Objectives
The objectives of The Boeing 7E7 case study is to seek the answer for the project question.
Why is Boeing contemplating the launch of the 7E7 project? Is this the good time to do so? How would we know if the 7E7 project will create value? How to estimate the WACC?
Is there anything else the board of directors should consider in assessing the financial appeal of this project? Why might the board vote 'yes' on the 7E7, when the cost of capital estimate is greater than the IRR? Why might the board vote 'no' if the cost of capital is less than the IRR?
What should the board do?
Introduction
Ultimately Boeing needs to determine if the project will be profitable and if it will have positive cash flows in
…show more content…
Airbus, the market leader, produced planes to serve the short, medium and extended-range routes. Analysts believe that Airbus seemed to be more bullish on the future of the large aircraft market leaving Boeing an opportunity to gain back market share in the mid-size market, assuming that Airbus did not pursue the mid-range segment with a competing product. Boeing had a drop in commercial airplanes delivered from 527 in 2001 to 381 in 2002 and needed this project to keep them in the hunt with Airbus.
The board will also have to consider the decades it may take to recoup the costs of starting this project. Development costs in the airline industry are substantial leading to many years of negative cash flows. The introduction of a new plane is a make-or-break activity for the producers and requires huge financing capabilities. The development costs and per-copy costs were difficult to predict, and Boeing also faced engineering uncertainty with the project. The success of the project depends heavily on Boeing's ability to keep the production costs low and actually deliver a more efficient aircraft than the competition.
Yes this is the good time for Boeing to launch their new aircraft. At this time, the price of raw materials are very cheap caused by unexpected disasters. Although there’s no demand at this moment, but they can still continue making the aircraft. The further information will describe how Boeing can continue
Airbus was planning to introduce the A380 in direct competition to Boeing 747 to compete in the large aircraft sector. The rivalry between Airbus and Boeing was already intense. Boeing’s market share reduced from 70% in 1974 to 45% in 1990 while Airbus’s market share had increased from 1% to 34% during the same time (Exhibit 5). Encouraged by this increase in market share, Airbus was contemplating the introduction of A380. Development of new product line is extremely expensive in the Aircraft sector. Following is a quantitative analysis of the project to calculate the risks involved in introducing a new line of Aircrafts.
I am the Project Manager developing the Boeing 787 Dreamliner. The development of this state-of-the-art airplane will include an international team of aerospace companies led by Boeing. The advances in this airplane will reduce the use of fuel by 20%, increase cargo capacity, increase nautical miles in a mid-range airplane, and improve passenger comfort. Boeing
Boeing’s position as a mature, well-established, and financially stable firm provides it with many competitive advantages. First and foremost, Boeing has been manufacturing airplanes for one hundred years, contributing to significant brand recognition and loyalty within the customer base.
Boeing being the market leader for almost a decade as a manufacturer of large commercial aircraft and had also reached economies of scale, the need to sustain its market share it presumed that “customers might demand for new”. Any potential growth was only through taking super leap and making VLCT jumbo aircraft which needed
Boeing adopts a very thorough, well planned out process to manage the project. The stages are defined clearly and tasks involved in each stage are carried out sequentially. The first stage of their approach is the project definition phase during which Boeing identified holes in the market not met by existing planes, assessed future airline needs, considered alternative plane configurations, explored feasibility of possible technologies and performed preliminary estimation of costs. During the market assessment, analysts gathered information regarding future needs of airlines by speaking directly to
Market Share Airbus will launch their new large, long distance plane A380 in 2006. This plane can be a dreadful competitive product to Boeing. If Boeing falls behind regarding innovations, fuel efficiency and other attributes of a long haul airliner, it will soon lose its market share. In order for Boeing to compete in the aviation industry, it is crucial to take on some risk and develop this new 7E7 project. This helps the company to fight against its competitors and recover from the slump in the industry.
1.) In early 2003, Boeing announced plans to design and sell an airliner named the 7E7. Boeing aimed for the 7E7 to be more fuel efficient, carry between 200 and 250 passengers, able to accomplish both domestic and international flights, as well as be 10% cheaper to operate than Airbus’s A330-200 aircraft. All of these attributes were attractive to Boeing but would come at significant costs. To accomplish these attributes, Boeing proposed to construct the aircraft
In its published Current Market Outlook (CMO), Boeing forecast a much smaller VLA market despite general agreement on overall growth with GMF. Boeing predicts the total market demand for VLA aircraft is 330 over the next 20 years. In addition, the most of the demand for the lager planes would not materialize for at least ten years. If the predicted market demand is true, there is no way for Airbus to reach the breakeven point. It is most likely Airbus will run out of the business if it commits build A3XX. In this case, Boeing could ignore the A3XX and concentrate on its existing product line. That is to say, Boeing had an opportunity to enhance profitability on its existing products while Airbus was tied up developing the A3XX.
In a strategy similar to that of Airbus, Boeing absorbed its largest rival, McDonnell Douglas, in 1977. Boeing’s newest entry into the market is the 787 Dreamliner, a revolutionary jetliner manufactured with up to 50 percent composition materials and designed to increase fuel efficiency and reduce environmental impact. The aircraft has suffered several problems since the first model rolled off the line in 2007, most notably with the lithium-ion battery pack. These issues were resolved in 2013 and Boeing expects the 787 to be incredibly successful due to new demand for super-efficient airliners, a result of rising global fuel prices. Boeing is the wworld’s largest aerospace company, and the leading manufacturer of commercial jetliners and military aircraft combined. The company designs and manufactures rotorcraft, electronic and defense systems, missiles, satellites, launch vehicles and advanced information and communication systems. They are a major
With the company being in the public eye at all times the planners must determine where, when, and how the product will be used before they begin building, testing, and using the new technologies. Since Boeing has become such a large company it has had to continuously evaluating the way it does things to make sure that they are doing the right thing.
Boeing Company has been and is still at the forefront of the aviation industry. The late 1990s were a time of trial and transition where the company encountered and overcame a number of
This paper analyzes the goals and actions of Boeing by analyzing its critical success factors as well as its strategic roadmap.
Developing the World's Largest Commercial Jet In this case, we will be analyzing strategic interaction between Airbus and Boeing, the two leading producers in the global commercial aircraft industry. In particular, we will be considering Airbus' proposed launch of the A3XX, their entry into the intercontinental jumbo jet segment, and Boeing's potential competitive responses to this entry. We will attempt to answer the questions: Should Airbus enter the jumbo jet segment? If so, how?
Air travel has drastically changed the way of life for many individuals that depend on air travel to take care of business. One of the top leaders in the air travel industry, The Boeing Company realizes in order to stay competitive in their chosen industry, an effective strategic plan should be implemented. There are several approaches that can be utilized, such as focusing on the external and internal objectives that could beneficial. Boeing strives to be the best aerospace-based manufacture in the world.
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