Q. 1
In order to shed Boeing aircraft-parts business, the company should sell Wichita operations. This is because the current operations have been expensive in-house operations, which is coupled with high labor costs. There are many reasons why the company should sell Wichita. This means that the company has the right to sell the business based on the present high labor costs. Firstly, the sale will lower the costs of operations within the company. Secondly, the sale will result to savings (about $ 65 million yearly) within the company, which originate from around 15% reduction in the initial workforce as well as wage and benefits cuts. Sell of Wichita will assist Boeing to recoup some of the debts that the company has incurred in the past. These reasons support the strategy that Boeing should sell Boeing other than spinning-off (Gates, 2006).
Q. 2
On the other hand, there are some reasons why Boeing should not sell the Wichita plant. First, sell of the Wichita plant will have some negative impacts on the company, and its employees. The sale will lead to new labor contracts, which will result to reduced wages of workers. Second, sell of the plant will lead to lowering of employees’ pensions, medical benefits, retirement contributions among other benefits. This will affect employees negatively in terms of their welfare (Gates, 2006). Lastly, sell of the aircraft-parts business will lower the revenue of Boeing affecting the profitability of the company because it means that the customers will shift to the new company.
Q. 3
I agree with the Stonecipher’s strategy of only doing design and final assembly of commercial airplanes. This is a great strategy that will assist the company cut the costs and maximize profits the outsourcing process. When the company sub-contracts design as well as construction of major parts of the airplane, the company will require relatively small personnel to undertake final assembly. Therefore, by extensive outsourcing, the company will lower its production costs and thus boost its return on assets. Likewise, the outsourcing will take a shorter term to assemble the parts, for instance, final assembly of the new jet would take just three days (Gates, 2006).
Q. 4
Modularization in designing and manufacturing airplanes has several advantages. This technique has been used for a long time to produce airplanes for potentially faster construction delivery time. It leads to cost-saving and production utilization tool. Modularization in the air industry has been regarded as the novel logic for product and organization design as it assists companies deal with current competitive environment. Furthermore, the pledge is that by conceiving products’modules, companies may take responsibility for the design, as well as development of different modules. Therefore, they may develop new products at a quicker rate, as the integration of the final product is an issue of ‘mix and match’. Moreover, Modular design, consequently, by simplifying design, as well as the development processes, permits a bigger division of labor across companies. Firms may in turn concentrate their capacities on few modules or the architecture and gain strategic and organizational flexibility, hence their competitive advantage (Gates, 2006).
Q. 5
Wichita was hit hard by layoffs at business-jet manufacturers in the wake of the current U.S. depression. Wichita plant was not competitive due to its size and sky-scraping labor costs. This affected the performance of the company, prompting the decisions to close the plant. Boeing did not spin-off the Wichita plant, but the company closed the plant after performing dismally, which was after assessing the market. In 2013, it decided to close the remaining plant after spinning-off commercial-aircraft operations in 2005 (Gates, 2006).
References
Gates, D. (2006). Boeing spinoff slashes labor costs. The Seattle Times. Published on August 31, 2006.
