Business Strategy – Global Aircraft Case

Business Strategy – Global Aircraft Case

Supplier power

The 787 Dreamliner project required substantial changes to Boeing’s existing supplier relationship. Based a ‘’build to performance’’ concept, all suppliers were responsible for designing and producing high-performance, efficient, and specialized parts for the aircraft. Historically, Boeing kept the design activities in-house, which allowed them to retain the ‘’learnings’’ of innovation, thereby keeping the supplier power at a minimal level. Boeing pursued these modifications to its supply chain hoping to trim costs by $4B and reduce development time by 24 months. This strategy could have given Boeing’s suppliers much more power. Had the 787 plan been executed as planned, the suppliers would have been the owners of these ‘’best in class’’ aircraft parts (technology/knowledge). Instead, the misalignment in design and production of the many supply chain management activities resulted in numerous inefficiencies. The delivery of the 787 was delayed by four years, fines and concessions added millions of dollars to the development costs, and most of the design came back in-house. However, the introduction of a new payment schedule/model for the 787 was designed to rebalance part of the forgone supplier power stated above, since suppliers had more to stake in the successful completion of the 787. In short, I believe that the decision to introduce the 787 could have put more pressure on Boeing’s profits due to supply chain changes, had it been a success launch, but ultimately, profits were only loss in the short run. No real long-term impact on the supplier power force.

Industry Rivalry

The lumpy product purchase cycle and structure of this industry makes this market very competitive. Boeing and Airbus, the two major competitors, are constantly battling for contract renegotiations. The design and supply chain plan for the 787 project were made with the sole intention of increasing Boeing’s value proposition against Airbus’. Focusing on a differentiation strategy, meaning by not pursuing the A380’s target market, Boeing planned to gain a competitive advantage for the long-haul, medium passenger volume, and point to point routes. The 787 advantage’s over the A330 was that it would cost less to operate because of lighter composite materials, efficient engine technology, and increased passenger/cargo volume. Ultimately, this strategy was put forward hopefully resulting in an increased benefit to the end user, which would translate into either better margins or more contracts. My analysis demonstrates that the Dreamliner product strategy addressed the rivalry force, even if Boeing lost the Iberia negotiation.