After experiencing major setbacks in the improvement of its 787 airplanes, Boeing took a significant step as part of its strategy in management by merging with McDonell Douglas to reduce the cost of building the plan. The earlier inventions to cut cost by outsourcing had crippled the company's finances, and the merger was intended to reduce the risks associated by spreading the risks to another entity. Technically, the merger between Boeing and McDonell Douglas was Boeing acquiring McDonell, although the latter metaphorically bought Boeing with Boeing's money in the end. Some of the risks that Boeing suffered under this merger was the exposure to cost-cutting techniques by McDonell, which weakened the latter's historical commitment to making significant investments in new products (Schonberger, 2018) . After the merger in 1997, McDonnell Douglas introduced into the parent company its culture averting risks by outsourcing, thereby "spreading the risks to the suppliers". This was done by cutting down costs on both the inventory and the possibility of incurring a loss during the manufacture of supplies.
After the merger, McDonell took over the operations of the mother company, playing a significant role in the decision making in the production of the 787 Dreamliner. To this effect, the company used capital budgeting to its advantage, primarily through outsourcing. It figured out that if it could delegate the duties of the production of supplies to be used to other manufacturers, without having to incur the additional cost of supervising the process through its engineers, then it could save more on capital and only incur the cost of assembling the plane. Some of the considerations that were discussed included the plane's increased efficiency, both for the immediate and the ultimate customers (Denning, 2015) . The decisions made after the merger would ensure that the Dreamliner used less fuel, thereby increasing the profits for the immediate customers, which were the airlines.
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By using carbon fiber, titanium and aluminum, the plane would permit increased pressure and humidity to be preserved in the plane, thus increasing comfort for the passengers, who were the ultimate customers. However, Boeing ran into several unanticipated issues and risks in the production of the 787 Dreamliner, one of which was the technical problems in the plane's engines due to overheating batteries. It had not been tested or proven the effect the lithium-ion batteries would have on causing fires once they overheat, resulting in billions of dollars being lost due to the fires caused (Denning, 2015) . While the merger solely focused on cutting down costs by outsourcing, the main challenge it faced which translated to its number one disadvantage was its lack of direct involvement in the production of the materials by the suppliers.
The company should have sent its engineers to spearhead the production of the parts used to ensure that the components produced were designed to fit together during the assembling. The failure in planning also served as the significant risk that the company ran into due to its lack of effective strategy. By failing to strategize the coordination for the manufacture of the components which would be assembled for the 787 Dreamliner, the company ran into the potential problem of having to either return the parts to be adjusted into the right sizes or having to employ their engineers to work on the correct dimensions needed (Schonberger, 2018) . Either way, the company ended up spending millions of dollars in these adjustments, crippling its financial sustainability since such risks had not been planned for. Additionally, the company's operations had to be put on hold, such as the launching of the Dreamliner, as the company went outsourcing for spare parts to make the needed adjustments.
In the merger, Boeing did not adequately assess the costs that would be incurred during the entire operation, and neither did they plan for long term capitalization of the merger. This can be seen more evidently in the way Boeing readily gave into the McDonell's culture of averting risks by outsourcing to cut down the cost of operations. Had Boeing made a long-term capitalization of the merger, it would have considered more keenly such issues as the risks involved in the innovation (Lewis, 2018). The innovation that was adopted by the company did not feature the outsourcing of the technology that was known to the company or any other airplane manufacturer. It also involved making major technological innovations which had not been proven in an airplane before. Venturing into such risks showed how unprepared the company was for the kind of risks associated with the type of outsourcing, and more of McDonell's history of outsourcing all its significant operations without considering the risks involved.
With the development of this new subsidiary, Boeing faced several risks, one of which was the change in leadership structure and culture. After the merger, McDonell took over significant operations of the company, including the decision making that was directly responsible for outsourcing the vital components for the assembly and production of the 787 Dreamliner. Regarded as a company that prides itself in its commitment to making substantial investments in new products, the decisions making by McDonell translated into the company not having a clear long-term capitalization plan, nor effectively assessing the risks and costs involved in the approach the company took by outsourcing (Lewis, 2018). On the other hand, the company faced the risks of increased cost in operations, which would translate into reduced profitability. The incurred cost in operations resulted from the financial losses that were incurred, correcting the flaws and defects of the supplied components in the innovation stage.
References
Denning, S. (2013). What went wrong at Boeing. Strategy & Leadership , 41 (3), 36-41.
Lewis, R. (2018). Considerations for Engineered Resilience from Examples of Resilient Systems. In Disciplinary Convergence in Systems Engineering Research (pp. 41-56). Springer, Cham.
Schonberger, R. J. (2018). Flow Manufacturing--What Went Right, What Went Wrong: 101 Mini-Case Studies that Reveal Lean’s Successes and Failures . Productivity Press.
