Another issue, which involves more of the Boeing’s social responsibility in relation to security, is the illegal export of commercial jets with QRS-11 gyrochip, Between 2000 and 2003, Boeing exported commercial jets with a QRS-11 gyrochip in the instrument flight boxes, even though the chip was classified by the State Department as an export-restricted defense item because it can be used to stabilize and steer guided missiles (Gates & Mundy, 2006).
Just imagine if these chips could go into the wrong hands. This issue could greatly impact Boeings management planning since the State Department last year prepared civil charges alleging 94 violations of the Arms Control Act. The possible outcome could lead to potential fine of as much as $47 million. Even without the fine, this will further degrade the already tinted image of Boeing organization.
As a response to this looming legal, ethical and social responsibility issues, Boeing organization has made the prevention of additional scandals the primary management concern. With these past and present legal, ethical and social responsibility issues it is apparent that Boeing can no longer take any additional scandals. At a Boeing annual leadership retreat, General Counsel Doug Bain emphasized the severe sanctions he said are possible from two major scandals on Boeing’s defense side and for alleged breaches of export laws.
Boeing faces possible indictment by U.S. attorneys on both coasts, and the Department of Justice’s assessment of damages exceeds $5 billion, he said. In addition, Boeing could be barred from government defense contracts or denied export licenses for both military and commercial sales, he said (Gates & Mundy, 2006). Additional scandal would reduce their chances of the legal outcomes of these present issues. In the recent years 15 company vice presidents have already been pushed out because of lapses regarding various ethical issues, which is a very alarming figure. The management planning has therefore focused the scandal prevention strategies within top post of the organization.
2- Analyze at least three factors that influence the company`s strategic, tactical, operational, and contingency planning.
In 2001 shocked the Seattle community by announcing that it would move its headquarters to another location. According to Parish & Company (2001) that Boeing made this decision due to an inability to compete for capital with a financial pyramid scheme at the Microsoft Corporation. Its workers in Seattle are falling behind due to wage increases not keeping up with the area’s true inflation rate. Since Boeing is a cost intensive highly unionized organization this has resulted in intense labor conflicts with management.
In the last bargaining session management asked that workers accept more wages in stock options rather than cash wages yet this is a tough sell to Boeing’s workers. Management is clearly attempting to join a pyramid scheme initiated by Microsoft yet being denied access by its workers who want real cash wages (Parish, 2001). While Boeing Corporation must get from its earnings the cash wages it pays to workers, Microsoft is not required to deduct its stock option wages from earnings, due to an accounting loophole, even though the same tax deduction is provided in each case,
This placed Boeing is placed in a situation where it is handicapped in the capital markets. Boeing’s stock is essentially deflated because it is being forced to show its wage expense as a deduction from earnings, thereby lowering earnings (Parish, 2001). On the other hand, Microsoft’s earnings are grossly inflated, drawing more investor interest. This forces Boeing to cut costs in order to improve earnings and thereby raise its stock price. This is more an economic factor that is affecting Boeing’s business strategy.
The recent battle between Airbus A380 and Boeing 787 Dreamliner has also greatly affected Boeing’s strategy and contingency plans. When Airbus launched the A380, a large plane with a capacity of more than 500, Boeing has to compete with great speed in the development life cycle in order to gain a larger market share. The A380 is built around the assumption that airlines will continue to fly smaller planes on shorter routes (spokes) into a few large hubs, then onward to the next hub on giant airplanes (Babej & Pollak, 2006).
This is based on the assumption that passengers will want to put up with the hassles of changing planes in exchange for the privilege of traveling in a jet-powered cruise liner. While Airbus focus on size and capacity, Boeing rides on the idea of fuel efficient plane that will bring people directly to where they want to go.
According to Marty Bentrott, Vice President of sales, “Our strategy has been to design and build an airplane that will take passengers where they want to go, when they want to go, without intermediate stops; do it efficiently while providing the utmost comfort to passengers; and make it simple and cost-effective for airlines to operate” (Babej & Pollak, 2006). Boeing’s strategy is to focus on innovation to make fuel-efficient engines as oppose to economy through size. This is an example of a technological factor affecting Boeings contingency plan.
Globalization has also greatly affected Boeing’s strategy. The growing power of international economic and market forces has made considerable impacts on tourism. Tourism studies have shown that Airline have made significant profits in 2004. These increases in travel coincide with Boeng’s target to build bigger and long range fuel efficient Boeing 787 Dreamliners.
Gates, D. & Mundy, A. (2006). Boeing lawyer warns of company’s legal peril. Retrieved on February 16, 2007 from the SeattleTimes online web site: http://old.seattletimes.com/html/businesstechnology/2002772936_boeing31.html
Parish, B. (2001). Microsoft Financial Pyramid Costs Seattle Its Largest Employer, the Boeing Corporation, and Destabilizes Government Tax Revenues. Retrieved on February 16, 2007 from the Parish and Company Home Page : http://www.billparish.com/20010322boeingandmsft.html
Babej, M, & Pollak, T. (2001). Boeing Versus Airbus. Retrieved on February 16, 2007 from the Forbes.com website : http://www.forbes.com/forbes/welcome/?toURL=http://www.forbes.com/2006/05/23/unsolicited-advice-advertising-cx_meb_0524boeing.html&refURL=&referrer=