The Factors Affecting Strategic Planning of the Boeing Company

Written by kevin o'flynn
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The Factors Affecting Strategic Planning of the Boeing Company
Airbus and Boeing compete for jumbo jet customers worldwide. (ChinaFotoPress/Getty Images News/Getty Images)

Managers of the Boeing Co. have many factors to consider when setting company strategy. Military spending affects half of the company's sales, so relations with the Department of Defense are crucial. Commercial aviation is also a huge part of Boeing, and the company must factor in economic considerations affecting air traffic demand. Finally, Boeing must monitor new competition that could challenge its position.

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Military Spending

According to "The Washington Post," Boeing is one of the largest defence companies in the world. Most of Boeing's profits came from defence products after 2000. Boeing must consider the Defense Department's needs and lock in long-term profitable contracts. In addition Boeing must factor in what other defence contractors are willing to bid on contracts. Boeing must specialise to some degree within military manufacturing so the company is the preferred choice when new contracts are awarded.

The Economy

Aircraft demand is affected by the economy. If oil prices skyrocket, Boeing must include the costs of fuel in the company's design plans. High fuel prices influence aircraft design, pushing more fuel efficient engines and lower weight composite materials. According to "Forbes," when the economy faltered in 2008, air travel declined. Boeing must adjust production strategy and even capacity to maintain profits and shareholder value. At the same time, Boeing must be able to increase production when the economy improves or lose sales to other companies.

Airbus

Airbus is Boeing's big competitor for commercial aviation. Many of Boeing's customers compare Airbus aircraft to Boeing aircraft when making purchase decisions. Boeing must consider the cost of its aircraft compared to Airbus. According to "Forbes," Boeing has adopted a strategy of producing aircraft that offer lower fuel and maintenance costs to compete with Airbus platforms. Boeing must also consider that some of its customers will not want to buy aircraft from just one company.

New Competition

China is entering the commercial aviation marketplace currently dominated by Boeing and Airbus. According to "The Washington Post," China's aircraft company will not have a plane for sale until about 2016, but Boeing must take this competition seriously. The C919 is a jumbo jet the Chinese plan to sell in 2016. Much of the growth of commercial aviation in the next decade is expected to be in Asia -- particularly China. Boeing must realise that there will be a domestic competitor in the Chinese market that may be heavily subsidised by the government.

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