Financial Analysis of The Boeing Company As part of a great company, the mutual fund department needs to outperform the prior year so as to contribute to the strength of our company. To be strong we must have good investments that will provide future income for the company and to meet the needs of the stakeholders. We must aggressively reinvest our revenue and look for investment opportunities that will grow along with the company. The Boeing Company is an investment opportunity that will strengthen our portfolio.
Peter Lynch once said, “Investing without research is like playing stud poker and never looking at the cards” (Investopedia, 2011). The following SWOT Analysis and research will prove the strength of Boeing as a great investment and support the decision to invest in this company. To further understand Boeing, we must look at the stakeholders, both internal and external to see if Boeing meets their needs and wants. This is paramount to the future success of their company and is an important part of this equation. Who are the stakeholders of Boeing?
The stakeholders of the company come from a wide variety of areas and those includes both inside the company and outside and are referred to as internal and external stakeholders. Internal stakeholders would include the owners, Chief Executives, employees, directors and public relations. All of these internal stakeholders have individual responsibilities that correlate with all of the others. Dealing with the boundary-spanning relationships which are complex but critical to the success of the company, success is ultimately based on the relationships developed and managed between internal and external stakeholders (Waddock, 2009).
External stakeholders are comprised of such groups as suppliers, distributors, manufacturers, unions, creditors, community activists, investors, government agencies, the public and special interest groups (Gurau, 2011). Suppliers can include companies that provide parts, supplies, or raw materials. Distributors are links between the companies and can be found between the suppliers and the company or they can represent the product for the company such as sales or marketing firms. These relationships are critical and each of the individual groups or entities is affected by the direction or actions of the company.
The relationships are also affected by the current state of the economy, current market factors, economies of scale, and other geopolitical factors. With Boeing being an international company, all of these factors are multiplied by the state of affairs everywhere the company conducts business. The government as a stakeholder represents both ends of the relationships. A large part of Boeing’s contracts are with the government which creates complex relationships and involves other government agencies such as the Internal Revenue Service (IRS), Environmental Protection Agency (EPA), Congress, Homeland Security and the Justice Department.
All of these stakeholders have a vested interest in the company’s success and will be scrutinizing the company operations as well as an investment analyses like this one. It is understood that no matter what a company does, how it performs or even if it performs; every result ends up somewhere in the company’s financial reports. Fulfilling the wants and needs of the Stakeholders Now that we have defined who the stakeholders are we need to look at their needs and wants. What is it that creates or sustains the relationships between them and Boeing? Is it value? What is it they want or crave to maintain the current relationship?
Is it a certain return on their investment or is it an agreement within the local community to make change in the company that will create less pollution in the neighborhood? Managing the stakeholder’s relationships is a fulltime job at any company let alone an international company like Boeing but it is very important to insure that it is properly managed. How is the company fulfilling these needs and wants? Boeing has done a very good job of maintaining a global competitiveness and staying out in front of the industry with their forthcoming 787 Airbus aircraft. This is an example that will satisfy stakeholders.
But by maintaining a strong presence in the international aviation industry with a new and bigger aircraft model makes suppliers, employees, creditors and owners very satisfied to be a part of Boeing. But in order to present a fair argument on why this company is a good investment we must complete a SWOT Analysis that will measure the targeted investment by looking at different areas of concern. What is a SWOT Analysis? SWOT stands for strengths, weaknesses, opportunities and threats. The information gathered from the research is used to analyze a financial investment.
The strengths and weaknesses are internal factors to the company and while the opportunities and threats are external to the company (Simpson, 2011). There is no limitation to the different types of criteria that can be used for each part of the SWOT and are used in a template that simplifies the whole SWOT assessment process. Listed are different examples of criteria used in a SWOT. Strengths: What are the capabilities? What are the competitive advantages? What are the key marketing attributes? What are the resources, assets, employees? What is the philosophy and vision of the company?
Weaknesses: What is the initial cash position? What is the companies’ reputation? Is the leadership of the company committed and has strong moral values (Chapman, 2008)? Opportunities: What are the new market developments? Can there be a global presence? What new businesses or products can be developed? What are the niche markets and are they vertical or horizontal or both? Threats: What does the political future hold? Where is the demand in the marketplace? What are the obstacles the company may face? Is there environmental issues lurking around the corner? The History of SWOT
Back in the 1960’s, Stanford’s Albert Humphrey developed what may have been one of the first known SWOT Analyses as a useful tool to evaluate and monitor financial investments. This tool quickly caught on as a poplar concept for business management and investment evaluations. Humphrey’s research team developed Team Action Model (TAM) which was used by executives to manage change in their companies. It is understood that SWOT was derived from Humphrey’s “Stakeholder’s Concept and SWOT Analysis. However over the years different authors have recognized other individuals and institutions as possible originators (Friesner, 2000).
Components of SWOT Strengths are characteristics that show a higher than average performance potential. Weaknesses highlight vulnerabilities within the companies’ structure in relation to its position in the industry. Opportunities are situations, events or scenarios that can lead the company to an increased performance level or present a better position in the marketplace. Threats are potential future events or scenarios that could be detrimental to the company should they happen to occur. These possible theories are brainstormed to provide the company with insight on how to prepare for market contingency plans (Simpson, 2011).
The usefulness of a SWOT Analysis as a management tool is only as good as the information that is used to develop it. One must insure that current data is used so as to avoid false forecasts and disappointed stakeholders! Boeing’s SWOT Strengths Boeing’s strengths are proven in the aviation community and have a long and storied history dating back to 1915 (Gale, 2010). It has proven longevity and is an international front runner in aviation. Boeing has developed a large and diverse fleet of aircraft with multiple models for each type of its aircraft; the 737, 747, 767, 777, and soon to follow, the new 787.
Boeing is complimented with highly skilled engineers and employee loyalty. The value of Boeing’s stock is up over 14% year-to-date despite a very weak economy and their Earnings Per Share (EPS) rose a 137% (NASDAQ, 2011). They had strong national sales balanced with international sales of 41%. Boeing is a blue-blood stock. Weaknesses Boeing’s newest plane is the Airbus 787 which is two years behind schedule due to flight testing and certification delays. An incident involving Southwest airlines occurred when a Boeing plane made a safe emergency landing after a part of the roof pealed back creating a hole.
Increasing duration of the government contracts due to having multiple changes, amendments and/or cancellations. Opportunities A thirty billion dollar contract with the U. S. Air Force is in process. Merging international markets will create buying opportunities. A diverse product line will continue to produce for the commercial, military, and space industries. Threats Aggressive international competition by Russia, China and Japan. The aggressive competitors often use government owned manufacturers to leverage cost and pricing.
Strong national competition in the likes of Lockheed Martin, Northrup Grumman, Raytheon and General Dynamics. Ever-changing and increasing regulatory matters consume a lot of resources and time and sometimes create negative public relations. Environmental concerns, commercial aviation oversight and safety concerns are also an ongoing effort. Market conditions are affected by the world economy and the geopolitical affairs which includes the ongoing wars. In summary, the SWOT Analysis painted a detailed picture of Boeing’s current situation and what the future possibly hold out for the company.
Despite the significant threats posed to Boeing, their strengths are an overwhelming reason for their success in the currently bleak business environment. The weaknesses are still prevalent but they are very consistent within the industry and also shared by its competitors. Boeing’s diverse product line will continue to present opportunities as evident with the thirty billion dollar contract with the U. S. Air Force. Conclusion The research and analysis conducted would pass even Peter Lynch’s expectations.
The key to continuing the success of the company is reinvesting with a strong and known market entity. Boeing provides that investment vehicle. The SWOT has shown the distance Boeing has successfully traveled so far and it provides a map for the future. The strength of Boeing within the aviation industry and its diversity in the marketplace has proven their strong existence and staying power for years to come. Even despite economic turmoil, unstable market conditions and a horizon that has many new players, Boeing has shown the stakeholders how it is a solid and dependable investment for the company.
