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C273-英文代写
时间：2023-06-05
tho35176_case20_C273-C278.indd 273 10/06/20 04:41 PM
The history of Boeing began in July 1916 when
William Boeing incorporated the aircraft manufac-
turer as the Pacific Aero Products Company, which
became renamed as Boeing Airplane Company in
the same year. Boeing began producing aircraft for
the United States military in 1917 when it produced
modified Model Cs for the U.S. Navy. This began a
relationship that the company would have with the
military that continued through 2020.2
After the war ended, the first commercial craft,
the B-1, began carrying mail from Seattle to Canada.
In 1927, the Boeing Model 40A was designed specifi-
cally for carrying mail, and it delivered mail from San
Francisco to Chicago. About this time, engineers and
pilots were testing the physical limits and the dura-
bility of airplanes. The Army Air Services’ “World
Flyers” completed the first airplane trip around the
globe in 1924. Then in 1927, Charles Lindburgh
made the first solo nonstop crossing of the Atlantic.
Five years later, Amelia Earhart became the first
woman to fly solo across the Atlantic.
Boeing continued to develop aircraft for the U.S.
military after World War I and launched the B-17
“The Flying Fortress” in 1935. The plane became a
key asset in World War II, as did additional aircraft
introduced by Boeing. General Carl Spaatz, who was
the U.S. Air Commander in Europe, said, “Without
the B-17, we may have lost the war.”3
Boeing 737 MAX: What Response
Strategy is Needed to Ensure
Passenger Safety and Restore
the Company’s Reputation?
Rochelle R. Brunson
Baylor University
Marlene M. Reed
Baylor University
CASE 20
“All Boeing airplanes are certified and delivered to
the highest levels of safety consistent with industry
standards. Airplanes are delivered with baseline con-
figuration, which includes a standard set of flight deck
displays and alerts, crew procedures and training mate-
rials that meet industry safety norms and most cus-
tomer requirements. Customers may choose additional
options, such as alerts and indications, to customize
their airplanes to support their individual operations or
requirements.”1
These were the words of a Boeing spokesman on
March 22, 2019, a week after U.S. President Donald
Trump grounded all Boeing 737 MAX planes. The
reason for the grounding was the recent crash of
two of these planes killing 346 people.
Following the grounding of the planes, Boeing
management had to decide how to respond to this
action on the part of the government, and the grow-
ing outcry that Boeing had known of certain prob-
lems with the MAX and did nothing. The MAX was
scheduled to be returned to service by June or July of
2020, so the company needed to find a way to repair
their faltering image by then.
History of Boeing
Commercial flight began in the early 20th Century
when several engineering entrepreneurs began to
build airplanes. Among those entrepreneurs were
William E. Boeing, Donald Douglas, Sr., James H.
“Dutch” Kindelberger, and James S. McDonnell.
Copyright ©2021 by Rochelle R. Brunson and Marlene M. Reed. All
rights reserved.
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tho35176_case20_C273-C278.indd 274 10/06/20 04:41 PM
C-274 PART 2 Cases in Crafting and Executing Strategy
which had six-abreast seating, on December 28,
1967. The following day, United Airlines was the
first U.S. carrier to take delivery of the plane, a
737-200 model with an increased seating capacity and
range. By 1987, the 737 had become the most ordered
plane in history. Boeing introduced upgraded and
lengthened 737-300, −400, and −500 versions of
the plane, with total orders reaching 3,100 by 1993.
Boeing continued to launch advanced versions of
the 737 with Next Generation −600, −700, −800,
−900, and −900ER models launched between 1993
and 2005.
The Fourth Generation 737 MAX was launched
in 2017 in multiple model configurations with the
MAX 7 having a length of 116 feet and seating cap-
acity of 172 passengers and the Max 10 having a
length of 143 feet and seating capacity of 230. The
MAX 8 and MAX 9 models fell between the two
other versions of the aircraft. Key advances of the
737 MAX included improved fuel efficiency that
expanded range to up to 3,850 nautical miles, innov-
ative carbon fiber/titanium engine turbine blades,
stylish cabin, improved cockpit displays and updated
flight deck. The 737 MAX was Boeing’s fastest-
selling passenger plane in history with about 5,000
orders from carriers in more than 100 countries.
Divisions of Boeing
The Boeing Company became the world’s largest
producer of commercial jetliners after its merger with
McDonnell Douglas in 1997 and its acquisition of
the defense and space units of Rockwell International
in 1996. Boeing was able to provide a selection of
23 different airplane models to serve markets that
required 100 to 600 seats. They also manufactured a
complete line of cargo freighters.
Boeing’s divisions in 2020 were Commercial,
Defense, Space, Innovation, and Services. The
Commercial Division had produced such airplanes
as the Next Generation 737, the 737 MAX, the 747-8,
the 767, the 777, the 777X, the 787, Freighters, Boeing
Business Jets, and Boeing Support and Services. By
2020, there were 10,000 Boeing commercial jetliners
in service. These planes were purported to fly farther
on less fuel and significantly reduce emissions.
The Defense Division produced a large number
of aircraft for the government including Air Force 1,
the AH-6 Light Attack Helicopter, the AH-64 Apache,
and various weapons systems. Their produce line
also included fighter jets, rotorcraft, cybersecurity
Commercial passenger service. Civilian air travel
grew rapidly during the 1950s and Post-War Era. The
President of American Airlines, C.R. Smith, commis-
sioned Douglas Aircraft to come up with an airplane
that would carry passengers overnight. The plane the
company designed was the DC-3. This plane, which
was rolled out in 1936, was the first airplane that
turned a profit based on commercial passenger
demand. By 1939, the DC-3 and its earlier version,
the DC-2, were carrying more than 90 percent of all
U.S. passengers. Other versions of the DC-3 were
later produced for military use during World War II.
Even 70 years after its first delivery, this plane was
still in use by smaller and emerging markets.4 Boeing
Commercial Airplanes, which is a unit of the Boeing
Company, is headquartered in Seattle, Washington,
and employed more than 60,000 people worldwide
by 2020.
The Cold War and Development of Military Jet
Aircraft. During the Berlin Blockade, many coun-
tries sent the B-47 Stratojet bomber in to bring food
and supplies to the divided city. Then as Cold War
tensions began to escalate, the United States and
the USSR raced to test new advanced jet aircraft.
The U.S. F-86 Sabre Jet helped speed the end of
the Korean Conflict as it dominated the skies over
Korea. The F-86 destroyed so many Russian-built
planes that the final air-to-air victory was 10 to 1.
The A-4 Skyhawk Light Attack Bomber gave
America’s allies the flexibility they needed in a light
aircraft. In 1964, the first A-4s took flight in raids
on North Vietnam. In addition, the F-4 Phantom
II fighter was deployed in the Vietnam War and in
Operation Desert Storm.5
Boeing’s introduction of commercial jet airliners.
The delivery of the four-engine Boeing 707 to Pan
Am in August 1958 marked a significant advance-
ment in commercial aviation. Pan Am made industry
news later that year with its flight from New York to
Paris which the 707 completed in 8 hours 41 minutes.
The 707 introduced the modern era of passenger jet
travel with longer flights, larger seating capacity, and
faster travel times. Boeing’s industry-leading com-
mercial jet airliners dominated the 1960s through
the early 21st Century with new model introductions
such as the 727, 737, 747, 757, 767, 777, and 787.
Boeing 737. The Boeing 737 became the workhorse
of the airline industry soon after its introduction in
1967. Lufthansa first took delivery of the 737-100,
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tho35176_case20_C273-C278.indd 275 10/06/20 04:41 PM
CASE 20 Boeing 737 MAX C-275
Boeing’s Enterprise Strategy
Operate as One Boeing
Build Strength on Strength
Sharpen and Accelerate to Win
Boeing’s 2025 Goals
Market Leadership
Top-quartile Performance and Returns
Growth Fueled by Productivity
Design, Manufacturing, Services Excellence
Accelerated Innovation
Global Scale and Depth
Best Team, Talent and Leaders
Top Corporate Citizen
The Global Aircraft
Manufacturing Industry
The Boeing Company was the world’s largest aero-
space company in 2020. The company was also the
second-largest defense contractor for the United States
Government behind Lockheed Martin Corporation.
Also, in 2020, Boeing was the largest exporter in the
United States.
Boeing and the French company Airbus were
the two largest manufacturers of commercial air-
planes in the world. Boeing had developed a com-
petitive advantage based upon its size and market
diversification. The company had the ability to take
on multiple projects and clients at the same time,
and it leveraged its economies of scale to buy inputs
in bulk.7 Because Boeing operated in both the com-
mercial and defense sectors, it was able to offset any
decline in one division with an emphasis upon the
other sector.
Over the five years leading up to 2019, Boeing’s
U.S. manufacturing sector revenue was expected
to decline at an annual rate of 1.0 percent to
$78.1 billion. A strong demand for commercial air-
craft has helped soften the declining defense spend-
ing in the United States and the billions of dollars
that have been committed to paying for damages
caused by the recent crashes and the thousands
of flight cancellations occasioned by the ground-
ing of the 737 MAX. (See Exhibit 1 below entitled
“The Boeing Company’s Financial Performance
2014–19.”)
products, surveillance suites, missile defense, and
commercial aircraft derivatives.
In terms of the Space Division products in
2020, Boeing was attempting to enable critical
research on the International Space Station, deep-
space exploration and life on earth, and the CST-100
Starliner commercial spacecraft. The company was
working on a joint venture with Lockheed Martin on
a United Launch Alliance. They were also building
a heavy-lift, human-rated propulsion to deep space
with the Space Launch System rocket that would
launch missions on a path to the Gateway Cislunar
Outpost.6
The Services Division had two parts: The
Commercial Service Division and the Government
Services Division. Boeing’s experience in bringing
innovative service solutions to commercial, defense,
and space customers had prepared them to offer cus-
tomer service to those particular groups.
Finally, Boeing’s organizational divisions in 2020
included an Innovation Division. This group had
more than $3 billion invested annually in research
and development. Some examples of Boeing’s inno-
vations were the first flights if the 737 MAX 9, the
787-10 and the T-X.
Boeing’s Purpose and Mission
Connect, protect, Explore and Inspire the World
through Aerospace Innovation.
At Boeing, we are committed to a set of core val-
ues that not only define who we are, but also serve
as guideposts to help us become the company we
would like to be. And we aspire to live these values
every day.
Boeing Behaviors
Lead with courage and passion
Make customer priorities our own
Invest in our team and empower each other
Win with speed, agility and scale
Collaborate with candor and honesty
Reach higher, embrace change and learn from failure
Deliver results with excellence–Live the Enduring
Values
Boeing’s Aspiration
Best in Aerospace and Enduring Global Industrial
Champion.
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C-276 PART 2 Cases in Crafting and Executing Strategy
Airlines Flight 302 crashed on takeoff from Addis
Ababa killing all 157 people aboard. The plane was
bound for Nairobi, Kenya. Just after takeoff, the
pilot radioed a distress call and was given immedi-
ate clearance to return and land. However, before the
crew could make it back to the airfield, the aircraft
crashed. This aircraft was only four months old.10
Investigators determined that Boeing’s design
decisions on both the MAX and the plane involved
in the 2009 crash (the 737NG) allowed a powerful
computer command to be triggered by a single faulty
sensor, even though each plane was equipped with
two sensors. In the two MAX accidents, a sensor
measuring the plane’s angle to the wind prompted a
flight control computer to push its nose down after
takeoff. On the Turkish Airlines flight, an altitude
sensor caused a different computer to cut the plane’s
speed just before landing.11 (See Exhibit 2 below
for a recounting of the times of the crashes entitled
“Timeline of First MAX Flights and Accidents.”)
What Caused the Crashes?
The 737 MAX could fly further and carry more
people than any previous generation of 737s. Because
the engines were bigger and because the 737 sat so
low to the ground, Boeing moved the engines slightly
forward and raised them higher under the wing.
However, the new position of the engines changed
how the aircraft handled in the air. This created a
potential for the nose to pitch up during flight, and
a pitched nose is a problem in flight. If it is raised
too high, the aircraft can stall. To keep the nose in
trim, Boeing came up with a software called the
Maneuvering Characteristics Augmentation System
(MCAS). With this system, when a sensor on the
The 737 NG and 737 MAX Crashes
On February 25, 2009, a Boeing 737 NG (Next
Generation), a predecessor of the 737 MAX, crashed
near Amsterdam. The plane was Turkish Airlines
Flight 1951, and it was carrying 128 passengers from
Istanbul. The first officer guided the plane toward
Runway 18R and called out changes to its speed
and direction. This officer was new to the Boeing
jet, so the crew included a third pilot in addition
to the captain who had 13 years of experience fly-
ing this aircraft. As the plane dipped to 1,000 feet,
the pilots had not completed their landing checklist.
When the plane reached 450 feet, the pilots’ control
sticks began shaking which informed them that there
was an impending stall. One of the pilots pushed the
thrust lever forward to gain speed; but when he let
go, the computer commanded it to idle. The cap-
tain intervened and disabled the auto-throttle. This
maneuver set the thrust levers to the maximum. By
this time, nine seconds had elapsed since the stall
warning. Now it was too late to do anything else.
The jet plunged into a field close to the airport.8 It
was later determined by an investigation of the crash
that Boeing had not included information in the NG
operations manual that could have helped the pilots
respond when the sensor failed.
The second crash occurred on October 29, 2018,
when a Lion Air Flight 610 fell into the Java Sea just
13 minutes after takeoff from Jakarta, Indonesia. In
that crash, 187 people were killed. The flight crew
made a distress call shortly before losing control.
The aircraft had just been received by Lion Air three
months earlier.9
The third crash, which involved a 737 MAX,
occurred in March of 2019. This time Ethiopian
Year Revenue Growth (% change) Operating income Growth (% change)
2014 $82.3 N/C $4.9 N/C
2015 85.9 4.4% 4.4 −10.2%
2016 83.7 −2.6% 4.6 4.5%
2017 81.4 −2.7% 7.5 63.0%
2018 85.0 4.4% 8.4 12.0%
2019 78.1 −8.1% 8.6 2.4%
EXHIBIT 1 The Boeing Company’s Financial Performance 2014–2019 ($ amounts
in billions)
Source: IBISWorld.com
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tho35176_case20_C273-C278.indd 277 10/06/20 04:41 PM
CASE 20 Boeing 737 MAX C-277
Street Journal reported that, even for airlines that had
ordered it, the warning light was not operating.14
On October 17, 2019, Boeing suggested that it
had turned over text messages between two of the
company’s top pilots which were sent in 2016. The
messages revealed that the company knew about
the problems with the MCAS system quite early. In
fact, a former chief technical pilot for the Boeing
737 described the MCAS’ habit of engaging itself
“egregious.”15
Then on December 23, 2019, the CEO of Boeing
Dennis Muilenberg was fired by the Board. He was
replaced by David Calhoun on January 13, 2020.
Calhoun was a Boeing Board member and a for-
mer General Electric executive. In an interview on
January 29, 2020, Calhoun criticized the company’s
prior leadership for not immediately disclosing a
large amount of damning internal communications
that raised safety questions about the MAX. Calhoun
promised that he would be more transparent.16
In February of 2020, Boeing fired a midlevel
executive in charge of pilots who exchanged internal
emails that have embarrassed the company as it con-
tinued to struggle to get the 737 MAX flying again.
Those email messages indicated that Boeing employ-
ees were mocking airline officials, aviation regulators
and even their own colleagues. In one of the emails,
an employee said the 7637 MAX had been “designed
by clowns, who in turn are supervised by monkeys.”17
fuselage detected the nose was too high, MCAS auto-
matically pushed the nose down.12
On October 25, 2019, the Indonesian
Transportation Safety Committee published its final
report on the Lion Air Crash. The report largely
blamed the MCAS device. Before the crash, the Lion
Air pilots were unable to determine the aircraft’s true
airspeed and altitude and struggled to take control
of the plane as it oscillated for about 10 minutes.
Whenever they pulled up from a dive, MCAS
pushed the nose down again. The report stated
further that the MCAS function was not a fail-safe
design and flight crews had not been adequately
trained to use it.13
Boeing’s Knowledge of Problems
On November 12, 2018, The Seattle Times reported
that MAX pilots from Southwest Airlines were “kept
in the dark” about the MCAS and how to respond
to warnings from it. Then the Dallas Morning News
found similar complaints from American Airlines
pilots just four months later.
In April 29, 2019, shareholders’ meeting, Boeing
CEO Muilenberg, in response to questions about the
accidents, suggested that in some cases pilots didn’t
completely follow the procedures that Boeing had
outlined to prevent a crash in case the MCAS should
happen to malfunction. On that same date, the Wall
Feb. 2009 2016
Boeing 737 NG crashes near Amsterdam The first MAX 8 Flight
2016 2017
2 of Boeing’s top pilots indicate problems with MCAS The first MAX 9 Flight
2018 Oct. 29, 2018
The first MAX 7 Flight Lion Air 737 MAX crashes
March 10, 2019 March 13, 2019
Ethiopian Airlines 737 MAX crashes Pres. Trump grounds MAX planes
October 25, 2019 October 28, 2019
NTSB publishes report on Lion Air crash Boeing’s Pres. Muilenberg admits
Boeing knew of pilots’ concerns
December 23, 2019
Boeing’s President Muilenberg is fired by the Board
of Directors
EXHIBIT 2 Timeline of First MAX Flights and Accidents
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C-278 PART 2 Cases in Crafting and Executing Strategy
when they were hit by parts shortages, production
delays and expenses occasioned by their merger with
McDonnell Douglas.18
The Board of Directors had to deal with the bad
publicity that the company had received and the loss
in revenue for the past year. Some observers specu-
lated that it might take a rebranding of the MAX to
recover the valued name of the company. Others sug-
gested that an even more desperate act of dropping
the MAX was in order. This was the dilemma the
Boeing Board faced during the first quarter of 2020.
There were even some observers who wondered if the
coverup of the difficulties with the MCAS system
might be tantamount to fraud.
Boeing’s Dilemma
Boeing reported a loss of $1 billion in the fourth
quarter of 2019 as revenue plunged 37 percent
due to the grounding of the MAX (see Exhibit 3
entitled “Summary Financial Results for the Fourth
Quarter of 2018 and 2019” and Exhibit 4 entitled
“Commercial Airplane Deliveries in the Fourth
Quarter of 2018 and 2019.”) The company sus-
pended deliveries of the plane in the early spring of
2019 and had speculated that deliveries would have
been restarted by the end of the year. The company
lost $636 million for all of 2019. This compared to
a profit of nearly $10.5 billion in 2018. This was the
first loss the company had experienced since 1997
2019 2018
Revenues $ 17,911 $ 28,341
GAAP
(Loss) Earnings from
Operations ($ 2,204) $ 4,175
Operating Margin (12.3)% 14.7%
Net (Loss)/Earnings ($ 1,010) $ 3,424
(Loss)/Earnings
Per Share ($ 1.79) $ 5.93
Operating Cash Flow ($ 2,220) $ 2,947
EXHIBIT 3 Summary Financial Results
for the Boeing, Fourth
Quarter 2018 and Fourth
Quarter 2019 (In millions
except for share data)
Source: Boeing Web Site. https://www.boeing.com
2019 2018
Commercial Airplane
Deliveries 238 79
Revenues $ 16,531 $ 7,462
(Loss)/Earnings from
Operations $ 2,600 ($ 2,844)
Operating Margin 15.7% (38.1)%
EXHIBIT 4 Commercial Airplane
Deliveries in the Fourth
Quarter 2018 and 2019
(Dollars in Millions)
Source: Boeing Web Site. https://www.boeing.com
ENDNOTES
1 German, K. (January 8, 2020). As Boeing
CEO is fired, it’s unclear when the 737 MAX
will fly again, CNET. https://www.cnet.com/
news/boeing-737-max-8-all-about-the-air-
craft-flight-ban-and-investigations/.
2 Boeing’s website. http://www.boeing.com
3 Boeing website. http://www.boeing.com
4 Boeing website. http://www.boeing.com
5 Boeing website. http://www.boeing.com
6 Boeing website. http://www.boeing.com
7 IBISWorld.Com. https://www.ibisworld
.com
8 Hamby, C. (January 21, 2020). How Boeing’s
responsibility in a deadly crash “got buried,”
The New York Times.
https://www.nytimes.com/2020/01/20/
business/boeing-737-accidents.html.
9 German, K. (January 8, 2020). As Boeing
CEO is fired, it’s unclear when the 737 Max will
fly again. https://www.cnet.com/news/boeing-
737-max-8-all-about-the-aircraft-flight-
ban-ande-investigations/.
10 Ibid.
11 Hamby, C. (January 21, 2020). How Boeing’s
responsibility in a deadly crash “got buried,”
The New York Times. https://www
.nytimes.com/2020/01/20/business/boeing-
737-accidents.html.
12 German, K. (January 8, 2020). As Boeing
CEO is fired, it’s unclear when the 737 Max will
fly again, CNET. https://www.cnet.com/news/
boeing-737-max-8-all-about-the-aircraft-
flight-ban-and-investigations/
13 Ibid.
14 Ibid.
15 Ibid.
16 Koenig, D. (January 30, 2020). Boeing
posts 1st annual loss in 2 decades, Waco
Tribune-Herald.
17 Tangel, A. and Pasztor, A. (February 14,
2020). Boeing fired midlevel executive fol-
lowing embarrassing emails, Wall Street
Journal.
18 Ibid.
Final PDF to printer
The history of Boeing began in July 1916 when
William Boeing incorporated the aircraft manufac-
turer as the Pacific Aero Products Company, which
became renamed as Boeing Airplane Company in
the same year. Boeing began producing aircraft for
the United States military in 1917 when it produced
modified Model Cs for the U.S. Navy. This began a
relationship that the company would have with the
military that continued through 2020.2
After the war ended, the first commercial craft,
the B-1, began carrying mail from Seattle to Canada.
In 1927, the Boeing Model 40A was designed specifi-
cally for carrying mail, and it delivered mail from San
Francisco to Chicago. About this time, engineers and
pilots were testing the physical limits and the dura-
bility of airplanes. The Army Air Services’ “World
Flyers” completed the first airplane trip around the
globe in 1924. Then in 1927, Charles Lindburgh
made the first solo nonstop crossing of the Atlantic.
Five years later, Amelia Earhart became the first
woman to fly solo across the Atlantic.
Boeing continued to develop aircraft for the U.S.
military after World War I and launched the B-17
“The Flying Fortress” in 1935. The plane became a
key asset in World War II, as did additional aircraft
introduced by Boeing. General Carl Spaatz, who was
the U.S. Air Commander in Europe, said, “Without
the B-17, we may have lost the war.”3
Boeing 737 MAX: What Response
Strategy is Needed to Ensure
Passenger Safety and Restore
the Company’s Reputation?
Rochelle R. Brunson
Baylor University
Marlene M. Reed
Baylor University
CASE 20
“All Boeing airplanes are certified and delivered to
the highest levels of safety consistent with industry
standards. Airplanes are delivered with baseline con-
figuration, which includes a standard set of flight deck
displays and alerts, crew procedures and training mate-
rials that meet industry safety norms and most cus-
tomer requirements. Customers may choose additional
options, such as alerts and indications, to customize
their airplanes to support their individual operations or
requirements.”1
These were the words of a Boeing spokesman on
March 22, 2019, a week after U.S. President Donald
Trump grounded all Boeing 737 MAX planes. The
reason for the grounding was the recent crash of
two of these planes killing 346 people.
Following the grounding of the planes, Boeing
management had to decide how to respond to this
action on the part of the government, and the grow-
ing outcry that Boeing had known of certain prob-
lems with the MAX and did nothing. The MAX was
scheduled to be returned to service by June or July of
2020, so the company needed to find a way to repair
their faltering image by then.
History of Boeing
Commercial flight began in the early 20th Century
when several engineering entrepreneurs began to
build airplanes. Among those entrepreneurs were
William E. Boeing, Donald Douglas, Sr., James H.
“Dutch” Kindelberger, and James S. McDonnell.
Copyright ©2021 by Rochelle R. Brunson and Marlene M. Reed. All
rights reserved.
Final PDF to printer
tho35176_case20_C273-C278.indd 274 10/06/20 04:41 PM
C-274 PART 2 Cases in Crafting and Executing Strategy
which had six-abreast seating, on December 28,
1967. The following day, United Airlines was the
first U.S. carrier to take delivery of the plane, a
737-200 model with an increased seating capacity and
range. By 1987, the 737 had become the most ordered
plane in history. Boeing introduced upgraded and
lengthened 737-300, −400, and −500 versions of
the plane, with total orders reaching 3,100 by 1993.
Boeing continued to launch advanced versions of
the 737 with Next Generation −600, −700, −800,
−900, and −900ER models launched between 1993
and 2005.
The Fourth Generation 737 MAX was launched
in 2017 in multiple model configurations with the
MAX 7 having a length of 116 feet and seating cap-
acity of 172 passengers and the Max 10 having a
length of 143 feet and seating capacity of 230. The
MAX 8 and MAX 9 models fell between the two
other versions of the aircraft. Key advances of the
737 MAX included improved fuel efficiency that
expanded range to up to 3,850 nautical miles, innov-
ative carbon fiber/titanium engine turbine blades,
stylish cabin, improved cockpit displays and updated
flight deck. The 737 MAX was Boeing’s fastest-
selling passenger plane in history with about 5,000
orders from carriers in more than 100 countries.
Divisions of Boeing
The Boeing Company became the world’s largest
producer of commercial jetliners after its merger with
McDonnell Douglas in 1997 and its acquisition of
the defense and space units of Rockwell International
in 1996. Boeing was able to provide a selection of
23 different airplane models to serve markets that
required 100 to 600 seats. They also manufactured a
complete line of cargo freighters.
Boeing’s divisions in 2020 were Commercial,
Defense, Space, Innovation, and Services. The
Commercial Division had produced such airplanes
as the Next Generation 737, the 737 MAX, the 747-8,
the 767, the 777, the 777X, the 787, Freighters, Boeing
Business Jets, and Boeing Support and Services. By
2020, there were 10,000 Boeing commercial jetliners
in service. These planes were purported to fly farther
on less fuel and significantly reduce emissions.
The Defense Division produced a large number
of aircraft for the government including Air Force 1,
the AH-6 Light Attack Helicopter, the AH-64 Apache,
and various weapons systems. Their produce line
also included fighter jets, rotorcraft, cybersecurity
Commercial passenger service. Civilian air travel
grew rapidly during the 1950s and Post-War Era. The
President of American Airlines, C.R. Smith, commis-
sioned Douglas Aircraft to come up with an airplane
that would carry passengers overnight. The plane the
company designed was the DC-3. This plane, which
was rolled out in 1936, was the first airplane that
turned a profit based on commercial passenger
demand. By 1939, the DC-3 and its earlier version,
the DC-2, were carrying more than 90 percent of all
U.S. passengers. Other versions of the DC-3 were
later produced for military use during World War II.
Even 70 years after its first delivery, this plane was
still in use by smaller and emerging markets.4 Boeing
Commercial Airplanes, which is a unit of the Boeing
Company, is headquartered in Seattle, Washington,
and employed more than 60,000 people worldwide
by 2020.
The Cold War and Development of Military Jet
Aircraft. During the Berlin Blockade, many coun-
tries sent the B-47 Stratojet bomber in to bring food
and supplies to the divided city. Then as Cold War
tensions began to escalate, the United States and
the USSR raced to test new advanced jet aircraft.
The U.S. F-86 Sabre Jet helped speed the end of
the Korean Conflict as it dominated the skies over
Korea. The F-86 destroyed so many Russian-built
planes that the final air-to-air victory was 10 to 1.
The A-4 Skyhawk Light Attack Bomber gave
America’s allies the flexibility they needed in a light
aircraft. In 1964, the first A-4s took flight in raids
on North Vietnam. In addition, the F-4 Phantom
II fighter was deployed in the Vietnam War and in
Operation Desert Storm.5
Boeing’s introduction of commercial jet airliners.
The delivery of the four-engine Boeing 707 to Pan
Am in August 1958 marked a significant advance-
ment in commercial aviation. Pan Am made industry
news later that year with its flight from New York to
Paris which the 707 completed in 8 hours 41 minutes.
The 707 introduced the modern era of passenger jet
travel with longer flights, larger seating capacity, and
faster travel times. Boeing’s industry-leading com-
mercial jet airliners dominated the 1960s through
the early 21st Century with new model introductions
such as the 727, 737, 747, 757, 767, 777, and 787.
Boeing 737. The Boeing 737 became the workhorse
of the airline industry soon after its introduction in
1967. Lufthansa first took delivery of the 737-100,
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CASE 20 Boeing 737 MAX C-275
Boeing’s Enterprise Strategy
Operate as One Boeing
Build Strength on Strength
Sharpen and Accelerate to Win
Boeing’s 2025 Goals
Market Leadership
Top-quartile Performance and Returns
Growth Fueled by Productivity
Design, Manufacturing, Services Excellence
Accelerated Innovation
Global Scale and Depth
Best Team, Talent and Leaders
Top Corporate Citizen
The Global Aircraft
Manufacturing Industry
The Boeing Company was the world’s largest aero-
space company in 2020. The company was also the
second-largest defense contractor for the United States
Government behind Lockheed Martin Corporation.
Also, in 2020, Boeing was the largest exporter in the
United States.
Boeing and the French company Airbus were
the two largest manufacturers of commercial air-
planes in the world. Boeing had developed a com-
petitive advantage based upon its size and market
diversification. The company had the ability to take
on multiple projects and clients at the same time,
and it leveraged its economies of scale to buy inputs
in bulk.7 Because Boeing operated in both the com-
mercial and defense sectors, it was able to offset any
decline in one division with an emphasis upon the
other sector.
Over the five years leading up to 2019, Boeing’s
U.S. manufacturing sector revenue was expected
to decline at an annual rate of 1.0 percent to
$78.1 billion. A strong demand for commercial air-
craft has helped soften the declining defense spend-
ing in the United States and the billions of dollars
that have been committed to paying for damages
caused by the recent crashes and the thousands
of flight cancellations occasioned by the ground-
ing of the 737 MAX. (See Exhibit 1 below entitled
“The Boeing Company’s Financial Performance
2014–19.”)
products, surveillance suites, missile defense, and
commercial aircraft derivatives.
In terms of the Space Division products in
2020, Boeing was attempting to enable critical
research on the International Space Station, deep-
space exploration and life on earth, and the CST-100
Starliner commercial spacecraft. The company was
working on a joint venture with Lockheed Martin on
a United Launch Alliance. They were also building
a heavy-lift, human-rated propulsion to deep space
with the Space Launch System rocket that would
launch missions on a path to the Gateway Cislunar
Outpost.6
The Services Division had two parts: The
Commercial Service Division and the Government
Services Division. Boeing’s experience in bringing
innovative service solutions to commercial, defense,
and space customers had prepared them to offer cus-
tomer service to those particular groups.
Finally, Boeing’s organizational divisions in 2020
included an Innovation Division. This group had
more than $3 billion invested annually in research
and development. Some examples of Boeing’s inno-
vations were the first flights if the 737 MAX 9, the
787-10 and the T-X.
Boeing’s Purpose and Mission
Connect, protect, Explore and Inspire the World
through Aerospace Innovation.
At Boeing, we are committed to a set of core val-
ues that not only define who we are, but also serve
as guideposts to help us become the company we
would like to be. And we aspire to live these values
every day.
Boeing Behaviors
Lead with courage and passion
Make customer priorities our own
Invest in our team and empower each other
Win with speed, agility and scale
Collaborate with candor and honesty
Reach higher, embrace change and learn from failure
Deliver results with excellence–Live the Enduring
Values
Boeing’s Aspiration
Best in Aerospace and Enduring Global Industrial
Champion.
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C-276 PART 2 Cases in Crafting and Executing Strategy
Airlines Flight 302 crashed on takeoff from Addis
Ababa killing all 157 people aboard. The plane was
bound for Nairobi, Kenya. Just after takeoff, the
pilot radioed a distress call and was given immedi-
ate clearance to return and land. However, before the
crew could make it back to the airfield, the aircraft
crashed. This aircraft was only four months old.10
Investigators determined that Boeing’s design
decisions on both the MAX and the plane involved
in the 2009 crash (the 737NG) allowed a powerful
computer command to be triggered by a single faulty
sensor, even though each plane was equipped with
two sensors. In the two MAX accidents, a sensor
measuring the plane’s angle to the wind prompted a
flight control computer to push its nose down after
takeoff. On the Turkish Airlines flight, an altitude
sensor caused a different computer to cut the plane’s
speed just before landing.11 (See Exhibit 2 below
for a recounting of the times of the crashes entitled
“Timeline of First MAX Flights and Accidents.”)
What Caused the Crashes?
The 737 MAX could fly further and carry more
people than any previous generation of 737s. Because
the engines were bigger and because the 737 sat so
low to the ground, Boeing moved the engines slightly
forward and raised them higher under the wing.
However, the new position of the engines changed
how the aircraft handled in the air. This created a
potential for the nose to pitch up during flight, and
a pitched nose is a problem in flight. If it is raised
too high, the aircraft can stall. To keep the nose in
trim, Boeing came up with a software called the
Maneuvering Characteristics Augmentation System
(MCAS). With this system, when a sensor on the
The 737 NG and 737 MAX Crashes
On February 25, 2009, a Boeing 737 NG (Next
Generation), a predecessor of the 737 MAX, crashed
near Amsterdam. The plane was Turkish Airlines
Flight 1951, and it was carrying 128 passengers from
Istanbul. The first officer guided the plane toward
Runway 18R and called out changes to its speed
and direction. This officer was new to the Boeing
jet, so the crew included a third pilot in addition
to the captain who had 13 years of experience fly-
ing this aircraft. As the plane dipped to 1,000 feet,
the pilots had not completed their landing checklist.
When the plane reached 450 feet, the pilots’ control
sticks began shaking which informed them that there
was an impending stall. One of the pilots pushed the
thrust lever forward to gain speed; but when he let
go, the computer commanded it to idle. The cap-
tain intervened and disabled the auto-throttle. This
maneuver set the thrust levers to the maximum. By
this time, nine seconds had elapsed since the stall
warning. Now it was too late to do anything else.
The jet plunged into a field close to the airport.8 It
was later determined by an investigation of the crash
that Boeing had not included information in the NG
operations manual that could have helped the pilots
respond when the sensor failed.
The second crash occurred on October 29, 2018,
when a Lion Air Flight 610 fell into the Java Sea just
13 minutes after takeoff from Jakarta, Indonesia. In
that crash, 187 people were killed. The flight crew
made a distress call shortly before losing control.
The aircraft had just been received by Lion Air three
months earlier.9
The third crash, which involved a 737 MAX,
occurred in March of 2019. This time Ethiopian
Year Revenue Growth (% change) Operating income Growth (% change)
2014 $82.3 N/C $4.9 N/C
2015 85.9 4.4% 4.4 −10.2%
2016 83.7 −2.6% 4.6 4.5%
2017 81.4 −2.7% 7.5 63.0%
2018 85.0 4.4% 8.4 12.0%
2019 78.1 −8.1% 8.6 2.4%
EXHIBIT 1 The Boeing Company’s Financial Performance 2014–2019 ($ amounts
in billions)
Source: IBISWorld.com
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CASE 20 Boeing 737 MAX C-277
Street Journal reported that, even for airlines that had
ordered it, the warning light was not operating.14
On October 17, 2019, Boeing suggested that it
had turned over text messages between two of the
company’s top pilots which were sent in 2016. The
messages revealed that the company knew about
the problems with the MCAS system quite early. In
fact, a former chief technical pilot for the Boeing
737 described the MCAS’ habit of engaging itself
“egregious.”15
Then on December 23, 2019, the CEO of Boeing
Dennis Muilenberg was fired by the Board. He was
replaced by David Calhoun on January 13, 2020.
Calhoun was a Boeing Board member and a for-
mer General Electric executive. In an interview on
January 29, 2020, Calhoun criticized the company’s
prior leadership for not immediately disclosing a
large amount of damning internal communications
that raised safety questions about the MAX. Calhoun
promised that he would be more transparent.16
In February of 2020, Boeing fired a midlevel
executive in charge of pilots who exchanged internal
emails that have embarrassed the company as it con-
tinued to struggle to get the 737 MAX flying again.
Those email messages indicated that Boeing employ-
ees were mocking airline officials, aviation regulators
and even their own colleagues. In one of the emails,
an employee said the 7637 MAX had been “designed
by clowns, who in turn are supervised by monkeys.”17
fuselage detected the nose was too high, MCAS auto-
matically pushed the nose down.12
On October 25, 2019, the Indonesian
Transportation Safety Committee published its final
report on the Lion Air Crash. The report largely
blamed the MCAS device. Before the crash, the Lion
Air pilots were unable to determine the aircraft’s true
airspeed and altitude and struggled to take control
of the plane as it oscillated for about 10 minutes.
Whenever they pulled up from a dive, MCAS
pushed the nose down again. The report stated
further that the MCAS function was not a fail-safe
design and flight crews had not been adequately
trained to use it.13
Boeing’s Knowledge of Problems
On November 12, 2018, The Seattle Times reported
that MAX pilots from Southwest Airlines were “kept
in the dark” about the MCAS and how to respond
to warnings from it. Then the Dallas Morning News
found similar complaints from American Airlines
pilots just four months later.
In April 29, 2019, shareholders’ meeting, Boeing
CEO Muilenberg, in response to questions about the
accidents, suggested that in some cases pilots didn’t
completely follow the procedures that Boeing had
outlined to prevent a crash in case the MCAS should
happen to malfunction. On that same date, the Wall
Feb. 2009 2016
Boeing 737 NG crashes near Amsterdam The first MAX 8 Flight
2016 2017
2 of Boeing’s top pilots indicate problems with MCAS The first MAX 9 Flight
2018 Oct. 29, 2018
The first MAX 7 Flight Lion Air 737 MAX crashes
March 10, 2019 March 13, 2019
Ethiopian Airlines 737 MAX crashes Pres. Trump grounds MAX planes
October 25, 2019 October 28, 2019
NTSB publishes report on Lion Air crash Boeing’s Pres. Muilenberg admits
Boeing knew of pilots’ concerns
December 23, 2019
Boeing’s President Muilenberg is fired by the Board
of Directors
EXHIBIT 2 Timeline of First MAX Flights and Accidents
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C-278 PART 2 Cases in Crafting and Executing Strategy
when they were hit by parts shortages, production
delays and expenses occasioned by their merger with
McDonnell Douglas.18
The Board of Directors had to deal with the bad
publicity that the company had received and the loss
in revenue for the past year. Some observers specu-
lated that it might take a rebranding of the MAX to
recover the valued name of the company. Others sug-
gested that an even more desperate act of dropping
the MAX was in order. This was the dilemma the
Boeing Board faced during the first quarter of 2020.
There were even some observers who wondered if the
coverup of the difficulties with the MCAS system
might be tantamount to fraud.
Boeing’s Dilemma
Boeing reported a loss of $1 billion in the fourth
quarter of 2019 as revenue plunged 37 percent
due to the grounding of the MAX (see Exhibit 3
entitled “Summary Financial Results for the Fourth
Quarter of 2018 and 2019” and Exhibit 4 entitled
“Commercial Airplane Deliveries in the Fourth
Quarter of 2018 and 2019.”) The company sus-
pended deliveries of the plane in the early spring of
2019 and had speculated that deliveries would have
been restarted by the end of the year. The company
lost $636 million for all of 2019. This compared to
a profit of nearly $10.5 billion in 2018. This was the
first loss the company had experienced since 1997
2019 2018
Revenues $ 17,911 $ 28,341
GAAP
(Loss) Earnings from
Operations ($ 2,204) $ 4,175
Operating Margin (12.3)% 14.7%
Net (Loss)/Earnings ($ 1,010) $ 3,424
(Loss)/Earnings
Per Share ($ 1.79) $ 5.93
Operating Cash Flow ($ 2,220) $ 2,947
EXHIBIT 3 Summary Financial Results
for the Boeing, Fourth
Quarter 2018 and Fourth
Quarter 2019 (In millions
except for share data)
Source: Boeing Web Site. https://www.boeing.com
2019 2018
Commercial Airplane
Deliveries 238 79
Revenues $ 16,531 $ 7,462
(Loss)/Earnings from
Operations $ 2,600 ($ 2,844)
Operating Margin 15.7% (38.1)%
EXHIBIT 4 Commercial Airplane
Deliveries in the Fourth
Quarter 2018 and 2019
(Dollars in Millions)
Source: Boeing Web Site. https://www.boeing.com
ENDNOTES
1 German, K. (January 8, 2020). As Boeing
CEO is fired, it’s unclear when the 737 MAX
will fly again, CNET. https://www.cnet.com/
news/boeing-737-max-8-all-about-the-air-
craft-flight-ban-and-investigations/.
2 Boeing’s website. http://www.boeing.com
3 Boeing website. http://www.boeing.com
4 Boeing website. http://www.boeing.com
5 Boeing website. http://www.boeing.com
6 Boeing website. http://www.boeing.com
7 IBISWorld.Com. https://www.ibisworld
.com
8 Hamby, C. (January 21, 2020). How Boeing’s
responsibility in a deadly crash “got buried,”
The New York Times.
https://www.nytimes.com/2020/01/20/
business/boeing-737-accidents.html.
9 German, K. (January 8, 2020). As Boeing
CEO is fired, it’s unclear when the 737 Max will
fly again. https://www.cnet.com/news/boeing-
737-max-8-all-about-the-aircraft-flight-
ban-ande-investigations/.
10 Ibid.
11 Hamby, C. (January 21, 2020). How Boeing’s
responsibility in a deadly crash “got buried,”
The New York Times. https://www
.nytimes.com/2020/01/20/business/boeing-
737-accidents.html.
12 German, K. (January 8, 2020). As Boeing
CEO is fired, it’s unclear when the 737 Max will
fly again, CNET. https://www.cnet.com/news/
boeing-737-max-8-all-about-the-aircraft-
flight-ban-and-investigations/
13 Ibid.
14 Ibid.
15 Ibid.
16 Koenig, D. (January 30, 2020). Boeing
posts 1st annual loss in 2 decades, Waco
Tribune-Herald.
17 Tangel, A. and Pasztor, A. (February 14,
2020). Boeing fired midlevel executive fol-
lowing embarrassing emails, Wall Street
Journal.
18 Ibid.
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