Minimization the Negative Implications of the B737 MAX Crashes

Executive Summary

The paper focuses on the analysis of Boeing as the aircraft industry player. An overview of the industry and its players, as well as the company’s profile, are suggested. Porter’s Forces analysis allows identifying potential threats to the organization’s activity. The final recommendation is to suspend the use of B737 MAX aircraft until a thorough investigation has been performed. Although Boeing’s reputation has been considerably undermined, the company can retain it if it repents and proves that it has fixed the mistakes.

Industry Overview

The Boeing Company is one of the key actors in the aircraft industry. A recent report prepared by Orbis Research group indicates that the market growth outlook in the industry is positive (“Aircraft manufacturing market 2018-2022,” 2018). There is a crucial progress likelihood in the sphere of passenger aircraft drones. The situation in the industry overall is twofold: on the one hand, aircraft companies are constantly under pressure to reduce prices, improve their products’ capability, and bolster safety options (“Aircraft manufacturing market 2018-2022,” 2018). On the other hand, the demand in the market is rising due to such factors as the decreased interest rate situation, increasing population, urbanization, growing levels of disposable income, and escalated military conflicts. Boeing and Airbus are the key actors in the industry, followed by Lockheed Martin Corp., Textron, Inc., and BAE Systems, Inc. (“Aircraft manufacturing market 2018-2022,” 2018). With the increased need for people to travel faster and cheaper, the industry is constantly improving and coming up with new viable solutions to satisfying its customers. At the same time, aircraft companies have to conform to numerous regulations related to their operations.

Company Profile

The Boeing Company was founded in 1934 as an aerospace organization. The company functions in four major segments: commercial airplanes, global services, defense, space and security, and Boeing capital (“Boeing Co,” n.d.). The first sector deals with developing, creating, and selling commercial jet aircraft. Also, it offers fleet support functions, mainly to commercial airline corporations of different countries. Apart from that, the segment focuses on the production of commercial aircraft meant to satisfy both passenger and cargo needs of various airlines (“Boeing Co,” n.d.). The primary products of this line are 747, 767, 777, 787, 737 MAX, and 777X (“Boeing Co,” n.d.).

The global services sector concentrates on satisfying the needs of defense and commercial clients. This segment maintains a variety of aerospace systems and platforms with a wide range of services and products. The major of these are engineering, upgrade and conversion needs, supply chain, spare elements, logistics, technical documents, pilot training systems, and digital supplies (“Boeing Co,” n.d.). Also, the global services sector is responsible for controlling modifications and performing data analytics.

The defense, space, and security department manages the development, research, production, and adjustment of both manned and unmanned military aircraft. Additionally, the segment is responsible for producing weapon systems for surveillance and strike, such as vertical lift and trainer and fighter aircraft (tilt-rotor and rotorcraft) (“Boeing Co,” n.d.). Commercial derivative products made by the sector involve tanker and anti-submarine products. Apart from these, the defense, space, and security department is involved in the research and improvement of such systems as intelligence, strategic defense, surveillance, satellite, cyber, and reconnaissance (“Boeing Co,” n.d.). Products in this range include P-8 programs, V-22 Osprey, F-15 Strike Eagle, AH-64 Apache, and others.

Finally, the Boeing capital segment deals with consumers’ financial deals. In particular, this department is responsible for making sure that clients have enough money to purchase Boeing products and have them delivered (“Boeing Co,” n.d.). The segment controls the general financial exposure of the company’s activities. The sector’s operations deal with finance leases, resources kept for sale, notes, operating leases, and investments. Each of the four segments of Boeing’s profile is an integral component of the company’s successful operations, working hard to gain profitability and increase options for customers.

Industry Players

Due to the increased demand for military and commercial aircraft in recent years, a considerable increase in the aerospace industry has been reported. As of 2018, Boeing topped the list of major players in aircraft production (“The world’s biggest,” 2018). The company was followed by such organizations as Airbus, United Technologies Corporation, Lockheed Martin, General Dynamics, General Electric Aviation, Northrop Grumman, Raytheon Company, BAE Systems, and Rolls-Royce. Each of these organizations is either a supplier or a rival of Boeing in the sphere of producing aircraft. Airbus is the second on the list of biggest aerospace companies, immediately following Boeing. Some of these players pose a competitive threat to Boeing, but it is currently the most successful of all.

Porter’s Forces Analysis

Supplier Power

Boeing carefully selects its suppliers since it requires materials of the highest quality to produce technologically excellent aircraft. Among the most distinguished organizations with which Boeing cooperates there are Gary Jet Center, Watson Furniture Group, Cyient Limited, nLogic, and Dell Technologies (“Supplier recognition,” n.d.). While these companies have a strong reputation and could increase their prices if they chose to, they realize the potential of cooperating with Boeing and are not likely to do so. Therefore, the bargaining power of Boeing’s suppliers is moderate due to the company’s size and value in business.

Buyer Power

Present-day businesses strive to provide their customers with high quality of services and affordable prices in order to remain competitive. Clients play a crucial role in regulating prices on Boeing’s products. Some of the most distinguished buyers are Gulf Air, Qatar Airways, Mid East Jet, Lufthansa, FedEx, Royal Brunei, Swiss, and Aeroflot (“Boeing customers,” n.d.). Each of these consumers, as well as many others, expect the best aircraft for a reasonable price. While in many industries, buyers’ bargaining power is high, it is moderate in the aircraft business since the most reputable airline brands keep their prices and quality nearly the same. Apart from that, Boeing has a long history and a good reputation, which eliminated the buyers’ potential to drive down the prices.

The threat of New Entry

In the industry where Boeing operates, the threat of new entries is rather low due to extremely high barriers to admittance. Apart from the need to invest in supply chain and operations, one should assemble a team of proficient employees, which is not easy to do from scratch for a large organization. Also, one would have to pay a lot of money to implement the newest technological ideas. Finally, there are also compliance costs and regulatory policies that make entrance quite complicated.

Threat of Substitution

As well as the threat of new entrants, the risk of substitution is rather low. There are not many aircraft producers with such a considerable reputation and history as Boeing. Apart from the main competitor, Airbus, there are several other players in the industry, such as Bombardier, Embraer, and Mitsubishi MRJ (Zhang, 2016). However, so far, Boeing’s rivals cannot be considered to pose a serious threat to the company’s position due to its prolonged history of serving customers with respect and loyalty.

Competitive Rivalry

Despite the previous elements of Porter’s Forces having low to moderate power, the competitive rivalry between the already established actors in the industry is high. The major rival of Boeing is Airbus, and these two companies are known to have dominated the aircraft sphere for the past fifteen years in the least (Zhang, 2016). However, new and active competitors set the aim of breaking Boeing’s and Airbus’s duopoly over the industry. The most successful among these are Embraer, Bombardier, Irkut, COMAC ARJ21, COMAC C919, and Mitsubishi MRJ (Zhang, 2016). So far, these companies have not succeeded in gaining Boeing’s popularity. Still, if the company faces more scandals involving human losses, it is likely that its competitors might weaken its power. Current active competitors are Textron, Inc., BAE Systems, Inc., and Lockheed Martin Corp. (“Aircraft manufacturing market 2018-2022,” 2018). However, they have not got enough resources so far to pose a considerable threat to Boeing.

Strategic Question

The strategic question to be answered is “What should Boeing do to minimize negative implications of the B737 MAX crashes?” Despite the company’s leading position among the world’s aircraft producers, its reputation suffers each time a fatal accident occurs. There were two major massive catastrophes involving Boeing 737 MAX over the past six months. On March 10, 2019, 157 people were killed as a result of the Ethiopian Airways crash (Goldstein, 2019). On October 29, 2018, a Lion Air crash in Indonesia took away 189 lives (“Boeing 737 MAX,” 2019). These two accidents have raised numerous questions and doubts about the company’s consideration of safety concerns. It is crucial to come up with viable solutions that could help Boeing to eliminate the negative outcomes of its B737 MAX crashes.

Analysis, Recommendations, and Potential Limitations

The study of the situation allows concluding that the company is trying to avoid responsibility for the two crashes. In six weeks after the latest accident, Boeing CEO declared that everything was fine with the “design and safety assessment process for a flight control system” (Bogaisky, 2019, para. 1). Such a type of conduct is highly inappropriate and even dangerous for the organization. As Goldstein (2019) notes, in crisis public relations, it is important to be the one who leads the conversation instead of letting others lead it for the party in question. Meanwhile, the tactic selected by Boeing triggered the decision to cut production, which is likely to undermine both the company’s reputation and financial stability (Gelles, 2019). While such an outcome is reasonable, it was possible to avoid a scandal if the CEO had not been rejecting Boeing’s fault for such a long time.

Hence, the major recommendation for the company in the current situation is to perform an exceptionally thorough analysis of the software. A potential fix has been suggested but not tested out yet (Singh, 2019). The major problem is reported to be in the flight control system’s ability to override pilots’ manual actions (Mervosh, 2019). Thus, a second recommendation is to give more power to pilots than the software when operating the plane.

Both of the suggested options to mitigate the negative implications of crashes have some limitations. To a great extent, the barrier is common in the two cases, and it involves losing time and profit. In the first case – finding how to fix the control issues – Boeing loses comparatively little time. However, in the second case – switching the control from software to pilots – it is likely to take exceedingly much time and is probably not cost-efficient. Thus, the first recommendation is more reasonable and sounds more promising for the company. If it manages to fix the current problem and testify its reliability, Boeing will retain its image and customer loyalty.

Implementation

The implementation of the suggested solution has already been initiated. The procedures involve a careful analysis of the problem and changing the software so that it does not overtake pilots’ decisions. Further, it will be necessary to assess the new software’s reliability by performing test flies in a laboratory. If there is a one-hundred-percent assurance that the new equipment is reliable, it will be possible to revive the use of B737 MAX.

Conclusion

Boeing is currently the most important actor in the aircraft industry. The company has a powerful human resource team, as well as innovative equipment, allowing it to create the most practical and reliable planes and other products. Recent deadly crashes involving the most modern B737 MAX aircraft led to significant losses both in the financial and social spheres. Boeing should perform a thorough analysis of its software and remove the faulty functions so as to retain its image and regain the trust of its clients.