Businessmodel of Boeing

Customer Segments

Boeing’s key customer segments vary according to its business segments.

Commercial Airplanes – This segment mainly serves the commercial airline industry.

Defence, Space & Security – This segment serves, as its primary customer, governments. Its biggest purchaser is the US Department of Defence, which contributes over 60% of segment revenue. It also serves other governments around the world, either through direct contracting or through US bilateral military sales.

The non-military offerings of this segment also serve other customers. One primary purchaser is NASA, which orders space-related equipment and services – such as satellites, launch vehicles, and launch engines. Other foreign government bodies serving in roles similar to that of NASA are also key customers.

Aside from governmental bodies, this segment also serves commercial entities. One group of entities are private defence agencies, who also require access, albeit restricted, to military equipment. Non-military commercial entities are also key customers, particularly for support services, and for space-related products – especially civil and commercial satellites and satellite systems (e.g. the Global Positioning System).

Boeing Capital – As this segment serves pre-existing customers of other segments, it does not serve any unique customer segment. It is to be noted however that different customers have different risk profiles – for example, the US government presents a far lower risk profile and a far stronger financial position as compared to most, if not all, commercial entities – this means that Boeing Capital may, in practice, serve only particular segments of Boeing’s customers.

Aside from the above segments, Boeing also works closely with governments on research and development projects.

Value Proposition

In an increasingly crowded market, Boeing’s multi-faceted value proposition has helped it stay afloat. One of its biggest draws is that it is a well-known, established, and trusted brand that has worked closely with key customers, particularly the US government, for more than a century.

Further, Boeing is known for producing quality, often bespoke, equipment – at high cost however. This equipment often uses proprietary technologies that are only available from Boeing, thus restricting customers to purchasing from the company.

In addition, given Boeing’s substantial experience and expertise in its areas of operation, its products tend to be of a higher utility as compared to its competitors.

Finally, Boeing offers integrated solutions for its customers – from the equipment itself, support services, financing, and even networked infrastructure. These solutions offer potentially lower overall costs and greater value to customers.

Channels

Boeing contracts directly with its key customer, the US government, either through recurring contracts or through open/closed bids, tenders, and proposals. It also contracts directly with foreign governments to sell military and commercial equipment. It contracts indirectly with foreign governments through US government bilateral sales of military or other equipment or services.

It contracts directly with commercial entities, including commercial airlines and others.

Customer Relationships

Boeing relies heavily on its pre-existing relationships with its customers – some of whom have been with the company for over a century.

In addition to this, Boeing continues its relationships with its existing customers through the provision of support services – ensuring customer satisfaction while keeping Boeing relevant.

Key Activities

Boeing designs, produces, and sells commercial and military aircraft, military systems, space systems, and other integrated solutions for civil, commercial, and military applications.

Key Partners

Key partners include both domestic and foreign government agencies, particularly the US Department of Defence and NASA, which often have specific and exacting requirements for equipment. One example is the partnership with NASA’s Commercial Crew Program to develop and refine Boeing’s CST-100 “Starliner” system to carry crew and cargo into orbit.

Other partnerships include with suppliers and manufacturers. Boeing also partners with other companies, some of which may be its competitors, on major projects such as the International Space Station.

Key Resources

Boeing’s key resources are its Property, plant and equipment, and it’s Goodwill. Aside from financial resources, its engineering and business talent are also key resources.

Cost Structure

Boeing’s key cost is the cost of production for its equipment and its services. Other key costs include research and development and general and administrative expenses.

Revenue Streams

Boeing derives its revenue streams from its three business segments – Commercial Airplanes, Defence, Space & Security, and Boeing Capital.

Source of Revenue/Cost Revenue (FY 2015, million USD) % of Total Revenue Total Revenues 96,114 100% Commercial Airplanes

66,048 69% Defense, Space & Security

30,388 32% Boeing Capital

413 0% Other

-735 -1% Total Costs -88,671 -92% Cost of products

-73,446 -76% Cost of services

-8,578 -9% Boeing Capital interest expense

-64 0% General and administrative expense

-3,525 -4% Research and development expense, net

-3,331 -3% Other

273 0% Operational Income 7,443 8%