Boeing 's Motivation For Its Strategy

3297 Words Jan 6th, 2015 14 Pages
During this essay I analyze Boeing’s motivation for its strategy to offshore outsource the research & development (R&D), and manufacturing of key components in Boeings latest aircraft, the 787, to Japan. I will assess the effectiveness of the offshore outsourcing strategy and judge whether Boeing was able to mitigate the risks associated with the liability of foreignness and institutional distance, as theorized by Eden & Miller, and Zaheer respectively. Ultimately my judgment of Boeings outsourcing strategy will be based on whether the costs reduced, technologies gained and the resulting competitive advantage associated with outsourcing to Japan outweighed the transaction costs of outsourcing complex component development and manufacturing to Japan.
The wide-body jet market is a paradox, As Gates (2014) suggests, it is a duopoly in which Boeing and Airbus control the market, with Boeing controlling the majority of the market share. However, according to Sarker, Hossan and Zaman (2012. pp 162-163): the primary customer of passenger jets; airlines, are coming under financial pressure due to “regulated markets, rising fuel cost, reducing passenger load factors, and slow paced regional economic growth, which ultimately reduces profit margins.”(Sarker, Hossan and Zaman. 2012. pp 163). These circumstances have led to extremely cost sensitive customers for Boeing.
The cost-sensitive customer base of the wide-body jet market has led to historical players, namely Lockheed and…
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