Introduction
Boeing is an American jet manufacturing firm providing its goods and services to countries situated in different parts of the world but headquartered in Illinois, Chicago. It is a multinational firm that is involved with designing, manufacturing and selling aircrafts all over the world. It is one of the largest aircraft manufacturers in the world and the largest exporter in the United States considering USD value. China on the other hand has always been a market aimed by many aircraft manufacturers to develop some part of their manufacturing and production units (Boeing.com 2018). Studies assert that even though the economy of China has slowed down, jet manufacturers still think that it has one of the highest priced markets for selling its aircrafts. Aircraft manufacturers are increasingly selling aircrafts and competing amongst each other in order to gain larger shares of the market. This report essentially considers the case of Boeing (Boeing.com.2018). The report is concerned with studying and analysing the strategies and techniques undertaken by the firm to expand the growth into the Chinese economy while remaining ahead of its competitors.
Discussion
Problem identification
Unlike before, the current situation persisting in China is such that it is improving in leaps and bounds and the economy is booming slowly and gradually. According to reports and experts, the demand will increase even more in the next twenty years and will cause China to emerge as the third largest market in the world following the United States and Europe. This is the major reason behind, jet manufacturers targeting the market of China as compared to most other countries in the world. It is important to note here, in this context that even though the existence of institutional barriers might be the source of challenges for the aircraft manufacturing firms willing to expand in China, the government of China is trying to promote al the cooperation possible to enable faster growth of these firms. Initiatives taken up the government of China also include leaving some parts of the air space of the country for the activities and the initiatives of these jet manufacturing and selling firms. In addition to this, the country’s growth is also being expected to propel because of the investments and activities of these aircraft manufacturing firms in the country. In other words, the situation of the economy in China has improved after the financial crisis that occurred in the year 2008 and now the situation existing in the country is conducive to the growth of the aircraft-manufacturing firms. The President of China Xi Jinping, has in fact, helped in clearing the market by driving off some state owned enterprises in this sector to make the markets free for the foreign countries so that greater amounts of foreign direct investments can be obtained and can be used for re-investment by the country.
Problem analysis
As mentioned before, Boeing is an aircraft manufacturing firm based out of America and is involved with manufacturing diverse varieties of products including missiles, security alarms, airplanes and rockets as well. It has operated for over a period of 80 years now and has been able to continuously cater to the changing demand patterns of the customers all around the world. To continuously cater to the changing demands and needs of the customers, the firm has always used the most innovative technologies. The firm has recently been expanding into the country of China. Boeing Business Jets are being increasingly produced and sold in China. The firm has set up its first overseas manufacturing unit in China and has delivered around a total of 100 Boeing 737 airplanes. The firm has built up strategies and techniques which help it to compete not only in China but also globally across different parts of the world.
A joint venture is a form of a business expansion strategy or a business technique used by firms for expansion in which two or more firms try to collaborate and share ownership of the collaboration formed. The major features of a joint venture also include shared risks and shared returns. It also includes the concept of shared governance (Yan and Luo 2016). There are essentially three types of joint ventures including business partnerships, separate joint venture business and limited cooperation. Boeing as a firm utilises the feature of business partnership in the context of joint ventures with Commercial Aircraft Corporation of China Ltd. The first and the most important strategy used by the firm is the partnernership with Commercial Aircraft Corporation of China Ltd (COMAC) which is a Chinese aviation manufacturer (Vitalis and Scott 2015). The production unit was to be set up in Zhoushan and the first delivery has been made in the year 2018. The two firms are also currently trying to produce a modified version of this aircraft series by the year 2025. The partnership between Boeing and Commercial Aircraft Corporation of China Ltd is occurring in two parts of which the first part consists of a 737-completion centre (which is a joint venture) and a 737 delivery centre (which is completely owned by Boeing).
Organic growth is the type of growth strategy used by firms to expand their growth rates internally using internal sales (Zollo, Minoja and Coda 2015). This strategy is a safer way to increase growth and expand internationally because it does not involve the acquisition of another firm and the growth rate is not dependent on the growth rate of another firm. This strategy involves maximising the potential and hence returns to a particular business from within the internal functioning of the business (Green 2016). The different strategies used for organic growth and expansion include promotions, new lines of products, customised products and continuous catering of the changing demand trends of the customers. Boeing as a firm trying to expand internationally and especially in China utilises all of these strategies to gain increased momentum of growth and surpass the barriers or resistances offered by its competitors.
The next strategy followed by the firm is that or organic growth wherein the firm utilises the internal strategies of growth instead of expanding with the help of other companies (in the form of mergers and acquisitions). It includes the use of innovative technology and reinvestment of revenues generated so that there is continuous evolution of the methods used for reaching highest possible amount of profit generation in less time than needed by its competitors. This causes Boeing to appear as a safe company to invest. This is so because even if its growth rate is less it is not dependent on other firms as it has not bought other firms. However in case of its competitors it has usually been found that they grow by buying other firms and hence appear to have higher returns of growth (the concept of mergers and acquisitions). This causes investors and shareholders to have more trust in Boeing and hence provide them with greater opportunities and options to expand internationally. Boeing is increasingly using a mix of organic growth along with strategic acquisitions to increase the amount of expansion in China. Some of the efforts taken up by the firm in this regard include better seating arrangements, sale of parts of the aircrafts and specially engineered goods like cargo conversions. The firm is essentially trying to invest in deals and options that will open up aftermarket possibilities and expansion opportunities in turn. This is directly related to the vertical relationship established by Boeing with the Commercial Aircraft Corporation of China Ltd.
The firm has also been successfully able to establish a strong place in the target market in spite of the existence of so many potential competitors is because of the excellent customer servicing options provided by the firm. The firm provides personalised and specialised customer satisfaction services. This includes use of two tools primarily. The first is the use of disruptive business models and smart devices to cater to the ever changing demand trends of the customers. The second is to provide services of support throughout the entire life cycle of the aeroplane manufacturing to the sale of the airplane to the reaching of the step wherein the plane is completely in the operating condition. Boeing Business Jets is a variant of the Boeing jet airliners produced by the firm to capture the market in the context of the corporate market especially. This venture is also a partnership in between Boeing Commercial Airplanes and GE Aviation. This strategy has been excessively in the target market of China with 21 in-service airplanes and almost three BBJ MAXs already in order. This has been possible because of the extremely stringent value of the firm in providing product reliability and brand trust. The firm increasingly uses disruptive business models with the use of smart devices which help the firm in identifying the major variables and parameters that affect the demand patterns of the customers especially in China. The firm uses the strategy of continuously being in touch with the customers from the starting of manufacturing to the completion of the aircraft including the interior decor and manufacturing of the aircraft.
It has particularly been challenging for the firm because the Chinese economy is very wide and comprises of a population of around 1.3 billion people and a land mass area which is larger when compared to the United States. Boeing as a firm has been efficiently able to identify the market areas and products particularly demanded by the Chinese population residing in different parts of the country. Hence, it becomes difficult for every firm whether already having multinational expansion experience and lack of local market understanding. It is very important to note in this regard that the Chinese market is not at all a homogeneous market as it is flooded with competitors from all different types of countries and regions of the world. The firm has been able to carefully investigate the different geographical regions within the country with the help of smart devices and figure out the markets which are the most conducive to expansion of the business.
As a matter of fact, the company has focussed on the attempts being taken by the firm to sell an increased number of aircrafts and aircraft products in China. By the year 2037, Boeing is expecting to sell a total of 7690 airplanes in China (Boeing.com 2018). Reports from the firm have also suggested and asserted that the firm will be able to grow at increased rates and that China will account for 18% of the total growth (Rong, Wu and Boeing 2017). Boeing has been competing with the biggest European Competitor Airbus to capture larger shares of the market in China as it is currently the fastest growing aircraft market in the world. Boeing is also currently involved in making strategies and techniques to cater to the increasing base of customers arising from the increasing middle class population of the country. The plant set up in China by Boeing is being considered to produce a total of 6,810 new aircraft in the next twenty years. Thus, the market expansion strategies are very conducive to the growth of the firm.
Conclusion
In order to conclude it can be asserted that Boeing is one of the largest aircraft manufacturing firms in the world based out of America and headquartered in Chicago, Illinois. The multinational firm is involved with designing, manufacturing and selling aircrafts all over the world. It has been expanding into the Chinese sub-continent and is using a set of smart strategies using organic growth and joint ventures to expand into this country. The firm also uses the concepts of smart devices and disruptive business models to expand into this country. These features enable the firm to remain ahead of its competitors and cater to the ever changing demand patterns of its customers. Even though the Chinese economy is diverse and not homogeneous and the demand patterns are varied, the firm has been successful in identifying the investment regions and the specific market demands of the customers in China.
References:
Boeing.com. (2018). [online] Available at: https://www.boeing.com/news/frontiers/archive/2009/october/oct09frontiers.pdf [Accessed 14 Oct. 2018].
Boeing.com. (2018). Boeing: The Boeing Company. [online] Available at: https://www.boeing.com/ [Accessed 14 Oct. 2018].
Boeing.com. (2018). Boeing: Boeing Business Jets Grows Presence in China. [online] Available at: https://www.boeing.com/commercial/bbj/news/boeing-business-jets-grows-presence-in-china.page [Accessed 14 Oct. 2018]
Green, M.B., 2016. Mergers and acquisitions. International Encyclopedia of Geography: People, the Earth, Environment and Technology: People, the Earth, Environment and Technology, pp.1-8.
Rong, Z., Wu, X. and Boeing, P., 2017. The effect of institutional ownership on firm innovation: Evidence from Chinese listed firms. Research Policy, 46(9), pp.1533-1551.
Vitalis, H. and Scott, R., 2015. Joint ventures in the public sector: Translating lessons from the private sector to New Zealand government departments. Proceedings of the 2015 Australia and New Zealand Academy of Management.
Yan, A. and Luo, Y., 2016. International Joint Ventures: Theory and Practice: Theory and Practice. Routledge.
Zollo, M., Minoja, M. and Coda, V., 2015. Toward an integrated model of strategy. In Academy of Management Proceedings (Vol. 2015, No. 1, p. 18733). Briarcliff Manor, NY 10510: Academy of Management.
