BM056-3.5-FMGTIndividual Assignment Contents1.0 Introduction22.0 Company Profile: Boeing22.1 Company background22.2 Vision and Mission32.3 SWOT Analysis32.4 PEST Analysis53.0 Boeings Ratio Analysis64.0 Critical Analysis of Boeings performance with regards to its internal and external analysis.75.0 Recommendations86.0 Conclusion97.0 References98.0 Appendix14

List of FiguresFigure 1: Boeings Global Operators3

List of Appendences Appendix 1: Boeings SWOT Analysis14Appendix 2: Boeings PEST Analysis14

1.0 Introduction Financial management is an essential element of good corporate governance and dorms part of the firm foundations of an organization, underpinning service quality and improvement on the basis of accountability to stakeholders for the stewardship and use of resources in todays world (Audit Comission, 2005). It can be said that, financial management is about managing performance and achieving an organizations strategic objectives, as much as about managing money. The essential objective of financial management can be categorized into two (2) broad functional categories; i) recurring finance functions and ii) non-recurring or episodic finance functions (Rasheed T., 2013). This report is divided into three (3) parts. The first part consists of a critical evaluation of the internal and external business environment of Boeing, this will aid to indentifying to what extent Boeing is strategically fir with its current business environment and its ability to perform. With respect to prospective creditors and investors, the second part of this report provides an analysis of different financial ratios in regards to Boeing. Finally, the third part of this report provides recommendations to creditors and investors pertaining to profitability of investments in the Boeing Company as well as recommendations pertaining to the future sustainability of the Boeing Company. 2.0 Company Profile: Boeing 2.1 Company backgroundFounded by William E. Boeing in 1961, Seattle, the Boeing company has become the world largest aerospace company and leading manufacturer of commercial jetliners including defence, space and security systems (Boeing, 2016). As of present, Boeing is operating in 150 countries (figure 1) with 22,000 suppliers and 165,000 most diverse, innovative, and talented workforce having advanced education and substantial experience in the aerospace industry (Boeing, 2016). Boeing commercial airplanes and Boeing defence, space and security are the two (2) systematic business units of the organization where the products and modified services are based on providing commercial and military aircrafts, satellites, weapons, electronic and defence systems, launch systems, advanced information and communication systems, and performance-based logistics and training (Boeing, 2014).

Figure 1: Boeings Global Operators

Source: (Boeing, 2016)2.2 Vision and MissionThe core aim of Boeing leadership is to focus on the execution today and into the future (Boeing Media, 2016) which directly addresses the vision of the company which is based on people working together as a global enterprise for aerospace industry leadership (Boeing, 2016). Boeings mission is a combination of vision, values, and business imperatives that the company believes will help them maintain the Boeing tradition of innovation, imagination, and aspiration into the future. With this said, Boeings mission statement is We are constantly re-examining our capabilities and processes to ensure that our company is as strong and vital as our heritage. In fact, our culture mirrors the heritage of aviation itself, built on a foundation of innovation, aspiration and imagination (Barbara F., 2015). 2.3 SWOT AnalysisSWOT analysis assists an organization to conduct strategic planning. This type of analysis is critical in terms of analysing internal strengths and weaknesses of the organization as well as to identify potential opportunities and threats in the external environment (Edward S., 2014; Thomson and Martin, 2010). Boeings SWOT analysis is based on evaluating the companys strengths, weaknesses, opportunities, and threats as follows. A summary of Boeings SWOT analysis can be found in appendix 1. Strengths: One of the major strengths of Boeing is their supply chain innovation. By outsourcing seventy (70) percent of the components of their aircrafts (rather than building the entire aircraft on its own) the company is able to reduce the inventory and final assembly time from thirty (30) to three (3) days (Business Teacher, 2016). In addition, Boeing is paying deep attention on Research and Development activities in terms of developing new products in order to satisfy customer needs (You Sigma, 2016). The strong association with Federal Government and large contracts with NASA and US air Force is giving n edge to Boeing in establishing a strong position (Charlie C., 2005). Weaknesses: A major weakness of Boeing is that the company has failed to meet deadlines in delivering commercial aircrafts to its customers. In the past, many deliveries have been delayed wither due to lack of engineering services or delay from the suppliers (The Economist, 2011). This has resulted to the market share of Boeing shifting towards Airbus due to the delay problem (Sascha M., 2008). In addition, with the traditional model of manufacturing the parts with American vendors, Boeing had a great control over its supply chain. On the other hand, in the new unconventional model of outsourcing, the control has shifted in the hands of suppliers, leading to a higher level of risk and possible ambiguity between Boeing and its suppliers (Business Teacher, 2016). Opportunity: A major opportunity for Boeing is the demand for point-to-point routes. The creation of the Boeing 787 has the ability to make long haul flights, with no lay overs. This is particularly of interest to most of the international travellers as well as the low cost airlines which uses point to point routes in order to reduce the cost (Business Teacher, 2016). The financial crisis of 2008 also brought many acquisition opportunities for the company in expanding the companys operations in the area of supply chain and logistic. The contract of Global Airline Inventory Network between Boeing and the British airways was also the result of such opportunities (Boeing, 2016). Threats: A major threat for Boeing is the deceleration in the commercial jet market. After the 9/11 attack, the airline industry was hit the hardest ad both Boeing as well as Airbus incurred losses in revenue post the 2001 attack (Business Teacher, 2016). Among all existing competitors, Airbus is the most obvious competitor for Boeing in terms of commercial airplanes. In addition, Boeing may face the threat of a new entrant from China as Chineses government is planning to launch commercial airplanes in 2020 (Clay D., 2010).

2.4 PEST Analysis The pest analysis is the most common approach for considering the external business environment (Abhishek G., 2013). These factors are crucial within the airline industry along with other industries as they may have strong impacts on the airline business. The summary of the key findings of Boeings PEST analysis can be observed in appendix 2. Political Factors: Boeing has deep relations and strong agreements with US Government and Federal Aviation Administration (FAA), so the policies of the US government may be a major driving force in accepting new orders of aircrafts. Similarly, the political intervention may also affect the sales of the company, for example restrictions of selling specific equipments or airplanes to particular countries like Iran, Iraq, Afghanistan and Pakistan. But on the other hand, the political policies may support the company as well like trading of large commercial jetliners has been tariff free since 1979 (GATT, 1994) and Open Skies agreement of US government with other countries (US Department of State, 2011). Economic Factors: With respect to the airline industry, subsidy and fuel prices are very important to Boeing for their daily transactions in terms of cost of capital. The debate/dispute between Airbus and Boeing on unfair subsidies was the centre of attention in 2010 which was settled through WTO agreement (Julian B., and Barbara L., 2011). Similarly, an increase in fuel costs, environmental restrictions, high security equipment due to terrorism threat, and insurance costs are becoming more vital for Boeing in the near future. According to John C. (2002), he identified that recent recession has caused to decrease the aircraft prices by twenty (20) percent and several airline companies have already closed global tourism industry.Social Factors: The social factors primarily deal with cultural factors which are very important to Boeing because the company is operating in multinational environment globally. Boeing needs to consider social factors which may affect the demand and sale of the aircrafts in the future; for example, changing needs and demands of the customers due to an increase in the population growth rate (Business Teacher, 2016). Also, the Anti-US policy of US government is also affecting the sale of Boeing especially in West Asia which can be a highly profitable market for the company.

Technological Factors: The usage of more carbon composites in the manufacture of Boeing aircrafts will make the aircraft more fuel-efficient. Greater fuel efficiency will enable the aircraft to fly in a longer distances without refuelling (Business Teacher, 2016). This new technology has led to more orders for Boeing. 3.0 Boeings Ratio Analysis To obtain a better understanding of the success or failure of the Boeing Company, one can analyze various liquidity, solvency, and profitability ratios. The first two types of ratios can be useful for individuals deciding whether to loan money to the company. Liquidity ratios measure a business ability to meet the payment obligations by comparing the cash and near cash with payment obligations (Qasim S., and Ramiz R., 2011). Solvency ratios are used to evaluate a companys ability to pay its bills in the long run (Kajananthan R., and Velnampy T., 2014). Profitability ratios measure the overall performance of a firm and its efficiency in managing assets, liabilities, and equity (Florenz T., 2012). For the prospective short-term creditor, various liquidity ratios can be examined and compared to competitors values, to get a feel for Boeings ability to pay back maturing loans and be ready for sudden cash needs. The most basic liquidity comparison is a calculation of Boeing's working capital, which is simply the difference between the company's current assets and current liabilities (Corey C., Sharon C., and Keith J., 2013). Current assets include cash and other assets which can most quickly be turned into cash, called liquid assets. Current liabilities are those which are expected to be paid back within the year or operating cycle of the company. Boeing's working capital for 2015 was $-5.7 billion (CSI Market, 2016), indicating that short-term creditors are less likely to be paid, although working capital isn't necessarily a dependable indicator of liquidity.The prospective long-term creditor can utilize various solvency ratios to determine the long-term survivability of Boeing. A calculation useful for determining solvency is the free cash flow calculation, which provides insight into Boeing's cash-generating ability, describing the cash remaining from business operations after adjustments for capital expenditures and dividends have been made. In 2015, Boeing's free cash flow was $1.83 billion (YCharts, 2016). Combining the low numbers for Boeing's time interest earned ratio and free cash flow, with its relatively large debt to total assets ratio, and relatively low cash debt coverage ratio, one should be left with the impression that the Boeing Company may not be a good choice for long-term creditors.There are also several ratios which help determine the profitability of Boeing for stockholders. Two more closely related ratios are the payout ratio, and the return on common stockholder's equity ratio, both useful for measuring corporate performance. The payout ratio measures the percentage of earnings distributed as dividends to stockholders. It is calculated by dividing amount of cash dividends declared on common stock by the company's net income. For Boeing in 2013, this was 34.6%, higher than the industry average of 30.4% (YCharts, 2016; Nasdaq, 2016). The return on common stockholder's equity ratio measures profitability from a stockholder's viewpoint. It shows the translation from common stock investment into net income earned, and is calculated by dividing the net income less preferred stock dividends by the average common stockholders' equity. 4.0 Critical Analysis of Boeings performance with regards to its internal and external analysis.

In order to recover the market shrink after 9/11 attacks and also compete with Airbus, Boeing introduced a new aircraft known as the Boeing 787 Dreamliner which has been known to be one of the best commercial airplanes of Boeing Company. After the initial success, Boeing is losing its market share once again by experiencing delays in delivering particular products to its customers (Narasimha L., and Ehsan E., 2012). In addition, these delays are resulting in huge extra costs for the company. Based on Boeings SWOT and PEST analysis, it is evident from various sources that numbers of factors are causing delays in development of a particular airplane model. Narasimha and Ehsan (2012) found that Boeing is currently struggling with supply chain problems as well as Boeings Dreamliner to potential customers can be delayed by two years due to engine problems. Peter (2011) indentified that Boeing has lost control over development activities on account that the company outsourced both the design and the manufacturing of Dreamliner. Based on the Boeings SWOT analysis (Appendix 1), the improvement of Boeings Supply Chain Information System (SCIS) is needed based on Boeings recent weak performance of the company in commercial airplane segment; in addition to the company also facing delays due to ineffective supply chain management approach. Furthermore, on account of the deep impacts of Great East Japan earthquake, Boeing has a long-term plan to establish supplier relationships with China (Xinhua, 2011). With Boeings improvement in its Supply Chain Information System, Boeing has been able to develop relationships with new suppliers in the Asian markets. The key issue of competency gap between Boeings vision and strategies due to supply chain problems was highlighted (Rob W., 2011). Based on Boeings PEST analysis, the reengineering process of Supply Chain Information System using people, processes, and technology will provide the opportunity to Boeing to establish and retain strong relationship with suppliers with effective control. Boeings highly unionised company in the airline industry and companys internal and external resources and core competencies support them to implement the improvement strategy of SCIS. Nevertheless, the current economic condition and cost overrun of 787 Dreamliner may hinder the companys decision in adapting this strategy. 5.0 Recommendations Boeing must implement a consultative selling approach and provide services that move toward a partnership relationship with customers. This involves altering the business plan to fir the demands of the environment. Additionally, Boeing needs to emphasize the importance of communicating the value of e-Enabling (the power of integrated information and communications systems) to their customers. Based on Boeings SWOT analysis, it is discovered that the organization faces supply chain issues due to lack of communication strategies (Sanders P., 2010). The SCIS strategy (if implemented by Boeing) will facilitate the organization by filling the communication gap between the company and their suppliers by using ERP software. However, the total cost of the Boeing 787 Dreamliner has already increased by 120% as compared to its original budget (Peter C., 2011). The outcome of using this strategy will result in avoiding any further delays which will be beneficial for the company in terms of cost-saving and increasing shareholders value. People have crucial roles in implementing this strategy. In order to apply SCIS strategy effectively, Boeing may need to change its business and functional level structures. At the business level, staff will implement the strategy by considering relevant actions needed to be taken to improve current Supply Chain Information System. For example, acquiring more licences of ERP or to customize the existing ERP packages to meet the required criteria. At the functional level, staff will ensure that every function must coordinate with other in order to address strategic objectives.6.0 Conclusion Within this report, the internal and external business environments of Boeing were evaluated critically to identify the relationship between Boeings business environment and the companys performance. As a result of strategic analysis of Boeing, it can be concluded that the company is currently facing the problem of delays in developing the Boeing 787 Dreamliner. The delay issue has been caused by supply chain management problems on account of outsourcing both design and the manufacturing services in making the 787 aircraft. In order to minimise or eliminate the delay factor, it was recommended that the best strategy is based on improving Boeings current Supply Chain Information System (SCIS) using, people, process, and technology strategy to develop effective control systems to manage supplier relationships to overcome deadly issues. While only the payout ratio is larger than average, the other profitability ratios are not much lower than the average for the industry, indicating that long-term investment would be a safe risk to take, and a possibly profitable one, considering Boeing's plans, including the release of the 787 and their Connectix by Boeing internet broadband service.7.0 References

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8.0 Appendix Appendix 1: Boeings SWOT Analysis

Source: (Thomson and Martin, 2010)

Appendix 2: Boeings PEST Analysis

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