New England College Capital Investment Economic Discussion Responses


one:

After careful assessment of the article and the YouTube video on How a Boeing 787 Dreamliner is Built, to the best of my understanding, it seems that Boeing is more on the capital-intensive side than being on labor-intensive. Capital intensive basically refers to business processes or industries that require large amounts of investment to produce a good or service and thus have a high percentage of fixed assets, such as property, plant, and equipment (PP&E) (McGuigan et. al., 2017). Capital-intensive firms like Boeing tend to have high levels of operating leverage, which is the ratio of fixed costs to variable costs. As a result, capital-intensive industries need a high volume of production to provide an adequate return on investment (McGuigan et. al., 2017). This also means that small changes in sales can lead to big changes in profits and return on invested capital (Ross, Westerfield, & Jordan, 2011). This is exactly the way Boeing functions. Boeing invests heavily in a different set of machinery to build the planes on an ongoing basis. The cost of 1 Boeing airplane is way more than compared to the number of employees that the firm may hire for its need. Hence, capital is more important than labor. If there is no capital, then there is absolutely no use of labor for Boeing. Modern machinery, use of sophisticated and updated technology is critical for Boeing.

The increased number of people and participants which improves the value of a specific service or good can be coined as the network effect (McGuigan et. al., 2017). The network effect can lead to an improved experience as more people participate but can also encourage new participants as they look to benefit from the network (McGuigan et. al., 2017). Network effects can be found throughout social media. For example, as more users post content on Twitter such as links and media, the more useful the platform becomes to the public. The network effect has created exponential growth rates for networking platforms such as Facebook, YouTube, and Instagram. To the best of my estimate, I feel that Boeing has established the network effect for their product over the course of the last few years. Overall, the firm has been able to multiply its manufacturing of airplanes and jetliners tremendously. It has been recognized for the quality of its aircraft as well as the research and development that the organization has conducted over the last few decades which has only added a huge amount of credibility amongst consumers across the globe. Boeing has one of the largest and premier range of Boeing series that have been manufactured in the last few years. This has only led to an increase in the network effect of the products.

two:

When discussing about the Boeing operations and network effect, one need to understand the operations performed by it. Boeing makes airplanes, defense tools, and so on. These are the products that need high investment on the capital goods. Boeing is both capital-intensive and labor-intensive across all its operational segments. Chui’s (2018) video shows that Boeing company uses both labor and capital in its operations. For instance, it imports the Dream lifter operations materials from different regions. The regions include South Carolina, North Charleston, Japan, and Italy. This shows the application of capital. The assembly of the aircraft occurs in eight regions. Thus, there are supervisors and controllers to ensure efficiency in each stage. The employees form part of labor required in the firm (Chui, 2018). They also assist in wiring the aircraft, where the company requires many employees if the aircraft must be completed fast. Boeing’s manufacturing relies on work as a corporation that is labor demanding. It was compelled to limit its work to decrease labor costs and expenses but used the available work intensively to optimize its productivity.

Boeing is one of the airlines that confront economic issues, tragedies, and risks but has been profitable with its robust strategy and management plans. The corporation battled silently through accounting fraud and protected the integrity of its business with a large amount of investment engagement. In 1997, Boeing experienced a production issue that led to a catastrophic decrease in its share and turbulence by many initiatives to trigger numerous internal adjustments that may revitalize the corporation (Boeing’s Secret)

In order to assist resolve many of the financial problems that have affected the stability of its economy, the corporation has employed both an intense capital strategy and an intense labor strategy. According to Aboulafia 2015, Boeing had to use these methods to adapt its strategy to business and manufacturing to contend with the severe rivalry of business competitors (Aboulafia, 2015).

Chui (2018) also illustrates that the management benefits from network effects. The assembly plant has eight positions, starting from zero to seven. The tasks undertaken in position zero is utilized by position one up to position seven. Therefore, the company is labor and capital intensive. Production efficiency relies on the joint efforts of machines and humans which makes it easy for the management to deliver value from the initial operations.

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