Harvard Case - Boeing 737 MAX: Dethroned by Competitive Rivalry?
"Boeing 737 MAX: Dethroned by Competitive Rivalry?" Harvard business case study is written by Saurabh Bhattacharya, Arpita Agnihotri. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Mar 5, 2020
At Fern Fort University, we recommend that Boeing implement a comprehensive strategy to regain its market leadership and rebuild trust with customers, airlines, and regulators. This strategy should focus on addressing the 737 MAX crisis, re-establishing its reputation for safety and innovation, and adapting to the evolving competitive landscape in the commercial aviation industry.
2. Background
The case study focuses on Boeing's struggles following the grounding of the 737 MAX aircraft due to two fatal crashes. This event significantly impacted Boeing's reputation, financial performance, and market share. The case highlights the company's efforts to address the crisis, including design modifications, pilot training, and regulatory approvals. However, it also raises questions about Boeing's long-term strategy in a rapidly evolving aviation market.
The main protagonists of the case study are Boeing's leadership team, including CEO Dennis Muilenburg, and the company's stakeholders, including airlines, regulators, and the public.
3. Analysis of the Case Study
This case study can be analyzed through the lens of various strategic frameworks:
Porter's Five Forces:
- Threat of New Entrants: High, with Airbus and other emerging players like Embraer and Comac entering the market.
- Bargaining Power of Buyers: High, as airlines have significant leverage due to the consolidation of the industry and the availability of alternative aircraft models.
- Bargaining Power of Suppliers: Moderate, with Boeing relying on a network of suppliers for components and materials.
- Threat of Substitutes: Moderate, with alternative modes of transportation like high-speed rail and video conferencing emerging as potential substitutes.
- Competitive Rivalry: Intense, with Airbus as a major competitor, and both companies vying for market share and technological leadership.
SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty
- Extensive experience and expertise in aircraft design and manufacturing
- Global network of suppliers and customers
- Strong financial resources
Weaknesses:
- Damaged reputation due to the 737 MAX crisis
- Delays in aircraft deliveries and production issues
- Increased regulatory scrutiny and pressure
- Dependence on a single aircraft model (737)
Opportunities:
- Growing demand for air travel in emerging markets
- Technological advancements in aircraft design and efficiency
- Development of new aircraft models and services
- Partnerships and collaborations with other industry players
Threats:
- Intense competition from Airbus and other emerging players
- Economic downturn and volatility in the aviation industry
- Environmental regulations and sustainability concerns
- Technological disruptions and advancements in alternative modes of transportation
Value Chain Analysis:
- Inbound Logistics: Sourcing components and materials from a global network of suppliers.
- Operations: Manufacturing and assembling aircraft at various facilities.
- Outbound Logistics: Delivering aircraft to airlines and customers.
- Marketing & Sales: Promoting aircraft models and securing orders from airlines.
- Service: Providing technical support, maintenance, and training for airlines.
Business Model Innovation:
- Value Proposition: Offering reliable, safe, and fuel-efficient aircraft to airlines.
- Customer Segments: Airlines, governments, and other operators.
- Channels: Direct sales, partnerships, and distributors.
- Customer Relationships: Building long-term relationships with airlines through service and support.
- Revenue Streams: Aircraft sales, maintenance contracts, and aftermarket services.
Corporate Governance:
- Board of Directors: Ensuring oversight and accountability for the company's actions.
- Executive Management: Leading the company's strategic direction and crisis management.
- Risk Management: Identifying and mitigating potential risks to the company's operations and reputation.
- Transparency and Disclosure: Providing timely and accurate information to stakeholders.
4. Recommendations
Address the 737 MAX Crisis: Boeing must prioritize the safe return of the 737 MAX to service. This involves completing all necessary design modifications, ensuring pilot training, and working closely with regulators to gain certification. The company needs to demonstrate transparency and accountability throughout this process to rebuild trust with airlines, regulators, and the public.
Re-establish Reputation for Safety and Innovation: Boeing must regain its reputation as a leader in safety and innovation. This requires a comprehensive approach that includes:
- Investing in research and development: Developing new technologies and aircraft models that prioritize safety and efficiency.
- Strengthening safety culture: Implementing rigorous safety protocols and training programs for employees.
- Engaging with regulators and industry experts: Collaborating with stakeholders to ensure the highest safety standards.
- Communicating effectively: Being transparent and proactive in communicating with stakeholders about safety and technological advancements.
Adapt to the Evolving Competitive Landscape: Boeing needs to adapt its strategy to address the changing dynamics of the commercial aviation industry. This includes:
- Expanding product portfolio: Developing new aircraft models to cater to different market segments and customer needs.
- Investing in digital transformation: Leveraging technology to enhance efficiency, improve customer service, and stay ahead of the competition.
- Focusing on sustainability: Developing more fuel-efficient and environmentally friendly aircraft.
- Exploring strategic alliances: Collaborating with other industry players to share resources and expertise.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Boeing's core competencies lie in aircraft design, manufacturing, and engineering. The recommendations align with the company's mission to provide safe and innovative aircraft solutions.
- External customers and internal clients: The recommendations address the needs of Boeing's key stakeholders, including airlines, regulators, and employees.
- Competitors: The recommendations are designed to position Boeing competitively against Airbus and other emerging players in the aviation industry.
- Attractiveness: The recommendations are expected to enhance Boeing's long-term profitability and market share.
6. Conclusion
Boeing faces significant challenges in regaining its market leadership and rebuilding trust. However, by addressing the 737 MAX crisis, re-establishing its reputation for safety and innovation, and adapting to the evolving competitive landscape, the company can position itself for future success.
7. Discussion
- Alternative options: Other alternatives include divesting the 737 MAX program, focusing solely on larger aircraft models, or exiting the commercial aviation market altogether. However, these options would likely have significant negative consequences for Boeing's business and reputation.
- Risks and key assumptions: The recommendations involve significant risks, including the possibility of further delays in the 737 MAX program, increased regulatory scrutiny, and continued public backlash. The success of these recommendations relies on the assumption that Boeing can successfully address the 737 MAX crisis, regain trust with stakeholders, and adapt to the evolving competitive landscape.
8. Next Steps
- Immediate action: Complete the design modifications and pilot training for the 737 MAX, and work closely with regulators to gain certification.
- Short-term (1-2 years): Implement a comprehensive safety program, invest in research and development for new aircraft models, and explore strategic alliances.
- Long-term (3-5 years): Expand product portfolio, invest in digital transformation and sustainability initiatives, and build a strong brand reputation for safety and innovation.
By implementing these recommendations, Boeing can navigate the current crisis, rebuild trust with stakeholders, and position itself for long-term growth and success in the global aviation industry.
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Case Description
In March 2019, Boeing's 737 MAX aircraft were grounded worldwide. This was a consequence of two deadly plane crashes within five months in late 2018 and early 2019. In both the crashes, the flawed design of the aircraft led to an erroneous reading of the onboard sensors. This, in turn, activated the stall prevention software of the aircraft, which kept pushing the nose of the aircraft down. Boeing was alleged to have hastily developed the 737 MAX aircraft in response to the Airbus A320neo. In August 2019, Dennis Muilenburg, CEO of Boeing, was hopeful that services of 737 MAX could resume within a couple of months. How should Muilenburg deal with the crisis? To what extent should he worry about the increasing competitive rivalry with Airbus?
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