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BUSINESS STRATEGYCONSTANCE L MABIALA A4064059
JANUARY 7, 2014LSBF
Lecturer NIGORA KHALMURZAEVA
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Student I.D A4064059
Surname __MABIALA__________________________ Intake 9
First Name CONSTANCE LELO
Programme __BUSINESS
Module Code A/601/0796____________Submission Date 12.01.2014
Module Name UNT7-BUSINESS STRATEGY- QCF LEVEL5
Assignment Title .BUSINESS STRATEGY
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SUMMARY
The main aim of this report was for the purpose of producing s strategic
plan using theories of Business strategic management for British Airways
that can be applied over the next three year period. At the
identicalperiod, being the United Kingdom’s leader in airline
operations, British Airways has faced an upsurge in rivalry over the
last 10 years and thus has had to contend with agrowingamount of the
market share being shared by more and more firms.
The report is carried out by first and foremost; analysing the current
internal and external environment of British Airways. Through strategic
evaluation several important recommendations that the British Airways
can focus upon are suggested. These strategies play an important role in
assisting the British Airways to regain lost ground in the current
airlines market. There will an implementation of a combination of two
strategies- namely the people processes strategy and a strategy that is
focused on technological advancements.
The people processes strategy has been derived from a few industry
sources that outline the British Airway’s decline in terms of customer
satisfaction. The technological advancement strategy coincides with the
renewal of the British Airway’s current fleet of aeroplanes and will
further improve the overall experience encountered by the customers.
Business strategy
Definition:
A business strategy typically is a document that clearly utters the
direction a business will pursue and the steps it will take to achieve
its goals.
Task1.1.To understand the Process of strategic planning
Explain the concept of “strategy” and state and explain
vision, mission, goals, objectives andcore competencies of
the BA and their connection ti the company
INTRODUCTION
British Airways History
British Airways overview Full service global airline, offering
year-round low fares Flag carrier airline of the United Kingdom
Founded in 1924 as Imperial Airways, and operated under that name
until 1935 1939, the airline was nationalized to form the British
Overseas Airways Corporation (BOAC) 1972, BOAC and BEA were
combined under the British Airways Board.
Mission, Vision, and Values
Mission and vision both relate to an organization’s drive and are
characteristicallyconnected in some written form. Mission and
vision are statements from the organization that answer questions
about:
Who we are?
What we do value?
Where we’re going?
A study by the consulting firm Bain and Company reports that 90% of
the 500 firms surveyed issue some form of mission and vision
statements. Furthermore,
organisationsthroughobviouslyinterconnected, widely understood, and
cooperativelyshared mission and vision have been shown to perform
better than those without them, with thecaution that they related
to effectiveness only when strategy and goals and objectives were
aligned with them as well.
A mission statement: communicates the organization’s reason for
being, and how it aims to serve its key stakeholders.
A vision statement: in dissimilarity, is a future-oriented
declaration of the organization’s determination and goals
Objectives and Goals
Objectives: are the ends that state specifically how the goals
shall be achieved. They are concreted and specific in contrast to
goals, which are widespread at the firm extensive level. In this
wayobjectives make the goals operational.
Objectives :
Specific
Stating exactly what it is trying to achieve.
Measurable
Able to be measured to decide if they have been achieved.
Agreed
Have the approval and understanding of everyone involved.
Realistic
Able to be achieved by the business taking into account its
resources, competition, market, etc.
Time Specific
State a time by which they should be achieved
Objectives are basic tools that underlie all planning and strategic
activities. They serve as the basis for creating policy and
evaluating performance. Some examples of business objectives
include minimizing expenses, expanding internationally, or making a
profit.
Goals
Goals and targets are more precise and expressed in specific terms.
They are stated in precise terms as quantatively as possible. The
emphasis in goals is on measurement of progress toward the
attainment of objectives. Goals have the following features, they:
Are derived from objectives
Offer a standard for measuring performance
Are expressed in concrete terms
The concept of strategy
Business strategy is a linear procedure; that goes on and on as long
as, there is a necessity to constantly review strategic objectives as
the environment is continually changing.
The drive of strategy is to suit business into its environment or to
use the resources of the business to ‘change the rules of the game’ or
reshape the environment. (David Campbell, George Stonehouse, Bill
Houston Business Strategy, An introduction, 1999, Second edition,
Butterworth-Heinemann publication, UK)
Henry Mintzberg (McGill University in Montreal) suggests his ‘Five Ps’
of strategy, rather than simply creating a single definition. A
strategy can be:
1. A plan: Commonly used by people to refer to the word strategy. It
implies a set of actions, a scheme, a program, or a method
orchestrated in advance for a purpose.
2. A subterfuge: Commonly used to mean a short-term strategy, with
some degree of objectives to gain an advantage. Mintzberg define a
ploy as ‘a manoeuvre intended to outwit an opponent or competitor’
(Mintzberg , 1987, p. 14).
3. A pattern of behaviour: A ‘pattern of behaviour’ strategy is about
a consistent practice of behaviour at times subconscious resulting in
progress or success.
4. Position strategies: It refers to the business position in a
particular market or environment. This is suitable when, a firm wishes
to achieve or defend a certain position, in respect of its competitors
or its markets.
5. Perspective strategies: This is about changing the organisation
perception, outlook, or culture, to achieve success. For example, get
the workforces to think and act politely, professionally or
cooperatively.
British Airways Corporate strategy:
We read: A maximum focus on dragging BA out through the current
crunch, while working out for bright and profitable time ahead. BA
this year has planned a long-term business vision “to be the world’s
leading global premium airline” (British Airways 2008/2009 Annual
Report and Accounts)
Vision, Mission, Goals, Objectives and Core competencies of the
British Airways
a) Mission & Vision
A) Mission statement is a brief report of an organization’s
fundamental purpose (current competences), who is to serve
(stakeholders), and what makes the organization exceptional
(justification for existence). It is a response to the question,
"Why do we exist and how we aims to serve our key stakeholders?"
B)Vision statement also define the organizations purpose but focuses
on a company’s future: Where we intend to go as an organization.
Mission and vision statements play three important roles: (1)
processionthe purpose of the company to stakeholders,
(2)instructstrategy development, and (3) outline the measurable goals
and objectives.
MISSION
BA Mission and Vision stand on three words Global Premium Airline
British Airways Mission is to be
“The World Favourite Airline” to deliver the full service experience
and achieve the target in both, in-flight and on the ground.
The mission statement of British Airways is ‘To be the undisputed
leader in world travel ’.
(Integrated Management 2006, Page 5 By David Harris, CIMA publishing,
Elsevier Ltd, Oxford
(http://www.jyanet.com/cap/0614fe0.htm)
BA VISION
BA vision statement reads “We have set our sights on being the world’s
leading global premium airline” “this vision is guiding us in how we
deal with current conditions and in how we go about building a
sustainable future for our business”. (British Airways 2008/2009 Annual
Report and Accounts)
British Airways Visions
• Vision Accreditation for Carbon Offsetting Scheme offer carbon
offsetting the first airline to win Government approval launch of the
Department for Energy and Climate Change new Carbon Offsetting Quality
Assurance Scheme
• Industry united position on climate change reduce climate change
emissions in aviation with a cap on net emissions by 2020 and a 50% cut
by 2050
• It will guarantee environmental targets are met, and minimize costs
to passengers.
Goals and Objectives
Goal
Objective
Definition
The broad aims toward which an
effort is directed.
[Goals are general intentions, less structured]
The concrete attainments achievable by following quantity of steps.
[Objectives are precise, concrete]
Measure
Goals may not be strictly measurable or tangible.
Must be measurable and tangible.
1. Time frame
2 .Longer term
3 .Mid to short term
BA FIVE STRATEGIC GOALS AND OBJECTIVES:
[1 Goal]: “Be the airline of choice for longhaul premium customers”
[1 Objectives] For BA, their profitability is from customers who take
long journey flying. Therefore the will do some researches to
satisfied them in term of BA product, network and facilities. For BA
the crucial supporting role comes from air freight, short haul and
economy sectors where BA intends to keep a durable presence.
[2 Goal]: “Deliver an outstanding service for customers at every
touch point”
[2 Objectives] BA, intend to excel in customer services, in the way
it lead, train and reward it staffs, so that all BA customers relish a
premium experience. To target premium customers and for all customers
benefits, BA aim to invest in training service approach
[3 Goal]: “Grow our presence in key global cities London is our home
city”
[3 Objectives] Although the well-known cities such as London (BA
stronghold) and New York remain crucial, BA aim to raise it dimension
in top stage cities with the support of partnerships by offering the
best global connectivity, at the same time expanding it position in
future global cities.
[4 Goal]: “Build on our leading position in London”
[4 Objectives] BA aim to play a key role in government policy making,
and work for the airport improvement to secure Heathrow as a world-
class Hub in return to serve the biggest international longhaul
markets.
[5 Goal]: “Meet our customers’ needs and improve margins through new
revenue streams”
[5 Objectives] BA considers creating new products and services which
is crucial to it business growth and profitability, with it competence
and assets, for customers need and fidelity.
http://www.britishairways.com/cms/global/microsites/ba_reports0910/
pdfs/Strategy.pdf
CORE COMPETENCIES
Core competencies are those unique recipes of a particular firm
proficiency that are crucial to the business to reach competitive
edge.
BA Core Competencies: In contrast to its competitors BA core
competencies is all about:
• Based in London, British Airways is one of leading global airlines,
is the largest airline in the UK:
1. Based on fleet size; with a fleet of more than 240 aircraft
2. International flights and international destinations
operating in excess of 300,000 flights a year to more than 160 cities.
3. It has the sole access to Heathrow terminal 5.
•Service on broad: British Airways has always excelled for its service
provided during flight.
• Brand image: Overall BA has always had a good reputation as a brand,
•BA cargo service is the world’s fifth- largest cargo airline and
transports almost 1 million tonnes of freight, mail and courier each
year, to 200 destinations in over 80 countries.
• Corporate partnerships: Part of Oneworld along with Air Berlin,
American Airlines, Cathay Pacific, Finn air, Iberia, Japan Airlines,
LAN Airlines, Malaysia Airlines, Qantas, Qatar Airways, Royal
Jordanian and S7 Airlines, BA and its partners in the alliance, offer
a global network of hundreds of destinations, seamless customer
service, shared benefits for frequent flyers and the benefits of the
Codeshares (are a type of shared flight ; one airline operates the
flight, while other airlines may sell seats on the flight under their
own airline codes).
British Airways Goals
1. Environment
Is to reduce carbon emissions, waste, noise and improve
localair quality.
CommunitySupport international communities, conservation
projectsand charities in the countries their fly to.
2. BA Market’s Goal place:
Encourage their customers and suppliers to act responsibly.
WorkplaceDeliver: to provide a great work environment and
encourage everyone atBritish Airways to hold One
Destination.
3. Internal and external capabilitiesInternal Capabilities
4. Internal
Aircraft fleet and destinations
Fleet of 238 aircrafts
Access to more than 300 destinations
Sole access to Heathrow terminal 5
Variety of Training facilities
• Cabin crews are trained 1200 hours
• Flight simulators – to Cabin Crews and Pilots
• Computer Base Learning, Library facilities, Audio and Video based
learning – designed to management staffs
Internal and external capabilities
Customer service goals
•Premium Services
• Quality services to customers at every touch
• Listen to customers feedbacks
• Close relationship with customers
• Attend customers complain and feedbacks
• Alliances with other airlines
Corporate social responsibility
• Community learning centre at Heathrow, London
• Partner with UNICEF, promote “change for good”
• Donate ₤1.3 million in 2010 from BA and staffs.
• Raise USD $30 million from passengers (10 years
.Climate Change Programme
• Reducing waste by 50%
External capabilities
• To extend greater services, Key Global City Growth (continue to
expand the list of top-tier cities through airline partnerships
e.g. One World, American Airline, City Flyers…etc.
• Openskies AllianceExternal capabilities
Close relationship with customers
Attend customers complain and feedbacks
This is how BA core competencies and their connection to the
company’s star
Task1.2Briefly evaluate what issues may be involved in
strategy planning
Strategic Evaluation would always form the post-strategic implementation
process of the strategic management exercise. It also encompasses major
evaluation-based aspects to determine the effectiveness of the
implementation performed in relation to the strategy formulation’s needs
and findings. The strategic evaluation is important in allowing for the
strategic implementation to be one that has satisfied the needs of the
strategic formulation.
In performing the strategic analysis, there would be a few aspects to be
taken into consideration. Among them would be to identify the short and
long term goals for the company. Next would be to identify ways that
would help in achieving the required goals. By focusing all of the
required strategic design towards the short term and long term goals, it
would be easier to create a purpose declaration that conciselycoveys
both the companies goals while also having a clear strategy towards
reaching that goal.
BA business plan is built around theirGlobal Premium Airline strategy,
and defines in detail both what they need to achieve as a business, and
how they need to work together. It contains their Compete 2012 change
programme. This is linked to their sponsorship of the London 2012
Olympics and Paralympic Games, and is tasked with refreshing their
culture. The plan is structured around five key themes –
Colleagues, Customer, Performance, Excellence and Partnerships:
Be the airline of choice for long-haul premium customers
Longhaul premium customers are key to their profitability. We will use
their deep understanding of what is required to be their airline of
choice to drive their design choices on product, network and service.
They will also maintain a strong presence in the cargo, economy and
short haul segments, which play a critical supporting role.
Deliver an outstanding service for customers at every touch
point
Their customer-facing staff have long been passionate about delivering
outstanding customer service. They want to build on this through a
revolution in the way they lead, train and reward, so that all their
customers, on all routes and classes, enjoy a premium experience. They
will invest both in improvements targeted at their premium customers,
such as service style training, and in those benefiting all customers,
such as Terminal 5 and ba.com.
Grow ourpresence in key global cities
They aim to deliver the finest global connectivity for theirclienteles.
They will span theirexistence in the top tier global cities, either
directly or through their expanding network of airline partnerships.
While the established global cities such as London and New York remain
critical, they will place a special emphasis on developing their
position in the global cities of tomorrow.
Build on their leading position in London
London is their home city, the emotional and financial heart of their
business. It is also the world’s biggest and most competitive
international air market. Ensuring Heathrow remains a world-class hub is
vital to give them a strong London base to serve the largest
international long haul markets. To support this, they will look to
influence government policy decisions, and work with the airport owners
on the continued development of the infrastructure.
Meet their customers’ needs and improve margins through new
revenue streamsAirline
Revenue streams will always be the core of theircorporation.Although,
they will look to amplify this by building lucrative subsidiary services
that offer customers great value and re-enforce their brand. They will
investigatehow they can develop new products and services which exploit
their assets and capabilities, and meet the needs of our core customers
and enhance loyalty.(see British airways.com)
Task1.3 Explain different strategic planning techniques that
organisations can use, such BCG growth-share matrix, and apply
these to British Airways.
The Boston Consulting Group (BCG) growth-share matrix is a strategic
model to guide companies in resource allocation. It is without doubt;
one of the most widely used modelfor portfolio management.
Figure above
shows the BCG Matrix model
The BCG matrix can be used to determine priorities that should be given
for the product portfolio of a company. Corporations with varied product
lines can make use of the BCG models strategies for evaluating the
organisation’s resources for products.
Placing products in the BCG matrix allows for products to be split into
4 portfolios in the company- which ate the stars, cash cows, dogs and
question marks.
Stars (high growth, high market share)
• Use greatsums of money
• Engenderssubstantial amount of revenue
• Leaders in the business and market
Cash Cows (low growth, high market share)
• Profits and cash generation is high
• Low growth makes investments in product should be low for higher
profit
• Always the initial foundation in a company
Dogs (low growth, low market share)
• It is better to avoid products which are dogs in the company
• Expensive to turn around and better to liquidate
Question Marks (high growth, low market share)
• High Demands and low returns make them the most vulnerable
portfolio for products
• In time will generate great fascination of internal resource.
• Investment should be at minimal or nothing to produceaffirmative
turnover boundaries
Strategy Implementation on British Airways
While, the BCG growth matrix will not be the most ideal tool for British
Airways to undergo strategic management restructuring, it is still an
important tool for the airlines to understand where its varying products
stand in the both the company’s internal and external environment. When
it comes to service for business passengers, the product can be
considered as a cash cow due to the high amount of profit that is
generated despite its naturally slow growth. British Airways will need
to start considering the option of focusing on bringing more value
towards services that are related to business customers.
At the same time, economical passengers comprise a majority of air
travellers today who are also a part of the most exciting market in air
travel today. The market for such a product is extremely competitive
while growth in the market is easily achievable as customers who are
ruined for choice are increasingly aware of the different advantages
that different airlines provide. While the company may not require too
much focus on the budget carrier market, it would be foolish to not take
full advantage of the hugely expansive market which boasts of huge
market returns too.
Task2 Formulating Strategy
Carry out an organizational audit of the British Airways
particularly considering strenghths and weaknesses( using
SWOT) culture, and benchmarking to determine current position
and perfomance related to other companies in the industry.
There has been considerable debate concerning whether culture can actively be
managed, much of the debate centring on the extent to which a culture can be
modified to resemble a pre-stated ideal (Brown 1998).
It is commonly argued that Human Resource professionals are able to play a
crucial role in managing key elements of culture. Lewin describes this stage as
the Refreezing where change is stabilised by introducing the new responses into
the personalities concerned (Armstrong 2001).
But the most impressive aspect of BA's cultural change was not so much the
sophistication of the PPF programme itself, but the extent to which other
employment policies and practices were changed to fit the 'new' culture.
Refreezing was aided by a whole series of training programmes throughout the
80's and 90's (Brown 1998). Not only were team briefing and team workings
introduced but these developed and refined with TQM, autonomous team working
and multi-skilling introduced in many areas.
Atkinson's model of flexible working patterns was introduced. This consisted of
part-time and subcontractors which extended to most aspects of BA's operations.
A report by the National Association of Citizens Advice Bureaux called
Flexibility Abused (1997), shows how flexibility can often take the form of
'worker insecurity'. One of the main reasons for this is introduction in
contractual arrangements. This includes replacement of full-time by part-time.
THE ROLE OF HR WITHIN CULTURAL CHANGE
Despite BA's attempting a great deal of effort into encouraging certain
behaviours, staff did not base its employment m everyone benefited from them.
In areas such as marketing, the criteria for choosing Managers had changed from
technical to Management skills and abilities. However, some Managers still
preferred recruiting the old fashioned way, promoting and selecting people who
were good Technicians, therefore 'not the best fit' was achieved and BA had
difficulties maintaining change. In Lewins composite model, rites of
integration suggest there should be a conflict reduction, thus consolidate the
change process. This was clearly not evident. Managers continued to resist
change. This was also evident in appraisal systems and performance related pay.
Despite the HR department designing the control systems to fit the new cultures
and their array of soft human resource, many managers continued to reward
employees using the old values. It appears here that they had failed, due to
these control systems merely providing an interface between human behaviour and
the very fact that the process of management had its informal group process
with its own set of norms, made this unfreezing stage unsuccessful. The driving
forces for change were identified by Anderson Consulting and Conference Board
(1995) in their research report of more than 300 companies found major re-
engineering efforts across the business require more people strategies.
Eichinger and Ulrich (1996) reported discouraging findings from interviews with
line executives: "Individual members of the HR team are not strong enough or
credible enough personally to help HR succeed, much less the business." Perhaps
if HR had adopted a more aggressive approach to change management, it may have
proved successful.
TYPES OF CHANGE - INCREMENTAL
The life cycle perspective of change (Greiner, 1972; Hanks, Watson, Jansen &
Chandler, 1994) argues that a company's life can be distinguished as a number
of sequential stages, following a now familiar pattern of start-up, growth,
formalisation, etc. Managers do tend to think in terms of the 'stage' of their
company. Tushman and Romanellis(1985) punctuated equilibrium model of change
emphasises the discontinuous nature of change. Long periods of small
incremental change are interrupted by brief periods of discontinuous, radical
change. Therefore it can be argued that organisation emergence happens in
'spurts', i.e. in very rapid punctuations that transform the company in
discontinuous ways.
Following the work of Tushaman and Romanellis, Katz developed such a punctuated
model of entrepreneurial emergence (1993). This model argues that each
organisational stage can be seen as a combination of four properties of
emerging organisations, where a trigger creates a revolution or shift in the
content of these properties, resulting in a new combination that remains stable
for a relatively stable period.
This model of punctuated change can be easily integrated with the Resource
based view/theory (RBV) to generate a theory of punctuated growth of a firm. In
this manufactured model, each unique combination of properties is a unique
bundle of resources that generates firm-specific capabilities over time. It can
be argued that strategy formulation starts properly, not with an assessment of
the organisation's external environment, but with an assessment of the
organisation's resources, capabilities and core competencies. This Resource-
Based View (RBV) of the firm approach which emphasises the internal side of
S.W.O.T analysis to strategy formulation is gaining in popularity among
strategy theorists (Porter 1991, Barney 1991,1992)
2 TYPES OF CHANGE -TRANSITION
The process of change is simply moving from the current way of doing things to
a new and different way of doing things. Bridges (1991) believes that it isn't
the actual change that individuals resist, but rather the transition that must
be made to accommodate the change. He states "change is not the same as
transition. Change is situational - the new site, the new boss, the new team
roles, the new policy. Transition is the psychological process people go
through to come to terms with the new situation. Change is external, transition
is internal. Unless transition occurs, change will not work." (Bridges 1991
The strategy formulation can be performed through to two different
approaches which would be the corporate strategy or the business or
competitive strategy. The corporate strategy involves a method in which
an organisation chooses which range of collections of business for the
company to interact with. The business or competitive strategy involves
the sets of structure that shall decide the success of the company.
Corporate culture
The firm reflectivebasic assumptions, philosophies, principles, ethics
and standards which are carried by members of an, rooted from the
organisation’s history and tradition and are adjusted by modern events
are considered to be the organisation culture. It’s simply a combination
of expectations about “the way people get things done over here”.
A corporate culture is a vital component in any business's decisive
success or failure. Add the environment in which a firm is operate, a
corporate culture is reflected in its dress code, leadership style,
business hours, management system, office setup, employee benefits,
turnover, hiring decisions, customer’s treatment and satisfaction etc.
BA compare to Virgin Atlantic culture
Passengers are after security, comfortability, punctual aircraft, be
treated with manners and care. Leaders have to manage these issues in
order to get the best for their employees and their customers. BA and
Virgin Atlantic marketing compete with the extremely noticeable
corporate culture experienced by passengers. The differences can be
perceptible from features, such as passenger’s seat, cabin staff, food,
services, staffs uniform etc.
British Airways structure
In line for to its size and the global scope of its activity, as the
third largest group in Europe and the sixth largest in the world, based
on revenue; BA has a more solemn structure endorsing specific rules and
procedures. There exist some small makeshift groups In BA operating in
parallel with the formal structure in diverse functions, or in sometime
replicated these tasks.
British Airways’ culture
In its structure, BA role culture is in line with functional
differentiation. But, frequently a company hold two or more different
cultures. Two visible cultures in BA, the one present while in flight
which is greatly co-operative, the primary objective is about service
dedicated on passengers and the other one on the ground highly
competitive and politicised. The execution of whichever strategy and the
end result of cultural change, is all about middle management; but this
is ran by distinct functions. At the top of the pyramid, still goes on
the individualist roles of high finance and take-over.
Competitive Politicised
Functionalist Specialist
Co-operative Service oriented
The marketing orientation culture managed by BA originated from the
80’s, customers have been put at the centre of the consideration and
individuals have been empowered to take initiative i.e. employees
dealing directly with customers has room for discretion and personal
initiative.
There are some tight spot that British Airways culture must resolve:
Lean and Mean versus Fat and Happy, individual responsibility versus
group cohesion, specialists versus generalists, hard (operational)
versus soft (service) part of the business. All those elements are
essential to success. Management must find a model which reunites all
different layers of the organization; the top, the bottom and the
middle.
Management style and leadership at British Airways
The traditional style at BA had been bureaucratic, very segmented
between functions and categorised by low personal feedback, carelessness
of subordinates, depersonalisation and hierarchy.
Lord King has had a more autocratic style to manage BA, but delegation
at BA has started with Sir Colin Marshall who preferred to work one-on-
one, delegating responsibility directly to key individuals. It is vital
to give status and support to people in the middle. This enables all the
elements of the circle to learn and develop.
Virgin Atlantic
Virgin Atlantic’s Culture
It has a lesser, networked and dynamic structure, thin and mean
organisation. Virgin Atlantic dependent more on personal initiatives,
helped in this by its small scale and its leader’s management style.
Virgin role culture is a flat and participative organisation with an
open, enterprising and flexible culture. Build on the vision of premium
customers dedication, Virgin culture is very much customers focus
With the informal culture, staffs morale is high, they are pleasant,
courteous; positive, and jovial, and they enjoy their work.
The Virgin culture can be defined as a power culture with Richard
Branson as the head and the central figure. Trust, empathy, personal
interactions, few rules and procedures, little bureaucracy and these are
the firm approach. A power culture such as Virgin has the ability to
move quickly, innovate and react well to threats. The culture at Virgin
is certainly a major contributor to its success.
The sense of identity and unity of purpose to members of the
organisation is remarkable at Virgin.
Management style and leadership at Virgin Atlantic
Regardless of employee’s lower wages compare to others airline firms;
staffs love working for R. Branson, at Virgin Atlantic. He is Virgin’s
biggest assets and biggest liability. Without him Virgin would not exist
or would probably a completely different airline.
Branson with a more charismatic and laissez faire style of leadership,
risk taking, entrepreneurial management, and his ability to communicate
has fascinated his workforces and the media.
At Virgin Atlantic, directors and staff are similarly trusted and
involved in decision making, making of Virgin one of the best delegated
companies. As a result, Virgin Atlantic is an innovative, forward
thinking, creative and quality oriented organization. With an informal
but not casual style management, Virgin’s approach to business is
completely serious. At Virgin staff come first, than customer second
and finally shareholders thirdcludes the planning, industry/market
research, success stories, dedication of resources and tracking.BA and
Virgin Atlantic marketing fuses with the highly visible corporate
culture experienced by passengers. The culture is really what customers
buy. It is a larger pattern in which the physical features, such as
seating and food, are embedded. Product innovations can be rapidly
imitated but the culture cannot be easily copied. It has to be built up
and learned. Developing an effective service culture moves an airline
ahead of its competitors with imitators are more likely to fail. One
projection of an airline’s culture can be observed in the behaviour of
cabin staff on board of both airlines.
STRUCTURE
STAFF
SYSTEMS
STRATEGY
SKILLS SHARED VALUES
STYLE
Illustration 5.1 - 7S’s model
5.2.1 British Airways’ culture
British Airways could be easily defined as a role culture reflecting
functional differentiation in its structure, but it’s not that easy. One
organisation often harbours two or more contrasting cultures, posing
more difficulties in order to remain successful. There are two cultures
in British Airways, one high in the sky at 30,000 feet which is highly
co-operative, service oriented focused on passengers and the other one
on the ground highly competitive, politicised head-to-head with the
external world, where it seems that fiercely adversarial values reigned.
Middle management, which is key to the implementation of any strategy
and the outcome of cultural change, is still ruled by separate functions
and at the top all the weight still goes on the individualist functions
of high finance and take-over.
TRATEGY FORMULATION SWOT Analysis
Strengths
Size and brand
Network presence
Cost cutting
Customer loyalty
Weaknesses
Damaged reputation
Debts
Labor relations
Reliance upon particular revenue streams
Opportunities
Terminal 5
Shifting customer needs
Further alliances
Industry recovery
Threats
Strong competition
Interest and foreign currency exchange rates
Fuel costs
Decline in airline industry
Environmental issues
1 Strength:
Size and brand
According to DataMonitor (2003), British Airways is classed as the
world's second largest international airline, but because its US
competitors carry so many passengers on domestic flights, BA is ranked
as the fifth biggest airline in the world in overall passenger
carryings. The company's size means that it can benefit from significant
economies of scale in order to reduce costs. The size of the company
also means that BA will benefit from such things as increased brand
awareness. An increase in brand awareness will result in increased sales
if associated with favourable brand perceptions.
BA flies to more than 156 destinations in 75 countries. The company's
global coverage will enable BA to tap into most of the main regions of
the world where demand for air travel is present.
Network presence
BA enjoys a strong network presence both in its domestic market and
internationally. The company's network presence incorporates two of the
major airports in the UK, as well as major international airports such
as John F. Kennedy International Airport in New York. Having a strong
network presence means that BA can generate traffic feed for both its
domestic and international flights.
Cost cutting
BA has had some success in implementing cost cutting procedures. The
company has cut more than 10,000 jobs and made annual cost savings of
around £570 million over the last few years. These programs of cost
cutting have proved vital for many European and US airlines, especially
in the current industry climate. A number of airlines have failed to
implement such cost cutting programs and have since gone out of
business.
Customer loyalty
BA's frequent flyer and loyalty programs help the company to retain
customers. For example, BA's Executive Club frequent flyer program was
established to develop passenger loyalty by offering awards and services
to frequent travelers. Membership of such schemes encourages repeat
travel on BA flights rather than other airlines, as passengers seek to
accrue the benefits given to regular travelers. This enables the airline
to retain customers and reduce costs, as the company does not have to
spend money targeting new customers to replace those lost to other
airlines.
2 Weaknesses
Damaged reputation
BA's reputation may have been damaged by the strikes that affected the
company's flights during the summer of 2003. Strikes held by ground
staff at London Heathrow's Terminal One forced BA to cancel many
flights. The strikes and cancellations caused a lot of ill feeling among
customers towards BA and this could have had the effect of weakening the
company's brand. The cancellation of flights also led to a reduction in
company profits, while costs also increased due to BA's decision to hand
out compensation to customers whose flights had been cancelled.
Debts
BA has a significant amount of indebtedness. At the end of the last
fiscal year, BA had long-term debts of £5,149 million, a decrease on the
previous years debts (£6,283.8 million) but still a significant amount
to service. Current and future indebtedness could have important
consequences for the stakeholders in the company. For example, debt
could impair BA's ability to make investments and obtain additional
financing for working capital, capital expenditures, acquisitions or
general corporate or other purposes. Debts could also put BA at a
competitive disadvantage to competitors that have less debts and could
also increase the company's vulnerability to interest rate increases.
Labour relations
Relations between management and workers at BA remain strained despite
the resolution of the strikes that affected the company earlier this
year. The strikes that took place during the summer of 2003 were caused
by BA management trying to replace a paper based clocking on system with
an electronic one, which was very unpopular with both workers and
unions. This summer's strikes were the latest in a number of industrial
disputes between management and workers at BA. Further strikes cannot be
ruled out and this will again harm BA's operations, revenues and
profits.
Reliance upon particular revenue streams
Since BA has in recent years tailored some of its network, product,
schedule and pricing strategies to the business travel market, the steep
decline in demand for business travel has affected the company more than
other carriers. BA is also reliant on high transatlantic passenger
numbers to drive revenues. This has also affected the company, as
transatlantic passenger numbers have yet to recover from the effects
that the September 11 terrorist attacks in the US had on passenger
numbers.
3. Opportunities
Terminal 5
The UK government has approved the construction of the new Terminal 5 at
London's Heathrow Airport. The new airport terminal is being constructed
to meet the anticipated future demand for air travel in the forthcoming
years. The expansion of Heathrow Airport should enable BA to gain more
takeoff and landing slots and build up its operations at the airport.
The expansion will not only cement BA's position at the airport, it will
also give the company an opportunity to increase the number of
destinations that it flies to.
Shifting customer needs
The needs of airline passengers are changing, as they become more and
more price sensitive. The effect of this has been that traditional
airlines such as BA have struggled, while low-cost airlines such as
easyJet and Ryanair have experienced significant growth despite a
turbulent industry, especially in the short haul market in Europe.
BA could look at the change in customer needs and attempt to make its
prices more competitive with the low cost carriers. If BA was successful
in making its prices more competitive, then the company should be able
recover some of the market share it has lost to the low cost operators.
BA could also look at some of the ways in which the low cost carriers
keep their costs low and retain high levels of efficiency in its
service. The company may be able to implement some of the strategies
used by the low cost carriers (e.g. electronic ticketing) in an attempt
to reduce its costs.
Further alliances
BA has entered into a number of bilateral and multilateral alliances
with other airlines to provide its customers with more choices and to
participate in markets worldwide that it does not serve directly. These
collaborative marketing arrangements typically include one or more of
the following features: joint frequent flyer participation; code sharing
of flight operations (whereby one carrier's flights can be marketed
under the two-letter airline designator code of another carrier); co-
ordination of reservations, baggage handling and flight schedules; and
other resource-sharing activities.
BA could attempt to extend the number of alliances it has with other
airlines in an attempt to increase its global coverage even further by
participating in more markets worldwide that it does not serve directly.
The company could increase the number of partners in the Oneworld global
marketing alliance or agree other partnerships outside of this
framework.
Industry recovery
Market analysts believe that the global airline industry will experience
an upturn in fortunes over the next few years. This represents an
opportunity for BA, as it could generate increased revenues and market
share if the company capitalizes on any increases in demand.
4 Threats
Strong competition
BA faces strong competition from a number of industry rivals. The
company's competitors include companies such as UAL Corporation (United
Airlines), Lufthansa, Virgin Atlantic Airways, BMI (British Midland) and
Delta. BA also faces significant competition from low cost operators
such as easyJet and Ryanair in the short haul market between European
destinations. All of these companies will combine to take away sales and
market share from BA.
Interest and foreign currency exchange rates
Fluctuating interest and foreign currency exchange rates will have a
significant impact on BA's earnings. For example, BA does business in
more than 100 foreign currencies, and generates a surplus in most of
these currencies. As a result, BA can experience adverse or beneficial
effects arising from exchange rate movements. BA will experience
beneficial effects from the strengthening of foreign currencies against
the British Pound and an adverse effect from the strengthening of the
British Pound.
Fuel costs
The price and availability of jet fuel significantly affects BA's
operations. Any increase in the price or a reduction in the availability
of jet fuel will have a significant effect on the company. Due to the
highly competitive nature of the airline industry, BA may be unable to
pass on to its customers any increased fuel costs that it may encounter.
Therefore, an increase in the price of fuel or reduction in its
availability will affect the company greatly.
Decline in airline industry
A number of factors have caused the current decline in the airline
industry. For example, the threat of further terrorist attacks since
September 11 and a fall in the number of business travellers have both
caused passenger numbers to fall. Other factors may continue to affect
demand for air travel in the future, which will then affect the revenues
generated by BA. For example, global problems such as an increased
threat of terrorism in response to the coalition's war on terrorism
could have an adverse effect on BA. The threat of terrorism may
discourage people from traveling on aircraft and could have the effect
of reducing the number of passengers traveling on international flights.
BA Benchmarking
British Airways is an example of an organisation which has successfully
used benchmarking in three ways; to learn from the competition, to
improve internal processes and to identify best practice. The starting
point for benchmarking is that the organisation must change, and change
radically. Twelve years ago, BA was not listening sufficiently to
customers. They had becomeself-satisfied. The crisis was that they had
lost around half a billion pounds. The need was to focus on the
customer.
Competitive benchmarking
In 1983, in order to develop a “Putting the Customer First” campaign,
British Airways looked around at a number of other companies which had
brought themselves closer to their companies which had brought
themselves closer to their customers. This was the start for the
relaunch of BA began benchmarking. They were seeking excellence in
training staff to be more responsive to customers. They identified
organisations which had done this and followed organisations which had
done this and followed their example to train staff to become more
customer focused. Sources of information for identifying excellence were
less extensive then than now but reputation was relevant. Management
magazines, executive surveys, consultancy contacts, self-help groups,
all were and are relevant in surveying the word’s enterprises for
comparators.
BA found that before setting out on to benchmark you must be clear as to
the aim. Survey data and gut feeling told BA their focus should be on
customers. Each month BA analyse survey data and customers’ complaints
in great detail. Currently, for example, their customers tell BA ways
they need to improve how they handle flight revolutionised with staff
using the fleet office regularly. Procedures were changed as well as
changes in personnel. Since the fleet has been in operation, substantial
benefits have improved as employees’ working conditions and motivation
were addressed.
What did the members of the crew themselves think? It was no good just
describing what the organisation was trying to do in setting up this
fleet. They had to work to communicate fully the reasons for it, the
comparators used and how it would help the crew themselves. They had to
convince them of the gap in best practice and the need to overcome some
of the obstacles. Best practice of the different companies are
demonstrated by the levels of customer satisfaction they achieve. BA
were interested to show how the changes in management practices would
benefit individual crew; the “what’s in it for me” issue. The success of
this initiative has help in he re-design of the future strategy for all
cabin crew. A new structure based on these results is being
progressively introduced this tear.
Generic best practice benchmarking
A project team was set up to introduce a focused engineering unit geared
to the production of high value, reliable and consistent maintenance
services.
Realizing the significance of internal marketing in the success of the
company, BA launches a series of programmes to refocus on the people
within the organisation. Every effort was made to help employees to
develop a positive attitude towards customers. In fact, the underlying
principle that the customer first was carried through at all levels of
the organization. How customers were treated at each point of contact
was considered of paramount importance. All theses initiaves were
executed with an aim to ensure customer retention. The change in the
approach and philosophy of the company helped the company not only
sustain a long-term relationship with its customers but also earn a high
level of profitability in 1992 despite a major recession. However, many
marketing experts believe that the major reason for the improved
performance of the company was the modification of the company’s
objectives from being in the business of flying airplanes to business of
satisfying passenger requirements. However, in response to changing
environment in the early 1990s, BA took the following measures:
•Greater attention to gaining new customers
•Focus on customer care
•Improving the service quality
•Flexibility of the staff while dealing with customers.
Recently BA introduced a number of changes in its systems of working and
approach to meet the growing demands of customers as well as
competitors. The improvements are related to all the aspects of a
customer’s journey and aircraft boarding to ensure a stress free, speedy
and seamless experience for travellers. Further, in bid attract more
customers, BA has succeed in giving its passengers an offering with a
different set of features which includes:
•Ergonomically designed seats with adjustable headrests and footrests
and more knee room
•Personal video screens and audio for every passenger, with up to 18
channels, including a dedicated children and family channel, as well as
up to 16 channels of audio programmes and
•Enjoy meals designed by leading chefs, as well as a complimentary bar
service which is available throught the flight.
STRATEGIC MARKETING: Making Decisions for Strategic Advantage By MUSADIQ
A. SAHAF, PHI Learning Private Limited Delhi, 2013, page 170
Task2.2 undertake an external environmental analysis for the
BA using PESTEL(macro environmental factors), identify
opportunities and threats present in the external environment
(using SWOT) and carry out industry analysis (you can Porter’s
5 Forces model)
EXTERNAL ANALYSIS
British Airways will need a proper understanding of the external
environment to achieve a sustainable competitive advantage over other
companies. At the same time, the external analysis on British Airway’s
environmental and competitive environment is also important in attaining
a proper representation of British Airway’s capabilities to meet current
and future business challenges.
From the SWOT analysis conducted earlier, it is essential that British
Airways look at a couple of the strategic options to be further
pursued;by way of to allow the company to togetherremainaffecting in the
correctdirection and to recover on any downsidesthey are facing in their
current set-up. For the right strategic options to be identified, a
HAULSmatrix will be suitable for the formulation process.
For the strategic options identification, two strategies will applied
through the use of the HAULSmatrix tools. The first strategy will use
British Airways internal strengths and applying it with their external
opportunities and threats. This willlet for the company to use its
strong pointto improve the company’s external factors. The second
strategy wi will be suitable for the formulation process.
For the strategic options identification, two strategiescould be applied
through the use of the HAULS matrix tools.
The first strategy will use British Airways internal strengths and
applying it with their external opportunities and threats. This will
allow for the company to use its strengths to improve the company’s
external factors.
The second strategy will consider the weakness in the company with the
external factors like opportunities and threats to excludeunderlying
company’s weaknesses.
1 Strengths – Opportunities
With the brand image that British Airways can boast of and the Skytrax
Star system of quality rating that is able to offer huge recognition in
the International level; it would beperfect for British Airways to
challengefor market segmentation focus. By focusing the goals and
objectives of the companies towards sectionthat will be the company’s
major generator, quality can be achieved in much shorter period. At the
same time, supply chainmovement will help to distinguisha British Airway
that is much stronger throughfusions; from the competition of smaller
airlines. With most competitors still not reaching the mark of being
able to provide reliable service, it is important that British Airways
is able to bring improvements to its complementary services that will be
able to define the airlines. Emergence of new markets provides a good
opportunity for British Airways to offer broader service ranges.
2 Strengths – Threats
With the increasing threat of environmental conscious consumers and
stringent policies that place priority on environmental protection and
CSR, it is important that British Airways produce a complete renovation
of its brand image to become a premier environmental-friendly airline
service. Instead of bringing environmental policies slowly into
different aspects of operation, completely remodelling the brand into an
environmental predecessor will improve the reputation of the brand among
the new wave of consumers in the same fashion as what Toyota Prius was
for Toyota in the United States and world market. Lowering cost for
competition to operate should be taken as an advantage by British
Airways. The resource that the company enjoys over rivals can be
utilised towards diversifying into other transport markets while the
cost remains low.
3 Weakness – Opportunities
Change should be brought into people management culture in the company.
Leaders who are more apt at transformational styles of leadership will
be suitable for the current crop of employees. Poor employee relations
history can be countered through and improved people process that will
look into treating individual employees in a more personal level. At the
same time, inability to adapt to innovation and change can be rectified
through technological advancement. Technology will play a vital role in
helping British Airways address concern with reliability and trust.
4 Weakness – Threats
In terms of strategies that can be implemented in ways where the
weaknesses of the company does not expose threats; one proper measure
would be to improve the environmental stance of the company to deter
negativity that might stem from increased environmental awareness. The
negative attention that the company has received in terms of reliability
and change can be focused towards an improvement in environmental and
ethical concern. This will help British Airways buy some time to repair
the said weaknesses.
PESTEL Analysis
2.2.1 Political
Air control and security have seen increase in safety and anti-terrorism
actions as a result of the September 11 air hijacking in the United
States and the London bombings of July 2005. Apart from that, heavy
regulations on airline schedule and a limitation on scheduled passenger
flights above United Kingdom region have also affected operations for
most airlines operating inside the European continent. Compliance to new
regulations is an essential option if British Airways required constant
and profitable operations. At the same time, security measures are also
an important measure as consumer confidence in an airline is starting to
weigh on the ability of airlines to actually assure safe journey’s
without freak incidents such as hijacking and bombings.
2.2.2 Economic
The global economic crisis of 2008 has had a heavy bearing on the United
Kingdom-based businesses and the scheduled airline business has also
been affected. From 2008 onwards, world growth had been projected for
just 2 percent annually. At the same time the weakening pound against
the Euro also badly affects British Airways which happens to be UK
based. Oil prices have declined by close to 50% since its peaks during
the year 2007. As the United Kingdom was the first global superpower to
be hit with the meltdown along with the United States, consumer spending
has also seen its sharpest decline in 13 years. This trend has not
changed much for the past 5 years. Cost cutting measures by both
individuals and businesses has seen a huge reduction in the number of
passengers over the past 5 year period.
2.2.3 Social
The United Kingdom has an aging population which is unhealthy. At the
same time, the global economic meltdown has also lead to critical levels
of unemployment that has never been seen in the United Kingdom for
decades. With the older generation ever expanding, British Airways can
take positives in the fact that the older generation comprise of mostly
retired folks who are more willing to make travel plans and long
vacations At the same time, with unemployment being at a high,
bargaining and price comparisons across competitions are bound to
increase.
2.2.4 Technological
A recent survey revealed that 34% of online consumers are planning on
using price-comparison sites more with Interned savvies seeing an
increase since the late 2009. At the same time, online booking services
and check-ins are becoming among the industry standards where most
competitors are using it. It is no more a novelty boasted by British
Airways alone. British Airways will definitely maintain technological
awareness while also avoiding the habit of becoming solely reliant on
technology based consumer marketing and forgetting other markets.
British Airways should not forget that the older generation still have a
large percentage of individuals who perform ticket purchasing and check-
in procedure the classic offline way.
2.2.5 Environmental / Ethical
New environmental policies such as noise pollution controls and energy
consumption controls have been mooted since the later stages of 2009 and
2010. Heathrow airport- which is the world’s busiest airport and British
Airways “home turf” is getting increasingly congested with approvals to
obtain more land for expansion procedures not showing any positive
signs. Newer legislations and environmental issues concerning land
acquisition will only increase operational costs. Consumers today are
also increasingly environmentally-conscious and search for signs of
ethical environmental policies when choosing services and products.
Environmental-friendliness is among the biggest marketing trends of the
2010 decade.
2.2.6 Legal
Legal problems have arisen in the form of price fixing amongstlike-
minded competitors in the hope of countering the variety in consumer
preference in terms of pricing. At the same time, legal wrangles due to
cabin crew strikes that has occurred previously also render an unstable
legal platform for British Airways. The Open skies agreement in 2009 was
seen as an opportunity for British Airways and competitions to freely
transport aircrafts between the United States and Europe. British
Airways merger with American Airlines underwent a lot of legal
proceedings that are both costly and unnecessary distraction from the
main business.
Porter’s Five Forces
Porter’s five forces is an important tool in analysing the competitive
nature of the airline industry in order to assess the position of
British Airways in the market. At the same time, the analysis will
enable British Airways to make strategic decisions in order to increase
profitability.
Strength Force/Threat
High Competive RicalryBritish Airways caters for both
long and short haul flights. Within the long haul
there exists little differentiation between BA and
its competitors in terms of pricing and service
offering.
• The short haul market is more fragmented with
many small players
• Direct competitive rivalry is fierce with
Virgin Airlines. Virgin Airlines were aggressive
in which the company goes to all lengths to oppose
any move by the British Airways in mergers
• Consolidation of competitors has also
increased competition.
High Supplier Power
.There exists two major aeroplane manufacturers
(Boeing and Airbus) with high amount of
competitiveness. This equals high bargaining power
• British Airways are restricted with a sole
supplier of fuel to the airport
• Priority of landing slots is given to
historic rights of existing users
• British Airways’ employees use collective
bargaining through trade unions in order to
increase their bargaining power.
Medium Buyer Power
• Low concentration of buyers to supplier mean
the buyers have little bargaining power
• Increase internet usage has amplified
awareness and interaction of customers
• Lowe cost carriers are seeing surge in buyers
due to economic conditions
Low Threat of Substitutes
• There exist few direct substitues
• Short haul flights (Eurostar and Ferries)
• Long haul flights (no notable substitutes)
Porter’s Generic Strategies
Task 2.3 Analyse stakeholders of the British Airways and
explain the importace of underaking stakeholders analysis
identifying the stakeholders; strategy development and Strategy
Management model assessment. As one of the leading airliners in the
world, British Airways has suffered a stormy internal and external
business environment in recent years. Though they are still first the
leading and competitive airliners in the world. their business can be
carried out based on their core competences: brand reputation and the
dominating flight slots in Heathrow Airport
In recent five years, the business environment of international civil
aviation industry is turbulent and changeable. The recent economy
downturn has forced BA to be sensitive and cautious about cost and the
passengers' volume has been cut down in terms of business and
tourpassengers. The industry competition is getting fiercer as by the
linking of the cheap cost airliners which indicates BA have to master
the value creation process, or the value chain, with business
perspective and cautious.Moreover, the cares on the stakeholders in each
stage of the business should be paid attention to, or it may leads to
the negative impact to BA such as the staff strike took place in January
2007, which gives BA's brand image a big shock.
Topreserve the market share and competitive advantage in this industry,
BA should concentrateon the resource opimizationt groundedon the
changing demand; in addition the diversification is optional for BA
which may allow it to compete with the lower cost airliners in the short
hauls. In the long termprospect, the cost powercan be applied in this
market of high price elasticity, fierce oppositionand high
inventiveeffort. Those recommendations are based on the former analysis.
Porter’s generic strategies involve three major strategic directions
that companies can take in order to achieve competitive advantage over
competitors. ThStakeholder Analysis
To analyze the stakeholders in BA, the Power/Interest Matrix (Gardner et
al, 1986) can be applied in terms of its power and interest.
Key Success Factor & Firm Analysis
Brand Reputation
As the brand reputation is such crucial to this industry, BA's goal of
being the undisputed leader, is based on achieving and maintaining the
wide customer recognition. It also helps BA building customer loyalty in
the long-run
Economy of scale
By constant expanding and purchasing, BA can enlarge its fleet scale and
make effective of each by resource optimization. It also help BA to
lower average unit cost.
Cost control
After expanding, the economy of scale can save the production and
maintenance cost. It helps BA to reach a better financial status and
lower down the threat of new player in the long-run.
Product Positioning
In addition the Boston Matrix can position BA's business in terms of
short-haul and long-haul
Long-haul
(Star Business)
Short-haul
(Cash Cow Business)
Long-haul: it is in a growing market however large investments is needed
to strength and expand the market share
Short-haul: the high-high situation means BA is in competitive lucrative
position
Key Stakeholders Analysis
Customers
Merger can give customer more choice in travelling and more seat
capacity, the differentiation is also favourable to customers as they
are the reviving-end which means more product feature can be obtained.
Cost-leadership is welcomed can somehow lower their cost which can lead
a fall in the price.
Industry Authorities
It provides the control and guide role in this industry. The merger can
make their work and control easier; differentiation will not play so
much on them; the cost-leadership is welcomed by them as it can set
example of saving costs.
Shareholders
Merger for them indicates more opportunities of higher dividends and
risks; differentiation also means more business opportunities and
revenues. Cost-leadership can leader to positive financial performance
which is directly related to their dividend payment in the future.
Strategic Development
The 'school of thought' developed by Mintzburg can be applied of which
the Positioning School (Mintzberg H, 1998) is believed to be applicable
to BA.
In the positioning school the strategy formation is based on the
scientific analysis of the industrial structure and the competitive
position the firm currently has. Founded by M. Porter, this school
believe that the core of business strategy is to obtain the comparative
advantages, which is determined by the profitability of the industry, or
the industry attractiveness, and the firm's competitive position.
The external environment is emphasized in this school. The industry
analysis can be carried out with PEST analysis, 5 Force model and the
BCG matrix. According to school of thought, BA's business can be
characterized as:
BA is the leading airliner in the global market with relatively big
market share
BA is in an industry of low growth rate
The industry profitability is lowering down and the overall economy
trend is undesired.
Gaps & strategic Recommendation
Currently BA is suffering a brand crisis, caused by the Terminal 5
errors and BA038 crashing landing. The high luggage-losing rate also
leads to critiquesHeathrow Terminal 5 IT glitch grounds British Airways
passengers. BA also lacks of good strategy to compete with the low-cost-
airliners and to cope with the fuel-cost
instability.(http://www.theguardian.com/world/2013/sep/25/heathrow-
terminl-5-british-airways-passengers-bags)
Strategic Model Assessment
The usefulness of strategic models applied in this article will be
assessed individually.
PEST analysis
PEST analysis recognizes the external variable factors that effecting
BA. It has divided those factors into political factors, environment
factors, social factors and technological factors. PEST is effective in
business planning, environment assessing, marketing strategy formulating
and business factor assessing. By the factor recognition, BA can make
the strategy based on the usefulness of each factors.
SWOT analysis
SWOT focuses on firm's internal analysis. By assessing on the firm's
strength, weaknesses it has, and the opportunities it's facing, it
enables the firm to combine the internal resources with the external
environments together in strategy formulation. SWOT can help BA to
manage the overall situation and clearly recognise its own position.
Meanwhile by recognizing the threats, some risks can be possibly
foreseen and eliminated. By SWOT, BA can plan its resource optimization
and the future resource re-allocation.
Porter's 5 Force Model
This model is a useful tool to assess the industry competition level.
According to Porter, the degree of rivalry of an industry is determined
by the bargaining powers of supplier and buyer, and the threat of new
entry and substitute. Industry competition or the industry profitability
is the firm primary concern in business. This is one of the most popular
strategic analysing tools and is applicable in either domestic or
international markets. The five forces could work together to influence
the profitability. They are also where the strategy basis takes place.
By examining the all the external factors, it mainly analyzes the
relationships between the industry competition and all the firms.
Value chain
According to M Porter, the value creation of a firm is through a series
of linked activities, which includes supportive and primary groups.
Porter reveals that the competition between firms such as BA and KLM is
mainly taken place in the whole value chain. Meanwhile the competence of
value chain decides the firms overall competence. Value chain analysis
can help BA to recognize the value adding process in different
activities and figure out its core competences.
Stakeholder Mapping Techniques
Stakeholder mapping matrix has categorized the stakeholders into
different groups in term of the varied power and interest that the
stakeholders have. It implies how different stakeholders are impacted by
firm's strategies. It is useful as it enables BA to build different
attention or relationships with different stakeholders.
BCG Matrix
Boston Matrix can help BA to recognize the competitive status each of
BA's business is and enables BA to optimize its resource allocation. In
addition, it also locates the firm's product range into one box which
made the overall business appraisal easy and clear. However the critics
on BSG matrix are that it's hard to define the growth rate and other
business indicators are needed to make decision.(Read more: three
strategies include Cost Leadership, Differentiation and Focus. The focus
strategies can be splitinto two areas where one would be for cost focus
and another for differentiation focus. Cost leadership involves the need
for a company to create products and services that are cheaper than
competition in order to maintain market advantage over other
competition. Distinctionstrategy involves the need for a organisation to
differentiate its products and services in such a way as to create a
exceptionallysuitableproduct thatreaches target market of its own or
stave off competitors’ products and services for being uniquely
different and non-imitable. Focus on the other hand involves the need to
offering a product or service that distinctively serves a niche market
that would have little competition. In splitting the focus strategy into
cost focus and differentiation focus, companies can decide to on whether
to emphasise on cost-minimisation in a focused market or product/service
differentiation in a focused market.
Porter’s generic strategies are an important way towards the strategic
design process for a company’s strategic management exercise. However it
would also be fundamental to note that the method is not one that can be
considered as fools-proof. It is realistically not possible for a
company to merely focus on any one aspect detailed in the generic
strategy figure shown above. This is because when a company is to follow
the differentiation strategy, it would attempt to work out ways towards
differentiating its product and services to gain a competitive advantage
over other brand names. However in a consumer-driven market it is
virtually impossible for a company to focus on differentiation strategy
without actually ignore cost leadership strategies no matter how unique
their products tend to be as consumers can easily shun a specific
product simply because of the high cost of the product.
Task 3 Approaches to Strategy Evaluation and Selection
Present and evaluate possibile alternative future strategies
for the BA using Ansooff’s matrix and Porter’s generic
strategies, retrechment strategy and select an approriate
strategy for this organisation to pursue.
ANSoff PRODUCT MARKET MATRIX
The Ansoff growth matrix is a strategic tool that helps companies to
evaluate products along with its market growth strategy. The product-
market growth matrix of Ansoff allows a business to grow by virtue of a
new or existing product succeeding in a new or existing market. The
Ansoff matrix outputs a series of suggested growth strategies that
directs the business’ strategy through the following drivers:
Figure above shows the ANSoff growth matrix
Market Penetration
Growth strategy that focuses on releasing existing products into
existing markets successfully through:
Maintaining or increasing current product’s market share.
(Competitive Pricing strategies and promotion)
Drive out competitors in mature markets through restructuring.
(Aggresive promotional campaigns)
Increase customer base through loyalty schemes
Market Development
Selling of existing strategies to new and fresh markets:
Marketing products in new geographical settings.
Different distribution channels.
Different pricing policies for trans-market customer pulling.
Product Development
Strategy that requires pushing new products into existing markets. This
requires appealing andcompetentproducts which canrequest existing
markets.
Diversification
Diversification allows for businesses to introduce new products into new
markets. This strategy allows for a company to introduce and controla
market that is non-existent initially. There are many risk factors
involved with this strategy and companies that take this route for
growth require deep pockets to suppress possible failure.
ANSoff Matrix on British Airways Strategies
In terms of market penetration, British Airways can actually gain market
share through renovation and modernisation of business approaches and
the brand image as a whole. At the same time, improving environmental
stance by actually going beyond minimal requirements in environmental
conservation to actually increase the measures will also drive market
share. By placing segment focus strategies, British Airways can actually
derive from the fact that profit margins from business class passengers
are the highest for the company and the fact the services that business
class passengers require cannot be replicated by budget carriers makes
it even more possible.
British Airway’s product development phase was involve technological
advancement. Introduction of internet access on flights along with
improved integration of mobile computing peripherals such as tablet PCs,
smartphones and laptops is a value increasing service offering.
Complementary services such as concierge services, car rental, hotel
booking and even smaller services such as appointment scheduling and
mapping of routes for foreign tourists is value added bonuses in the
product offering.
Diversification and Market Development can be formed together for
British Airways. The company will need to diversify into substitute
services such as ferries or cruise with the same level of quality that
is recognisable from the British Airways brand name. At the same time,
increasing the number of scheduled flights with primary focus on large
Asian economies such as China and India would increase the service
offering ranges.
TASK 4
4.1 Roles and responsibilities
Sadler (2003) introduces three main roles of strategy implementation.
Those roles are envisioning future strategy, aligning the organisation
to deliver that strategy and embodying change.
The first role is envisioning future strategy. This role involve with
clear communicating the strategy to internal and external party. The
internal party includes the organisation and the external party is
includes all stakeholders. The next role is aligning the organisation to
deliver the strategy. Under this role, it is expected that all people in
the organisation be committed to the strategy. These people should be
motivated to follow the strategy and should be empowered to deliver the
change. The final role is embodying change. The strategic implementation
is highly involved with the organisational change. Thus, strategic
leader has a major role of following strategic change process.
According to Sadler (2003) the responsibility of strategy implementation
should be taken by two main parties. Thos two parties can be identified
as middle managers and outsiders. Middle managers have been identified
as the implementers of top management’s strategic plan. The
responsibilities of the top-management have three main areas. Those main
areas can be identified as sense making of strategy, reinterpretation
and adjustment of strategic responses, and advisers to more senior
management. Outsiders have more responsibilities for strategy
implementation. Especially as outsiders, consultants and other
stakeholders have more responsibilities. Consultant always helps to
formulate the strategic for the change process. Stakeholders have
responsibility as strategy implementation agents in the
organisation.
4.2 Resources Required for implementation
At the implementation of the strategy, the resources allocation is
vital. These resources requirements can be differed from one
organisation to another and one strategy to another. It is clear that
the organisational environment and nature of resources determines the
resources requirements (Coulter, 2001).
As discussed above British Airways should implement interactive
strategies to face to the future competition of the industry. Thus,
British Airways needs three main resources for implementing these
strategies. Those are physical resources, people resources, and initial
start-up cost.
The physical resources are consisted with production resources, finance
resources and marketing resources which need for implementing
interactive strategies at British Airways. Since, these interactive
strategies mainly focus on the quality improvements of the British
Airways product; it is advisable to allocate more physical resource for
the quality improvement. People resources also a major requirement for
strategy implementation. British Airways should develop their human
resources by implementing more learning and development activities.
Finally these all these strategy implementation processes are involved
with initial start-up cost and British Airways should allocate
appropriate finance for these implementation activities.
4.3 Monitoring the implementation
Johnson et al (2011) introduces three main criteria and techniques which
can be used to monitor a strategy namely suitability, acceptability and
feasibility. Suitability is that assess whether proposed strategies
address the key issues. Acceptability measures whether proposed
strategies meet the expectations of stakeholders. Also feasibility is
measured whether strategy could work with in practice.
As discussed above British Airways future strategies will be interactive
strategies. These interactive strategies can be monitored by the
suitability criteria. Under this criterion it can be monitored that
whether British Airways interactive strategies address the key
opportunities and constraints in the organisation face. Acceptability
criterion can be used to monitor whether implemented strategy meet the
expectations of stakeholders. Under this criterion the risk and return
also monitored. Feasibility measures whether strategy work in practice.
Further, feasibility can be used as to check the targets of the
implemented strategies. For an instance, it can be used to measure the
finical targets of British Airways by implementing interactive
strategies.
CONCLUSION
Decisively, from the Ansoff Matrix and BCG matrix analysis, British
Airways should give priority in implementing the SO strategy of using
their strengths to gain in opportunities. This is particularly obvious
in British Airways Ansoff Matrix and BCG analysis. Their Star products
should be turned into cash cows as the market matures, as minimal
investment will turn in higher returns and profit. This extra cash can
be poured into improving on products that are in the question marks
category. As these products are risky and could turn into dogs, mass
amount of cash pouring and brand image renovation would be an advantage
for British Airways. Implementing new markets into existing markets and
rising fast as the market leader will be easier with strengths such as
huge resource pool, established name in the business and strong merger
with other industry leaders.
As identified in the PESTEL analysis, environmental issues are becoming
increasingly important. A reactive strategy therefore would be to build
an improved environmental posturethough going beyond the desires of
current regulations such as the climatic change bills. The strategic
management improvements are to be implemented into the corporate level
structure, business level structure and functional level structure. Due
to the scale and scope of British Airways’ operations it was decided
that the focus of this report would be neighbouring scheduled passenger
flights. Moresuggestions would comprise strategic analysis to implement
SBU level strategies.Due to absence of principal research and restricted
access to company information there maybe limitations in the findings
and recommended strategy, however it is believed that if the general
direction of the suggested strategic determinedis followed it will lead
to success.
