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School of Aerospace, Mechanical and Manufacturing Engineering
BUSM 1222 – International Business
Internationalization
Due Date: 27th April, 2012
Topic: Boeing Australia
Lecturer: Prof. Nattavud Pimpa
Student: David Chipperfield
Student No.: S3135373
Word Count: 2,469
AERO2364 – Contemporary Issues in Aerospace
David Chipperfield – S3135373
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AERO2364 – Contemporary Issues in Aerospace
David Chipperfield – S3135373
Table of Contents
TABLE OF CONTENTS................................................................................................................................II
LIST OF FIGURES.......................................................................................................................................II
1 INTRODUCTION.............................................................................................................................3
2 HISTORY OF THE BOEING COMPANY....................................................................................3
3 COMING TO AUSTRALIA............................................................................................................6
4 FACTORS AFFECTING THE MOVE..........................................................................................9
5 THE IMPACT IN AUSTRALIA...................................................................................................10
6 LOOKING TO THE FUTURE......................................................................................................12
7 CONCLUDING REMARKS AND PERSONAL INSIGHT.......................................................13
8 BIBLIOGRAPHY...........................................................................................................................15
List of Figures
FIGURE 1 REPLICA B&W MODEL 1 FLYING OVER SEATTLE, (PELLETIER, 2010) 4
FIGURE 2 CONSOLIDATION OF THE MAJOR US AEROSPACE COMPANIES,
(HTTP://WWW.ECONOMIST.COM/NODE/1223580 VIEWED 226/04/2012) 5
FIGURE 3 BOEING AUSTRALIA LOCAL INVESTMENTS, (BOEING AUSTRALIA, 2012) 8
FIGURE 4 BOEING SUPER HORNET, (HTTP://WWW.AIRLINERS.NET , VIEWED 26/4/2012) 11
FIGURE 5 BOEING 787 DREAMLINER, (HTTP://PERSONAL.PSU.EDU/TYL5059/787.JPG , VIEWED 26/4/2012)
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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
company’s largest foothold outside the US base. This report will investigate the key
items in Boeing’s 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 1960’s, 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
well as substantial trickle-down losses to the numerous subcontractors and communities
in which Boeing operates, (Bauer, 2008).
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In the early 1990’s 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 Boeing’s operation. Boeing and Rockwell
completed a merger of their defence and aerospace units in 1996, which would also
become Boeing’s 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)
During the 1990’s 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
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across the world, with Australia having the biggest presence outside the US (Boeing
Company, 2012).
3 COMING TO AUSTRALIA
Boeing’s footprint within Australia is said to begin in 1927 when de Havilland Aircraft
Company began sales and maintenance at Fishermen’s Bend, Melbourne. However
Boeing’s 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 Boeing’s 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
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).
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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).
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Figure 3 Boeing Australia local investments, (Boeing Australia, 2012)
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AERO2364 – Contemporary Issues in Aerospace
David Chipperfield – S3135373
4 FACTORS AFFECTING THE MOVE
There are a number of factors that attributed to Boeing’s shift into Australia from the
first push in 1959. Initially Boeing’s 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
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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
country’s 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, Boeing’s 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).
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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)
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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).
Boeing’s 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 on-
going supplier issues that have caused the initial aircraft delays. Australia’s efforts in
the production have been successful thus far with production already supporting six
units per month, (Sloan, 2012).
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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 company’s 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
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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, Boeing’s 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 Boeing’s 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).
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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.
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Walker, D. (1995, April 19). Rockwell To Expand Aerospace. Sydney Morning Herald,
p. 39.
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