Boeing Five Forces Analysis
Boeing Five Forces Analysis
Boeing is the world’s largest aerospace company known to be highly innovative and productive. Now into its second century of business, the aerospace brand has an impressive backlog worth more than $500 billion. Apart from this backlog, Boeing has opportunities waiting in the aerospace market worth trillions of dollars. Its position in the commercial, defense, space and services markets is strong. With some excellent sources of competitive advantage apart from its ability for innovation, Boeing is poised to deliver profitable growth and higher cashflow in this decade.
In tandem with its suppliers, the brand is working to drive its productivity higher. The brand believes in delivering unmatched value to its customers. By improving productivity and investing in innovation, it will be able to deliver consistent results and compelling financial returns. This is a five forces analysis that discusses how the porter’s five forces affect its competitive strength. These forces are a part of every market and industry and affect its attractiveness and ability to compete.
Bargaining power of suppliers:
Boeing’s suppliers are several well known companies like General Electric, Honeywell, UTC Aerospace, Rolls Royce, Triumph Group and so on. It depends heavily on its suppliers for the raw material required to produce the world class and technologically the finest aircrafts. Most important raw materials it needs for aircrafts’ production includes aluminium, titanium and composite material. Most of its suppliers are large technology firms that supply raw material and technology for its aircrafts. However, Boeing is also a large firm that only selects the suppliers that can accountably supply raw material and care for all the aspects of quality and performance as highlighted in Boeing’s supplier guidelines. The overall bargaining power of suppliers is moderate because of Boeing's size and its financial clout. Its ability to pay is the biggest factor giving it an upper hand and higher bargaining strength than its suppliers.
Bargaining power of customers:
In any industry the power has shifted into the hands of the customers. Now businesses are devoting themselves to delivering superior value to the customers and other stakeholders. The customers of Boeing include several major and minor airlines brands around the world including delta airlines, Lufthansa and Fedex. Government, military and space agencies are also customers of Boeing. The bargaining power of customer becomes high for several reasons but in case of Airlines industry where the level of technological innovation matters and switching costs can be high, it remains moderate. Every airlines brand wants the best aircraft at the best price. They want aircrafts that are technologically advanced, light, low on fuel consumption and high in terms of traveller convenience. The brands that provide value as per the expectations of these airlines brands are winners and Boeing is among them. Another factor that proves the bargaining strength of Boeing is the high backlog worth $500 billion. This means that it is loaded with orders and its customers believe in the quality of the products it sells. Overall, the bargaining strength of Boeing’s customers is moderate.
Threat of substitutes:
The threat of substitutes before Boeing is low because there are pretty few substitutes for aircrafts and then the number of commercial plane makers is also not very high. There are few competitors who can provide matching quality like Airbus or bombardier. In this way, the threat of substitute products remains low. Moreover, due to its quality and the level of technological innovation, Boeing is loaded with orders. The overall threat remains low.
Threat of new entrants:
The threat of new entrants is low in the airlines industry. The barriers to entry are very high. While there is a very large investment in operations, supply chain and other things, you also need skilled Human Resources. To deliver great quality, you need to invest in technological innovation. While the barriers to entry are high, the barriers to exit are also high. All these factors along with the regulatory environment and the high level of legal regulation add to compliance costs and make entry difficult. This all just means that the threat of new entrants is very low.
Level of competitive rivalry in the industry:
The level of competitive rivalry in the industry is high. It is because every brand is trying to push the line of quality and innovation higher. The major players include Boeing, Airbus, Bombardier and Embraer. Boeing and Airbus are the market leaders with the largest market share. The other brands too are pushing the line of quality and innovation. The only factor that slightly moderates the intensity of competitive rivalry is the quality and image of Boeing. Its technology and financial strength also make it highly competitive. These factors lend it competitive strength but yet the overall level of competition is high.