British Airways Environment Analysis and Corporate Strategy - Case Study Example

Module British Airways Environment Analysis and Corporate Strategy The tourism industry is an important sector of the UK economy and one of the major players in it is the transport sector. British Airways, the flag carrier, prominently features here as the largest airline firm in terms of domestic and international flights. The fact that it has managed to attain market leadership in a largely volatile industry informs its choice for this study (Mayer 15). The course of this study will flow from a brief explanation of the company’s timeline then an analysis of its external environment through PEST. This will be followed by a discussion of a corporate strategy that can be pursued by the company based on a theoretical framework. British Airways Company Background. British Airways is the largest airline in the UK both domestically and international hence it has a huge bearing on the tourism industry. Some of its activities include commercial carriage of passengers within and outside the UK, mail and freight among other ancillary services including holiday management, car rentals, airport parking, travel insurance, currency exchange and credit card help all of which serve to integrate it further into the tourism industry (BritishAirways.com). Figures such as 42,755 employees, 550 global destinations indicate just how much British Airways has grown from humble beginnings in 1974 with much growth being achieved through a series of successful acquisitions of smaller companies. It has total capital of £4.401 billion and a capital expenditure of about £800 million according to the figures of 2010 financial year (YahooFinance.com). Environment Analysis for British Airways: PEST Analysis. One of the best approaches to analyze the environment in which a company such as British Airways operates in is through conducting a PEST analysis which is based on four areas; political, economic, social and technological aspects (Bensousan and Fleisher 169). Such an analysis is particularly important when taking into consideration that it explores the overall factors at play in the industry dynamics and generates the company’s past, present and future which is crucial for successful development of an effective corporate strategy for British Airlines (Smith and Raspin 63). On the political front, the main considerations for this analysis are the roles of government in the airline and tourism industries and the extent to which the government intervenes in these markets. The government of UK has established restrictions in which companies are supposed to operate within. Regulation involving airline monopoly in their home city is one particularly at play in this case. British Airways has used this policy to their advantage; through acquisition of BA Cityflyer BA operates a second of such hubs in Gatwick besides its hub at the Heathrow Airport in London. Bilateral agreements also play an important role in the airline industry where companies such as British Airways can achieve new markets. Political events that may interfere with British Airways include terrorist threats that have the effect of discouraging air travel. The economic considerations have particularly serious implications for big companies such as British Airways. Air travel is directly linked to economic activity, tourism and spending power and thus the economic growth of a country. Reduced economic activity leads to reduced spending power and in extension reduced tourism which is hard hitting to British Airways since it has huge operational costs. The recent global economic decline is a demonstration of this scenario where British Airways and other players in the air travel industry had to do with massive losses and are still trying to recover. Strategies that have been adopted to go around this include forming economic alliances and code sharing that ensures reduction of counteractive competition and instead maximising on revenue. The tourism industry is also seasonal hence there are periods of reduced activity and sustained growth can thus be difficult to achieve. The social and cultural perspectives of the aviation environment are also crucial since it is directly related to tourism. The propensity to travel is on the decline due to time and financial constraints in families. The strength of the British tourist market comes into play also where the number of tourists attracted to the country affects the airline’s business (Robinson 147). Alternative destinations for holiday experience thus hurt British Airways since they reduce the volume of its air travel and impact on its projected financial figures. Besides this, the trends of holiday makers also have strong effects in the industry where short breaks versus long holidays and choice of destination affect economic activities. Domestic tourism also has the potential to impact on airline activities. On a totally different note, terrorism threats in the society hamper airline activities since terrorists have previously targeted this sector in the past and caused major losses and grief. Technology as a determinant of the environmental implications for a major player in the aviation industry is increasingly becoming important due to its importance and related financial costs. To begin with, British Airlines and competitors have had to develop and sustain online booking systems to not only increase convenience in using their services but also to cut the correct image among the public. Travel security is also increasingly relying on technology in this industry. The alliances formed by airlines have been particularly important in enabling them to share certain technological resources such as check-in systems. Proposed British Airways Corporate Strategy. After the extensive industry analysis already undertaken the next step is to establish a corporate strategy that can be pursued by British Airways successfully. Furrer (2) defines corporate strategy as the avenue through which a firm seeks to create value by configuring and coordinating its multimarket activities. The concept of corporate strategy is based on analysis of the market to establish, a long-term direction and scope basing on the resources available for use by the company. It involves establishing objectives and goals and then implementing a plan to achieve the set objectives. Some of the features of a corporate strategy include the fact that they are visionary, have impacts on the entire outlook and operations of the company, and utilize short-term steps to arrive at an ultimately long term goal. A mission guides the company to arrive at the set objectives and after an appraisal of the internal and external environment a strategic plan is set forth and then implemented (Dransfield 18; Caldert and Ricart 5). Since British Airlines is an international player and has already established market leadership at home, a strategy based on the mission of being the global industry leader is proposed (Saee 2). Besides the international theme, another consideration for the mission statement should be based on the quality and target market; hence the proposed mission should be “To be the global leader of quality premium air travel.” This mission statement caters for global industry leadership, premium market and high quality. In terms of strategic analysis, the environmental industry analysis performed earlier reveals several considerations on the external level; all the four factors in PEST analysis are in a state of recovery from the recent global economic decline as countries strive to reverse economic fortunes. This is therefore an opportune time to undertake an expansionary strategy based on the mission statement (The Times). The internal environment would require to be harmonised with the proposed outlook. The next step in development of the corporate strategy is generation of a strategy to achieve the given mission. The proposed strategy is to focus on the premium market and identify niche markets around the world where provision of the best quality service will win loyalty and establish British Airlines as the air carrier of choice. The convenience, effectiveness, reliability and quality of the premium service provided will present customers with an opportunity to get value for money and the extra bit to be paid will be worth the experience. Organisational appraisal will be undertaken to consolidate all resources in the visualised strategy. Implementation of the strategy will first be preceded by undertaking an effective and mission-based training of both on-flight and off-flight personnel to improve their performance and motivate them to do more than the minimum which is particularly crucial on a premium-focused strategy being implemented. The next step will then be to identify and establish strongholds in key cities in the world with an aim of attracting the premium travelers on tourism, business or any other travel purposes. After this, a roll-out of the strategy will be undertaken accompanied by evaluation of the achievements of the strategy and making the relevant and appropriate amends in case of anomalies from the mission. CONCLUSION British Airways is already an industry leader in the UK hence a corporate strategy that may be adopted should be aimed at establishing it as the airline of choice on a global scale. This necessitates an environmental analysis on PEST where the political, economic, social and technological considerations are examined. This analysis indicates that the global outlook on all accounts is on the recovery hence justifying an expansionary strategy. The proposed corporate strategy is to improve the quality of service to the highest level possible and undertake a global expansion in which the high-end market is targeted with premium services. Works Cited Bensoussan, Babette and Fleisher, Craig. Analysis Without Paralysis: 10 Tools to Make Better Strategic Decisions. New Jersey: Pearson Education, 2008. Print. BritishAirways.com. Information. UK, 2011. Web. 10 October 2011. Caldert, Adrain and Ricart, Joan A. “Corporate Strategy Revisited: A View from Complexity Theory.” Center for Globalisation and Strategy, 2003. 528-5. Dransfield, Robert. Corporate Strategy. Oxford: Heinemen, 2001. Print. Furrer, Olivier. Corporate Level Strategy: Theory and Applications. Canada: Routledge, 2011. Print. Mayer, Flourian. A Case Study of EasyJet and the Airline Industry. Germany: Verlag, 2003. Print. Mennen, Miriam. An Analysis of Ryanair’s Corporate Strategy. Germany: Verlag, 2005. Print. Robinson, Peter. Operations Management in the Travel Industry. UK: CABI, 2009. Print. Saee, John. Contemporary Corporate Strategy: Global Perspectives. Uk: Rotledge, 2007. Print. Smith, Brian and Raspin, PG. Creating Market Insight: How Firms Create Value from Market Understanding. England: John Wiley and Sons, 2008. Print. The Times. Business Strategy: Theory. Web. 11 October 2011. YahooFinance.com. British Airways Plc Company Profile. Web. 10 October 2011. Read More