Introduction
As strategic management paves the way for better capturing the market for a company, it is vital to plan a management strategy for battling in the competitive market of today’s world. A management strategy approach should be chosen in analysing deep into strategic management in the real business world. In strategically managing firms, a sophisticated set of techniques must face any existing or future risk. The following report sheds light on the strategic management issues of British Airways. Modern tools and techniques have been employed to understand the issues deeply. Through well-investigated internal and external environments, the various levels of strategies of British Airways have been discussed in this report.
Task 1 Analysis of the External Environment
Analysis of the Micro Environment: Porter’s Five Forces Analysis of British Airways and the Airline Industry
Bargaining Power of the Customers: In the airline industry, the customers are highly price-sensitive, and they change their preferences according to the price ranges of the airlines. This is why the force here is very strong. The customers expect more value in affordable prices in the airline industry. In the low-cost market, bargaining power is a very strong force in the whole industry. There are little bits of differences in the market offered by the airline firms, giving more bargaining power to the customers as well. In recent years, customer’s strong knowledge about the price and offers from the Internet has empowered their bargaining ability more.
Bargaining Power of the Suppliers: The suppliers of the aircraft firms have a high level of bargaining power. All the aircraft firms in the industry have to comply with the secondary rules established by IATA. IATA has made it compulsory for aircraft firms to reevaluate the period of land use and the slots in the timings. Air BP is the sole supplier of aircraft fuel for British Airways, restricting the power of British Airways with a single supplier. There are also trade unions of the employees, which also increases the power of the suppliers’ bargain.
The threat of New Entrants: It needs a lot of capital investment to start an aircraft firm. Besides, there is a close relationship between pricing and customer satisfaction. These two things make the industry somewhat protected for the existing players like British Airways. There are many regulatory policies and legislations to pass and maintain, which might not be easy for a new entrant in the market. Experienced aircraft businesses reign the market. Moreover, many competitors in the market and a new entrant might face huge competition to run a business. Hence, the threat of new entrants is low in the industry (Berenbak and Lanser, 2012).
Competitive Rivalry: The airline industry is mature. As it happens in a mature industry, competitors have to steal a customer from another competitor to win a slightly higher market share, as it happens in the airline industry. In terms of short-haul flights, British Airways can differentiate itself from its competitors. However, in terms of long haul flights, there is little difference between any two airlines. Hence, competitive rivalry is very high in the industry (Engrossian, 2015).
The threat of Substitutes: In terms of long haul air travel, there is seemingly no substitute for airline travels. It is convenient and possible for a customer to reach a distant destination with airlines, and people usually do not go for an alternative option. However, it is very common for people to calculate many things while travelling for a short-haul airline. Short-haul airline travel has a lot of substitutes like bus travel or train travel.
Analysis of the Macro Environment: PESTEL of British Airways and the Airline Industry
Political Context: Recently, there have been many regulations regarding the airlines’ timing from the government to make air travel more convenient for the passengers. There have been many ill-practices in the airline industry by some players regarding pricing and ticket reservations (Mihir, 2015). The government has come forward to curb these issues. In recent time, there have been significant changes in the airlines’ security by the government as the number of terrorism incidents has increased worldwide.
Economic Context: The world is undergoing fuel costs to be higher, and consequently, the airline industry is the worst sufferer. The entire cost structure has been changed, and hence the airline firms are undergoing serious reforms. This price reform influences the customers and airline firms like British Airways (Marriott, 2013). Due to the increase in the airline industry’s security, the industry has moved to higher prices and the prices are passed on to the ultimate customers. As there is pressure from the British Pilots Association, the cost is expected to rise higher in the future.
Social Context: Nowadays, travelling via airlines is not considered a luxury. The number of holidaymakers has increased a lot throughout Europe. Therefore, the number of passengers for the airlines has also increased a lot (Brender, 2015). The life expectancy of the people has increased. This is what leads them to travel more via airlines and visit many places before they die. The ageing and retired population in the UK has increased lately. Hence, British Airways is giving a systematic disability assistance facility for customers like them.
Technological Context: Online booking and online information has taken the airline industry to a new height. Social networking has been a major issue for people now. Hence, they want to be recognised in society more by travelling places via aircraft.
Environmental Context: There have been issues regarding carbon emission by airline firms. This might also increase the environment for them to bear. Moreover, to gain the customers’ support, some of the competitors in the airline industry are coming up with eco-friendly travelling promotions (Endres, 2009). There are new fleets with eco-friendly technology and lower sound pollution.
Legal Context: The open skies agreement has drastically changed how aircraft firms ran their business earlier. The number of regulations regarding different factors of an aircraft firm has increased than that of the past. Government regulations have imposed a ceiling on pilot flying hours to prevent dangerous fatigue (Ninrida, 2015). Therefore, British Airways could not force pilots to fly more than a precise number of hours per week.
Task 2 Analysis of the Internal Environment
Resource-Based View
Threshold Resources:
Tangible resources: There are more than 250 aircraft of British Airways flying worldwide, approximately to 550 destinations regularly. The company also has some supplementary services to earn revenues from.
Intangible resources: It has one of the widest customer networks in the airline industry. Through this customer database, British Airways can pinpoint its offers to the customers. The aircraft firm is also a partner of “One World”, which is a very good intangible asset for the firm (Riggorin, 2015).
Threshold Competencies:
British Airways arranges training for its ground school and arranges many flight simulators to reduce the number of embarrassing incidents during a real flight. It also arranges cabin security training (Musso and Risso, 2014). As British Airways achieves economies of scale through its dedicated suppliers, it has also gained a competitive advantage over its competitors.
Exclusive Resources:
British Airways has exclusive access to Heathrow airport’s Terminal Five, which means it runs exclusively in that particular area. On the other hand, the brand image of British Airways is the exclusive one that has been developed for years. The brand is surviving exclusively with a particular brand image in the customers’ minds for many years. Experience is another vital exclusive resource.
Value Chain Analysis
British Airways has been trying to control its system by using a forwarding and backward mitigation process. The value system of British Airways has so far been upgraded through in-house supplies. Moreover, British Airways Holdings Plc. has also been a vital factor in rejuvenating the firm.
Support Activities
Firm Infrastructure: British Airways has a very structured hierarchy in its firm. There is a multitude of specialist knowledge in British Airways, which is one reason why British Airways has gained a competitive advantage over its downsized competitors.
Human Resource Management: British Airways has invested a lot of money in its customer service training schemes. The firm has developed new and very well designed human resource planning during the past decade (Loren, 2015). For example, in 2007, British Airways came up with an employee motivation scheme to increase the airline’s customer service. With the new strategic move through British Airways’ “Speak Up”, the employees now get more opportunities to let their opinions work in the organisation (Mirin, 2015).
Technology Development: While small airline firms struggle to cope with new technologies, British Airways has been flourishing its flag of good customer service by bringing new and better technologies each year. British Airways has a good amount of slack resources, enabling the firm to invest in innovative services (Miller, 2009).
Procurement: British Airways has been operating in the airline industry for many years. Hence, it has historically produced a good number of suppliers and partners in the field. Through the benefits of economies of scale, British Airways has leveraged its alliances and suppliers.
Primary Activities
Inbound Logistics: British Airways controls its stock very efficiently and effectively. Moreover, British Airways provides the best quality training for its inbound logistics personnel and the partnering agencies. City and Guilds accredit the training provided by British Airways. British Airways maintains a profitable and regular relationship with its suppliers (Saloner, Shepard and Podolny, 2001).
Operations: In the wake of security concerns, British Airways has revamped its baggage security. The check-in services are turned quicker through new technologies in the airports. Online booking has been made more secure but easy for the customers. There are pre-book additional services available now for the customers of British Airways (Pepe, 2003).
Outbound Logistics: The outbound logistics of British Airways are maintained by a large database that contains customer information. It is categorised by airport slots, which makes it easy to manage.
Marketing and Sales: With the new use of renewed technology, British Airways is trying to get involved with all the firm’s stakeholders. Through regular communication, the marketing messages are regularly sent to the destined receivers. In recent years, British Airways is investing a lot of money in rebranding. Hence, the firm allows the marketing department to rejuvenate the brand to the customers of today and tomorrow.
Post Sale Service: British Airways provides Royalty Club Cards to the airline’s most dedicated and trusted customers (Dess and Miller, 2013). This is the way the airline keeps in touch with the customers before and after a journey. British Airways also gives regular updates of new offers from the air service to the customers through this system.
Internal Strengths
The major internal strength of British Airways is its brand image that the firm has built throughout many years of operations in the industry (Simpanir, 2015). The airline giant has also shaken hands with many agencies for its work to be done smoothly. British Airways’ alliances are the firm’s major strengths when it is in any difficulty (Ansoff, 2009). There are many partners of British Airways who also support the firm year-round. The firm has gained a lot of capital base from operating for many years (Sinhanir, 2015). Hence, the size of the corporation is huge. Due to a strong capital base, British Airways’ financial department is stable.
Internal Weaknesses
Though there are many good stories to tell about British Airways, there have not been so many good ones about its employee relations. British Airways has so far handled most of its employee-related issues very poorly (Montgomery, 2015). Moreover, there is an allegation against British Airways that it does not provide reliable and trustworthy services to the customers, compared to other airline firms in the industry (Weiss, 2005). Hence, customer handling issues are also not solved properly. Though British Airways has been innovative for quite a bit, it does not incorporate its innovation to all the departments, increasing the cost of operation (Sadler, 2003).
Task 3: Analysis of PR Crises
Inefficient Management:
In 1983 and 1990, British Airways had a huge loss due to its inefficiency in managing its costs. Moreover, it did not have any specific strategic planning on cost reduction. Hence, the firm became an inefficient and costly firm to run. Therefore, British Airways should also apply cost strategy in its internal management and maintenance operations (Birkinshaw, 2004).
New Competitors with Cheaper Services:
The market demand for no-frills services has increased now. Customers do not want additional services for additional money spent. Hence, economic airline firms like Ryanair, a tough competitor to the airline firms, are successful nowadays. Price sensitive customers are on the increase now (Belew and Elad, 2009). The number of short-time travellers has so far been increased and on the other hand, the number of long time travellers has decreased. This is why the price sensitivity of the customers has increased too.
Trying Out Too Many Things:
There is a lack of focus strategy for British Airways. The firm is trying out different things at different times, not settling up in one strategy that ensures its survival in the market. Differentiation strategy is a good option, but British Airways needs something extra in the airline industry where there is extreme competition. It should focus only on the customers’ current needs (Cockrum, 2011). Well-done marketing research on why customers are leaving British Airways might satisfy the management with appropriate answers. Then the management can take appropriate actions to make the customers happy again.
Task 4: Strategic Analysis
Business-Level Strategy of British Airways
British Airways follows differentiation strategies in its business-level strategy. Though there has been significant competition in the airline industry, British Airways has grown to its fullest due to its differentiation strategy, which kept it from the other competitors in the customers’ eyes (He, 2005).
There are many things that British Airways have tried to create a differentiated image in the market. For example, it has so far been innovative in its business operations. It created policies in 2002 to reduce greenhouse gases, which has been a burning issue in the airline industry (Riboldazzi, 2005). Moreover, from 2004, British Airways allows its customers to print their online tickets themselves and thus reduced the costs and hassles of the customers and the firm (Bethhi, 2015). In its mission statement, the airline giant also expressed its concern over different issues of the industry. It has vowed to be the most responsible airline industry in its mission statement (Hitt, Ireland and Hoskisson, 2009). British Airways launched a voluntary scheme for its customers that involves their effort to reduce carbon emission. This is how British Airways has also applied to gain customer trust.
A strategic approach has always been there for British Airways to differentiate a religion for the whole business-level operations. It has always been focused on the customers, and customer satisfaction is their sole concentration in terms of their business-level strategy. Hence, British Airways has been working for many years to fulfil the needs of the customers (Longtinri, 2015). In 2000, British Airways was the only airline firm that thought of creating more spacious cabin travelling and charging the customers on world travelling fare. This is the thing that made British Airways different in the eyes of the air travellers. In addition, the firm also invented to provide meals on short flights. Coming up with new things for the customers has been a motto of British Airways (Chen and Roma, 2010). This is how it practices its differentiation strategy. British Airways’ business strategy is putting the people first in priority, which is how it excels in the industry. Small things make people happy. Hence, British Airways tries to be innovative even in the smallest things that the other airline firms do not pay heed to.
With differentiation, British Airways also tries to be cost-effective. Cost leadership has been its business strategy in internal operations. For example, it tries to keep the number of employees more in the maintenance department while shortening the number of people in the internal operations departments (Foss, 2007).
British Airways also implemented Skills for Quality Improvement (SQI). This is an approach to incorporate differentiation strategy in every phase of the firm. The strategy involved situation appraisal, problem analysis, decision analysis, and the management’s involvement. With active management support, the implementation of K-tool also helped British Airways to gain a differentiated image.
When Total Quality Management (TQM) was applied in the airline industry in 1991, British Airways was the first to incorporate it. It was another attempt to signify its differentiation strategy in every operation of the firm. This helped British Airways to gain control over the financial issues that the firm was suffering from during that time. Moreover, the firm also benefited from its employee preservation with total quality management implemented all over its operations.
In order to differentiate the firm, British Airways again strategised its vision in 2005. It downsized its operators (Derianvi, 2015). Moreover, it took the strategy to increase its number of flight services in a week. Hence, the number of flight services was increased four to six times, which created an image of differentiation for British Airways.
Recently, British Airways has also introduced one of its newest services for its corporate customers. The new line check services through British Airways’ extranet have added a competitive advantage for the firm. For years now, the customers who have been loyal to British Airways get the additional facility at the airline firm, which is expected to increase customer loyalty and time to come (Havinga, 2012). The Executive Club of the airline’s value-added service provided to the customers is yet another strategy for the firm to be considered number one airways worldwide by the customers through its well-planned business strategies.
Corporate Level Strategy of British Airways
Product strategy: As a firm’s product is the most important factor to be successful, it requires more attention from the company than any other tangible or intangible factors. The product of British Airways is flight services from one place to another destination, basically for transportation purposes (Kelly and London, 2013). British Airways has been nourishing its product strategy very well by introducing much value addition to the customers’ flight experience. Quality of flights is the very basic strategy of British Airways that is always well operated (Holden, 2010). Each flight’s quality is maintained through a separate team working solely to keep the flight quality up to the firm’s standards. The various destination flights are managed differently, as short, and long haul flights require extra care to the customers. Moreover, there are executive class and business class passengers on a flight. British Airways also maintains the quality of each department differently, as different customers have different expectations from a flight experience (Hampton, 2010). Security of a flight, nowadays, is another vital concern of the customers. Hence, the security of British Airways has been beefed up recently in the wake of terrorist attacks all over the world. Support facilities for each flight to the customers have been increased as the number of competitors in the airline industry has increased in the last couple of decades.
Pricing Strategy: Pricing has been one of the major issues in the airline industry as new competitors are fighting with the established airline firms in the pricing of the services. The company requirement of charges has increased from that of the past. Hence, there is an increase in prices for each flight of British Airways. The positioning of the product is closely related to its price. British Airways has developed three different strategies for three different customer pools of its flight services (Gennari, 2010). British Airways gives the customers freedom to choose from a range of seats, while some of the newcomers in the airline industry set a single price for all the passengers. With the differentiation in quality, British Airways provides its customers to choose from any price out of the three available categories. British Airways has split its prices into categories to attract customers of any type. The premium strategy of the flights attracts customers who want luxury during a flight (Devrib, 2015). The medium price strategy attracts regular business customers. And finally, the low price strategy attracts customers who are also wooed by the no-frills airline firms in the industry.
Recommended Strategies
British Airways has been applying defensive strategies mostly. Hence, it should change the course of its actions and go for attacking the competitors. The number of competitors has increased, and most of them give no-frills services at lower prices (Jeffs, 2008). Hence, British Airways should introduce a special flight service to ensure a guerrilla marketing strategy (Jeyarathnam, 2008). The guerrilla marketing strategy will corner the recent competitors who are taking British Airways’ customers away.
Theories for Evaluating the Strategies of British Airways
SAF Model
The Suitability of the strategies implemented by British Airways is okay as the strategies have been working well. However, in this competitive industry, the suitability of strategies might vary from time to time (Kremer, Mantin and Ovchinnikov, 2014). The feasibility of the strategies of British Airways might not be applicable as this era requires more cost-effective strategies in the airline industry. The Acceptability of the strategies of British Airways also is in question by the stakeholders as many of the strategies of British Airways have gone wrong. Hence, the acceptability of the strategies can be increased by involving all the vital stakeholders of British Airways.
STAIR Model
British Airways is considered a firm with design management as a function (Hunger and Wheelen, 2006). British Airways created much awareness in its internal management. Through proper planning and with adequate resources, the functions of the firm have been running well. With years of experience, British Airways also has a good deal of expertise.
Conclusion
Strategic management is not established in just one day. It requires a lot of time to be implemented and applied in the firm. British Airways has made the mistake of trying out too many strategies for its management. This is not the way an experienced firm should go. Moreover, the firm has not also been aware of the external forces of the industry, which is why the firm recently lost its valuable customers to the no-frills airline firms. During the recession, the firm also suffered a lot in its financial factors. However, due to its huge capital base, the firm somehow was saved from much damage. This is an era of innovative strategic management. Hence, British Airways should go for new strategies to tackle the new competitors but should often not change its course of action. This is how the strategic management issues should be solved for an established and experienced airline firm like British Airways.
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