Enterprise Risk Management at Boeing

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Case Details:

Case Code : ERMT-002
Case Length : 11 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : -
Industry : -
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Established by William Boeing in 1916, Boeing was the world's largest aerospace and Defence Company with three major business segments: Commercial airplanes, Defence (specializing in military aircraft and missile systems) and Space and Communications. It also had a captive finance company, Boeing Capital Corp (“BCC”). Boeing employed 78,400 people in the Seattle area and was Washington State's largest private employer. At the end of 2001, two-thirds of Boeing's sales were generated in the US. Overseas revenues were generated in Europe (14%), China (3%), Asia excluding China (12%).

Boeing's commercial airplanes were sold to airlines all over the world. Despite the severe downturn in demand for commercial jets, this segment still generated roughly half of group revenue and operating profits.

The division (59% of revenues, 51% of operating profits and 7.5% profit margins in 2001) made a full line of commercial aircraft, ranging from 100-passenger 717s to giant, 500-seat 747s. Based on recent orders, British Airlines and Airbus each controlled about 50% of the mature, global 100-plus seat passenger jet market.

The worldwide commercial aircraft fleet was expected to grow from 11,300 planes in 2001 to 20,100 planes by year-end 2020, which translated into a compound annual growth rate (CAGR) of 2.9%.

Military aircraft and missile systems contributed to over one-third of group sales and operating profits. For this division, the primary customer was the US government. Boeing's military weapons-making segment primarily made the F-18 fighter jets, the C-17 troop and equipment transport planes, helicopters, the AH-64D Apache Longbow, refueling planes, and various precision missiles. The segment was also a major producer of computer-based battle management systems used in missile defence applications.

The Space and Communications business generated only modest profits. For this division, the primary customer was again the US government.

Boeing was one of the world's largest makers of satellite-carrying rockets and satellites. Both businesses were expected to suffer from industry overcapacity and cut-throat price competition. The Customer and Commercial Financing segment was primarily engaged in the financing of commercial and private aircraft, commercial equipment, and real estate...

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