Strategic Analysis Of British Airways Essay.

Task 1

Task 1

1.1. Explain the concept of “strategy”, state and explain vision, mission, goals, objectives and core competencies of British Airways.

1.2. Review the issues involved in strategic planning.
 
1.3. Explain strategic planning techniques that organisations can use, such as BCG growth-share matrix, and apply to British Airways.

Task 2

2.1. Carry out an (internal) organizational audit of British Airways particularly considering strengths and weaknesses (using SWOT), organisational culture, and benchmarking (to determine current position and performance of BA relative to other companies in the industry).

2.2. Undertake an external environmental analysis of British Airways using PESTEL model (macro environment), identify opportunities and threats present in the external environment (using SWOT), and industry analysis (using Porter’s 5 Forces framework).

2.3. Using Stakeholder Mapping Technique undertake analysis of the British Airways stakeholders
and explain the importance of undertaking stakeholder analysis.

Task 3

3.1. Present and evaluate possible alternative future strategies of British Airways relating to substantive growth (horizontal and vertical integration, related and unrelated diversification), limited growth (do nothing, strategies described in Ansoff’s Matrix – market penetration, market development, product development) and retrenchment.

3.2. Select an appropriate future strategy for British Airways to pursue using Porter’s
Generic Strategies.

Task 4

4.1. Compare the roles and responsibilities of the managers and (project) team members in implementing strategy, relate to British Airways, evaluate on the example of any specific strategy (increasing the number of flights on Dubai service in the Middle East, or launching flights to Seoul in South Korea).

4.2. Evaluate what resources (financial, human resources, time, materials and equipment/technology) will be required to implement a new strategy for British Airways.

4.3. Discuss targets and timescales set to successfully realise a particular British Airways strategy, and use these targets and timescales for evaluation.

British Airline wanted to become the Global Airline of the world. The strategy involves the planning and implementation on the ground. BA have bought the multiple airlines to become the 2^nd largest airline of Europe and 3^Rd largest of the world. The airline has followed the path of inorganic growth by acquiring the other airlines (Carpenter and Hanssens, 1994). The strategy to build a company into a International Airline of choice if reflect in its vision, mission, objectives and goals of the company. The company has also built the core competencies in a long run to sustain and fulfil the objectives of the shareholders.

Vision: The long term plan of the company to sustain in the business as a Global, premium and operate and focus only in the aviation business. This will result in making a large company in Aviation business.

Task 2

Mission: The mission are the benchmarks, the company want to achieve in the short term. The goal is set for the short term like cost cutting, increase profit achieve milestone by increase revenue.

Goals: The goals are meant for achieving the vision of the company. The goals are like to become the airline of the choice, increase the operations, entering into the new geographies etc (Giapponi and Scheraga, 2010).

Core competencies: The flexibility and strength of the company attained in the period of time by taking steps like merger and acquisition become the competence in the long run that help Airline to achieve the objective of the company.

The issues that involved in the strategic planning is the implementation at the ground level, the acceptability of the new policies by the employees, accept the employees of the acquired company as the peers, the trade union negotiations etc. The strategy should be align to the common objectives of the company and the employees for instance the objective is to defeat the competition by reducing the cost, the cost can be reduced either by cutting the avoidable expenses like free food or by cutting the employee strength. Though the objective is same but there will be lot of problems and issues if staff strength is cut down ("Six Carrier Mutual Aid Pact": A New Concept of Management Strike Strategy in the Airline Industry, 1960).

The BCG matrix is Cash cows, stars, question mark and Dogs.

Dogs: The area of business where the investment required is very low/ Nil and the returns/ Cash flows are low but stable. The BA have edge in the London market and the cash flows are stable the company has already made the goodwill in the markets and reaping the benefits. The competition can’t beat BA in this market

Cash Cows: The Middle East market is the cash cow. It is emerging market and the hub for the airlines and connect to south east Asia. The investment will give high and stable returns for the company (Althonayan and Sharif, 2010).

Stars: The stars is the US market. BA is 3^rd largest airline company, first two are from the US. In US market the revenues are high, the investments are high due to competition and the client need to spend on the regular up gradation on services to keep competing and managing its share in the market.

Question Mark: The question mark are the areas were the company is not making much of the profits. BA is focused in the long haul premium services but still operating within the Europe on short distance. It doesn’t match to its vision and mission so therefore these operational areas to be closed down.

Task 3

British Airways is centric to the employees, channel partners, customers centric, performance and excellence based. This make them a unique combination of the strengths that is gained over a process improvement and acquisition of other airlines. The diversity of the employees, the presence in the global cities, the flexibility of taking fast decisions, the economies of scale make them a airline of the choice of commuters (Brueckner et al., 2015).

We will do the SWOT analysis point wise:-

Strength:

The multi culture, diversified, large operations, low cost achieved due to economies of scale, quick decisions to operate in Profit making geographies and focus approach in the airline business.

Weakness:

The big enough to move or reorient business, multi combination of trade unions, the aging staff of acquired companies, training problems to standardised the operations (Carpenter and Hanssens, 1994).

Opportunities:

The employees are the strength of the any service industry and the satisfied employee bring delight to the client by serving well. BA can use this strength to bring differentiation to the customer comfort and experience. The culture of equal opportunity to employees reduce the attrition and therefore cost of the company. The diversity and employee strength will help the BA to concentrate on the new potential geographies of business (Czipura and Jolly, 2007).

Threats:

The employee become the weakness when he joins the competition. There are routes which are not profitable and BA want to close operations on such routes and cut down the jobs. These people will join the competition and will become the threats, as they are trained, productive for the completion and therefore the cost will come down for competitor.

PESTEL: The macro environment effect any business. The macro environment consist of political, environmental, social, technological, legal. Airline business is highly regulated by the respective governments. The ease of doing business makes business sustainable. The social acceptance is important because the staff, the partners comes from the society so brand value should be reflect confidence among the people. The business require advance use of technology. The aviation industry required lot of investments on advancements from the security and safety point of view. The legal system should be robust enough to provide the justice to the company in case of any loss happen. The BA should operate in such countries which can provide these bare minimum required security for running the operations (Digman, 1980).

SWOT: The strength, weakness, opportunities and threats of the British airlines are as follows. The strength is the economies of scale and large operations with flights to 148 locations of the world. The weakness is the large workforce which is vulnerable due to reason of high cost. The threats is from the macro environment where the fuel prices are unstable and make the business unviable any day.  The opportunities are in the new geographies where the business has no competition and make good profits (Diversification as an alternative growth strategy for the airline industry, 1982).

Task 4

Porters 5 Forces;

The threat of the new entrants in the market, the loyalty to be built with the customers, the long-term agreement to be done with the corporates to avail the services so the competition have to wait for long run to sustain. The bargaining power of buyers is emerged due to competition, the building of competition to be avoided by business orientation techniques. The threats of substitute like on the short haul, trains, ferry should not take away BA business so the price should be such that replacement will not be effective. The suppliers like fuel, caterers should be dependent by making long term contracts and dependability to be decreased over the time. The alternative should be there to avoid strike like situations.

The stake holders are the channel partners of the British airlines. It is one of the core competence of the BA, the stakeholders are customers, employees and vendors. The competence of the stakeholders increase the strength of the company, the company is global operating in different geographies and it became difficult for the central management team to control the overall operations and standardised them. The analysis is done to check the importance of the stake holder and win its confidence for the long term sustainability of the business (Gudmundsson and Rhoades, 2001).

Future strategy: The cost cutting is the alternative for the company to sustain its profits. The cost cutting will happen by forward and backward integration of the related and dependable business like caterer business we see that due to strike by them the company has incurred a huge loss. The dependability on them is huge so the backward integration of caterer services will give assurance of the quality and profits for the business. The substantial business growth will come by acquiring the related business and one of the vision of the company is to remain in the airline business only. The unrelated diversification to be avoided. The Ansoff Matrix suggests that market penetration should be done by segmentation of the clientele, the market development by campaigning and need of the services, and customised product development for the market. The British airline is facing the problem of the ageing employees (Leahy, Tretheway and Oum, 1994). The retrenchment policy to be adopted so that the more effective workforce will be involved for the growth of the company.

The British airline is in the business of long haul premier airline. The long distance premium have virtually no competitor except the other airline. The long haul required the global operations and huge investments in the big planes. The diversified work force and multinational approach. The porter’s generic strategy suggests that the bargaining power of customers and suppliers to be avoided. The competition to be taken care of by having farsightedness. In the business, the competition can emerge form anywhere like bullet trains for the short haul distance, the Video conference that can make possible to avoid the air travel for business purpose. The most important is the challenge among the rivalry competition and the survival of fittest is true in this context. The BA is the 3^rd largest airline for the world, the first two airline are operating in the same industry and on the same route the price war, service quality are the main factors to affect the sales or shift of sales to the other airline. The British airline needs to keep check on the cost and customer delight to sustain in business (Teodorović, 1988).

The project management team is the execution/ implementation team. Their role is very important to understand the requirement and implement in line with the strategy of the company made by the managers. The delay in the execution will cost British airways the opportunity to earn the super normal profits (Shi and Yu, 2012). The Middle East is the hub and gateway to the south East Asia market. All the major airlines are operating on the route. BA wants to capture the market and want the project manager to increase the number of flights on the route in the shortest duration. The roles of the managers and implementation team are as follows:

Managers will decide to outsource all the activities related to the caterer, the cleaning and service staff. The project team will do the assessment of the third parties, will check their execution abilities and past experience in the similar work basically the background scrutiny and implement the strategy of outsourcing the work (Ruefli, 1988).

Managers will require the inputs from the project team on the technical grounds to go for the option of leased aircraft or to buy aircraft to increase the flights on the route. The project team give the feasibility study which will help in decision making to the managers.

The idea is to make rational decision that can increase the profitability of the company.

The British airline required the following resources to implement the new strategy to increase the operation in the new geography.

Financial: The Company need to invest in the different vertical, channel partners for support of the airline business. The BA needs new aircraft to increase the number of flights. The company needs the bank loans, promoter funds or may be cash from the existing business to run the operations till it starts generating its own cash flows (Liasidou, 2013).

Time: The timelines are the crucial parameter to make the profits in the new territory. The demand of the business is to start the operations in the defined timelines so that the competition will not take over and will make profits and built loyalty and goodwill with the customers.

Materials: These are the important factors and its availability will make sue the sustainability of the business. The fuel for example is the most important, its source should be permanent, and otherwise the idle aircraft will become the liability for the British airlines.

Equipment/ Technology: For the airline business the technology plays a important role form the safety and security point of view. The availability of the latest gadgets, equipment’s for the efficient working is the necessity.

While entering into the new geography is the costly affair, the company is required to understand the business, cross culture, laws and other factors of those countries so initially the company spends huge amount in understanding the sources of availability of resources at cheap cost.

The target and timeline for the strategy implementation is the key. The focus is to determine the prices/ fare of the journey, the procurement of the materials, the airport fees and strategy to keep the planes idle or moving or standby mode. The strategy implementation is key to the objectives of the company. The differentiation factors will come by adhering to the timelines. The increase in the number of flights on the route will take time as new planes need to be procure, the local staff needs to be hired and trained about company policy (Ruefli, 1988). The external agreement with the suppliers are required to be done. The timelines for these activity ad smoothen of the operations will take at least 6 month time. The strategy to be followed in interim:

1. The ideal routes or less traffic routes to be cut down and shifted to this route. The employees of these routes are also put on deputation on these flights.
    
2. The external consultants to be hired to fasten the work of procurement, vendor assessments. The analysis to be done basis the global strategy of the British airways.
    
3. The British airways once sure about the business and cash flows through this standby mode operations, the company should invest in the permanent solutions.

References

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