Process of Strategic Planning, Approaches to Strategy Evaluation and Selection - Term Paper Example

Business Strategy Contents TASK The Process of Strategic Planning 3 1Concept of ‘Strategy’ and Vision, Mission, Goals, Objectives and Core Competencies of British Airways 3 1.2Issues involved in Strategic Planning 4 1.3Strategic Planning Techniques 4 TASK 2: Formulating Strategy 6 2.1 Internal Organizational Audit 6 2.2 External Environmental Analysis 9 2.3 Stakeholder Mapping Technique 12 TASK 3: Approaches to Strategy Evaluation and Selection 13 3.1 Evaluation of Possible Alternative Future Strategies of British Airways 13 3.2 Future Strategy of British airways 14 TASK 4: Strategy Implementation 14 4.1 Roles and Responsibilities of Managers and Team Members 14 4.2 Evaluation of Resources 15 4.3 Targets and Time Scales 16 References 18 TASK 1: The Process of Strategic Planning 1.1 Concept of ‘Strategy’ and Vision, Mission, Goals, Objectives and Core Competencies of British Airways Strategy is the integrated, unified and comprehensive plan that relates to the strategic advantages of an organization and it is designed to ensure that the basic objectives of the organization can be achieved in a smooth and uninterrupted way. By applying strategies, management of an organization can challenge the internal and external threats of that company. Different organization has different pattern of response to its environment and by this way they are achieving goals, fulfilling mission and vision. These are also a part of strategy. Strategic action only should be taken after setting the objectives of a company. In this assignment, the selected organization is British Airways. It is a national airline company of Great Britain. Four British airline companies merged together and formed the British Airlines. It is the 2nd largest Airline Service Company in Europe and 3rd largest Airline Service Company in the whole world in terms of annual revenue and profit. Vision of an organization always focuses on the future status of that organization. Vision of this organization is to be most reliable, responsible and admired airline across the major cities in the world. Mission of this company is to provide customer friendly services and such an atmosphere during the time of journey which would be enjoyable by every customer. Goal and objective of this company are – to increase the quality and value of their provided services, increase the trust of shareholders and increase the dependency of customers on this airline service provider. Core competence of this organization is to make differentiation than the other competitors in the market by adopting safety and security measurement and maintaining environment protection act. 1.2 Issues involved in Strategic Planning Sometimes management of an organization may face trouble while they are going to make strategic plans for the purpose of business. ‘British Airways’ is not an exceptional organization in this case. Management of this company also faces some challenges during the time of forming strategic plans. At first they should predict the future demand of services. If they do this prediction on the basis of informal data then there will be a high chance in case of taking wrong strategy. As a result business may face loss in future days. For example, if this company is going to launch new route for a new destination then before implementing this process a detailed market survey is required from the end of the company. From the market survey if the management can get satisfactory response from the customers then only the company should take this step. Otherwise investment for making new route will not be profitable. Objectives of strategic plan are to set the direction of a particular business and create the shape of product and services that the company going to offer its customers. In case of the mentioned company, management should create their service procedure in such a way so that customers can get maximum satisfaction than the other airline service providers. If the customers do not get the expected satisfaction level then they will move to other competitor companies in the next time for availing the same type of services. So, management should concentrate for innovative service strategy in each and every month so that customer can get something new during their journey (Sekhar, 2009). 1.3 Strategic Planning Techniques An effective strategic planning can be done by using some efficient techniques such as BCG Growth Share Matrix. This planning tool plots the product or service offered by a company in a four square matrix. Management of a company can analyse the possibility and current position of market growth and market share of that company. Again, this tool is very much helpful in resource allocation. It helps to focus priority areas for developing an optimum product portfolio. The four squares of the mentioned matrix are cash cow, dog, star and question mark. ‘Star’ square shows the high growth and high market share position for a particular organization. In this situation company is one of the leaders in the market and invests huge amount of money in business. At the same time it earns large amount of revenue from business activities. ‘Cash cow’ refers low growth but high market share position. Percentage of cash and profit generation is high. This situation mostly observed in case of new business entities. Investment also is low in this situation for making higher profit (Daft, R. 2008). ‘Dog’ square indicates low growth and low market share position. It is very expensive to turn around from this stage and better to liquidate the business as early as possible. ‘Question Mark’ refers to the high growth but low market share situation. In this case investment should be minimal for generating positive profit margin. Low return and high demand make the product’s portfolio more vulnerable in nature. In case of British Airways, this can be said that BCG Growth Share Matrix is not an ideal tool for understating the actual scenario of this company. From the initial stage, the company is belonged in the cash cow position. In the current days, the company has high market share and for this reason it is one of the leading airline service providers in Europe as well as in the global market. But the company needs to achieve more growth percentage in the market. So it has started to provide more value added services to its customers (Enz, 2009). TASK 2: Formulating Strategy 2.1 Internal Organizational Audit Internal organizational audit cannot be completed without identifying the strengths and weaknesses of any particular organization. After analyzing the strengths and weaknesses of an organization, management can take relevant strategies which will be helpful in case of future business practices. Again managers can get information about the available resources of the business, how much more resources are required for doing better practices, the type of internal environment of the organization etc. In case of British Airways some strengths and weaknesses also can be observed. Strengths of this company are – The Company has strong support from the end of UK government. It has strong brand presence in the domestic market as well as in the international market. The company has strong business hub in United Kingdom. It is the 2nd largest airline service provider in United Kingdom in terms of stability and financial size. It is one of the major market leaders in the world airline service industry. It has strengthened the prosperous partnership with United Airlines (Böhm, 2009). The organization has approximately 150 international destinations across six continents in the world and also has a fleet size of over 260 aircrafts. The company has recently developed terminal five which helps to improve mobility in Heathrow Airport. Weaknesses of this organization are as follows. Poor employee employer relationship is one of the major weaknesses of this organization. Strong presence of trade and labour unions can be observed within organization. Many times the company faces loss due to cabin crew strikes conducted by the trade unions. As a result, the company is unable to provide uninterrupted services to the customers. Trust and reliability issues are going to be demolished. The company is also going to lose its customer base for such unstable service system. The company is unable to retain its employees. There is lack of initiative for increasing more technological advancement within service procedure. Innovation and bring changes in services are slightly slow down comparatively other airline service providers in the market. The company cannot maintain the safe issue at optimum level due to the threats of terrorist attack (Pahl and Richter, 2009). Strengths Weaknesses Well known brand name and reputed airline service provider in United Kingdom Largest airline service provider in terms of stability and financial size Development of terminal 5 improves the mobility in Heathrow Airport 3rd largest airline service provider in world. Strengthening and prosperous partnership with United Airlines Poor employee relation history Several cabin crew strikes and labour union related problems Change and innovation in services is slightly slow Trust and reliability issues in case of safety is not in optimum level Culture of an organization focuses on some important parts which are basically norms, systems, symbols, language, assumption, beliefs, habits, visions, values, assumptions and languages of an organization. British Airways is changing its corporate and organizational culture by changing the location of its headquarters building. The management of this company wants to bring people together so that a good team work can be build by the help of cooperation and collaboration. Without effective team work the company cannot be able to provide smooth services to its customers. Waterside corporate headquarters of this organization provides all type of facilities to its employees like entertainment, relaxation, healthy working environment etc. The company has one inside club where the employees can get facility for playing tennis. Again few coffee shops are there inside the corporate office where employees can get relaxation during office hours. Employees of this organization are engaged to raise money for cancer research and through this process the company is also maintaining corporate social responsibility. In case of information technology the company is getting sustainable competitive advantages than the other companies in the same industry. The company is offering online facilities to its customers for booking tickets and getting detailed information about services. Again customers have not to carry hard cash as there is advanced money transfer facility which is provided by this company. More improved financial and business performance of this organization can be observed than the other rival companies. But position of this company is not in a stable situation due to high oil prices [from $ 48 to $ 110 per barrel] since last six years. All the transporting companies are facing deepest economic downturn due to this reason. It increases the amount of cost and the company cannot increase the price of tickets for getting competitive advantages from market place. As a result percentage of profit is decreasing day by day. 2.2 External Environmental Analysis External environmental factors are such kind of factors which are related with the business entity but the organization has not much control over those factors. These factors are also known as macro environmental factors. If economy is moving downward then an organization can take precaution in its operating procedure but does not control the movement of economy. So it is one of the external environmental factors of a particular business entity. Finding opportunities and threats are the two major parts of external environmental analysis process. Possible opportunities which are getting by British Airways from the market are as follows. The Heathrow terminal of this company is a major hub across the global market. Again the company gets several opportunities for expanding its business activities in more new countries such as South Korea, Libya, Lebanon, Jordon and many other Middle East countries. Most of the competitors in this market are forced to exit due to the high cost factors and struggle with the present downturn economy. This is providing a huge scope to this organization for expanding their business activities and thus increasing the amount of revenue. Skytrax quality system also helps this company to build strong brand image in the market (The Economic Times, 2008). The company is also facing few threats in the market. Rising oil prices is one of the major threats in the recent years. Labour costs are also increasing day by day. There is a huge and tough competition in the airline service industry especially in European market. This competition is also increasing due to the open sky agreement. Some environmental regulations are making the flight schedules stricter than the earlier days. PESTEL Analysis Political Factors – UK government has implemented some new regulations and compliances on this industry for increasing more safety as a precaution for handling terrorist activities. Economic Factors – Hike in oil prices, economic downturn, weakening pound etc are some economic factors which help to reduce 2% growth rate of this company in each year. Social Factors – Population in UK is increasing day by day and there is a trend among local people to use airline services for their travelling purpose. Technological Factors – 34% customers of British Airways are using online facility for booking their air tickets. From this scenario it is clear that the company has implemented improved technology for better operations but it needs to be more improved for technology based consumer marketing purposes. Environmental Factors – New legislation regarding environmental issues increases the operating cost of this company. Legal Factors – The Company is facing some legal problems due to price fixing incident and cabin crew strikes (Slamanig, 2013). Porter’s five force model is a useful tool for analyzing competitive nature of British Airways in the market. There are only two major aeroplane manufacturers and for this reason they have high bargaining power. Again the company is restricted for getting fuel from a sole vendor. So this is clear that the power of suppliers is high in the above mentioned case. Significant barriers are there in case of new entrants in this industry. Huge capital costs are associated in this business and there is huge competition which is becoming a threat for new entrants. There are very few substitutes in the market. In case of long haul flights, there is no substitute in the market and in case of short haul flights, only two substitutes can be observed. It is a positive sign for the growth of British Airways. The Company is already offering competitive prices to the buyers. As there is no enough substitutes in market and large number of customers are there for availing such services so this can be clearly stated that the bargaining power of buyers is low by nature. The threat of competitive rivalry is very high because of the presence of strong competitors such as Euro star and Ferries in the domestic market and Virgin Airlines, Jet Airways etc in the international market. 2.3 Stakeholder Mapping Technique Internal stakeholders of this organization are employees and managers. Connected stakeholders are distributors/ suppliers, customers, shareholders and financiers. External stakeholders are government, local community, professional bodies and society. The above mentioned picture shows the stakeholder’s mapping technique according to their importance in the organization. For example, customers and employees are major stakeholders of British Airways and at first the company needs to fulfil the requirements of these groups. Stakeholder analysis is important to any business concern for reviewing present business practices. If there will be any loopholes then management can take corrective steps in this regard. Without fulfilling the needs of stakeholders a business cannot run its activities in sustainable way. TASK 3: Approaches to Strategy Evaluation and Selection 3.1 Evaluation of Possible Alternative Future Strategies of British Airways Growth is the key goal in any business strategy. In case of British Airways, the management also wants to gain sustainable growth in business. They have taken some future strategies which can lead the company for achieving desirable targets. Reducing cost in the operational activities is one of the major strategies taken by the management and such cost factors can be reduced by decreasing the number of employees within organization. The company wants to implement more advanced technology in place of human labour and through this way it can provide uninterrupted services to the customers. Through this strategy the company can remove the power of labour unions and reduce the chances of strikes. For achieving more percentage of growth the company wants to expand its operation in South Korea and some other Middle East countries. By applying Ansoff’s matrix this can be said that the company wants to develop market at the present stage by using existing line of services. The management of this company already applied retrenchment strategy for reducing huge amount of cost to maintain same percentage of profit in business. The company should adopt related diversification and horizontal integration strategy for gaining benefits in future. 3.2 Future Strategy of British airways Porter’s generic strategies model includes three major strategic directions that a company can take for achieving more competitive advantages than the competitors in market. These three major directions are cost leadership, focus and differentiation. The mentioned company should follow focus strategy at the time of taking effective future strategy. Focus strategy is divided into two areas which are cost focus and differentiation focus. The management of British Airways should follow the cost focus strategy for reducing operational cost and at the same time the company should concentrate for providing different and innovative services which will be above the expectation level of the customers (Jarvis, 2014). TASK 4: Strategy Implementation 4.1 Roles and Responsibilities of Managers and Team Members Managers of British Airways have to play an important role in case of implementing strategies. To reduce operational cost managers should fridge the recruitment procedure and take initiative for reducing human resources from the organization. After that they should manage and lead the existing team with efficiency for removing chances of any further labour strike incidents. Detailed planning is required from the end of management for expanding business operation in new market places such as South Korea. Before staring the new routes or increasing number of flights, a detailed research work is necessary for interpreting the actual demand of airline services in that routes (British Airways Plc, 2014). Team members should carefully follow the guidelines provided by the managers. Without an efficient team work the business cannot be able to get success. As the company is a service provider so it is more important that all the team members will give their best in their relevant field. Team members should behave with the customers in a friendly way. If customers face any kind of problem related service then team members should take immediate action to resolve that problem (Westcott, 2005). 4.2 Evaluation of Resources For implementing the new strategy few resources are required by British Airways. These are financial resources, technological resources and efficient human resources. Marketing members should take attractive and aggressive marketing strategy for creating awareness among people about the new routes which are going to be implemented by this company. Internet and social networking sites can be used for this purpose because this medium has the sufficient ability to reach maximum number of people in the country at a time. Website of this company should provide up to date and detailed information about the offered services. In this case technological up gradation is important. More quantity of fuels is required than the earlier stage as the company is going to launch new routes and increase the number of flights in existing routes. 4.3 Targets and Time Scales Management of this company should decide six months time scale for observing the demand of services in the new routes. Target customers will be the local people of UK. In case of increasing more number of flights in the existing routes the company also can fix a six months time scale for achieving growth. If the company cannot get success within the mentioned time scales then gradually it has to decrease the business operations in these routes for minimizing the amount of loss. As the company is losing 2% growth in each year so the target should be fixed for recovering the reduced percentages and achieving additional 5% of growth in each and every year. Gantt chart References Böhm, A. 2009. The SWOT Analysis. Germany: GRIN Verlag. British Airways Plc. 2014. Annual Report and Accounts Year ended 31 December 2013. [Online]. Available at: http://www.iairgroup.com/phoenix.zhtml?c=240949&p=irol-reportsannual. [29 August, 2014]. Daft, R. 2008. The New Era of Management. Boston: Cengage Learning. Enz, C. 2009. Hospitality Strategic Management: Concepts and Cases. Beijing: John Wiley and Sons. Jarvis, P. 2014. British Airways. Gloucestershire: Amberley Publishing Limited. Pahl, N. and Richter, A. 2009. Swot Analysis - Idea, Methodology and a Practical Approach. Germany: Books on Demand. Sekhar, G. 2009. Business Policy and Strategic Management. New Delhi: I. K. International Pvt Ltd. Slamanig, M. 2013. Pest Analysis Hungary. Germany: GRIN Verlag. The Economic Times. 2008. London Heathrow airport terminal faces more turmoil. [Online]. Available at: http://articles.economictimes.indiatimes.com/2008-04-05/news/27704967_1_baa-flight-delays-baggage. [29 August, 2014]. Westcott, R. 2005. 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