IBUS1000 Boeing 737 Max Global Crisis Case Study Sample

• Subject Code : IBUS1000
• University : The University of Newcastle My Assignment Services is not sponsored or endorsed by this college or university.
• Subject Name : International Business Management

Managing International Business Risk Report

Executive Summary of Managing International Business Risk Report

The subject of crisis management is regarded to be quite critical in public relations. In the modern world, crisis management is a critical aspect in determining the sustainability of any business after a disaster. Ineffective management of a crisis has a potential of leading to serious harm to a company, its stakeholders and even its own sustainability. This report discusses the Case of Boeing 737 Max Global Crisis and its approach to the same, the lessons that can be derived from it and the future implications. Boeing 737 Max is fourth-generation Boeing 737 passenger airplane, whose production started and continued between 2014 and 2020, after which productions ceased temporarily over safety issues. In 2018, Boeing’s Max aircrafts were involved in two fatal crashes within two months, subsequently leading to the death of over 350 people.

These resulted to worldwide safety concerns. Numerous investigations extended blame to the company for poor management, decision making and operations. In addition, the company did not have adequate and effective disaster handling mechanisms, leading to poor management of the incidents that caused further blow to the company’s reputation. In this regard, the incidents and disaster management approach by Boeing could be a significant lesson for other airline companies and business in general to know what they need to do in such scenarios. In particular, compared to its competitors, the company appeared to have been ill prepared in handling disasters. They didn’t have a PR or communication team in place nor did they collaborate with the involved airlines in handling the matter.

Table of Contents

1.0 Introduction.

2.0 The Importance and Role of Crisis as well as Crisis Management in International Business Firms

3.0 A comparison of the Crisis Management Cycles-Mitigation and Prevention.

3.0 Analysis of Boeng’s Preparedness in dealing with the ‘2018 Boeing 737 Max Crisis.

3.1 Pre-Crisis Background Context (the 737 max aeroplane)

3.2 The Risk Event ( The 737 MAX Crash)

3.3: Crisis Response and Management

3.4 Implications Arising From the Boeing 737 Max Crisis.

4.0 Conclusion.

References

1.0 Introduction to Managing International Business Risk Report

Crisis management refers to the processes and strategies that an organization employs in dealing with crisis and incidents that threaten to cause harm on the business, its consumers, the public or stakeholders (Wang, 2016). The environmental and industrials disasters that occurred on large scale basis in the 80s triggered companies and researchers to reconsider the subject of crisis management. Currently, this topic is regarded to be a very crucial process in public relations. Crisis management is even more significant in today’s business environment for the purpose of addressing environmental disasters, ethical supply chains, safe products, cross cultural communications and even company data. The approach a business uses in managing its crisis is crucial in determining its success (Fragouli, and Ibidapo, 2015). In the modern world, crisis management is a critical aspect in determining the sustainability of any business after a disaster. This report discusses the Case of Boeing 737 Max Global Crisis and its approach to the same, the lessons that can be derived from it and the future implications.

2.0 The Importance and Role of Crisis as Well as Crisis Management in International Business Firms

At one point, a business may find itself facing challenges in crisis management which include decision fatigue, sustainable supply chain, sustainable management, human trauma, measurement methodologies, and resilience among others. In most of the cases, how a business manages a touch crisis gives customers an honest perspective of the company’s effectiveness in approaching those risks compared to press releases that are meticulously fashioned (Ischbacher-Smith, and Ischbacher-Smith, 2016).

There are a myriad of examples depicting the results of poor crisis management approaches. A good example is the FIFA crisis incident whereby; a section of top managers were arrested and arraigned in court for bribery. There is also the case of Sports Directors whereby; some of its top managers were accused of paying its workers wages that were beyond the legal minimum wage. Another case is that of Krispy Kreme Club which was accused of using an offensive and inappropriate name in its promotions. The case of VW Company where the outcome of their cars performance were falsified for marketing purposes is also known to many. These scenarios only work to show how serious could a poor crisis management approach be to a company.

Ineffective management of a crisis has a potential of leading to serious harm to a company, its stakeholders and even its own sustainability. According to Fragouli, and Ibidapo, (2015), poor crisis management can ruin a company’s reputation, its leadership, its whole communities, its workers and even its geographical location. The impact can also extend beyond the business itself. In this regard, businesses and companies need an early warning system to support the management in controlling and effectively managing the risks. Capkovicova, and Bednarik (2016) points out that the early warning system offers an immediate forecast through the use of standard forecasting approach as well as the use of simple approaches. Zhang & Wang (2016) emphasize that incorporation of the risk warning and management system is something that is crucial and urgent for an organization’s sustainability in times of crisis. 

3.0 A Comparison of The Crisis Management Framework-Mitigation and Prevention Framework

Crisis management is commonly known to be a process which is multiple-phased. However, these phases are in most cases paralleling instead of simply running sequentially as depicted by the cycle illustration. Though there are diverse frameworks of crisis management cycle. However, the four phases cycle, which have became widely accepted among organizational members(Srinivas2019). These phases which are shown in figure 1.1 below consist of preparedness, response, mitigation and recovery.

Nonetheless, the focus of this section will be to make a comparison any of the two phases. In this regard, the phases compared include Preparedness Mitigation Phases. The term “preparedness” can be related with “readiness” and implies the ability to respond when necessary. In respect to disaster management, a business needs to have in place a mechanism to prevent and deal with a crisis in its eventualities. This means that it must have a mindset of these possibilities and thus put in place mechanism to address it (Bullock et al, 2013). Therefore, preparedness is related to the mitigation in the sense that both are focused towards the same goal; that is dealing with risk eventualities. However, while preparing for such risk eventualities, there is no business that is sure the exact kind of risk it will face. This means that the risk preparedness strategies and measures are either based on modeling, probability or guesswork. The truth of the matter is that any company may experience a risk that it didn’t envision and which will warrant it to modify or replace the existing risk mitigation strategies.

The adverse implication of risks may not be fully prevented. However, their severity and scale may be substantially reduced through effective preparedness measures. This means that the level of a company’s preparedness towards a crisis determines its success in mitigation. Mitigation measures constitute of construction of harm resistance techniques, policies and employee awareness. These measures have to be put in place early enough before the risk incident actually happen. If there are no such measures in place when a hazard occurs, it simply means that the crisis may go out of control and cause an adverse negative impact to the company. In this regard the implication here is that risk preparedness is directly related to risk mitigation. This is because as earlier explained; the success of risk mitigation strategies is directly related to preparedness towards the same. Preparedness means that a company puts in place relevant strategies, and mechanisms to deal with the potential crisis. On the other hand, lack of preparedness means that a company does not have such measures in place and thus vulnerable to the full impact (Sumitomo Mitsui Financial Group, 2011).

3.0 Analysis of Boeng’s Preparedness in Dealing with The ‘2018 Boeing 737 Max Crisis

3.1 Pre-Crisis Background Context (the 737 Max Aeroplane)

The Boeing 737 Max is uniquely designed, with a relatively lengthy linear distance, which in turn ensures maximum efficiency, flexibility and reliability. It is among the several single-aile Boeing 737 airplane models, built by Boeing Commercial Airplanes (CBA), which is an international airplane manufacturer based in the United States. This is the fourth-generation Boeing 737 passenger airplane, whose production started and continued between 2014 and 2020, after which productions ceased temporarily over safety issues. The Boeing 737 Max airplane is the immediate successor of the Boeing 737 Next Generation (NG) and is a popular choice among many airliners. Even though this 737 Max model is designed uniquely, its design concept is borrowed from previous builds. The engine designs were then remodeled accordingly and o accompany me the new more efficient CMF International LEAP-1B turbofans. As of 2014 till now, approximately 387 airplanes have been delivered to customers. By Dec 2019, 400 vessels in total had been made and stored (Root, 2020).

The much celebrated fourth generation Boeing 737 Max, which was re-engineered futuristically, comprises several safety and high-quality comfort features. Some basic features in the plane include a spacious and gorgeous interior, which is fitted with LED lighting. The traditional Boeing 737 Max engine design has also been upgraded to fit the flight Requirements of the NG successor, thus making it achieve unbelievable speeds. Its auxiliary unit power exhaust and inlet is a revised version if its predecessor's and it also features a re-contoured tail cone. There are several other improvements such as the exclusion of the aft-body vortex generators. The speed current record of this airplane is Mach 0.79, which blandly translates to 839 Km/h or 453 km. Besides the state-of-the-art features, the Boeing 737 max also has many benefits that sets it apart from most airplane designs (Langewiesche, 2019).

Airliners, or simply revered to as airline companies, are large corporations that are responsible for provision of either chartered or scheduled flights within a region or across various regions. However, like all competitive business environments, this sector is swarmed with both large and small airlines, some of which include the sorts of American Airlines, Air Peace, AeroMexico, Air Canada and Air Europa and many more. Majority, if not all of these airlines, including numerous others, have several carrier Boeing 737 Max planes in their fleets. In this greatly competitive market, many airliners mostly prefer to settle for this plane due to several reasons. Aside from the features earlier mentioned, this plane also offers immense reliability well as efficiency.

In Australia, where two of the world's busiest flight routes are, the airline market is expected to grow by an inordinate margin to somewhere around $29.3 billion in between the periods of 2019 and 2038. Furthermore, the airline passenger market is expected to grow at a compound annual growth rate (CAGR) of 4.6% each year. Qantas Airline and JetStar hold the largest market shares in this sector, which alongside each other hold 60% of the market share (Qantas, 2018). Other domestic stakeholders include Virgin Australia, Rex and Tiger Airways. It is safe to incur that this growing market's demand will be met sufficiently by the many domestic airliners in Australia. It's also evident that due to the abundant carrier services, that this is among the busiest flight routes in the region. On the other hand, the U.S has one of the largest airline corporations in the globe, namely American Airline Corporation. Presently, it is among the most popular choice in the U.S airline market and is immediately followed by United Airlines and then Delta Airlines. Just like previously stated airlines, these American airliners have a large fleet of various Boeing 737 Max airplane variants (Qantas, 2018).

On the international scale, the aviation industry is worth billions of dollars, and according to expert predictions, will only get higher in the foreseeable future. Globally dominating airlines in the world today include colossal corporations like Qantas, Air New Zealand, Fiji Airways, JetBlue Airways, Air Canada and many more. Likewise, passenger traffic is also expected to rise in direct proportion to the CAGR, which is 4.6% per annum (Qantas, 2018).

3.2 The Risk Event (The 737 MAX Crash)

In 2018, Boeing’s aircrafts were involved in two fatal crashes within two months, subsequently leading to the death of over 350 people. The first incident was a Lion Air 737 Max which crashed into the Indonesian sea in October 2018 causing the death of all the 189 people that were on board. Then there was an Ethiopian Airline that crashed in March 2019, shortly after taking off and killing more all the 157 people that were on board. This also led to the families of the deceased suing the aircraft manufacturer for impropriety and negligence. Further, global aviation authorities were forced to ground the Boeing 737 Max passenger plane after the incident (Thisdell, 2020).

In October 29, 2018 a 737 MAX 8 operating as Lion Air Flight 610 crashed shortly after taking off from Jakarta airport, killing 189 people on board. Preliminary investigations established the prevalence of serious flight control issues which led to traumatizing of the crew and passengers on the previous flight. The report also found signs of instrument failures and angle of attack (AoA) sensor on those particular and previous flights. These problems were also related to a design flaw that involved the Maneuvering Characteristics Augmentation System (MCAS), of the 737 MAX series. Interestingly, the maintenance records of the aircrafts designer showed that the A0A sensor was just replaced the day before the accident flight. Nonetheless, the accident was attributed to the erroneous data in the A0A as well as the false command of the MCAS that led to automatic nose down (Graham, 2020).

Over the next weeks and days, media reports such as The Seattle Times indicated how the management of Boeing as well as FAA had supported decisions that could lead to cost savings in their decisions. According to this media outlet, the poor managerial decisions and insufficient oversight resulted into production of an aircraft with a flawed design. Another interesting fact revealed by the media was that Boeing failed to include a description of the The Maneuvering Characteristics Augmentation System (MCAS) in its flight manuals (Hradecky, 2019). This means that the pilots were literary unaware of the existence of the systems upon entry of the airplane in service. MCAS is flight control software which is engrained into the Boeing 737 MAX flight control system with an ability to mimic pitching behavior of the aircraft in the former generation of the Boeing series. Another report by the Wall Street Journal indicated that the management of Boeing had been aware of the key deficiencies which suppressed the all important A0A disagree message. Furthermore, Boeing did not share information concerning that knowledge or issue before the Airlines crash in Indonesia. This put the pilots of the Lion Air plane at a disadvantage when trying to respond to the erroneous activation of the system since they had no knowledge of MCAS as well as its behavior (Pasztor et al, 2019).

3.3: Crisis Response and Management

From Boeing’s incident and response over this matter, it is apparent the company’s preparedness on disaster mitigation was below par. First of all, this company failed to consider incorporating safety features on its new airplanes which could have offered crucial information to the crew and operators taking into concern that they were sold as options by Boeing. According to an evaluation by the On The Air Current, a warning light could have been necessary to make the crew alert on the disagreement between the angle of attack sensors in the Max jet. The Times also noted that aircraft manufacturer could opt to incorporate optional features that involve comfort and aesthetics such as extra bathrooms, fancy lighting or seating (Langewiesche, 2019). In addition, there could also be other features which include safety systems, navigation or communication system and which are more critical to the planes operations. Sadly, Boeing failed to put in place a disagree light from its Max plane and which would have activated when the angle of attack sensor were at running parallel to one another (Hawkins, 2019).

From Boeng’s response on the Max crash crisis, it is evident that the company did not have prior crisis response and mitigation program in place. This was evidenced by the unclear and confusing apologies issued out by the company’s CEO Muilenburg owning up to the crisis and at same time absolving the company from blame. Furthermore, most of the communications at this time was certainly not from a point of knowledge since the reports was full of errors. Initially, Boeing attempted to downplay the incidents while blaming the pilots for the errors, yet investigations showed that the problem was caused by system malfunction. Rather than being upfront about the disaster, the management downplayed the incident. It seems that company ignored the safety concerns after the incidents. The mishandling this issue caused a PR nightmare for the company. It is also an indication that there was no effective PR and communication team to handle the matter as required (Talevska, 2019).

Perhaps, Boeing could learn from how, Raytheon, the manufacturer of the Beech 1900 twin-engine turboprop operated by the US Airways that crashed in 2003. The flight had crashed shortly after taking off from Charlotte-Douglas Airport resulting to death of all the 21 members who were on board. However, an assessment by McClellan(2018) of the company’s handling of the disaster found that it was effective to some level. This firm had instituted an effective crisis plan. It was able to handle over 40 media calls with its internal PR personnel. It also availed information regarding the type of aircraft and its safety record. What is more, Raytheon also collaborated with the US Airways to provide any assistance required.

3.4 Implications Arising From the Boeing 737 Max Crisis

Just the past year, two different planes from Boeing Commercial Airplanes (CBA) were involved in vicious accidents. What's shocking is that these tragedies involving the 737 Max series occurred within 6 months of each other, thus resulting to worldwide safety concerns. This duly resulted to several implications that has seen Boeing reduce its production and ultimately have it ceased. From lowered revenue to a disdained reputation, the crisis has orchestrated several detrimental effects). Together with the global pandemic, which is still at large, Boeing's future still remains uncertain. Other consequences in line include victim litigation, reduced debt ratings, consumer compensation and many more (Polek, 2020).

However, the CBA is not the only entity whose operations and strategic business plans has been severed. Major airliners, safety regulators and even Boeing itself have a broad lesson to learn, which will not only help mitigate future accidents, but also improve the current state of standard aircrafts. First, as a manufacturer, Boeing should never have compromised their product, be it to save or make more within a short stint. Second, although normative pressure at times might compel corporate entities to focus on cost reduction, revenue augmentation and time saving, which mostly compromises quality, large corporations like Boeing should strive to adhere to the set standards. Airliners on the other hand should ascertain that the aircraft they've purchased meets the strictest safety standards. This should be done before the aircraft is approved for commercial and cargo flights (Benigo, 2020).

The air regulatory/safety sector also has a massive role to play in ensuring aircraft safety standards are met and that each airplane model is safe for human transport. With the recent events unfolding, involving the Boeing 737 Max planes, aviation safety regulators can obtain a few lessons. One of which is that even highly certified and tested systems, including planes can have defects. As such, there should be a thorough and vigorous review of all manned flights before take-off.

4.0 Conclusion on Managing International Business Risk Report

The crash of Boeing 737 Max jets that is the Lion Air Flight 610 as well as the Ethiopian Airline 302 was a significant disaster to Boeing Company. Numerous investigations extended blame to the company for poor management, decision making and operations. In addition, the company did not have adequate and effective disaster handling mechanisms, leading to poor management of the incidents that caused further blow to the company’s reputation. In this regard, the incidents and disaster management approach by Boeing could be a significant lesson for other airline companies and business general to know what they need to do and not do in such scenarios. In particular, compared to its competitors, the company appeared to have been ill prepared in handling disasters. They didn’t have a PR or communication team in place nor did they collaborate with the involved airlines in handling the matter. In this regard, they needed to incorporate an effective PR and communication team who understand how best to handle such matters in the event of a disaster.

References for Managing International Business Risk Report

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