nts from contractors. On the other hand, subcontracting does have the benefit of lowering the amount of risk associated with large investments in specialized assets that would be rendered almost useless in a deep recessionary cycle. Subcontracting also remains a very important issue because Boeing recently had to grant their labor unions very generous contracts in order to avoid costly strikes. A major point of these contracts diminish the companys ability to decide which jobs to cut and subcontract. This lack of flexibility could hinder Boeings performance in a recession, as its labor costs cannot be adjusted downward.A second problem with the turnaround plan is its inability to address Boeings loss of technological leadership to Airbus Industrie, a differentiating factor that had given Boeing a strong competitive advantage throughout its history. Boeing had acquired its technological leadership from its research and development investments, striving to develop new and unproven technologies. But it has recently changed to a more conservative attitude, perhaps in an effort to lower risks. Its plans to abandon development of a new supersonic commercial jet, and reducing R&D expenditures from $1.9 billion to $1.5 billion in the next few years show a lack of vision and commitment to innovation. This could be the factor that permanently relinquishes technological leadership to Airbus.Recommendations1)Subcontract as much of the component assembly as possible, within the limits of union contracts. Subcontracting should be done for all those components whose technologies are not crucial to Boeings product differentiation, i.e. standardized products and services. Subcontracting should be done as long-term relationships in order to provide greater value added in the production chain. Boeing should stress a commitment to purchasing from its subcontractors, at a price that offer value to both parties, as long as several criteria such a...
