What are the 6 predicted issues?

Case Study Boeing Perhaps the first step in recognizing that the cycle of demand for their products caused massive fluctuations in revenue each year and the com- pany needed more stability occurred when Boeing acquired McDonnell Douglas in 1997 to increase its defense contracts. This merger, however, brought with it difficulties in the way of cultural synthesis. McDonnell Douglas had a very strong culture that focused on their dealings with government offi- cials for defense contracts. Combined with Boeing's family-orientated culture, the merger was not with- out integration issues. The merger also had financial implications when investors accused the organization of trickery in regard to the merger with McDonnell Douglas and a payout of $92.5 million was made to shareholders. The long list of Boeing's woes seems to have reached its pinnacle in late 2003 with the scandal surrounding the Pentagon deal that alleged inap- propriate behavior and the loss of documents by Boeing officials. After his seven-year reign at the head of the organization, December 2003 saw the eventual resignation of Phil Condit. Many breathed a sigh of relief at the news. The problems at Boe. ing were reportedly endless. From a stock price that had decreased by 6.5 percent while the company was under his leadership to increasing competitive pressures, the future for Boeing was in doubt and changes were needed. For many years Boeing graced American corpo- rate news for their prowess as the leading manufac- turer of aircraft. However, in 1994 Airbus-their main rival-booked more orders. This shocked the man- agement executives and began a series of changes that were implemented to overcome the bureau- cratic structure, outdated technological systems, and unnecessary processes in a company that had report- edly changed little since World War II. THE BEGINNING OF CHANGE AT BOEING In 1997 market demand increased dramatically and Boeing attempted to meet this surplus of orders by doubling their production capabilities instanta- neously. A manufacturing crisis ensued and Boeing's reputation took a dramatic turn for the worse when they were required to halt production of the 747 aircraft for 20 days. The company had "stubbed its toe," according to the then-president of the Com- mercial Airplane Group, Ron Woodward, who was dismissed not long after the crisis. The "win at all costs" approach that Boeing supposedly had to its business dealings and a lack of communication within the organization appeared to have been the source of this problem. After experiencing these manufacturing diffi- culties, an attempt was made to revitalize Boeing's operations by streamlining aircraft assembly and increasing the efficiency of the company. This was to be done by focusing on production and costs, not on "airy vision statements. "43 Their overall strategy was to update their technology systems, downsize their operations, and reestablish relationships with their suppliers--the only feasible way costs could be cut. WHEN TECHNOLOGY BECAME AN ISSUE In 2001 Boeing adopted the principles of lean manufacturing and aimed to rejuvenate their repu- tation by making their production more efficient. The object of the project was to implement an auto- mated system of assembly lines. They also hoped to coordinate and facilitate easier channels of commu- nication between Boeing staff and suppliers. They implemented a Web-based procurement system that allowed suppliers to monitor stock levels and replenish supplies when they dipped below a prede- termined minimum. The process of automating the production line was a struggle for Boeing. Information technology within the organization was decentralized and over 400 systems were being used to meet the needs of various departments. The lack of collaboration in regard to product procurement meant that the same product could be manufactured by Boeing for one aircraft but subcontracted for another. Boeing had recently chosen to implement a technological platform to regulate product life cycles. This was hoped to cut costs and facilitate the more rapid production of the 7E7. It would do this by stan- dardizing the "use of specifications, engineering rules, operational parameters and simulation results across its extended enterprise. "44 It was hoped that this new system would "improve collaboration, innovation, product quality, time-to-market and return-on-investment."45 . THE CULTURAL IMPLICATIONS was regarding the new 7E7 planes, which would be OF DIVERSIFICATION Boeing's first new plane in a decade. On December The decision was made to diversity from the tra- 16, 2003, Stonecipher announced that Boeing was ditional commercial airline industry and the many to go ahead with the production of the 7E7 jets. acquisitions that were made created integration Stonecipher promised to work closely with unions to see that the low morale is reversed and that the issues for the company. The aim again was to add more stability to the business by diversifying into planes are produced at a quicker pace and for less information services and the space industry- money. Despite Stonecipher's best efforts, critics are providing services with elevated margins that calling for an outside leader to come in and take would reflect on Boeing's bottom line. Condit later Boeing back to basics. admitted that entry into the space industry was an A researcher of a shareholding firm claimed that erroneous move. According to the CEO of Airbus, Boeing's problems lay in the fact that they had Noel Forgeard, the process of diversification was "overpromised and underdelivered." 48 The past "extremely demoralizing for Boeing employees," has shown that Boeing's inability to react to exter. but Boeing's vice president of marketing, Randy nal pressures has increased their demise. The future Baseler, claimed that "what affects morale right now of the industry will now depend on the ability of is that we are in a down cycle."46 Regardless of the either Airbus or Boeing to predict the way the mar- reasoning behind it, Boeing's employee morale was ket will go. Boeing has bet its future on the mar. at a low and this issue needed to be addressed. ket developing a partiality for smaller aircraft, like According to a BusinessWeek reporter, Boeing their new 787. Airbus, on the other hand, projects was in. dire need of "a strong board and a rejuve. that the airlines will purchase larger aircrafts in the future. nated corporate culture based on innovation and competitiveness, not crony capitalism."*7 Boeing's Questions past had left its culture in pieces. After the merger with McDonnell Douglas and many other organiza- 1. Select one or more diagnostic models that you tions, the decision was made in 2001 to move the believe provide a framework that succinctly iden- headquarters of their operations from their histori- tifies the key factors at the center of the Boeing cal home in Seattle to Chicago. The relocation was situation. Explain your choice of model. said to be the factor that most significantly disturbed 2. Explain the Boeing situation in terms of your the culture of Boeing. The move was instigated to selected model. provide a neutral location for the diversified Boeing. Having acquired many different organizations, the Note: In-answering these questions, it may be of past connections to the Seattle site were to be sev- interest to know that Boeing did turn things around. ered. The strategic reason for this move was to help Fast forward to 2007 and we find that the last few refocus attention on international growth prospects. years have been good for Boeing. Its 7E7 is the fastest- Harry Stonecipher, the past head of McDon- selling new aircraft ever and is sold out for years into nell Douglas who had come in as the new chief the future. Boeing addressed many of its issues and operating officer of Boeing after the company was its performance has benefited. Airbus, on the other acquired, was announced as the new CEO after hand, has suffered continuing delays with its giant Condit's resignation. His first important decision A380