Business Strategy Adopted by British Midland Airways Limited - Literature review Example

Business Report Student’s name: Instructor’s name: Course title: Date: Business Report Introduction Every business organization is unique with regard to how they craft and execute business strategies, as well as how they operate their business activities. Strategies are crafted and implemented to provide various business organizations with competitive advantage both in the local and international marketplace (Strasser, 2011, p.45). The purpose of this business report is to provide an insight on the business strategy adopted by British Midland Airways Limited and how it has enabled them to grow. Moreover, the report indicates why they choose that approach. In addition, the report presents a political, legal, economic, socio-cultural, environmental and technological (PESTLE) factors which are shaping the external environment in which the firm operates in. to attain the later aim, the report examines current position of the company, in the current economic climate and forecasts the future performance of this company in the UK. The Current Positioning and How They Have Reached That Position BMI is ranked as the second largest firm operating in London’s Heathrow airport. The firm has over 300 flights in a week. The firm has an experience of over 70 years in this field. The company offers different services at different fees (BMI, 2012). Bowman’s strategy clock is used analyze an organization’s competitive position. In order to analyze BMI’s business strategy and strategic position in the marketplace, consideration is given to the company’s Product, Price and the Perceived benefit. According to Senupta (2005, p.12), Bowman’s strategy clock is an extension of porter’s three strategic positions to eight strategic positions. With regard to Bowman’s ‘Strategic Clock’, the fist position is the Low Price Low Value part. Many business organizations that operate within this strategic position are those which lack differentiation value for their products and services. According to Burrow (2008, p.34), this strategic position enable business organizations which operate in a cost effective manner with high volume of products to operate effectively. This approach has not been utilized by BMI since they endeavour to offer quality services to their clients. The second strategic position in Bowman’s strategy clock is the low price position. This strategic position mainly consists of low cost market leadership. Business organizations that operate in this strategic position usually drive the prices of their products and services as low as possible while compensating for it through high volume production of products and services. According to Jones and Hill (2007, p.100), the key challenge for business organization operating in this strategic position is that which relates to balancing the cost of production with the perceived income. BMI employs this kind of strategy by having economy sections in their flights so as to carter for low end markets. Moreover, in 2002 they developed bmibaby a low cost subsidiary (BMI, 2012). The third strategic position in the Bowman’s strategy clock is referred to as hybrid, the moderate price or moderate differentiation strategy position. In this strategic position, business organization producer low products and services and offer them at low cost. This has not been employed by them firm. The fourth strategic position is the differentiation strategy position. Business organizations employ this strategy when they need to offer highly differentiated products and services. BMI at times operate within this framework particularly when introducing discounts in some of its airlines and routes. This strategy enables BMI to acquire the trust of the customers while promising high value products at very competitive and unbeatable lower prices, which other industry players find difficult to compete (Rapp, & Nilson, 2005, p.653). The focused differentiation strategy position lies fifth in Bowman’s strategy clock. In this strategic position, business organizations produce high value product and services at high prices. Consumers perceive these high valued products and services as having high values for their monies. In this regard, Burrow (2008, p.34) reiterates that consumers will buy the high valued due to the perception created from the high price. This strategy is employed by BMI in its high business class flights. The services offered by BMI in these sections are perceived to be of high value with very high prices. Usually the prices of such products are informed by how well the label or the brand name’s presence in the marketplace. BMI offers highly valued services at Heathrow airport and in the planes that is of highly value. In the risky high margins strategic positions of the Bowman’s strategy clock, there is increased price and standard value. This position is characterized by business organizations raising the prices of their products and services without adding any value to them. If consumers accept these price increases producer will enjoy the benefits resulting from it. On the other hand, this strategy could be risky since it can jeopardize the public image of the company. This strategy is usually employed by business organizations, which are the only providers of specific products and services (Alimin et al, 2009, p.231). Considering the aviation in the UK is a dynamic and a highly competitive one, it does not allow BMI to operate under such strategic positions. Apart from the above, the company has engaged in strategic partnership (BMI, 2012). BMI’s PESTEL Analysis The strategies crafted and implemented by business organization determines their strategic positions in the marketplace The strategic position of a business organization is also influenced by how business organization interact with the key external factors impacting on their operations and business activities. According to Kristandl and Bontis (2007, p.943), PEST analysis relies on an organization past events and experience but plays crucial roles in determining the future of a business organization. Enz (2009, p.53) notes that PESTLE analysis is an audit a business organization can undertake to determine environmental influences affecting the business and use the findings to develop strategic decision-making. The following is the PEST analysis for BMI. Political Economic Social-Cultural Insecurity Issues due Terrorist attack affecting sales directly Tax system in Britain is remarkably low for corporate and personal taxes. Has a large economy base being racked fourth worldwide UK has Low inflation and strong government finances. Low Interest rates Stable economy with minimal inflation cases Resent global recession greatly affected lending abilities for bank and UK was affected which led to closure of many businesses. Cultural influences on shopping trends vary from country to country across the EU. BMI should consider exploiting opportunities in other states. Societies are high spenders and this culminates to more sales especially at peak seasons. Technological Legal Environmental The popular use of Wi-Fi hot spots within Cafes and Restaurants Increased information sharing through greater communication technology Improved supply chain knowledge through greater sock control and EPOS systems. Tax rules are strict and heavy penalties imposed on failing to comply Most of the people are environmental conscious. Most products are expected to be environmental friendly; the public greatly reject any non-green business practice. The Impact of severe weather; reduced sales due to snow PESTLE Analysis. Source: (Leiblein, 2003, p.942). Political Factors King (2007, p.890), argues that the UK government is stable and reliable with only a few disagreements with other EU members prevailing. As such, the political environment in which BMI operates in is a good one. The combined EU business environment provides strict policies that ensure businesses are protected through a well setup legislative system. Political factors can be impacted through labour laws, tax policies trade restrictions and the environmental law. These legal frameworks offers level playing field. This is good for business development Economic Factors The prevailing economic situations and trends both at the local and international levels impact on the performance of business organization in all industries. However, in the UK under the Labour Government since early 1990s, the country’s economy has resisted any form of cyclical trends back into recession with the exception being the 2008 global recession. This stable economic situation is healthy for aviation industry that is highly affected with recession. Social Factors Consumers are well informed about the products they want and are able to access lots of information from the media, TV, Radio and the internet, which offers resourceful information. Customers are able to determine the type of products they want, the manufacturer and even the supplier as al the information is available to them (Barney, 2007, p.13). This makes it easier to convince customers as they know what they want. Technological Factors The introduction of e-commerce in the mid 1990s has enabled BMI to pioneer in implementing the internet technology in its online business (BMI, 2012). This has enhanced bookings, sharing of information and advertisements. Legal Factors According to BMI (2012), the legal framework for conducting business activities in the UK is well structured and encourages the growth of the market, business security, as well as sustainable profitability of most business organization across many business industries including aviation. Business laws that govern aviation industry in the UK are well structured and defined, hence promoting both local and cross boarder business ventures. Conclusion Porter’s value chain developed in 1985 recognizes that business organizations are basically an integration of activities geared towards designing, producing, marketing, delivering and supporting products and services. Every business organization has a specific and unique value chain which is the potential sources of their competitive advantage (Henry, 2008, p.102). from the above observations, it is clearly evident that the BMI has formulated a working strategy and the future is bright if they are able to anticipate any change. References Alimin, I.I. et al. 2009. Management, Strategic Management Theories and the Linkage with Organizational Competitive Advantage from the Resource based View. European Journal of Social Sciences, 11(2): 402-418. Barney, J.B. 2007. Gaining and sustaining competitive advantage, 3rd edition. Upper Saddle River, NJ: Pearson Education. BMI. 2012. About Us. Retrieved June 16, 2012 from: http://www.flybmi.com/bmi/en- gb/index.aspx Burrow, L.J. 2008. Marketing. London: Simon and Schuster. Enz, A.C. 2009. Hospitality Strategic Management. New York: John Wiley & Sons, Inc Henry, A. 2008. Understanding Strategic Management. New York: Oxford University Press Jones, R.G. & Hill, L.C. 2007. Strategic Management. New York: Cengage Learning. King, A. 2007. Cooperation between corporations and environmental groups: A transaction cost perspective. Academy of Management Review, 32(3): 889-900. Kristandl, G. & Bontis, N. 2007. Constructing a definition for intangibles using the resource based view of the firm. Management Decision, 45(9): 1510-1524. Leiblein, M.J. 2003. The choice of organizational governance form and performance: Predictions from transaction cost, resource-based, and real options theories. Journal of Management, 29(6): 937-961. Rapp, B. & Nilson, F. 2005. Understanding Competitive Advantage. New York: Harvard Business Press. Sengupta, S. 2005. Brand Positioning: Strategies for Competitive Advantage. London: Cengeage Learning. Read More