Analysis of British Midland Airways Limited - Report Example

British Midland Airways Limited Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission Introduction It is an apparent fact that the correct approach in any firm’s strategy is imperative in attaining and maintaining a favorable niche in the market. This is more so when the particular firm is confronted my immense competition and dynamism in the consumer demand which threaten to affect both its short and long-term viability. In this regard, issues like the application of an ideal market mix is fundamental in identification of the market opportunities, coping with real and prospective competitors as well as instigation of new products in the market. This is supported by Anderson (1982, p. 6) who determined that the role of marketing in strategic planning involves the identification of the most suitable long-term positions for the firm which stresses the necessity for proper identification of the opportunities in the current and future market. This paper is thus a profound effort to explore the method through which British Midland Airways Limited has chosen in its expansion strategy and the reasons why it has chosen this method. This will be realized through analyzing the political-legal, economic, social cultural and technological factors (PESTLE) which have been fundamental in shaping the external environment in which this firm operates. Brief company profile According to BMI (2007, p.1), this company launched its operations in 1938 as Air School Ltd with primary specialization in RAF pilot training. In the 1950s, BMI ceased the training of RAF pilots and instead undertook expansion of the cargo routes worldwide as well as passenger routes across the UK and the wider Europe. In 1964, the company adopted the name British Midland Airways. In 1965, the company shifted from its home at Burnaston to the East Midland Airport which had been newly opened before an eventual merger with Invica Airways in 1969. Since then, the company has enjoyed extensive expansion which is best epitomized by the fact that today, BMI operates close to 2,000 flights per week over a system of 69 airports in the UK, Middle East, Africa and Europe (BMI website, 2012, p.1). Reasons for expansion Several reasons have been cited as the best explanations for this rapid expansion, for instance, according to American Chambers of Commerce in Almenia website (2012, p.1), IBI is a renowned innovator and a market leader with its developments and evolution being forged to meet the passengers’ needs. There is thus widespread embracing of technology at BMI, for instance, e-ticketing, self-check in and online booking at the airport which has been key in heightening efficiency as well as the betterment of consumers’ experience. This expansion method has been in the effort to meet the dynamics in the consumer needs as well increasing technological competition in the industry. Another expansion has been through internationalization whereby in the contemporary times, this company is proud of having operations in all the continents around the globe as previously mentioned. This method might have been as a response to domestic competition as well as expanding the consumer base and market share. Lastly, mergers and acquisitions (M&A) have been central to IBI expansion strategy which is best exemplified by the acquisition of 20% stake in BMI by Lufthansa in 1999 from the 40% previously owned by Scandinavian Airlines (IBI, 2007, p. 2). This rationale behind choosing this growth method is based on the fact that M&A are usually chief in strengthening skills and knowledge capital in the firm, technological knowhow as well as sharing of risks. PESTLE analysis According to Johnson et. al (2008, p 2), the PESTLE framework is a tool of analysis which is basically put into utility in the identification of principle change drivers in the strategic environment. In this regard, PESTLE analysis entails political, economic, social, technological, legal and environmental factors. All these factors have been key in shaping the external operating environment of IBI as explored in the subsequent section. Political factors It is imperative to be cognizant of the fact that interplay between several political realities has been fundamental in shaping the operations of BMI. This is epitomized by the fact that in the 1990s, the airline experienced further growth through the entrenchment of its ‘challenger’ status evidenced by its continued rigorous campaigns against the restrictive air service agreements between USA and UK (BMI, 2007, p.2). In addition, the improved political relations between the UK and the rest of the globe, most notably the Muslim world was chief in the instigation of air travel routes to countries like Saudi Arabia and Egypt. This is evidenced by the fact that in October, 2007, the airline instigated new route from Heathrow to Cairo (BMI, 2007, p.3). Lastly, the collapse of the U.S.S.R in the early 1990s which marked the end of the cold war can be perceived as a fundamental political determinant in the eventual penetration of this airline into countries which had traditionally been associated with socialism ideologies. Economic factors Heightened competition in the airline industry has been chief in shaping the external environment under which BMI has been operating in. This is best evidenced by the entry of low cost airlines aiming to capture a significant market share. Against this background, these new entrants have significantly affected the air travel pricing strategies culminating in cut-throat pricing competition among the players in this industry around the world who compete to win or retain customers, mostly with the heightened changes in consumer demands. This has prompted drastic changes in the airline industry, both in the demand and supply sides (Alderighi, Cento, Nijkamp & Rietveld, 2004, p. 2). On the other hand, the introduction of market liberalization in different countries around the world has been key in shaping the economic landscape under which BMI has been operating. This is evidenced in India whereby the inauguration of market liberalization in the 1990s played a major role in the successful penetration of the airline in the country as well as in the wider Asia-pacific region. This has also been replicable in other countries like China which embraced market liberalization, thus promoting free trade in place of protectionism. Lastly, the global economic slump in 2008 had effects on the airline industry, an effect which was felt at BMI. This was in the sense that consumers sought cheaper modes of transport as a response to hard economic realities. Social factors These can be attributed to the changes in the demographic set-up of different countries, most notably in Europe whereby the heightened degree of the ageing population in most countries has direct impacts on the nature of services being offered based on shifting air travel preferences towards comfort and efficiency rather than pricing. In addition, a more contemporary concept of globalization has been chief in heightening the level of interdependence between states which has emanated from the elevated integration of trade, ideas and people in a singular marketplace. The interplay between both of the above factors was principle in informing the introduction of a new business traveler-focused initiative with enhanced product base for the most loyal consumers to the airline –diamond club members (BMI, 2007, p. 3). Technological factors This can be perceived in the extensive trend by the airline to embrace the most modern forms of information technology. According to Gittell (2003, p. 4), majority of the companies primarily use information technology as a key platform for sharing of information mainly from one business unit to another as well as improving the consumers experience and convenience. In recent past, most airlines have made enormous efforts to enhance their technological capital aimed at achieving both of the above goals. This has intensified the level of competition in the acquisition of technological capital which is key in attaining and maintaining competitive advantage in the market. In response, BMI has invested in its technological capacity, through continued use of technology which is characterized by online booking, e-ticketing as well as self-check-in at the airport via internet. This has been fundamental in smoothening and speeding up the pre-flight experience (American Chambers of Commerce in Almenia website, 2012, p.1). Legal factors This is primarily embedded in the development of both domestic and international laws governing the practices of the airline industry. This is whereby diverse laws and regulations have been formulated and implemented around the world’s airlines, mostly in relation to restricted and prohibited items on an aircraft. The most commonly prohibited items include firearms, explosives and sharp objects. This can be perceived as a response to increased instances of aircrafts high jacking and global terrorism. Moreover, other laws governing the operations of the players in the airline industry have also been instrumental in affecting the external environment of BMI, for instance, pricing policies and security requirements. Environmental factors This is mostly in relation to the issue of climate change which rose to prominence in the 1990s. Against this backdrop, CBI (2006, p. 1) determined that the heightened level of CO2 emissions-stimulated by a sharp increase of passengers and freight travel has coincided with many of the civil groups and politicians calling for the airline industry to reduce the carbon emissions. In this regard, the elevated level of environmental conservation advocacy by different organizations as well as global laws governing the issues of climate change, for instance, the Kyoto Protocol and the UN Framework Convention for Climate Change have been principle in shaping the external environment in which BMI has been operating under. Current economic climate and performance projections It is apparent that the different states are in the recovery process from the detrimental impacts of the global economic decline in 2008. This is bound to increase the level of investment in the airline industry based on its imperative role in the overall GDP of various countries. Against this background, BMI is bound to experience increased growth in the future as a result of this investment. However, it is imperative to be cognizant of the fact that this will also elevate the level of competition, and the response of this firm will influence its performance. References Alderighi, M., Cento, A., Nijkamp, P & Rietveld, P., 2004, The Entry of Low Cost Airlines, Tinbergen Institute, Amsterdam. American Chambers of Commerce in Almenia website, 2012, ‘British Midland Airways Limited’, Retrieved 25th June 2012, . Anderson, P.F 1982, ‘Marketing, strategic planning and the theory of the firm’. Journal of Marketing, vol. 46, no. 1, pp. 15–26. BMI, 2007, ‘British Midland Airways’, Retrieved 25th June 2012, < http://www.flybmi.com/downloads/bmi/history%20summary.pdf> BMI website, 2012, Retrieved 25th June 2012, < http://www.flybmi.com/bmi/en-gb/about-us/about-bmi/our-history.aspx>. CBI, 2006, ‘CSR Case Studies: British American Airways’,Retrieved 25th June 2012, Gittell, J, 2003, ‘The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance’, Retrieved 25th June 2012, . Johnson, G, Scholes, K., & Whittington, R., 2008, Exploring Corporate Strategy Text Cases, 8th ed, Prentice Hall, London. Read More