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BOEING PESTEL Analysis

Boeing PESTEL analysis

Boeing is one of the most well-known and powerful players in the aviation industry. It has acquired several critical capabilities and due to its technologically innovative models, the demand for Boeing’s aircrafts has increased sharply. However, its business is affected by a wide range of factors that vary in nature. From political factors to economic and technological, all of them can have a direct and big impact on Boeing’s business. Even after the deregulation in US market, there are several nations where the aviation market is still regulated heavily. If Boeing has accumulated a heavy backlog then it is because of technological innovation and its other competitive advantages. Apart from government and economy, other forces affect its business and profitability. This PESTEL analysis explains how these various forces in its macro-environment affect its business.

Political:

The political factors have an important role in the aviation industry and these factors can differ from nation to nation. The political and regulatory environment is not the same across all the nations. The regulatory restrictions were eased in US in 1978 only. However, in the world market, there are several areas where aviation is still highly regulated. These regulations affect the sales and business of Boeing. While air travel has grown in popularity, the level of regulation in some countries is still a hindrance to profitable business. The more profits the airlines companies earn, the higher is Boeing’s revenue since it can sell more aircrafts.  Boeing’s aircrafts and cargo aircrafts are known for their excellence. However, until the relationship between the governments and the industry is very friendly, the hurdles would remain. As per a report by ‘Open Secrets’ Boeing’s lobbying expenditure in 2016 was $3,980,000. All these facts indicate towards the remarkable importance of the political factors in case of Boeing.

Economical:

Economic factors are very important to be considered in terms of the aviation industry. The condition of the global economy and the purchasing power of the individual customers and aviation companies, has an important bearing on the revenue and profits of Boeing. The revenue and profits of the airlines companies had fallen sharply during the recession. However, the industry responded with price cuts and by raising the service standards. The results have been positive and now that the recession has passed, Airlines companies are again enjoying better profits and revenue. The condition of world economy is much better and this is some good news for the world’s top manufacturer of commercial airplanes. These economic trends have led to a surge in demand for air travel and with it for new and technologically improved aircrafts. The industry expects consistent growth in the coming years and this means Boeing can expect faster growth owing to better economic conditions globally.

Social:

Socially, the acceptance of air travel has increased. Now, more and more people are using air travel for tourism and professional travelling. It is being considered safer. The credit goes to the manufacturers who make excellent airplanes that are better in terms of fuel consumption. This has helped the airlines companies drop prices and make air travel affordable for the masses. Moreover, air travel is the preferred mode of transportation for the millennial generation. In the developed nations particularly, its demand is very high which is very good for Boeing. Apart from Western, in the Eastern and Mid-Eastern cultures too, the demand and acceptance of air travel has kept rising in the 21st century. Apart from the convenience it provides safety and affordability are also the reason behind its popularity. This demand is expected to rise further in future based on increased reliance on airlines and because of the social value such companies create. They generate employment and provide a kind of convenience that any other mode of travel cannot afford. However, whenever there is some bad news like terrorist attacks or plane disasters it affects the entire society and in turn also the airlines companies and manufacturers.

Technological:

Technology has become central to growth in the airlines industry. Boeing’s aircraft models have excellent technological capabilities. Its 787s are in demand because of the great inbuilt capabilities they have. They are better than other crafts in terms of fuel efficiency as well as range. Boeing produces a wide variety of models which are better than the competing crafts in terms of technology as well as design. Apart from that, Boeing spends a lot on research and development to make its aircrafts safer and better in terms of fuel efficiency and other features. The main reason that Boeing is ahead of all is its ability of technological innovation. It conducts a lot of research before developing its mind blowing models. In the 21st century, technology has acquired a central role in transportation. Faster planes that are low on fuel consumption and environmental impact will continue to remain in demand. Technology will continue to decide the winner in the defense and aerospace sector too.

Environmental:

Environmental concerns are just as important for Boeing and the aerospace industry as the other industries.  Boeing is also committed to the protection of the environment and the planet. It has invested in several areas related to environment and fuel efficiency. It is developing and testing new technologies that can bring greater fuel efficiency. It also sets environmental performance targets for its facilities and works to meet them. Boeing notes, “From researching biofuels, fuel cells and hybrid electric propulsion to improving air traffic management, finding sustainable composite materials and exploring new chemical coatings that resist corrosion, our team of technicians, technologists, engineers and scientists collaborate with research and development partners around the world to solve today and tomorrow’s environmental challenges” (Boeing, Environment, 2017). As a part of its remediation program, Boeing is taking innovative approaches in clean up efforts to protect human health and the environment.

Legal:

There is a complex web of laws and regulations that affects Boeing. As a manufacturer of commercial airplanes, it is also a big employer. From labor laws to environmental laws and other laws related to air travel and passenger safety, there are several that apply to its business. There are several risk related areas including U.S. Defense Department procurement rules, proper handling of sensitive information and anti-corruption. The managers are responsible for compliance in the areas that they oversee. Boeing also provides training to its employees and managers regarding ethics and compliance. In 2005, it has faced some serious legal problems over a rocket launch program. Apart from that labor related cases had also troubled Boeing in 2011. Due to these factors Boeing has instituted an internal team called Compliance Risk Management Board that handles the legal risks.

Sources:

  1. https://www.boeing.com/principles/ethics-and-compliance.page#/compliance
  2.  https://www.nytimes.com/2005/02/04/business/boeing-hires-a-legal-team-to-handle-scandal-cases.html?_r=0
  3. https://www.boeing.com/principles/environment/index.page
  4. https://www.opensecrets.org/lobby/clientsum.php?id=d000000100&year=2017
  5. Boeing SWOT Analysis

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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