School of Aerospace, Mechanical and Manufacturing Engineering

BUSM 1222 International Business

Internationalization

Due Date: Topic: Lecturer: Student: Student No.:

27th April, 2012 Boeing Australia Prof. Nattavud Pimpa David Chipperfield S3135373

Word Count: 2,469

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

Table of Contents
TABLE OF CONTENTS............................................................................................................................... II LIST OF FIGURES...................................................................................................................................... II 1 2 3 4 5 6 7 8 INTRODUCTION............................................................................................................................ 3 HISTORY OF THE BOEING COMPANY................................................................................... 3 COMING TO AUSTRALIA ........................................................................................................... 6 FACTORS AFFECTING THE MOVE ......................................................................................... 9 THE IMPACT IN AUSTRALIA .................................................................................................. 10 LOOKING TO THE FUTURE .................................................................................................... 12 CONCLUDING REMARKS AND PERSONAL INSIGHT ...................................................... 13 BIBLIOGRAPHY .......................................................................................................................... 15

List of Figures
FIGURE 1 REPLICA B&W MODEL 1 FLYING OVER SEATTLE, (PELLETIER, 2010) FIGURE 2 CONSOLIDATION OF THE MAJOR US AEROSPACE COMPANIES, (HTTP://WWW.ECONOMIST.COM/NODE/1223580 VIEWED 226/04/2012) FIGURE 3 BOEING AUSTRALIA LOCAL INVESTMENTS, (BOEING AUSTRALIA, 2012) FIGURE 4 BOEING SUPER HORNET, (HTTP://WWW.AIRLINERS.NET, VIEWED 26/4/2012) 5 8 11 4

FIGURE 5 BOEING 787 DREAMLINER, (HTTP://PERSONAL.PSU.EDU/TYL5059/787.JPG, VIEWED 26/4/2012) 13

ii | Page

1 INTRODUCTION
The key to international business in the ability to analyse the movements of a company and its international ventures. In the modern, age globalisation is becoming a norm and multi-national companies are the major figure heads in industry due to their vast reach in the markets. Globalised companies can have an effect on all aspects of a country that it branches into, from economy and health as well as local politics. US aerospace company, Boeing is a prime example of these items; Boeing has expanded its global reach to countries including Japan, China and Australia, with the latter being the companys largest foothold outside the US base. This report will investigate the key items in Boeings expansion into Australia, and the impacts the venture has had on the Australian landscape.

2 HISTORY OF THE BOEING COMPANY

The Boeing Company is a manufacturer of commercial jetliners and military aircraft, and one of the largest aerospace companies in the world.
The idea for The Boeing Company was born on a lake in Seattle on July 4, 1914, when William E. Boeing, a lumber company executive from Michigan, took a ride on a Curtiss seaplane with a barnstormer named Terah Maroney and Navy Commander Conrad Westervelt, (Pelletier, 2010). Despite having no initial knowledge about aircraft Boeing enlisted Westervelt to design an aircraft for him to build, this would result in the Model 1, B&W Utility aircraft. On July 15, l916, Boeing tested his aircraft and incorporated his company as the Pacific Aero Products Company, which would later become The Boeing Airplane Company in 1917, (Pelletier, 2010).

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

Figure 1 Replica B&W Model 1 flying over Seattle, (Pelletier, 2010)

From here The Boeing Aircraft Company blossomed. The company grew during both world wars with the development of all metal aircraft, propulsion technology and directional radios for navigation and night flying, (Pelletier, 2010). By the end of the Second World War had a large repertoire of well-known aircraft including the B-29 "Super Fortress" which dropped the atomic bombs on Hiroshima and Nagasaki in August, l944 ending the war. During the space race in the 1960s, Boeing was the prime integrator for the development of the Saturn V rocket which helped put man on the moon. In 1961, Boeing Aircraft Company changed its name to the Boeing Company at the time when American consumers expanded through the birth and adolescence of commercial passenger airline travel. The company built some of the most popular commercial airliners between 1935 and 1965 including the 707, 727, 737, and the 747 Jumbo Jet. The 747 was so expensive to develop that it almost drove the company into bankruptcy, (Pelletier, 2010). Boeing has faced some setbacks over its life. In 1969, Boeing reduced its workforce from 105,000 to 38,000 due to a lack of aircraft orders. Labour problems led to a strike that lasted 69 days in 1995, resulting in $2 billion in financial losses to the company as

4 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

well as substantial trickle-down losses to the numerous subcontractors and communities in which Boeing operates, (Bauer, 2008). In the early 1990s Boeing sort to begin diversifying the company to shift from 85% commercial and 15% defence, (Georgetown Journal of International Affairs, 2003). This also marked the era of mergers for the Boeing Company as downsizing and consolidation within the modern aircraft industry affected lead to a number of competitor companies being integrated into Boeings operation. Boeing and Rockwell completed a merger of their defence and aerospace units in 1996, which would also become Boeings first step onto Australian soil. Additionally Boeing completed its merger with McDonnell Douglas Corporation on August 1, 1997 despite some difficulties getting approval from Europe, (Bauer, 2008). In 1993, Boeing did attempt a takeover bid from the aeronautical side of defence firm General Dynamics, however they were beaten by Lockheed Martin who acquired the company from $1.5 Billion, (Pelletier, 2010).

Figure 2 Consolidation of the Major US Aerospace companies, (http://www.economist.com/node/1223580 viewed 226/04/2012)

5 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373 During the 1990s Boeing operated through four divisions and is now organised into two business units; Boeing Commercial Airplanes and Boeing Defence, Space and Security. With corporate headquarters in Chicago, Boeing employs more than 170,000 people across the world, with Australia having the biggest presence outside the US (Boeing Company, 2012).

3 COMING TO AUSTRALIA
Boeings footprint within Australia is said to begin in 1927 when de Havilland Aircraft Company began sales and maintenance at Fishermens Bend, Melbourne. However Boeings real first step into Australia occurred in 1959 when they established their first office in Sydney as a base for sales and support of their commercial jet fleet, (Boeing Company, 2012). In 1996, Boeing went on to acquire majority of the space and

military activities of Rockwell International Corporation, which included the Australian businesses Rockwell Electronics, and AeroSpace Technologies of Australia (formally the Government Aircraft Factories), to become Boeing Defence Australia, (Boeing Company, 2012). Under the new banner the company it was awarded contracts for the modernization of the Australian Defence Forces. In 2000, Boeing acquired Hawker de Havilland (formally de Havilland Aircraft Company) to become Boeing Aerostructures Australia and in 2002-2003 they moved to consolidate their interests under a single entity now known as Boeing Australia Holdings Pty Ltd, (IBISWorld Company Report, 2010). Over the past 10 years, Boeing has made a number of additional acquisitions within Australia including Jeppesen Optimization Solutions Holding Pty Ltd in 2006,

Jeppesen Marine Australia Pty Ltd and global supply chain company Aviall in 2008 and Insitu Pacific Pty Ltd in 2009, (IBISWorld Company Report, 2010). Currently Boeing Australia employs about 3,500 people at its facilities and offices throughout Australia and is divided into four separate divisions; Commercial Airplanes, who develop major parts for Boeings commercial aircraft including the 737, 747 and new 787, Boeing Defence, Space & Security, who supply aircraft and provisions to global military, government and commercial clients which include the Australian made

6 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

Wedge-Tail radar system, F/A 18 Hornet and Super Hornet, and Boeing Research and Technology who carry out Boeing Australia's research and development activities, (IBISWorld Company Report, 2010). To date, Boeing Australia has invested more than $350 million into the upgrade of local facilities, more than $200 million in research and development, and a further $100 million in technology transferred to Australia. Boeing has exported from Australia $2.5 billion worth of complex aerostructure components, (Boeing Australia, 2012).

7 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

Figure 3 Boeing Australia local investments, (Boeing Australia, 2012)

8 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

4 FACTORS AFFECTING THE MOVE

There are a number of factors that attributed to Boeings shift into Australia from the first push in 1959. Initially Boeings move was to simply setup a base for sales and support of the Boeing aircraft fleet, which was being newly implemented into the Qantas fleet, (Qantas, 2012). With Qantas becoming a new international importer of Boeing aircraft, this would give rise to the need for an Australian foothold from the US based manufacturer as the distance between the two countries was too great for aircraft support to remain in America. The steps Boeing took for their engineering side of business could be seen as being not quite as simple as the expansion of sales and more of an accident. The engineering aspect of Boeing entered Australia after the acquisition of Rockwell International, who entered the country the year before in the purchase of the Government Aircraft Factories, (GAF) (Walker, 1995). Rockwell made the push to purchase GAF after they began to struggle for aviation contracts, and planned to; To expand its business and export activities through access to substantial new work, advanced technology and enhanced financial resources, (Walker, 1995). With the holdings in Australia, Rockwell was able to secure a number of contracts from the Australian military due the increased technical knowledge Rockwell had at their disposal. This was during the time when Boeing planned to diversify its efforts in the defence market, and as a result they acquired most of the defence and space activities of Rockwell, with the by-product of the merger being the Rockwell holdings in Australia. The merger also made Boeing the largest

aerospace and defence company in the world, (Pelletier, 2010). Boeing proceeded to use the foothold in Australia as a potential model for the company's aspirations to internationalise its mostly US-based operations and become a truly global company. Australia formed the strategic base to allow Boeing to expand its operations to emerging Asian economies, (Thomas, 1997). Using Australia as the regional base in the Australasia region, Boeing has increased defence and aerospace activities including research and development

9 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

and further expanded its operations both in Australia and into China and India, (Thomas, 1997).

5 THE IMPACT IN AUSTRALIA

Boeing has caused a profound effect on Australia. In 2006 Boeing directly contributed $362 million to the Australian GDP and through its interaction with other Australian businesses it is estimated the company indirectly contributed a further $174.4 million. In 2010 this figure has risen to over $790 million, approximately 0.056% of the countrys GDP, (IBISWorld Company Report, 2010). As well as the 3,803 people Boeing employs in Australia, there is a further 1,400 Australian jobs from related supplier roles, (Kelly, Boeing boosts presence down under with Phantom Works Australia, 2008). In 2008, Boeings introduction of the Research and Technology department has resulted in an increase in technological knowledge and intellectual property within Australia. The facilities in Melbourne and Brisbane generally focus on manufacturing research which has led to Boeing Aerostructures Australia becoming one of the most advanced manufacturing facilities in the world, (Kelly, Boeing is no Phantom in Oz, 2008). Boeing also works closely with selected Australian universities to enhance the undergraduate curricula, support the continuing education of Boeing staff, recruitment and collaboration on research that may be beneficial to the company. In 2008, Boeing contributed to four Australian universities; University of Queensland, Queensland University of Technology, RMIT University and University of New South Wales, with funds used for student projects, travel bursaries, scholarships, awards and student outreach programs. The impact Boeing has had on Australia has also been felt within the political aspect of Australia. In 2002 Boeing announced that former Liberal leader Andrew Peacock would become the new head of Boeing Australia, with this being dubbed; A brilliant strategic appointment. (Baker, 2007).

10 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

It is believed Mr Peacock helped smooth the way for those working on the sales of the FA-18F Super Hornet aircraft to get their message across to Defence Minister, Dr Brendan Nelson regarding the $6.6 billion purchase. It is understood that Boeing members personally briefed Nelson in 2006 on the Super Hornet and how it could fill any "capability gap" Australia might encounter with its purchase of the new Joint Strike Fighter (JSF) it was to acquire in 2012, (Baker, 2007). "They targeted Nelson and probably fairly quickly read into his personality, appealing to his vanity and desire to be seen as someone who is in charge. A decision maker," (Baker, 2007). The purchase of the Boeing FA-18F has raised significant controversy in the Australian parliament, with arguments over the disregard for normal purchasing protocol and the capability gap of the aircraft causing Australia to lose its air superiority in the Australasian region, (Fowler, 2007).

Figure 4 Boeing Super Hornet, (http://www.airliners.net, viewed 26/4/2012)

11 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

6 LOOKING TO THE FUTURE

Looking to the future, Boeing has displayed strong efforts for the future works on the company, especially its Australian efforts by incorporating a number of its key subsidiaries into the global pool. Currently Boeing Defence Australia is looking beyond the host government for potential sales. Boeing is pursuing export deals of defence equipment designed and manufactured in Australia with the Insitu Pacific subsidiary seeking to operate the ScanEagle unmanned aerial vehicle on behalf of the Singapore navy, (Trimble, 2010). Boeings commercial aircraft efforts have been shifted after the close of the operations in Bankstown, NSW. Boeing Aerostructures consolidated its efforts in the new facility in Melbourne with the bases becoming a centre of excellence within Boeing for building composite aircraft structure. The newly renovated factory is where the

company continues to make rudder and elevator components for the 777 airliner, the movable leading edge on the 747-8 Jumbo and moving trailing edges on the new 787 Dreamliner. The 787 work represents 50% of Boeing's business at in Melbourne, and is projected to account for $4 billion in business over the next 20 years, Mark Ross, managing director of Boeing Aerostructures Australia, (Trimble, 2010). The 787 work is currently in the stage of ramping up production as backlogs of the aircraft cause major issues for the company. While the ramp up efforts is going to plan some analysts have questioned whether Boeing will be able to ramp up production of the 787 to reach its target of 10 aircraft a month by the end of 2013, this is due to ongoing supplier issues that have caused the initial aircraft delays. Australias efforts in the production have been successful thus far with production already supporting six units per month, (Sloan, 2012).

12 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

Figure 5 Boeing 787 Dreamliner, (http://personal.psu.edu/tyl5059/787.jpg, viewed 26/4/2012)

7 CONCLUDING REMARKS AND PERSONAL INSIGHT

The look into the Boeing Company and its movements into Australia has given keen insight in workings of the aerospace giant. Upon discussions with colleagues who work of the Melbourne base of operations as well as those in the aerospace industry, it was interesting to view how differently each view the companys efforts down under. Naturally those working for the group see the company as a god send, and with the large revenue and on-going support to the local community, it is easy to see why, (Sloan, 2012). However, those who look from the outside of the company argue a different story, this is especially dominant over the Super Hornet acquisition which Boeing had a hand in, (Baker, 2007). From a personal view point the role that the company has had in the shaping of the Australian aerospace community is outstanding. Prior to the writing of this report, the political influence that Boeing displayed was only a rumour and their grasp just a comment from a rival competitor, now however it is apparent. It was interesting to see how Boeing did come to be in Australia, and despite most of the documents claiming
13 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

otherwise, mostly Boeing reports, it can be seen as an accident.

The US based

company did not truly begin to globalise itself until it became necessary, compared to that of Rockwell and other groups, and they only expanded to Australia as it proved to be a strategic facility that would help in the further their expansion . Nevertheless, Boeings work in Australia has been highly beneficial. The increase in technological capabilities and the global reach that is now available within the industry. This is easily summed up by a comment made during Boeings initial move down under in 1996; Boeing Australia is worth far more to Australia as a fully integrated part of the global company [and] in a globalised company you get everything. former Boeing Managing director David Gray, (Thomas, 1997).

14 | Page

AERO2364 Contemporary Issues in Aerospace David Chipperfield S3135373

8 BIBLIOGRAPHY
Baker, R. (2007, July 9). The Hornet's nest - In Depth. The Age. Bauer, E. E. (2008). Boeing: The first century and beyond. Washington: TABA Publishing. Boeing Australia. (2012, January). Overview of Boeing in Australia. Retrieved April 10, 2012, from Boeing Australia:

http://www.boeing.com.au/ViewContent.do?id=29982&aContent=Overview Boeing Company. (2012, January). Boeing In Brief. Retrieved April 10, 2012, from Boeing Company: http://www.boeing.com/companyoffices/aboutus/brief.html Corners, A. -4. (Director). (2007). Flying Blind: [Motion Picture]. Georgetown Journal of International Affairs. (2003, Winter/Spring). Expanding Horizons: Boeing's Global Business Operations. Georgetown Journal of International Affairs, 49-56. IBISWorld Company Report. (2010). Boeing Australia Holdings Pty Ltd. Melbourne: IBISWorld . Kelly, E. (2008). Boeing boosts presence down under with Phantom Works Australia. Flight International. Kelly, E. (2008). Boeing is no Phantom in Oz. Flight International, 34. Pelletier, A. (2010). Boeing: The Complete Story. Somerset: Haynes Publishing. Qantas. (2012). The Qantas Story. Retrieved April 18, 2012, from Qantas: http://www.qantas.com.au/travel/airlines/history/global/en Sloan, S. (2012, March 22). Boeing Aerostructures Presentation. (D. Chipperfield, Interviewer) Thomas, I. (1997, February 17). Australia is in pilot's seat for Boeing's push into Asia. The Australian Financial Review, p. 5. Trimble, S. (2010, June 15). Boeing recovers Down Under. Flight International. Walker, D. (1995, April 19). Rockwell To Expand Aerospace. Sydney Morning Herald, p. 39.
15 | Page