Read attached detailed description of the strategy my team is suggesting to achieve our chosen goal for company called Boeing.
- Write 1.5 page describing Benefits and possible risks of implementing out strategy that is attached. • Write 0.5 page Explanation and justification for the additional resources necessary (operations, human resources, financial support, etc.) to implement the strategy
Boeing’s goal for making low-Earth orbit travel commercially available is quite clearly a blue ocean strategy. In short, blue ocean strategies are those that position a company in a competent market to which it separates the product/service from the norm. Doing so does not necessarily require unique products or technology innovations nor does it require a significant increase in cost; rather, it requires existing technologies and products/services to be presented in a unique format (Kim & Mauborgne, 2004). In creating the business model that defines the strategy, we will have the following four elements: customer value proposition, profit formula, key resources and key processes (Johnson, Christensen, & Kakermann, 2008).
As each element is defined it is important to recognize that Boeing is working within their core competencies. The proposed market is not vastly different than any of Boeing’s individual programs. Therefore, technologies from their commercial segment and space segment can be combined to bring a unique value to the customer.
CVP is the first step in creating a strategy. It identifies a way to help customers get an important job done (Johnson et. al., p. 106). In Boeing’s case, low-Earth orbit will allow customers to travel to destinations faster. This also allows Boeing to develop more efficient vehicles, as with low-Earth orbit, you are not using engine thrust to keep your vessel in the air. Drag is negligible and weather conditions are not apparent (Allain, 2015). This result leads to better margins for the company and/or the savings can be passed on to the customer in the form of lower fares. Another opportunity provided by this program is the potential to increase the number of direct flights to various destinations, creating additional value for the customer.
Profit formula is the defining step in creating value for the company. Product price and volume compose the revenue model. Cost structure will require a deeper investigation, as it consists of direct costs, indirect costs and economies of scale. The margin model considers volume and the cost model defined previously. This results in the definition of contributions that meet the desired profit. Resource velocity defines the turnover rate for assets and inventory. For Boeing, volumes will likely be lower than that of their current airline demand. They must perform the following:
Start by setting the price required to deliver the CVP and then work backwards from there to determine what the variable costs and gross margins must be. This then determines what the scale and resource velocity needs to be to achieve the desired profits. (Johnson et. al., p.108)
Key resources are the composition of people, technologies, suppliers, competencies, etc. that create an advantage for a company. Boeing has a well-established network of suppliers and resources that have already made vessels for space travel. The necessary components for low-Earth orbit are already established within the company. The key, now, is to bring everything together to begin this new program. Resources will need to be pulled from the commercial airline segment and from the space segment; however, technologies may be recognized in other segments, such as defense, that can be applied to the program. Having this flexibility will allow Boeing to navigate into their blue ocean.
Within the key resources at Boeing lies key processes. In a similar fashion, Boeing has established processes, standards, budgeting techniques, sales, etc. that have led them to success in different markets. It is important that Boeing identifies these techniques such that they can be applied to the low-Earth orbit program effectively. Furthermore, these processes should remain flexible and should be reassessed for changes frequently. This is particularly important early in the program, as flexibility allows for optimization.
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