...THE BOEING 7E7 Teaching Note Synopsis and Objectives In 2003, the Boeing Company announced plans to build a new “super-efficient” commercial jet called the “7E7” or “Dreamliner.” This was a “bet the farm” gamble by Boeing, similar in magnitude to its earlier introductions of the 747 and 777 airliners. The technological superiority of the new airframe, as well as the fact that it would penetrate a rapidly growing market segment, were arguments for approval of the project. On the other hand, the current market for commercial airplanes was depressed because of terrorism risks, war, and SARS, a contagious illness that resulted in global travel warnings. Boeing’s board of directors would need to weigh those considerations before granting final approval to proceed with the project. The task for students is to evaluate the 7E7 project against a financial standard, the investors’ required returns. The case gives internal rates of return (IRR) for the 7E7 project under base-case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis, the students identify the key value drivers and distinguish, on a qualitative basis, the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need for students...
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...Boeing 7E7 Case Study Solution BACKGROUND As the world’s largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security system, Boeing puts a lot of efforts and innovations in its products and services. These include commercial and military aircraft, satellites, weapons, electronic information and communication systems, and performance-based logistics and training. Due to customers’ needs and requests, Boeing has expanded its product line and services. The long tradition of aerospace leadership and innovation has given the company the advantages. Its broad range of capabilities includes creating new and more efficient commercial airplane, integrating military platforms and defense systems through network-enabled solutions; and arranging innovative customer-financing options. Nowadays, Boeing, as the top exporter of U.S. and with its corporate offices in Chicago, supports airlines and U.S. and allied government customers in more than 90 countries. Besides, Boeing employs more than 159,000 people across United States and in 70 countries. In between, more than 123,000 of its employees hold college degrees, including nearly 32,000 advanced degrees, which means in virtually every business and technical field from approximately 2,700 colleges and universities worldwide. By the way, we can see how diversified, talented and innovated the workforces of Boeing company. Basically, Boeing is diversified into...
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...THE BOEING 7E7 Teaching Note Synopsis and Objectives In 2003, the Boeing Company announced plans to build a new “super-efficient” commercial jet called the “7E7” or “Dreamliner.” This was a “bet the farm” gamble by Boeing, similar in magnitude to its earlier introductions of the 747 and 777 airliners. The technological superiority of the new airframe, as well as the fact that it would penetrate a rapidly growing market segment, were arguments for approval of the project. On the other hand, the current market for commercial airplanes was depressed because of terrorism risks, war, and SARS, a contagious illness that resulted in global travel warnings. Boeing’s board of directors would need to weigh those considerations before granting final approval to proceed with the project. The task for students is to evaluate the 7E7 project against a financial standard, the investors’ required returns. The case gives internal rates of return (IRR) for the 7E7 project under base-case and alternative forecasts. The students must estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis, the students identify the key value drivers and distinguish, on a qualitative basis, the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need...
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... Bottom of Form Boeing vs. Airbus: It's Getting Ugly The two plane makers are raising the volume of their spat over subsidies. Will the dispute go to the WTO? What's Airbus up to now? On Sept. 6, Chief Executive Noel Forgeard hinted that the European plane maker may soon unveil plans for yet another new aircraft even before the double decker A380 takes its first test flight early next year. Studies on a new plane could start within weeks, Forgeard said, with industrial agreements signed by early 2006. "Airbus is bubbling over with new projects," he said. Forgeard's comments followed weeks of rumors that Airbus is set to revamp its A330, a midsize widebody jet, to counter Boeing Co.'s (BA ) superefficient 7E7 Dreamliner, a brand new 215-seater that's scheduled to get airborne in 2008. Boeing is banking on the 7E7, its first new model since the Boeing 777's launch in 1990, to help regain the lead from Airbus in the global commercial-jet duopoly. A revamped A330 would probably use lighter-weight composite materials and next-generation engines developed by Rolls-Royce PLC (RYCEY ) and General Electric Co. (GE ) for the 7E7. Most analysts reckon such a plane could get onto the market before the 7E7's scheduled debut. And the startup would probably cost no more than $2 billion, which Airbus could pay out of cash flow even as it wraps up the $13 billion A380 project. But will this idea ever fly? A reworked A330 might cost a little less than the 7E7's $120 million list...
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...Boeing 7E7 It is our understanding that there is a new and better jet to be made. However, with times they way they are, it is extremely risky to embark on an endeavor of this magnitude and not be successful. We have put together a study and recommendation that should assist you in your decision in whether or not to grant final approval to proceed with the project. Although significant investments are required to develop the Boeing 7E7, a competitive advantage cannot be achieved with the Company’s current product scope. Therefore, due to the IRR being higher than the commercial segment’s WACC as well as the need to achieve a competitive advantage in the market, we believe the project should be undertaken. #18 and The Force Executive Summary Due to the above quantitative analysis, it is evident that the project is beneficial to the company. However, several other issues should be taken into consideration before the Board of Directors’ make their final decision. A positive factor is the ability to achieve customer satisfaction as the aircraft will provide 20% less fuel costs than any other plane in its size. There is flexibility of short or long flights and Boeing 7E7 has enhanced passenger features. This will increase the demand for the airplane as customers will face lower operating costs, increased flexibility and will be better able to satisfy their market share. There is a projected rate of annual increase in air travel of 5.1%. This growth in the industry will...
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...In late 2003, the company of Boeing was the worst of its life. However, it was changed some market demand and solved the technology issues, then slowing to improve. According to the case study (Boeing), the six-box organisational model provides a framework that succinctly identifies the key factors at the centre of the Boeing situation. It explains the following according to Palmer et al. (2009): 1. Strategy – was to update their technology systems, downsize their operations, and re-establish relationships with their suppliers and the only feasible way costs could be cut. 2. Structure – the problem of 1994 airbus which shocked the management executives and began a series of changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that had reportedly changed. 3. Systems – Boeing adopted the principles of lean manufacturing and aimed to rejuvenate their reputation by making their production more efficient. The object of the project was to implement an automated system of assembly lines. 4. Style – the decision was made to diversify from the traditional commercial airline industry and the many acquisitions that were made created integration issues for the company. The aim again was to add more stability to the business by diversifying into information services and the space industry that providing services with elevated margins that would reflect on Boeing’s bottom line. ...
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...The Boeing 7E7 ‘Dreamliner’ Case #3 Section 1, Group 8 Introduction: The Boeing 787 Dreamliner case provides us with a brief background of Boeing’s business through the end of the 1990’s, and how company management recognized the importance of reinventing their core business in order to remain competitive in the consumer air travel segment. We learned how in-depth of a process it can be to successfully design and produce a new airplane with revolutionary technology and high-tech manufacturing requirements. Boeing struggled with these aspects of the plane, and as we learned, greatly underestimated the amount of time and money that the project would require. 1.) A: Boeing and Airbus both issued corporate reports regarding the demand for aircraft in different segments going forward. Despite differences in the overall outlook in terms of segment popularity and the exact volumes of aircraft to be required by the market, both reports were very obviously positive. The main differences between the reports were seen in Boeing’s willingness to forecast for the increased popularity of mid-range aircraft, versus Airbus’ decision to place a higher weight on the importance of international-scale jetliners. Boeing predicted demand over 20 years would call for “5,437 intermediate twin-aisle airplanes; and 889 747-size or larger airplanes” (Boeing’s 2003 Current Market Outlook). Airbus’ predictions were shifted toward the larger aircraft segments, citing “3,842 twin-aisle aircraft;...
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...the center of the Boeing situation. Explain your choice. I chose the 7 S Framework and the six box organizational model. The models are most often used as a tool to assess and monitor changes in the internal situation of an organization. 7S Framework 1. Strategy- Boeings strategy was to update the technology systems, downsize their operations and reestablish relationships with their suppliers and the only chance of cutting operating cost. 2. Structure- the problem of 1994 was the Airbus ( their main rival-booked more orders). This shocked the management executives and began a series changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that reportedly changed. 3. Systems-Boeing adopted the principles of creating more value for customers with fewer resources. 4. Style-the decision was made to diversify from the traditional commercial airline industry and that many acquisitions that were made createe integration issues for the company. They were trying to add more stability to the business by entering the space industry and information services. 5. Staff-According to The CEO of Airbus( Noel Foregeard), the process of diversification was demoralizing for Boeing employees. Boeings vice-president of marketing contradicted Foregeard and said “what affects morale right now is that we are in a down cycle” (Palmer, 2009). Regardless of why the employees morale was low, Boeing had to take steps...
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...Case Study: Boeing 42 The long list of Boeing's woes seems to have reached its pinnacle in late 2003 with the scandal surrounding the Pentagon deal that alleged inappropriate behavior and the loss of documents by Boeing officials. After his seven-year reign at the head of the organization, December 2003 saw the eventual resignation of Phil Condit. Many breathed a sigh of relief at the news. The problems at Boeing were reportedly endless. From a stock price that had decreased by 6.5 percent while the company was under his leadership to increasing competitive pressures, the future for Boeing was in doubt and changes were needed. For many years Boeing graced American corporate news for their prowess as the leading manufacturer of aircraft. However, in 1994 Airbus—their main rival—booked more orders. This shocked the management executives and began a series of changes that were implemented to overcome the bureaucratic structure, outdated technological systems, and unnecessary processes in a company that had reportedly changed little since World War II. THE BEGINNING OF CHANGE AT BOEING In 1997 market demand increased dramatically and Boeing attempted to meet this surplus of orders by doubling their production capabilities instantaneously. A manufacturing crisis ensued and Boeing's reputation took a dramatic turn for the worse when they were required to halt production of the 747 aircraft for 20 days. The company had “stubbed its toe,” according to the then-president of the Commercial...
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...Boeing Australia Limited Executive Summary My decision is to continue on the same course that Boeing Australia Limited (BAL) is on. I feel, after reading this case study that BAL has been on the correct path with regard to building their systems architecture. There is a need for a more sophisticated procurement process and the issue of a procurement application may be easily found. The key is the process by which BAL has implemented all other IT applications, they have been very successful. They are thorough and have processes in place to rationalize whether a new by-in application or an in-house developed program would be best. My thought is that at least one, if not more; of the current systems have an appropriate off the shelf application that would work for BAL’s procurement needs. Further investigation through the Materials Management Process Council should reveal an appropriate tool for BAL to use. In this case study I will outline the reasons for my decision and some of the potential cost savings involved. Statement of Issues The main issue of this case is to buy a new e-procurement application or to continue to wait for the best case scenario application to come along. It is an important decision that affects many aspects of the business. The potential to lose a client or a critical supplier is possible during this process. An in depth analysis of the situation must be conducted prior to any move toward a process change. Initially, change is difficult in...
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...The Pennsylvania State University Department of Industrial & Manufacturing Engineering IE466: Concurrent Engineering Individual Homework #1 – Boeing 787: The Dreamliner Boeing 787: The Dreamliner Case Study (download from Angel) During the past decade, Boeing watched as their competitor, Airbus, launched several new and very successful aircraft. In 2004, Airbus surpassed Boeing in commercial airplanes delivered and future orders placed. This is the first time that Boeing has ever lost its leading market share. The 787 is the first new airplane that Boeing has introduced to the market in a decade. This case study examines how the 787 is strategically transforming Boeing’s approach to aircraft design and development, and Boeing itself. Questions for Boeing 787 Dreamliner Case Study 1. Is the 787 appropriately positioned in the marketplace with a high likelihood of success? Why or why not? The Boeing 787 is in fact positioned in the marketplace with a high likelihood of success. The 787 has a good design, and the aircraft is designed in a way that is tailored to its customer. Composed of a new material composite, the aircraft has a lighter weight and higher fuel efficiency than any other aircraft. The aircraft also made sure the composite materials are non-corroding so that the aircraft lasts longer. It has a unique feature both for cargo and passengers. The seats/cabins are bigger, and new technology is installed for the...
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...The University of Lethbridge Calgary Campus Faculty of Management Management 4430Y Financial Management Spring 2011 A.P. Palasvirta Office: Markin 4132, Lethbridge Phone: (403) 332-4582 e-mail: oz.palasvirta@uleth.ca Goal of Course Management 4430 is the capstone course in finance and will incorporate concepts you have learned in through your study of corporate, investments, and international. We will utilize the case methodology to focus our analysis. Cases describe a context in which a particular problem is found. Regardless of the particular characteristics of the problem, problem solving follows a general methodology: identification of the problem, describing the context of the problem, analysis of potential alternative solutions, the identification of the best solution, implementation of the best solution , and the creation of controls and contingency plans, if applicable. Text and Other Sources: E-book based on Case Studies in Finance, 6th ed., 2010, McGraw Hill, Toronto, ISBN Prerequisites Management 3412, Fundamentals of Investments Investments, Analysis & Management, 2nd Canadian Ed., 2005, Cleary & Jones, John Wiley & Sons Canada Ltd., Mississauga ISBN 0-470-83542-7 Management 3460, Corporate Finance Fundamentals of Corporate Finance, 6th Canadian Ed., 2007, Ross, Westerfield, Jordan, & Roberts, McGraw-Hill Ryerson, Toronto ISBN 13: 978-0-07-095910-1 A list of topics for which you should have working knowledge...
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...Nestle Case Study 1. The company of Nestle had undergone both the first order change and second order change. In a first order change, the company underwent some changes in terms of transactional and organizational climate change. On the other hand, Nestle also underwent second order change wherein there are changes in terms of transformational change. This order second-order type of change is more evident. Below are the snippets organizational change that occurred at Nestle according to its order: First Order * Nestle began expanding globally and begun to purchase local subsidiaries in local markets. * Offshore transfer of Executive from Switzerland to United States * Strengthening/Centralization of its IT department Second Order * Diversification of market through entering in cosmetics and pharmaceutical market. * Complete overhaul of executive board with 10 executives replaced * Acquisition and Mergers Discussing more on the second-order change, a transformational change happened when the organization switched from entrepreneurial to become a wider and more professional management kind of structure when they begun to purchase local subsidiaries in foreign market in order for their sales agent (new position) to introduce their product outside of Switzerland. Another transformational change that happen involves the visionary changes that make the organization change in terms of involving in other fields of business through product d1versification...
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...super jumbo plane known as the A380 at a launch cost of $13 billion. Prior to and after Airbus’ commitment, Boeing started and canceled several initiatives aimed at developing a “stretch jumbo” with capacity in between its existing jumbo (the 747) and Airbus’ planned super jumbo. In addition to making the super jumbo one of the largest product launch decisions in corporate history, this figure represented 26% of total industry revenues in 2000 ($45.6 billion) and more than 70% of Airbus’ total revenues in 2000. The inherent risk associated with this major strategic commitment is magnified by the fact that Airbus must spend the entire amount before it delivers the first plane. History has shown that many firms including General Dynamics, and, more recently, Lockheed, have failed as a result of attempting such bet-the-company product development efforts. If, however, the launch effort does succeed, Airbus is expected to dislodge Boeing as the market leader in commercial aircraft after more than 50 years of market dominance by the latter. We can write a custom term paper on Airbus for you! This term paper presents an analysis of this new product commitment and, more generally, of competition in very large aircraft (VLA is defined as planes capable of seating more than 400 passengers). CASE BACKGROUND In the early 1990s, Airbus and Boeing independently began to study the feasibility of launching a super jumbo. Both agreed there was a growing need for a super jumbo because...
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