Introduction
Of all aircraft manufacturers, Boeing is, perhaps, the best-known and the most renowned one. The organization presently operates in 150 markets and seeks to expand further, entering new markets and diversifying its products and services (Woo et al., 2021). Despite a major crisis that the company suffered in 2019 as a direct result of the COVID-19 pandemic, the organization has been seeking opportunities to grow further into the global market and embrace a broader number of potential customers (Woo et al., 2021). Specifically, the company has been experiencing understandable difficulties in shaping and refining its approach to financial risks and resources management (Woo et al., 2021). By incorporating the principles of contingency and encouraging flexibility in the organization’s decision-making, one will be able to improve Boeing’s current performance.
Economic Environments and Market Conditions
The economic settings and market contexts in which Boeing has been operating are extraordinarily diverse, yet they have been dominated by two issues that have been affecting the nature and course of relationships within the specified economic contexts to a notable extent. These are the pandemic and the obvious trend toward accepting the notion of globalization as an integral part of the business experience (Wang et al., 2021). Specifically, the economic environments and market conditions in the target setting are highly diverse and colorful (Wang et al., 2021). In turn, the market conditions are represented by rather stiff competition, especially as far as domestic markets are concerned (Wang et al., 2021). Furthermore, despite the devastating effects of the pandemic, the domestic aircraft market has been growing due to the necessary expansion of the global supply chain and the emphasis on international partnerships, including investments, mergers and acquisitions, and other cross-border collaborations.
International Financial Markets
Similarly to organizations working in other industries, international financial markets have been affected strongly by the pandemic. Causing numerous banks to collapse due to the increasing number of emergencies and obstacles to proper functioning in the global market, particularly, the continuous instances of hedging, many companies of a smaller size have decided to cease to compete, which has reinforced Boeing’s position as the leading global aircraft manufacturer (Wang et al., 2021). Therefore, the current state of financial markets in relation to the aircraft industry and benign, in general, can be described as rather challenging.
Global Credit Crisis
Another issue that has shaped the aircraft market tremendously, the global credit crisis is worth addressing as one of the essential factors that have shaped Boeing’s performance. Specifically, the 2007-2008 global credit crisis should be mentioned as one of the most recent examples of a global credit crisis (“The Boeing Company 2008 annual report,” 2008). Representing the scenario in which the global credit was no longer effective in supporting profits, the specified economic situation indicated the necessity to integrate the role of the housing market into the analysis of the factors that shaped the performance the U.S. financial sector and, therefore, ensured the successful management of financial operations on an international scale (Wang et al., 2021). In turn, Boeing, as one of the ley U.S. companies, had to operate in a setting where a rapidly and uncontrollably dropping demand was one of the key features (“The Boeing Company 2008 annual report,” 2008). Therefore, the 2007-2008 global credit crisis could be seen as one of the major factors that shaped Boeing’s business strategy. Specifically, the role of resilience, restructuring, and collaboration in the environment of the rapidly declining economy.
International Financial Markets and Institutions
Additionally, examining Boeing’s 2007-2008 performance, one must mention the role that global financial markets and institutions played in its revival and development of its resilience. Specifically, the gradual transfer of core business processes into the online domain should be mentioned as one of the major global financial trends that have affected Boeing to the greatest extent (“The Boeing Company 2008 annual report,” 2008). Allowing the organization to transition to the context where the core processes, including customer communication, partner collaboration, and related processes are managed significantly faster, the integration of digital tools has also helped streamline core financial processes at Boeing (“The Boeing Company 2008 annual report,” 2008). As a result, the company has benefitted substantially from the described innovation, having gained vital leverage in the global economic context.
Impacts of Exchange Rate
In turn, changes in the exchange rate have also affected Boeing to a substantial degree, causing the organization to lose a significant amount of financial resources. Specifically, the drop in the Dow Jones industrial average caused a chain of unfortunate yet necessary changes in the company at the time, causing Boing to dismiss a significant portion of its employees (Dwilita et al., 2021). The specified step was vital in maintaining its financial status and ensuring that the organization did not go bankrupt (Dwilita et al., 2021). Moreover, the company’s liquidity rates and, specifically, its capability to manage its debts hinged on the availability of its financial assets and, therefore, required drastic measures in the specified time slot (Dwilita et al., 2021). Therefore, the exchange rate has also played its role in creating a particularly complicated environment for Boeing to operate in and navigate successfully.
Risk Mitigation
The ability to manage risks, which ranges from the skills of forecasting them to developing appropriate strategies for risk prevention to introducing tools for mitigating the consequences of specific financial risks can be considered vital constituents of any company’s financial strategy. Therefore, the choice risk mitigation for Boeing depends to a notable extent on the external environment and, specifically on the economic, political, and financial aspects thereof. To give credit to Boeing, one must admit that its risk mitigation strategies, particularly, those applied to address the 2008 crisis, were primarily reactive, meaning that they were geared specifically to address a current concern (“The Boeing Company 2008 annual report,” 2008). However, the specified approach also suggested that they were not gathered at broader framework based on future forecasts and a long-term financial management strategies. At the same time, the company’s report mentions that Boeing’s approach could be described as cross-disciplinary and cross-sectional, which suggests that the developed approach was instrumental in supporting the developed supply chain and ensuring that all parties involved could benefit from decision-making (“The Boeing Company 2008 annual report,” 2008). Thus, Boeing’s risk mitigation technique could be described as the most suitable for the circumstances at the time.
Hedge Foreign Exchange Exposure
Though diversification as the process of being exposed to foreign currencies could be seen as a positive phenomenon due to the emergence of opportunities for faster returns, the specified change also entails numerous issues, especially increased and mostly uncontrollable volatility (Bessler et al., 2019). Therefore, for Boeing, the described change could be represented as another challenge to overcome in a highly competitive and risk-prone market of the post-COVID-19 era (Bessler et al., 2019). For this reason, the use of hedging as the means of seizing at least partial control over the highly volatile environment was instrumental for Boeing (Bessler et al., 2019). Specifically, the sue of hedging should be seen as the means for Boeing to restrict changes to the exchange rates so that core financial transactions could be carried out at a specified point in time without the adverse impact of volatility in the financial market (Bessler et al., 2019). In hindsight, the application of hedging saved Boeing from an array of excruciating and unnecessary expenses that would have affected the company drastically.
Exchange Rates and Interest Rates
Exchange rates and interest rates represent another set of factors that define Boeing’s financial strategy significantly. Specifically, central bank rates and inflation levels represent some of the core concerns that have been shaping Boeing’s performance to a significant extent (Bessler et al., 2019). Namely, the transition to the digital context and the acceptance of digital currency by the Central Bank has served as one of the main disrupting factors in the airline industry, particularly, for Boeing (Bessler et al., 2019). According to Bessler et al. (2019), speed considerations in relation to transfer payments may hinder the process of conducting core financial transactions, which, in turn, will affect Boeing’s performance substantially (Bessler et al., 2019). Similarly, changes in interest rates, particularly, their current propensity to increase, are likely to lead to reduce the amount of discretionary income for Boeing, leading to an increase in expenses and the resulting rise in the company’s debt (Bessler et al., 2019). Therefore, exchange and interest rates should be regarded as essential factors in changing the financial landscape of Boeing’s performance.
Specifically, the described changes are likely to cause Boeing to revisit6 its financial approach. Due to a rise in expenses, Boeing is likely to undertake a more cost-efficient strategy as the means of managing its financial resources. As a result, service quality may suffer.
Diversification
Similarly, diversification has been a major trend in Boeing’s recent approach toward addressing financial concerns. Representing Boeing’s attempt at improving its risk management approach, the firm’s portfolio diversification has helped to ensure that its resources are not affected by the same range of risks and, therefore, are not affected to the same drastic extent should an unexpected issue occur (Krivolutsky, 2020). Furthermore, the specified change in the company’s strategy has helped lower the cost, which represents an essential support in addressing the current problem of high development costs associated with building aircraft (Krivolutsky, 2020). Indeed, according to Boeing’s 2021 performance, even though the company has shown progress due to the well-crafted strategy, the improvement has been gradual, which can be seen as the direct result of the cost management issue (Krivolutsky, 2020). Nevertheless, an undeniable improvement has been observed, leading one to believe that Boeing has been correct in its choice of diversification.
Company Strategies
Remarkably, Boeing has come a long way in approaching financial concerns in the global market since the 2008 crisis. Comparing the approaches that the firm used before 2008 to those that Boeing utilizes nowadays will reveal that the organization has experienced a breakthrough in its financial risk mitigation and financial forecasting (“The Boeing Company 2008 annual report,” 2008).
In addition to the practical outcomes of the organization’s current financial strategies and solutions, one must also consider ethical ramifications of the tools that Boeing has been using to manage financial risks and control its financial processes. Due to alignment with key ethical provisions in relation to business-related decision-making, Boeing has rarely had any discrepancies in addressing core ethical concerns and preventing ethical dilemmas from emerging (Bai et al., 2020). Namely, the organization has been seeking to align with the set regulations for conducting digital financial transactions rigidly despite the fact that the current regulations still have certain gaps in them (Bai et al., 2020). Similarly, Boeing has been focusing on meeting the established legal principles of managing financial operations in the digital setting (Bai et al., 2020). However, reports mention that Boeing’ alignment with other legal standards for performance in the target industry has not been as unwavering (Bai et al., 2020). Namely, the company has recently been fined due to the failure to comply with safety standards, as the FAA audit mentions (Bai et al., 2020).
Ethical and Legal Management
However, when considering the changes that Boeing’s ethical and legal strategies have undergone since 2008, one will have to give the company credit for significant improvements. Namely, Boeing managed to retain its ethical principles despite the challenges that the 2008-2009 crisis entailed, proving that the company’s ethical framework is fully sustainable and quite viable (“The Boeing Company 2008 annual report,” 2008).
Impact of Ethical and Legal Decisions on Internal Stakeholders
Boeing’s approach to decision-making has had a profound and resonant effect on its stakeholders as well. Specifically, the focus on the needs of all parties involved, including not only company members and customers, but also its employees, suppliers, retailers, and other partners, has allowed Boeing to keep its competitive advantage as an organization with a high level of corporate social responsibility (CSR) and strong corporate ethics. In relation to employee and company members, adherence to ethical principles and standards has allowed Boeing to create corporate culture of loyalty and CSR.
Impact of the Company’s Ethical and Legal Decisions on External Stakeholders
Similarly, boing’s rigid approach to corporate ethics and compliance with essential ethical principles during the decision-making process has reinforced the organization’s reputation as it is perceived by its external stakeholders. Specifically, compliance with ethical principles has made it possible for Boeing to encourage trust and loyalty in its external stakeholders, including its customers, suppliers, retailers, and investors.
Future Risks and Challenges
Though Boeing is already struggling quite strongly to maintain its effect score in the aircraft manufacturing industry, the company is likely to experience further pressure in the nearest future. Apart from obvious economic challenges that are likely to percolate into the following year due to the complexity of the global supply chain and the issues within the global economy, Boeing is also likely to face increased risks due to the issues to be observed in the digital market setting. Specifically, the company’s defense program, which has been developed to ensure the safety of the organization and its customers, is likely to require additional expenses due to the inclusion of innovative solutions that will allow minimizing risks associated with safety, while also ensuring that the quality of aircraft production and maintenance remains consistently high.
Financial Decisions
Similarly, Boeing’s financial decisions are likely to change quite drastically in the future, with the focus on a more cost-efficient approach to managing the company’s financial assets. Specifically, it is believed that the integration of the company into the digital market and the subsequent change in its approach to managing financial processes, ranging from cost analysis to forecasting, will lead to better management of Boeing’s financial assets. Namely, the organization is expected to seek better opportunities for investment, as well as explore options for maintaining a more satisfying balance between its expenses and product quality (“The Boeing Company 2008 annual report,” 2008). The proposed set of measures will help the organization retain its status as a leader within the industry despite the challenges faced recently.
Ethical and Legal Considerations
Furthermore, Boeing will need to update its ethical framework and ensure that its financial transaction and related decision-making align with the current legal standards. Though the realm of digital trade is comparatively new, it already has a well-established and effectively functioning financial framework that is regulated by the state government (Bai et al., 2020). Therefore, deviating from the specified standards will lead to devastating outcomes for Boeing, which is why extra control must be placed on the management of core financial issues.
Risk Mitigation Strategies
Finally, Boeing will have to revisit its risk management approach. Specifically, Boeing will need to build a financial ecosystem within which key transactions will take place. Thus, the organization will acquire the necessary control over the major processes and increase the extent of safety within it. Specifically, cybersecurity concerns must be addressed in an appropriate manner so that Boeing does not suffer from the risks associated with data leakage. While seemingly unrelated to financial concerns, the specified threat may affect how the company is perceived by its investors and customers, thus, reducing the profits substantially.
Conclusion
With the emphasis on contingency and continuity in the use of respective financial approaches, Boeing will be able to overcome the issues caused by the 2019 crisis and gain the attention and unwavering support of a range of new customers, while retaining the encouragement and loyalty of old ones. The current approach adopted by Boeing will need to be altered toward the use of greater flexibility so that the current decision-making framework could reflect the complexities of the post-cCOVID-19 environment. Moreover, the offered approach will help minimize risks associated with creating financial forecasts and improve the precision and accuracy thereof.
References
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Bessler, W., Conlon, T., & Huan, X. (2019). Does corporate hedging enhance shareholder value? A meta-analysis. International Review of Financial Analysis, 61, 222-232.
Dwilita, H., & Mingka, A. Y. (2022). The effect of NIM, NPL, Firm size and exchange rate on profitability with car as an intervening variable in the company conventional banking sector registered in Indonesia stock exchange 2015-2019 Period. Accounting and Business Journal, 4(1), 28-37.
Krivolutsky, Y. V. (2020). Development of a promising area of diversification in helicopter industry. TEM Journal, 9(4), 1502.
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Woo, A., Park, B., Sung, H., Yong, H., Chae, J., & Choi, S. (2021). An Analysis of the Competitive Actions of Boeing and Airbus in the Aerospace Industry Based on the Competitive Dynamics Model. Journal of Open Innovation: Technology, Market, and Complexity, 7(3), 192.
