Corporate and Global Strategy at British Airways - Assignment Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxxx Title : Corporate and Global Strategy: British Airways Tutor : xxxxxxxxxxx Executive summary Business strategy is important in highlighting how a business unit plans to have a successful competition within its particular business area. Strategic analysis of British Airlines specifically in resource based view provides an evaluation of how its resources can be allied to its enhanced organizational performance. A company’s competitive advantage and superior performance, comes from its distinctive capabilities and therefore the resource-based view contributes sustainable competitive advantages along with long term development to organizations. British Airlines has various competitive advantages which include high level of technology used in the company, a renowned brand name, partnerships and alliances among others. Resources-based view is valuable in businesses since it enables organizations to develop and implement with their business plans. Table of Contents Executive summary 2 Table of Contents 3 Corporate and Global Strategy 4 Introduction 4 Introduction to the company 4 Corporate strategy 5 Business unit 6 Resource Based View of British Airlines 8 Internal analysis 8 Threshold resources 8 Tangible resources 8 Intangible resources 9 External analysis 10 Evaluation of the strategy 13 New-product strategy 13 Promotion strategy 14 Competitive strategy 15 Customer service strategy 16 Conclusion and recommendations 17 Bibliography 18 Corporate and Global Strategy Introduction The business strategy in organizations is very important within the present competitive pressure under which various businesses seem to be. As one of the main areas of administration in organizations, strategy can be perceived as a hierarchy illustrating the organizational structure of multidivisional corporations whereby corporate strategy provides the broad direction: in regard to the scope and choice of business segment that the organization will follow, whereas business strategy is a formulation on how a business unit plans to compete within its particular business area (Williamson 2005). This report aims at conducting a strategic analysis of British Airlines which is an international company. After analysis of the company as well as strategic position of British Airlines, the report identifies and examines one business unit of the company, in this case, Resource Based View of British Airlines. In addition, the report will evaluate the strategic choices of the company and make recommendations. Introduction to the company British Airways is a renowned and established business within the airline industry. It is the United Kingdom’s largest international scheduled airline. It a market leader and most preferred firm for the quality of its services. British Airways is the UK’s largest airline firm as well as one of the largest companies worldwide. It business operations are in London with considerable presence at Heathrow, Gatwick and London City. British Airways runs one of the most widespread international scheduled airline route networks, along with its codeshare and franchise collaborators. British Airways has flights to more than 550 destinations in the world. According to the company, in the year 2008/2009, more than 33,000,000 passengers travelled using British Airways flights (www.britishairways.com). From the company’s data, the company carried about 32,000,000 million passengers within 2010 (Aer 2010). The company owns about 250 aircrafts within services and its revenue is approximately GBP 8 billion. British Airways has its headquarters at Waterside next to London Heathrow Airport. The company was started within 1971 and the motto of the company is “upgrade to British Airways”. In addition, the company was privatized within 1987. The mission of British Airways is to be the best and most successful firm within the airline industry. British Airways has made remarkable progress within airline industry with time. Over time, the company has made continuous progress, integrating newer as well as more refined aircraft and operating the Concorde from 1979. The success of the company can be mostly attributed to its constant addition of more international flights and extension of their fleet. Additionally, the entire airline has features that offer its passengers with the most excellent valuable comfort service (British Airways Plc 2010). Corporate strategy The strategy of British Airways is indicated within its mission statement, which is “To be the undisputed leader within world travel”. The British Airway’s strategy depends mostly on good leadership which offers a sense of direction to the company and also provides efficient management, and in the same way valuable, through outstanding communication, teamwork and partnership. This strategy is coordinated throughout its international personnel of around 48,000 workers along with its team players as well as service providers. This is necessary for both continued existence and success of British Airways (British Airways Plc 2010). British Airways believes that it requires an efficient human resource management as well as planning in order to accomplish its objectives. Consequently, the company has human resource management module at all sectors with the aim of becoming the leader and most economically sound airline internationally. The company considers that there is a strong connection between the human resource strategy and the success of the business. An organization cannot accomplish its goals without spending on human resource; the employees (Torrington, Hall &Taylor 2008). In its annual report, British Airways clarifies that the board of directors and the management of the organization laid down the strategic objective of the organization to make sure that essential human and financial resources are primed to meet the company’s objectives and reviews management performance. The human resource also responds to the corporate strategy through defining its strategy for supporting the organizational and business objectives. British Airways focuses on retaining experienced and qualified workers and it believes that through this, it can recognize the needs of customers (Madsen 2003). Business unit Itami, H, & Noto, L, (2007) notes that the resource-based view in an organization examines the outcomes of corporate resources on organizational performance. One of the main contributions of resource-based view is the specifications under which resources can be linked to better organizational performance. The elementary principle of RVB is the fact that the competitive advantage of an organization is primarily within the application of the collection of important resources at the organization’s disposal. In order to change a short-run competitive advantage into a constant competitive advantage, resources should be diverse and not perfectly mobile. Successfully, this implies that organization’s valuable resources should not be perfectly imitable or substitutable easily. In case these conditions are sustained, the organization’s bundle of resources can help the organization in sustaining above average proceeds (Sirmon 2007). The resource-based view contributes sustainable competitive advantages along with long term development to organizations. It provides internal information access concerning the needs of clients in corporations. Corporate should have a strategic decision making system for the future to be able to constantly uphold the organizational strength. Good decisions making is one of the aspects that assist businesses in accomplishing their core missions and objectives. RBV guides companies in regard to challenges and opportunities within the conditional environment. The environment has external aspects that have a direct effect on the organization objective accomplishment and new development of goals. Therefore, the organization system and management is supposed to harmonize strategic actions taken for productive subsystems, and also the actions offering production delivery as well as other support organizational functions (Sirmon 2007). Resource Based View of British Airlines Internal analysis According to Johnson et al (2008) the competitive advantage and superior performance of a company, results from its distinctive capabilities. The resource based view indicating the resources of British Airways is provided below. Threshold resources Tangible resources British Airways has 250 aircrafts accessing more than 550 destinations and also additional services such as British Airways Holidays and The London Eye Company. In several ways, existing marketing activity of British Airways is following convectional and renowned methods, which replicates decisions regarding the product/service specification of routes, assigning of seats and categories, in-flight in addition to ground-based services. British Airways has selected those worldwide multi-market sectors, which the company regards as most comfortable and in which it is able to keep away from comforting organizations serving comparable markets (Peteraf 2006). British Airways refuses being satisfied with its preset status quo, with such a strong dedication it predicts its obsolescence through development of new routes, improvement of the quality of services it offers and augmenting costs for sales force, advertising along with sales promotion comparative to the airline market development rate. Furthermore, British Airways has suitable breakdown of market, and it has established that few chief-markets account for an extremely big share of its profits. The company follows a customized strategy in order to meet environmental differences, repute for high quality from medium to low comparative prices and hence harmonizing high quality that offers economic influence (Park & Martin 2010). Principally, product repositioning has two objectives, which involves enhancing the British Airways’ life cycle as well as amending any positioning oversights. Actually, the product ought not to be perceived as a physical item but rather a collection of several services that match the needs of the customers. Additionally, British Airways’ corporate red, white and blue palette is being brightened to show the heritage of British Airways from British. It has a standard service with adjustment relative to its product/service plan (www.britishairways.com). Intangible resources British Airways has international database and partnerships and alliances. The company works with a variety of team players and also services providers within the tourism industry, for example Oneworld® Partner Alliance, hotels, car rentals, sightseeing organizers, tour leaders, travel shops, holiday packages organizers for more than 350 destinations internationally and transfers operators. Equally vital to British Airways are the backstage service providers who work within the tourism industry like those offering catering services, cleaning service, maintenance services and many more. Without such backstage services, British Airways cannot carry out its everyday activities effectively (www.britishairways.com). In partnership with its diverse team players, British Airways is able to provide an enormous selection of holiday package solutions to its clients, for instance airport transfers, accommodation, air travel, tours and many more. It is possible to book these services, via a variety of online booking services. All these operations need coordination, team work, partnership as well as communication between British Airways and its diverse team players and service providers within a well-timed manner (Park & Martin 2010). External analysis British Airways has a highly regarded brand image. It has superior performance which results from its distinctive capabilities. It has numerous innovations that enable it to stand out among other airlines. British Airways utilizes innovative IT-Communication coordination to make sure that the operations are run efficiently. Information Management (IM) has the responsibility of carrying out all IT operations across the company and plays an important role whereby it shapes the future of the British Airways. The company relies greatly on IT which influences the performance of the airline enormously (British Airways Plc 2010). British Airways utilizes corporate communications which is responsible for the management of the worldwide repute of the company and makes sure that all interested parties get to know the developments and news of the airline. The role of corporate communication includes managing the intranet content of the airline, which is one of the major channels utilized in maintaining updated mobile workforce with the most recent news and policies of the company. The company has an isolated workforce population that is always traveling all over the world. In spite of this challenge, British Airways workers are always well connected through the intranet in the company. For instance, British Airways launched the Employee Self Service project for providing mechanisms that enable employees globally to manage their own daily administration through the internet (British Airways Plc 2010). In addition, corporate communicates plays another important role of producing the company’s news, which is a weekly newspaper that is dispersed to its workers and team players as well. A secure, vigorous and consistent 24/7 global IT operation is utilized in ensuring a better collaboration and communication channel; leading via communication. Another vital communication guide for British Airways is IP Telephony. Cisco as well as Prime Business Solutions established new infrastructure and this enhanced communications in more than 14,000 British Airways offices as well as airport employees (British Airways Plc 2010). Advertisement is also an efficient channel that British Airways uses in communication. Several specialist communications organizations are established for delivering the company’s main messages to clients and media within more than eighty nations where the company carries its operations. This is of strategic significance within the operation of British Airways’ marketing strategy. Once more, British Airways Media is another vital communication channel of the company. British Airways Media refers to the sales arm for communication channels provided by Britain’s premier airline brand. The communications setting that British Airways Media provides in unique and always expanding; this provides the company with a chance of reaching its audience. British Airways has the responsibility of producing High Life Magazine, Business Life Magazine and also First Life Magazine that are disseminated during flights, television, radio, lounges marketing material and many more (British Airways Plc 2010). For its well-known service, British Airways attempts to maintain the price because entering into price wars can result into big losses and as a result, raising the price can make the company finally lose its competitive advantage. British Airways has a discriminatory pricing strategy where it sells its services to various passengers at a varying price under varying class (First Class, Business/Executive Class, World Traveler Plus and World Traveler), this is referred to as dual pricing. What’s more, the company also employs a projected pricing strategy whereby the price range acceptable to clients is established, the response analyzed and then follows price fixing. As well, British Airways has implemented pricing strategy in regard to its geographic market segmentation. Besides, the company’s tickets have an odd pricing where the price ends with an odd number or simply a round number for example $69.99. Basically, numerous customers make judgments regarding the quality of a product or service through its price. British Airways utilizes this within its pricing strategy through having a price generally in excess of those charged by near-perfect competitors. This is accomplished through prestige pricing that is offered just on some profitable destinations (Park & Martin 2010). Evaluation of the strategy New-product strategy In regard to the company’s new-product strategy, British Airways is the leader as far as the establishment of new products for serving its customers better is concerned. This is in regard to value marketing strategy and also for distinguishing it from its competitors; British Airways developed the “flat-bed”. This was enormously advantageous for British Airways since this move drove customer curiosity (British Airways Plc 2010). Moreover, using IT in supporting the horizontal diversification strategy had a major role within the company. The IT transformed the British Airways from an incompetent state-owned airline that was offering poor services to one an international leading airline. British Airways has also set up Speedwing within the IT marketplace that sells software and services to other airlines, within sectors like passenger reservations and check-in, flight operations, maintenance services and also systems development and integration, in addition to installing mobile communications and support. British Airways took a 51% majority stake and this provided the company with a competitive advantage (British Airways Plc 2010). British Airways avails all its tickets booking and purchase at all travel bureaus, but for their regional offices and also passengers are able to book their tickets online. In order to reduce the number of middlemen, within the value chain, British Airways has embarked on selling tickets to the passengers through the internet where the customer needs not to pay commission to any agent or intermediary. British Airways’ strategy of vertical integration was one means of improving its distribution system of vertical integration or multiple terminals at some international airports (British Airways Plc 2010). Promotion strategy According to Priem & Butler (2008) British Airways facilitates the progress of this strategy through advertisements and public relations as well. The company spends suffice sum of yearly turnover on advertisements and sales promotions and this is based on percentage sales approach. British Airways selects its media channel through making advertisements within magazines, online, newspapers, TV, transit advertisements and sporadically radio. Accordingly, British Airways’ media selection strategy is excellent in regard to the quality of audience it reaches. When the company makes an advertisement through the internet, it is not seeking a direct response. This company is a good test case for the success of making advertisements through the internet. Whereas British Airways used standard lively buttons and banners, the company made them unique in numerous ways; one banner advertisement features coffee being served, while another one indicated wine being served. These are synergy advertisements which referred to the offline elements of the promotion. The liquids were illustrated from the angle of the individual lying within the flat bed seat; an extraordinary eye-catching viewpoint. The statement “click to see the bed” is on the banners and this enables a person who had seen the advert elsewhere to take advantage of the internet and obtain additional information regarding the seats. This implies that British Airways utilizes advertising-copy strategy efficiently and effectively (Wernerfelt 2008). Competitive strategy British Airways competes on the grounds of its high quality services achieved via its break-through technological innovations. British Airways focuses on the value chain innovation, concerning efforts of re-inventing. The industry value chain may consist of a four-hold suborn, namely; lower costs, superior quality of product/service, higher ability to turn out manifold product versions as well as shorter design-to-market cycles. On the other hand, a stronger focus is on reducing the costs, which consists of stiffening price competition and this offers British Airways additional incentive of driving down unit costs. As a result, the company increases sales to customers within a mature market, through developing and getting existing clients from competitors through offering complementary items, ancillary services and establishing more ways of customers of using the product and service (Rugman & Verbeke 2002). With the maturation of domestic market, British Airways got into foreign markets where attractive potential of growing was present and competitive pressures were not very strong. British Airways spread out into up-and-coming country markets line South America, trailing a focused strategy targeting the fasted-growth sections in the airline industry. Strategic plans of leveraging existing resources and capabilities of British Airways through getting into new businesses with a promising potential to develop and progress in attaining fast penetration of market (Barney 2006). Customer service strategy British Airways enhances its customer relations in regard to quality of delivery, services and speed. Fundamentally, British Airways is divided into 7 distinct client focused teams which consist of: Airport team: This team handles the baggage and provides passenger services along with terminal control Profit development team: This team handles both engineering and cargo operations Revenue management: This deals with managing inventory and pricing as well Corporate team: This team handles revenue, runway capacity, developing networks, corporate strategy in addition other key departments Operations team: This team handles flights and services, plans and delivers operation and also handles crew resources Sales team: This handles global sales as well as sales forecasting Marketing team: This handles relation marketing in addition to product/service development Even though the location of all these teams is London Heathrow, the teams work independently, and this is shown through their different locations in the Heathrow site. Nevertheless, employees are regularly on basis front-line training and rotated between the teams and mutual meetings held regularly, and this makes sure that there is maintenance of cohesion (Williamson 2005). Conclusion and recommendations British Airways is a large and complex company and the practices of product/service orientation, which was promoted through the monopolistic operations of a regulated industry, are not easy to prevail over. However, good marketing, within its various forms, is progressively more perceived as the key to the competitive success of British Airways. Threshold resources provide British Airline with threshold competencies that include economies of scale from ongoing supplies and capacity to manage safe flights on different routes. British Airways is supposed to adopt new technologies to meet the requirement of new skills and categories of workers. The resource-based view plays a big role in sustaining competitive advantages and also long term development to organizations. Consequently, all corporations should have a strategic decision making system for the future enable them to constantly uphold the organizational strengths. In conclusion, resources-based view enables organizations to forge ahead with their plans of entering new markets and implementing their strategic plans. Bibliography Aer L., 2010, Annual Report. Available at www.aerlingus.com. Retrieved on 15th January, 2012. Barney, B., 2006, Strategic Factor Markets: Expectations, Luck and Business Strategy, Management Science, Vol. 32/10. British Airways Plc., 2010, 2009/10 Annual Report and Accounts, Likemind, London. Itami, H, & Noto, L., 2007, Analyzing Resources and Capabilities, The Tools of Strategy Analysis, Vol. 9/21. Johnson, B, et.al, 2008, Resource-Based View within Industrial Organization Economics, Journal of Management, Vol. 17/1. 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Torrington, Hall &Taylor., 2008, Toward a Synthesis of the Resource-Based View and Dynamic-Capability Views of Rent Creation, Strategic Management Journal, 22/5. Wernerfelt, B., 2008, A resource-based view of the firm, Strategic Management Journal, Vol.1/2. Williamson, E., 2005, Markets and hierarchy: Analysis and antitrust implications, Free Press, New York. www.britishairways.com Read More