Evaluate the planning function of management within Boeing Organization
Category : Planning Function of Management
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1. Social responsibility entails an individual or a group’s actions benefiting the society more than oneself or more than the group. Research and development is a social responsibility of every airline company. Boeing benefits from the systematic use of industrial research so as to increase costumers' choices each year as well as to be able to provide a safe and effective service for their costumers. The purpose of research and development, more than being able to raise profits, is to ensure an effective and safe service for the benefit of the customers. These factors became easily recognized ingredients in explaining Boeing’s success as one of the world’s top airline company.
Business owners and managers as private citizens may assume responsibility for other problems in society, such as the CEO of Boeing providing leadership for a national drive to raise money for medical research to cure childhood leukemia. The distinction between the public responsibility of businesses and the responsibility of the individuals who own and work in businesses is an important one (Besser, 2002). However, the social responsibility of a member of an organization could reflect on the entire organization itself, even if it was done outside the company’s intent.
Successful operations and resolution of company- and industry-specific problems depends on forging good relations with the government with which the airline is operating under, using joint ventures and large sized investments and on long-term presence in the country. This is one legal responsibility of Boeing, to follow country or area soecific impositions on the airline industry by different governments. Foreign firms had to conduct normal business operations in a politicized and bureaucratic environment. The safety of their passengers is also a legal responsibility since this would reflect on the capability of the aircraft used. When a plane crashes by accident without any outside manipulation, for example, it is almost always to be taken as a legal responsibility of the airline. Most often, the airline involved would have to pay whatever compensatory damages arise.
The government can influence company’s strategy by imposing laws and legal restrictions. Business has never been fond of government's having an activist role in establishing the ground rules under which it operates, but then organizations have no choice. Government regulatory actions can often force significant changes in industry practices and strategic approaches. And it is a company’s legal responsibility to follow government regulations. In some instances deregulation has proved to be a potent pre-competitive force in many industries including the airline industry (Sims, 2003).
Ethical issues also abound the airline industry. A basic concept in any system is that the major function of the management of business units is to maximize profits for the benefit of the company and its owners. As long as the actions are legal and not immoral, any decision that might enhance the return of investment would appear to be a proper course of action. An example of an ethical issue that occurred in Boeing and even in many organizations outside the airline industry is the laying off of employees as a result of closing down of offices or moving to new locations. In some instances, ethical rather than profit motives have resulted in some decisions that could not be morally right to other individuals.
The efforts to create a favorable corporate image, while they may eventually prove valuable to Boeing, involve management decisions based on what is right and good rather than the most profitable. Corporate giving to universities and colleges, community chests, and support to civic undertakings is condisered the right thing to do although it is doubtful if such acts make an even indirect contribution to profits. Somehow, one could see that there is an overlapping of what comprises ethical and social responsibilities.
2. Commercial aircraft industry has too many uncertainties, which contain risks and factors that could affect its overall success. Economy, terrorism and globalization are three factors that could significantly affect or influence Boeing’s strategic, tactical operational, and contingency planning. The company at present has reins on the pricing, profit margins and a string cash flow. It enjoys a virtual monopoly on planes in the most profitable part of the commercial aircraft market (Crain’s Chicago Business), however, given the volatile and fluctuating nature of the industry, Boeing has to take into consideration when making strategies several very important factors.
The economy of a country is a major factor that affects the aircraft manufacturers. The decrease in the new airplane orders can be explained by the downturn of the economy. There is actually and interrelation, when there is a recession, the demand for the airline travel will be poor. This in turn will affect the purchasing power of airlines.
Typical large companies focusing on target costing include Boeing. At Boeing, which implemented target costing as a pilot project and now uses the strategy companywide, reaching target costs is a challenge for the company’s entire value chain. The company works with its suppliers to explain the current market pressures on cost based on an economy’s performance and works together to find solutions to the challenges it faces (Hoctor & Thierauf, 2003). Adopting a low-cost strategy therefore results in the company’s costs being lower than that of the competitors. Therefore, they are able to offer a lower price for a product of equal or higher value. To achieve success with this strategy, a company must control their cost drivers. One of the most commonly used strategic approaches to establishing a company apart from other rivals is its low-cost leadership.
On the other hand, another dynamic factor that affects the strategic and management plans in the airline industry is the presence of terrorism and wars. Terrorist attacks are not predictable and it gives passengers fear for flying, therefore customers will not use planes as their transporter. Again, demand for the airlines will affect the demand for airplanes. Due to the breakout of the war in certyain countries and due to terrorist attacks many airlines have stopped their flights to certain countries such as the Middles East and the main countries involved with the fear of their planes being attacked.
Terrorists threats and attacks have prompted airline carriers to invest large sums of money in capital equipment for use at airports in addition to establishing relevant training programs for their staff in order to ensure that no form of terrorism will occur (Wallis, 2003). If one lesson is to be learned from major assaults on civil aviation, it is that the intelligence services must work with those directly responsible for a nation’s security. Equally they must recognize the important role airline staff can play in making the skies safe to fly. Air terrorism can be minimized, but doing so requires the combined actions of governments and their security agencies together with the carriers and airport managements.
On the other hand globalization as factor affecting strategies and management makes the airline industry more competitive. Competition, typically the most powerful external force, is increased by the advent of globalization. The number of companies and the number of countries where these companies operate and the way governments are dealing with the impacts of globalization is accelerating. The interaction of changes in government policy and business innovation in the airline industry has actually made globalization even faster. If a company does not become a global, it would simply be shut out of new markets.
A business needs to adapt itself to fluctuations and changes in demand. For a number of reasons, fluctuating demand is an inevitable fact of life for businesses. There are times when demand exceeds supply and at other times supply exceeds demand (John, 2003). Competitors correspond to enemy ships, knowing their location, direction, and strength is critical to achieving strategic and tactical success. The perceptions and motivations of customers are like the winds, it is fluctuating and could change directions at any given time. It is important to know their direction, their strength, and possible changes.
The airline industry uses sophisticated methods to get customers committed early so that a certain level of demand is ensured for any given period. The 21-day and 14-day airfares ensure that airlines have a certain amount of capacity filled before prices are raised. Idle capacity is too expensive to carry.
These factors are interrelated. One could affect the other, thus presenting more problems for a company. To illustrate, let us examine the case of the September 11 terrorist attacks. The terrorist hijackings coupled with a slowed economy may have pushed the airline industry within the area towards what could probably its worst financial losses ever (Comerford, 2001). What usually happens in response to these kinds of events are higher labor costs, rising fuel prices, mounting losses and a decreasing number of passengers.
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