British Airways Corporate Strategy - Case Study Example

British Airways Corporate Strategy [Supervisor British Airways Corporate Strategy British Airways positions itself in the market as a global premium airline. In 2009/2010, the company stated that its main objective was to deliver high performance by focusing on its customers. It looks to target the high class, global business and pleasure travelers. It operates in large metropolitan cities where wealthy business persons work and live. British Airways charges a little extra compared to other airlines but the organization claims that the extra price they charge justifies to the premium service they provide. It concentrates to improve its services in order to attract global business clientele (Gaskell, 1999). The corporate mission set out by the company is to provide service to customers that value an extra ordinary experience of flying. Their business model is based on making revenues by providing exemplary services to its customers globally. For this purpose, British Airways pays specific attention to train its staff. British Airways was the objective to serve the needs of its long haul premium customers. It has always focused on its global customers and providing them extraordinary services. Its aim is to capture the international market by providing facilities to all the major cities of the world (Cole, 1997). Resource Based Theory The Resource based theory looks at the resources an organization possesses and how it utilizes them in order to make revenue. The theory also looks at the competitive advantage an organization has in terms of its competitor and how long it can hold that advantage. Capron et al. are of the opinion that when looking at the competitive advantage, it is important to look at the organization and not the market it is operating in. Thus, an organization must focus on its resources rather than its competitors and derive ways to maximize returns through those resources (Shi, 2007). Based on this theory, it is important to consider the assets and resources British Airways possesses. The company has more than 250 aircrafts and an access to 550 destinations all around the world. The company also has the sole right of entry to London Heathrow Terminal 5, which no other airline has. The terminal 5 is an experience within itself consisting of lavish shopping malls and restaurants. The company provides special training to crew members and for this purpose they have an institute all by themselves. Employees are also trained to handle customers with care. The research department of the company is very efficient which always have updated information about customers, not only in the UK, but globally as well. Alliance with American Airlines has led to more resources and capital for the company. The company complies with the rules of the international aviation industry and ensures safety for the customers on the different routes it travels. It has an average of one flight attendant for every 10 people. They do not carry more than 65 persons on their flights (Cartwright, 2003). However, the company has been laying people off, which is hurting its image both domestically and internationally. It has adopted this strategy to reduce their overall costs and insist that they will continue firing off people that are in access of their requirement. It has also cut pensions of some employees in order to keep the cost down. When 5,000 people were fired in 1997, a lot of employees felt insecure and protested against the company (Gilman, 1997). PESTEL Analysis In order to work for the future strategy, it is highly important to consider the external factors that may contribute to a change in the functioning of British Airways. A PESTEL analysis would help to analyze the market external forces by reflecting on the industry, its competitors, and its strengths to face the challenges in future (Thompson, 2005). Political Regulations from the British government pose a certain amount of threats for the airline. These regulations cannot be ignored and British Airways must look to adhere to it in order to successfully carry out business in the UK. Since September 2011, the British government has become very cautious about security measures especially pertaining to airlines. This could also work in favor of the British Airways if they look to provide security to tackle terrorism and ensure customer safety. Moreover it could also maintain its competitive advantage (Conery, 2010). Economical The global recession has hindered the economic growth for major countries in the world. Since the recession, teleconferencing has become a much favored option among businesses as they are trying to keep the cost of communication down. British Airways should encourage their employees to communicate with overseas employees and clients via software like Skype than to go and visit them abroad (Welham, 2009). Social The national statistics online proves that there has been a rise in the aging population of the people in the Great Britain in the last twenty years. This means there is a newer market to explore as older people have more time in their hand to travel and make trips abroad. British Airways should look to target older people and expand their horizon (Thompson, 2005). Technological A research proves that just about 40% customers tend to use price comparison techniques online to find themselves the cheapest deal possible. Also many customers now prefer to book their tickets online rather to make visits to travel agencies in order to purchase the ticket. British Airways must go hand in hand with all the technological advancements and make sure they do not leave any market segment unexplored (Thompson, 2005). Environmental Due to a higher number of deaths resulting from pollution, new legislation is brought to practice each year. Newer equipments to avoid pollution add cost. Other than cost, sometimes it becomes unreasonable for the company to take preventive measures just as these legislations have been implemented. It becomes hard to comply with these rules when the company is busy providing services to its customers. But with growing concerns over environmental matters, British Airways cannot afford to put its image at stake. Its failure to meet the requirements could harm its reputation. However British Airways were the first airlines that came up with an environment report in 1992 to ensure the government and its customers that they do care about the environment (European Union Committee, 2004). Legal Accepting the rights of trade unions is compulsory if the organization has to function in the global market place. A healthy relation between the employer and employees is necessary for the continuous running of the business. Agreements similar to Open Skies could present British Airways with a chance to deliver aircraft between European and American countries (Thompson, 2005). Porters Five Forces Model It is mandatory to monitor the competitive properties of the airline sector to calculate where British Airways lie. Porter’s five forces will determine and help the company make strategic decisions to perform better (Hill, 2010). Competitive Rivalry British Airways provides services to customers for both long haul and short haul flights. There is little to choose for customers from long haul flights as the company and their competitors provide the same kind of services at a similar price range. The short haul market is occupied with many players and the competition is tough. Each company is ready to capitalize on the mistake the other company makes to expand their market share. Small companies like Eurostar and Ferry give cheaper deals to consumers in order to rapidly gain market share. Their pricing strategy have made them stronger.. Thus there is high rivalry in the domestic airline (Thomas, 2012). Power of Supplies There are just two major aircraft companies in the UK namely Airbus and Boeing. When there are fewer suppliers in the market it suggests that there is high bargaining power because both the suppliers try to compete with one another. British Airways is also dependent upon its sole supplier of fuel. It however gets preference for landing at the airport because of historical rights Power of Buyers The company does not have high bargaining powers over its buyers as it concentrates more towards its suppliers. The customers are very well informed these days mainly because of the internet. Except for the brand loyal, a customer would not hesitate to switch his preference if he or she considers cost over loyalty (Thomas, 2012). Threat of new entrants Companies like XL tried to make it into the market but could not succeed. Their failure might discourage companies from entering the market. The market itself is quite competitive and requires a huge amount of investment. Threat of new entrants is quite low (Thomas, 2012). Threat of substitutes There are many substitutes available in the short haul market for example like Eurostar and Ferry. There are no notable competitors in the long haul market. Threat of substitutes is quite low too (Thomas, 2012). SWOT Analysis: Strengths The company’s main strength is its brand name which has evolved as a quality service provider. It has loyal customers around the globe who do not like to substitute British Airways with any other airline mainly because of its consistency in maintaining quality. The company takes advantage of modern trends like online sales. The company has a great network of communication with emphatic foreign coalition that helps to smoothly carry out operations on a diurnal basis (Cha, 2012). Weaknesses There is always a threat coming from terrorist organizations. Because British Airways is a global airline it has to be more cautious and take measures depending on the country it is operating in. It has a huge amount of debts that up to £3 billion that it still has to pay. The company continues to invest more and more in to aircrafts mounting the debt even further (West, 2009). British Airways have laid off many employees in the past couple of years creating insecurity and hostility between the current staff and the management (Cha, 2012). Opportunities British Airways have the opportunity to explore more about online ticket seekers. As their research department is ranked very high, they can collect information and data about the online buying pattern between users. The government of the United Kingdom is planning to work on a new terminal, terminal 6 that will enhance the reputation of the British Airways (Cha, 2012). Threats Inexpensive airlines are continuing to create a name and impact for themselves in the airline market. If they are given the license for the long haul journeys then that could create a problem for British Airways. Customers who are travelling in numbers in these low cost airlines would not mind paying less regardless of the services they deliver. The cost of fuel is constantly rising decreasing the profits of the company. British Airways cannot fiddle much with the pricing strategy especially at these times when travelers have become so price conscious because of recession (Cha, 2012). After analyzing the internal and external forces that shape up British Airways, further analysis is done to penetrate some of the problems the company is going through and how they can be rectified. One of the major problems almost every country in the world is facing is the issue of unemployment (The Guardian, 2012). With the rising number of people being laid off each year, British Airways should focus more on these social issues to enhance their image. As British Airways tend to lay off more and more people each year, it should look to retain them in order to build a healthy relationship between employees and management. The cost of discontented employees in the workforce is more than the cost of saving from firing them (Thomas, The Telegraph, 2013) As indicated by the PESTEL analysis, people are becoming wary of environmental issues. The company should look to go beyond the basic concerns of environment and look to explore newer subjects like climate change. As British Airways promises to provide quality in airways, this would only lift its image even further and customers will have complete faith on them. The business executives would not mind paying a little extra for a company which is doing so much for the environment. As environmental issues are adding up to the concern of people each day it would be a wise decision for British Airways to lead from the front (Thompson, 2005). British Airways must look to improve their packages. They should look to create a package for the elderly people and plan a vacation for them. The stats show that elderly people are the favorites to travel to distant places so the company should look to target them. Elderly people do not use the internet as a source of information or purchasing tickets so British Airways should devise a plan of directly approaching them on their doors through direct selling. British Airways should also look to stay in touch with the younger generation through internet just like their rivals. They should work on websites that are not complicated to handle and give out the exact information customer wants. The company also needs to work out different routes for its customers. Currently it provides services from London to New York through a direct flight but it should look to explore other transits and routes (Hill, 2010). The British Airways image is the most important element for the company. It stands for a global premium brand and that is the way it should be positioned even in the future. It could hurt its image by cutting the price of the ticket to compete with low cost companies. British Airways has conditioned itself as a premium global airline. Whenever its subject is broached, people identify it with quality. To cut prices would mean that the company would have to compromise with quality and that could be fatal for the image of the firm that has been in operation for so many years and made so many loyal customers. Whatever changes might be made, the British Airways should still look to position itself like it has done in the past. The business model will only improve if these strategies are implemented. British Airways main objective has been to capture the market through its service. It wants to differentiate its brand from that of its competitors by providing better services. If these strategies are applied then the company would be able to improve its security, its technology (online services) and the environment around only enhancing its global name among customers (Conery, 2010). The British Airways is very pessimistic about its future in the airlines market. In order to repay its debts, the company has cut more jobs in recent years but has assured their employees of a better future with the company. They plan to keep a consistent workforce in the future but it is yet to be seen. British Airways has suffered because of terrorist activities and they continue to take measures in terms of security to assure their customers of safe flights The rising cost of Fuel is another problem the company is encountered but does not plan to increase prices in the long run and aim to capture market share by improving the quality of their service (European Union Committee, 2004). Reference List Cartwright, R. (2003). Training and Development Express. Oxford: Wiley Publishers. Cha, F. (2012, December 4). And the worlds best airline is. Retrieved March 16, 2013, from www.http://travel.cnn.com: http://travel.cnn.com/and-best-airline-world-775311 Cole, G. A. (1997). Strategic Management. Bedford: Cengage Learning. Conery, B. (2010, October 27). The Washington Post. Retrieved March 16, 2013, from http://www.washingtontimes.com: http://www.washingtontimes.com/news/2010/oct/27/british-airways-boss-rips-us-on-security/?page=all European Union Committee. (2004). The EU and Climate Change: Evidence. New York: TSO. Gaskell, K. (1999). British Airways: Its History, Aircraft and Liveries. Ramsbury: Airlife Pub. Gilman, M. W. (1997, June 28). eironline. Retrieved Marrch 16, 2013, from www.eurofound.europa.com: http://www.eurofound.europa.eu/eiro/1997/06/inbrief/uk9706137n.htm Hill, C. (2010). Strategic Management Theory: An Integrated Approach. Mason: Cengage Learning. Shi, Y. (2007). Advances in Multiple Criteria Decision Making and Human Systems Management. Amsterdam: IOS Press. The Guardian. (2012, December 4). BA looks to cut 400 cabin crew jobs. Retrieved Narch 18, 2013, from http://www.guardian.co.uk: http://www.guardian.co.uk/business/2012/dec/04/british-airways-to-cut-cabin-crew-jobs Thomas, N. (2012, August 21). The Telegraph. Retrieved March 16, 2013, from http://www.telegraph.co.uk: http://www.telegraph.co.uk/finance/newsbysector/transport/9488808/Virgin-to-compete-with-BA-on-short-haul-routes.html Thomas, N. (2013, March 1st). The Telegraph. Retrieved March 16, 2013, from http://www.telegraph.co.uk: http://www.telegraph.co.uk/finance/newsbysector/transport/9899185/British-Airways-parent-firm-IAG-warns-of-job-cuts-as-losses-hit-1bn.html Thompson, J. L. (2005). Strategic Management: Awareness And Change. Bath: Cengage Learning. Welham, R. (2009, May 29). Recession incurs record losses for British Airways. Retrieved March 16, 2013, from www.http://news.xinhuanet.com: http://news.xinhuanet.com/english/2009-05/23/content_11422964.htm West, K. (2009, February 11). British Airways debt cut to junk level by agencies. Retrieved March 15, 2013, from www.dailymail.co.uk: http://www.dailymail.co.uk/money/article-1142500/British-Airways-debt-cut-junk-level-agencies.html Custom essay QUOTE ORDER a custom essay Read More