Research Proposal: Aerospace Defense

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Boeing and Globalization

The process of globalization, which is emphatically pursued today by economically empowered entities such as North America and the European Union, seeks an economic world order in which unfettered international trade and the deregulation of the global marketplace can -- according to theoretical claims -- help to elevate the development sphere of the world by transferring technological and political developments thereto. By contrast, critics of globalization argue that this claim is unrealistic, and instead allege that wealthier nations have used 'developing' nations to exploit low resource and labor costs, reduced environmental or labor laws and the essential need of such nations for international support. In such a scenario, the advances in technology or policy, it is argued, do not benefit members of the public. The result of this sharp contradiction in interpretations of globalization leads to our discussion on its impact on American firms. In particular, we consider a domestic firm possessed in the means to the pursue globalization, underscored by the reputation and resources to actualize an international strategy and market interest which is particular to the new context of global free trade. As a provider of military equipment, a developer of defense technologies and an innovator in the field of aeronautics, the Boeing Corporation

For a corporation such as Boeing, a leading force in the development and retail of military technology, and lately with a focus on missile guidance systems and other non-commercial endeavors, globalization is a double-edged sword. It has created a considerably more massive open market for the company which, given its recent history and contractive experiences of the 1990s, is in a position of need with regard to enthusiastic buyers. By contrast, its position of dominance is likely also to be imperiled by the competitive entrance of foreign firms in the American market. The latter of these quite often are capable of operating at a lower cost, and thus, of passing that premium on to the contracting nation. For Boeing, the implications of globalization are therefore extremely complex.

As to the expanded marketplace, there is a sheer necessity for Boeing to take advantage of presented opportunities. The last near-decade of military conflict and significant foreign reconstruction contracting, deeply entwined with the goals and rhetoric of globalization regarding the advancement of capitalist democracy, have been extremely important to the rehabilitation of Boeing. This is because "during the 1997-98 boom cycle, its factories tried to build too many planes too quickly and wound up having to trigger a disastrous shutdown of the assembly lines. The fallout cost Boeing $2.5 billion in delivery penalties and cost overruns, and nearly destroyed its reputation as the world's leading developer of commercial jets." (Holmes, 1) the limitations of its domestic market and the concurrent contractive cycle in its military venturing would be fundamentally problematic for the increasingly defense-minded company.

However, with the current War on Terror driving defense, military and technology contracts to the height of government interest and investment, globalization is shown to be closely correlated with the theoretical premises of free trade. Such is to say that, as with the wars in Iraq and Afghanistan, its advocates view globalization as the inherent effect of technological advance, with natural market tendencies serving as the prime impetus for expansion beyond traditional nation-state parameters. The International Monetary Fund, a primary institution in the implementation of globalization efforts, notes that the process "refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity -- village markets, urban industries, or financial centers." (IMF Staff, 1)

In this way, globalization is seen as an evolution of market behaviors, with our technological capabilities and a degree of cultural relativism breaking barriers to inter-state commerce. It has oft been argued, therefore, that the greater inclusion of formerly 'third-world' nations in the activities of the first-world will promote the improvement of economic, political and diplomatic characteristics. For Boeing, it is true that its operations have taken it to places far afield, where its technology becomes beneficial to other cultures.

Thus, if Boeing is able to play the market correctly, it will have the opportunity to gain in the global competitive scheme as well. In July of 2008, Boeing struck a deal with Etihad Airways, based in Abu Dhabi, for $8 billion. (Rigby & Lalor, 1) the deal, made feasible by the directives of Free Trade, is indicative of a mounting pattern whereby economic considerations have demanded that such corporations search elsewhere for such contracts. This is not only demanded as a means to mitigating losses through more intensive domestic competition. Beyond this, "high oil prices have dozens of western airlines struggling to avoid bankruptcy while a new breed of majors from the Gulf invest in large fleets backed by oil wealth and driven by a concerted push to develop the region as a crossroads for globalisation." (Rigby & Lalor, 1)

Still, indicators for Boeing are not totally positive as concerns globalization. As with many other participants in this process, American firms are finding global competition to be genuinely problematic. Indeed, it is the case of globalization that by and large it has helped to exploit the higher overhead that defines the American labor and production markets. Accordingly, to domestic advocates of globalization, a "disruptive trend may be the fast-rising tide of white-collar jobs shifting to cheap-labor countries. The fact that programming, engineering, and other high-skilled jobs are jumping to places such as China and India seems to conflict head-on with the 200-year-old doctrine of comparative advantage. With these countries now graduating more college students than the U.S. every year, economists are increasingly uncertain about just where the U.S. has an advantage anymore." (Bernstein, 1)

The faded advantage has manifested thusly with little reprieve even for the largest or most implicated of firms.

On one hand, it must be argued that Boeing is by the nature of its business among the most inherently globalized American firms. Phrasing it bluntly, one theorist argues that "quite frankly, arguing against a global corporate partnership would just sound silly coming from a company that touts the international nature of the supply chain it forged to produce its latest flagship product -- the 787 Dreamliner. Just last fall, a Boeing production executive spoke to MBT with pride about infrastructure Boeing created to coordinate the efforts of 132 partners from Japan, Australia, and Italy." (Hill, 1) Still, we find today that Boeing is in fact engaged in the institutional effort to protect itself against foreign competition.

It is interesting that even as the expanding global conflicts related to globalization tend to inflate business opportunities for companies like Boeing, it is this very same scenario which places Boeing in such a compromised competitive position even within the domestic context. Such is to say that where Boeing has had few parallels in its aerospace and defense capacities within the United States -- accepting its long-time collaborator, Lockheed Martin -- it must now match both innovation and cost with foreign competitors. And the latter of these issues, one of the driving effecters of globalization, is particularly hard to match. In a recent case, the impact of this newly open market would be evident not just for Boeing but additionally for key U.S. agencies.

Namely, in the spring of 2008, Boeing formally filed petition against the United States Air Force for determining to invest $40 billion in a contract for military use refueling tankers into a firm based significantly in Europe. (Hill, 1) After the Air Force named European Aeronautic Defense & Space Co. (EADS) as one half of the team commissioned to meet its expectations, Boeing raised a very important recurrent issue on the subject. Accordingly, "evidence Boeing presented to the GAO includes a claim that the Northrop Grumman-EADS team was able… [END OF PREVIEW]

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