Boeing’s Open System Model

Introduction 

William E. Boeing saw his first manned aircraft fly in 1909 that turned into a fascination that would later become known as a multi-billion dollar corporation called The Boeing Company. Through his fascination and determination, William Boeing was able to construct his organization into a well-oiled machined. Like many other organizations in the industry, Boeing had chosen to follow an open systems model. The company should take the environmental feedback and adjust their inputs to create better outputs, always revolving and creating a continuous cycle. The environment in an open systems organization plays a big role in how a company will operate as that company, if smart, will listen to the feedback of the environment and take notice. This review is true, of William Boeing when he realized the U.S was going to need aircraft going into World War I. 

The open systems model allows for the inputs that are transformed into outputs or products ( Al-Najjar et al.., 2017 ). This transformation is happening simultaneously while managers and supervisors are utilizing throughputs to transform happen. Organizations that operate an open systems model are relatively more open to ideas from within the organization itself and feedback from environments. This paper is going to cover the history of The Boeing Company and how they used the open systems model way of thinking as well as find out how they became one of the aviation industry’s giant manufacturing companies. 

History of Boeing 

This company would not be where it was today without the determination, incredible work ethic, and passion for aviation from its founder William E. Boeing. In this little glimpse of history, this paper will show how William Boeing got his start and found his passion for aviation. Going through the company on its first start, and when they flew their first test flight in 1961 to today. It is important to go through some of the company’s businesses, subsidiaries, and divisions as well as give the philosophy, vision, and mission statement of today’s Boeing. 

It all started in 1909 during the Alaska-Yukon-Pacific Exposition, held in Seattle, where William Boeing saw his first manned airplane take to the sky (The Boeing Company, 2010). That is all it took to ignite a deep passion for aircraft with William. A year later he attended his first airshow where he attempted to get a flight with any aviator but was ultimately turned down by everyone. Even after the turndown William’s persistence finally paid off four years later when he sparked a friendship with Conrad Westervelt: that friendship would turn into a great partnership (The Boeing Company, 2017c). They took their first flight together in 1914 and came to a conclusion; they could build a better plane (The Boeing Company, 2017c). Boeing ordered his first plane. Boeing ordered his first plane from the Martin factory, a Model TA, in 1915. William Boeing recognizes that in October of 1915 the machine was delivered to him and since he believed there was a future in aviation, his interest in constructing a well flying aircraft grew (The Boeing Company, 2017c). 

The first location would be located on the shores of Lake Union in Seattle. With the help and push of his partner, Conrad, Boeing secured a deal with the Navy to supply seaplanes for WWI (Wired Staff, 2009). Originally, the company was reffered to as Pacific Aero Products but was reformed to Boeing Airplane Company in May 1917(The Boeing Company, 2010). After WWI, the aviation industry hit an all-time low due to all cheap used military aircraft for sale; this is where Boeing listened to the environment and made some changes to stay alive. Boeing had to diversify and began to sell furniture, countertops, and flat-bottomed boats among other things. Boeing however, did not have to wait for long before getting back to the aviation industry focus. On March 3rd, 1919, Boeing made the first international airmail delivery (Wired Staff, 2009). He decided, however, not to stick with airmail and returned to repairing military aircraft and designing and building new ones. This would take Boeing to the lead manufacturer of fighter airplanes. 

Boeing was approached to do airmail, and after a contract bid he won, he created Boeing Air Transport around the late 1920s (The Boeing Company, 2010). He ended up merging/ acquiring Pratt and Whitney, Hamilton Standard Propeller Company, Chance Vought, and National Air Transport creating a large corporation (The Boeing Company, 2010).The government was not going to have this and accused Boeing of monopolizing. On June 12, 1934, the government passed the Air Mail act that forced aviation companies to separate their air company operations from manufacturing and development which resulted into Boeing retiring from aviation. He sold his stock and resigned as chairman around 1934 then was awarded the Daniel Guggenheim Medal for aeronautical achievement. He later passed away on September 28th, 1956 after suffering a heart attack. He was inducted into the Aviation Hall of fame in 1966 (The Boeing Company, 2010). 

The current Boeing is much larger than what William Boeing could have ever imagined. Its vision is not far from what William had first thought of, to “explore and inspire the world through aerospace innovation,” and be the “best in Aerospace and enduring global industrial champion” (Boeing, 2017a). Boeing now does more than just build airplanes; they are now in the commercial, millitary, and space sectors as well. The company maintains the cutting edge of technology and continue putting out solid products that keep them ranked number one among their competitors as they continue to keep getting strong. 

Environmental profile of Boeing 

The Boeing Company has been through a broad range of the ever-changing aviation industry, which has forced Boeing to become a more in-house company. Boeing moving to a more mechanistic company allows them to compete with their rival Airbus, who is Boeing’s biggest competitor in the commercial aviation since the 1990s. In 2013, Airbus was leading in the competition with a market share of 53% while the remaining 47/% belonged to Boeing (Schmidt, 2014). Other competitors include Embraer and Bombardier. 

The Boeing Company happens to be the global aerospace leader and thus have the responsibility to create a sustainable future for its employees, communities, customers, and investors. Boeing encourages the sharing of ideas and actions that help the environment. Weather, climate and climate change are important factors that have a major impact in the aircraft industry. Increased carbon dioxide concentration leads to high levels of global temperatures and extreme weather events. The numbers of environmental concerns that affect the industry are greenhouse gas emissions, hazardous waste, fuel (energy) consumption and the use of renewable energy, water quality and stormwater, and airplane noise pollution. With the constant attention on global warming and new regulations on emissions such as Paris Climate Agreement, Boeing has been improving fuel efficiency with new technology and operational improvement, as well as supporting efforts to find an alternative, sustainable fuels around the world (Air Canada 2017, para 4). Fuel consumption is the largest component of airplane operating cost thus the company develops new technology that will help in reducing fuel consumption. Boeing thrives to fit into its global and general environment and exploit its competencies through the transformation of inputs into outputs. 

Organizational inputs 

Boeing develops and markets commercial and military jet aircraft and offer associated support services worldwide to the commercial airline industry. For the past 40 years or more, Boeing has been the leading manufacturer of commercial jetliners. As it is the leading producer of aircraft, it offers various commercial jetliners its products designed to meet the passengers and cargo requirements of these foreign and domestic airlines. Some of its commercial jetliners customers include Air Canada, Air Berlin, Air India, and Air China among others (AeroWeb, n.d). Besides it also provides aviation services support, training, aircraft amendments, spares, and give advice on technical issues to government and commercial customers worldwide. Its primary customer for the defense, space and security airplane is the United States Department of Defense. Last year, the company deprived 64% of BDS’ revenue of DoD. Other customers include National Aeronautics and Space Administration (NASA), public markets, international defense markets, and commercial satellite markets (AeroWeb, n.d). 

Boeing recruits innovative, highly qualified and dedicated employees in various departments since the aeronautical industry is dynamic and demands the management the production of innovative products. The company hires employees based on knowledge, skills, and abilities to perform a certain job. They offer structured interviews such as assessment questions and rating scales as methods of evaluating the job-related skills and abilities of candidates (Boeing Frontiers, 2005). 

Boeing depends solely on the availability of essential materials such as aerospace products, parts and subassemblies from subcontractors and suppliers. Important raw materials include aluminum, titanium, and composite materials which take one or more years to qualify. The company also relies on the availability of energy sources such as electricity should be at reasonable prices to bring success to the company. Boeing major supplies include Rockwell Collins, Pratt and Whitney, Precision Castparts Corp., Spirit AeroSystems, Triumph Group, Honey well, and Rolls-Royce. Boeing expanded its supply agreement with titanium products with Allegheny Technologies in October 2013 ( Al-Najjar et al.., 2017) . 

Throughputs 

Boeing has evolving and innovative technologies that aim at improving the performance and operations of the company and also reduce cost. Development in engine technology aims at improving the operating economics of the airplane which has a direct effect on the airline profitability. The latest generation of the company’s airplanes are 787, 747-8, and the company is looking forward to bringing 737 MAX and 777X that are expected to reduce fuel consumption by twice the rates compared with the previous models. Development in engine technology takes place through the advancement of materials, manufacturing techniques and aerodynamics. Advancing in wing design of the airplane also contribute to better fuel efficiency. The 787 and 777X wings could not be achieved using conventional materials, and thus the company uses composites permitted aerodynamic improvements. This advancement optimizes the performance of the wing of a single-aisle airplane. The new airplanes have improved engines, systems and aerodynamics that reduce noise pollution by approximately 30 percentages as in the case of the 747-8. Technology advancement increase range and payload capabilities which in return allow the airline to increase passengers. The new models have larger and higher windows, with higher ceilings and sculpted sidewalls which provide the cabin interior with a more spacious feel. The 787 has a cabin pressure of 6,000 feet of attitude, comfortable cabin humidity and improved air purity than previous generation airplanes (Slayton, & Spinardi, 2016). 

The company uses a matrix leadership throughput that includes vertical and horizontal structure. The horizontal wave is made of different departments which perform different specialized tasks and improves the productivity of employees. Employees work in small groups which the Department heads or supervisors manage. The company uses a vertical ranked structure made of various management levels. The top management is the Chief Executive officer who heads the Department Head. He/she makes critical supervision decisions that determine the company’s activities. The matrix organization structure helps the company recruit innovative, highly qualified and dedicated employees in various departments. This industry of aeronautical is dynamic and demands the management the production of innovative products, thus recruiting a diversified workforce in all departments will ensure that the operations of the company run without hitches. Boeing produces innovative military hardware that is used in many countries making it complex, Boeing, have to ensure that its production is of high standards to avoid or reduce losses to the country. Financially, the company distributes its finances according to the budgetary requirements of a department enhancing transparency. 

Boeing has adopted an organizational structure that enables it to compete with the rivals through reduction of manufacturing costs and to improve the quality of products. Boeing’s matrix organizational structures enable it to restructure and realign its operations. For example, the managers have to consider different intersection decisions such as innovation, resource allocation and customization for its success. This structure enables the company manufacture new products without compromising the quality of the older brand. Boeing company aim is to improve workplace safety of the employees by building a culture of caring. Thus, it has taken different tactics to improve workplace safety. Safety is the first consideration in the mind of the engineer during the construction of a design airplane. Each airplane model has to meet the time-proven design standards, and regulatory requirements before issuing of certificates. 

Organizational outputs 

Boeing is a leading producer of LCA, but before that, it was a manufacturer of military aircraft. Because of the technology development and the knowledge it had established during the construction of military jets, the company was able to develop a commercial jet. Until today, it is the largest defense contractor for the United States Military and with the profits derived the firms can be stable even when the LCA is not doing well. The company is involved in developing satellites, launch systems, weapons, and advanced technologies besides building military jets and commercial jets. The company focuses on providing innovative services in digital aviation, engineering, transport support, analytics, and supply chain logistics to the customers. 

Boeing’s net sales or revenue in 2016 fiscal year was 94.57Billion with a gross profit of 13.84billion. According to the Flight Global fleet forecast, the compound annual growth rate for the 2016-2035 period was distributed as follows: Airbus held 45% market share, followed closely by Boeing at 43%, Bombardier Aerospace at 5% and lastly 4% and 3% for COMAC AND Irkut Corporation respectively. In 2016, the operating cash flows were at $ 10.5 billion, which is the same amount this year, and in the same year, Boeing Company repurchased 55.1 million shares for $ 7billiom creating a dividend of 3.1%. Boeing has increased its full-year forecasts as it has reduced spending by reducing payrolls, streamlining production, and winding down development costs. Its latest plane, 787 Dreamliner was responsible for the $530 million in cash in the quarter, raising its stock by 37% this year (CNBC, 2017). News from CNBC reports that Boeing shares increased at nearly 8% after that development. Boeing is set to increase its share buybacks by $3.5 billion that will amount to $10billion to reduce future costs (CNBC, 2017). 

Personal reflection 

Boeing company stock is having a good run with an impressive gain of 44%. Its performance is much better in contrast to some years ago when Airbus was leading in the share market. I would invest in this company since for more than a century; it has been leading in innovation. Currently, Boeing is the largest aerospace company in the world and is in 150 countries. Furthermore, the company is involved in developing satellites, launch systems, weapons, and advanced technologies besides building military jets and commercial jets. For the long-term trends, the Company has a promising stock. For example, in India, the company is expected to develop 1850 new planes for the next couple of years, as there will be a strong demand in that region. According to the International Air Transport, by 2035 Boeing is expected to double passengers demand to approximately 5.8 billion passengers. On the company’s financial, it is continuously solid. Last year, the operating cash flows were at $ 10.5 billion, which is the same amount this year. Therefore, with this cash flow, the company has enough resources to pay out dividends, make share buybacks, and plow money into R &D. In 2016, it repurchased 55.1 million shares for $ 7billiom creating a dividend of 3.1%. The major risk that could prevent an individual from purchasing stocks at Boeing is the change in demand for commercial aircraft which depends on the long-term health of the country’s economy (Boeing, n.d). 27% of the company’s revenue is from U.S government contracts, and if they are curtailed, the stock may drastically fall as it did during the post 9/11 and financial crisis. However, people could also take effect as an opportunity to buy Boeing stock as individuals will always need to fly, even if it’s finding a place for safety. 

References 

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Slayton, R., & Spinardi, G. (2016). Radical innovation in scaling up: Boeing’s Dreamliner and the challenge of socio-technical transitions. Technovation, 47, 47-58. 

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