ontracted to competitors. A subcontractor could also be the technological leader in the assembly of any one component and thus manufacture a large portion of the total without winning the primary contract. Post-Merger Internal AnalysisWith the acquisition of McDonnell Douglas, Boeing became the worlds largest producer of military and commercial aircraft and the second largest supplier to the US Department of Defense. This was a very related diversification strategy, since both industries have many engineering, technology and manufacturing commonalities. This merger had two major benefits;1)Knowledge transfer: between military and commercial divisions. Experience in the commercial division would give Boeing the cost discipline necessary to win government contracts, while technical knowledge in military aircraft could be transferred over to develop better commercial aircraft. This knowledge transfer had historically played a key role in giving Boeing technological leadership as it employed its knowledge from the defense industry into developing jet commercial aircraft, and achieving market leadership. Even the competition acknowledged knowledge transfer to be an enormous advantage. 2)Risk Pooling: The merger was also supposed to lessen the effects of the deep business cycles associated with commercial aircraft. Increasing the % of revenues derived from the defense industry, subject to long-term contracts and lower volatility would help in weathering deep recessions in the commercial aircraft industry. But Boeing also experienced some problems. As its revenues increased by over 60% immediately after the merger, the company suddenly had to take on many new responsibilities. In the process, management committed a major blunder by focusing almost exclusively on expanding its military business, at the expense of overlooking many problems in the commercial aircraft group. As a result, Boeing ran into many problems. It quickly failed...
