/1417212/international-aviation-emissions-worldwide/