Strategic Management: Global Cultural Perspectives for Profit and Non-profit Organizations - Report Example

Business Strategy Introduction Strategy entails the process of setting of goals, determining the appropriate actions on how to achieve the goals, and organizing resources to carry out the actions. A strategy shows how the ends are going to be achieved by use of the available resources. The top management of the organization is tasked with the crafting the strategy. A strategy can either be planned or can only be an emergent at the time an organization is trying to adopt to its changing environment. Strategy also entails the formulation and implementation where strategic planning helps in coordination and implementation (Katsioloudes, 2006). The mission of British Airways is to be the world’s favorite airline and offer a full service experience and achieve its target in both inflight and on the ground. The company’s vision is to become the first airline in winning the approval from the government in launch of the department for energy and climate change new Carbon Quality Assurance Scheme and provide offsetting of carbon. Its vision also involves reducing climate change emissions in the aviation industry in the year 2020 and a reduction of 50% by 2050. It will ensure that environmental targets are achieved and reduce the costs to its passengers. The company’s goals include: i. Reduction of carbon emissions, noise, waste, and improve the quality of the local air ii. To offer support to global communities, charity and project conservations in the countries they fly iii. Offer a better place to work and encourage every individual at the company to embrace one destination iv. Encourage their suppliers and customers to act in responsive ways. The company’s core competencies include: a fleet of over 238 aircrafts that flies to over 300 destinations in the world and is the only aircraft that can access Heathrow terminal five. It has various training facilities where their Cabin crew are offered training of 1200 hours and there are flight simulators to pilots and Cabin Crews. There is also a computer Base Learning meant for management staff. The company has external capabilities including close relationship with its customers through proper handling of customer complaints and effective feedback. It has made alliances with other companies in the aviation industry like American Airline and City Flyers to extend greater services. British Airways has participated in various CSR activities like partnering with UNICEF to promote the “change for good”, donating $20 million in 2010 from staff and BA. Issues involved during Strategic planning Some of the issues involved in strategic planning of British Airways include: Lack of surety about the need for planning Not being aware of those issues that might affect the process of planning Lack of actual focus on new opportunities for growth. The financial forecast is not fully considered Lack of external focus on the threats from the competitors More operational than being tactical STRATEGIC PLANNING TECHNIQUES BCG Growth-Share Matrix BCCG growth-share matrix is one of the basic models that assist most of the companies in allocation of resources. It is one of the widely used model especially during portfolio management. The above figure indicates the BCG Matrix Model The model can be used to set priorities that should be offered for the product portfolio of an organization. Companies with various line of products can utilize the BCG model strategies to the resources for the product with the organization (Sekhar, 2009). Putting products in the matrix makes the products to be divided into four portfolios within the company i.e. stars, cash cows, dog and question mark Stars (high growth in high market share) Use large amount of money Generates a lot of profits Leaders in the market and business Cash cow (low growth in high market) Cash and profits is very high Slow growth rate makes product investments should be lower for high turnover Always at the initial stage of the company Dog (low growth in a low market share) Avoid products that are dogs within the company Costly to turn around and it is better to discharge Question marks (high growth in a slow market) Very high demand and low revenues makes them more susceptible for products Will generate a lot of absorption of internal resources in time Investment be minimized so as to create positive profits STRATEGY FORMULATION British Airways SWOT analysis Carrying out SWOT analysis into the company’s business operations is an effective way of identifying the strengths and weaknesses and the ways of making some improvements. It is very essential that development of the company’s strategy is reflected upon the company’s strengths and weaknesses in relation to its potential strengths and weaknesses existing in the external environment in which the organization operates Strengths i. The company is proud of a well-known and established brand name that is alleged with flying with UK air travel symbol ii. Successful and well established partnerships with United Airlines together with development of a Oneworld airline becoming among the largest airlines in the world iii. Largest UK based airline in terms of stability and financial size iv. Development of Level five terminal increases mobility in Heathrow airport Weaknesses i. Bad history of employee relations that was seen in several strikes by cabin crew and issues that have not been carefully addressed ii. Slow in change and innovation regarding to British Airways application iii. Issue of trust and reliability in terms of safety is low as a result of increase in terror threats Opportunities i. Rise in the company’s Skytrax system is a vital marketing strategy that the company can utilize to increase international image ii. Several competitors have been pushed out of the market due to high cost of competition and the instability of the world’s economy iii. Consistency during service delivery is an issue facing some of the company’s competitors. iv. Rise and increasing importance of emerging markets as travelling budget. Threats i. Increase in environmental awareness by most consumers has increased pressure on the company to reconsider energy policies and put stringent regulations on flight programs during low seasons so as to implement environmental regulations ii. The Open skies agreement has offered open and fair competition for smaller operators in the aviation industry while also enhancing the competitiveness by removing barriers on global routes for all airlines iii. Reduction of operational costs between the competitors is making it difficult for the company to be satisfied on previous strategies for profits iv. There has not been a full recovery of global economy from the 2008 recession. The reflection is seen in the reducing value of the pound against the Euro Organizational culture As a way of transforming the way they conduct their business, the company focuses on crafting a varied, challenging and rewarding place of work where all the people across the airline can be proud to be part of irrespective of the company’s expectation to streamline the business through reduction. The company also runs a local incentive plan aimed at rewarding improved performance. Management bonus scheme comprise of both financial and non-financial motivation designed to enhance performance and employee individual effort (MARTIN, 2009). The company is proud to include diversity of workforce in its operation. Their diversity programs are all about respect and dignity. They are meant to enhance good relationship among colleagues regardless of their culture, religion or background. In order to foster employee relations, the company negotiated with representatives from three trade unions across the business. It seeks to work positively with colleagues and their representatives to enhance productivity and performance British Airways External Analysis The company requires a proper understanding of its external environment so as to acquire competitiveness over other competitors. Concurrently, the analysis of the external environment of the company plays a major role in attainment of proper representation of its capabilities so as to meet present and futures business challenges PESTEL Analysis Political Air control and safety security have increased in anti-terrorism and safety actions since September 11 2005 at the time of US hijacking and London bombings. In addition, heavy airline regulations and restrictions on scheduled passenger above UK region has affected several airlines operating in within Europe. Complying with new rules is an import an option if British Airways needed profitable and constant operations. On the same note, security measures is a vital measure as confidence of consumers in an airline is considering the airline’s ability to assure journey safety without anomaly incidences like bombing and hijackings Economic The world economic recession experienced in 2008 has had a negative effect on several businesses in UK and also airline industry. Since 2008, the global annual growth was projected at 2%. The decline of pound against Euro badly affected UK based British airline. There was reduction of oil prices by almost 50% during the year 2007. Since UK was the first superpower nation to be hit by the collapse of the economy together with US, consumer spending also sharply contracted in a period of 13 years. This trend has never changed for the past five years. Cost reduction measures by both businesses and individuals has reduced the number of passengers for the last five years. Social UK has an aging population an indicator which is not healthy. Similarly, the global economic recession has led to high unemployment rate that has never been experienced in United Kingdom for several years. With the growth of aging population, British Airways can seize the opportunity in that the older generation constitute of older people who are willing to travel and take long vacations. With the rate of unemployment being high, price comparisons and bargaining across the competitors are certain to increase. Technological A recent survey conducted showed that 34% of online customers are anticipating to utilize price comparison places more with online services increasing since 2009. Similarly, check-ins and online booking services are increasing amongst the industry standards where several competitors are using it. The company will ultimately be technologically aware so as to avoid over reliance on technology based consumer marketing at the expense of other markets. The company should not forget the fact that even the aging generation still comprise of people who perform purchasing of tickets and check-in procedure in the offline way Ethical/ Environmental New environmental program like energy consumption and control of noise pollution have been introduced between 2009 and 2010. Heathrow airport- which is the busiest airport in the world and British Airways home turf is becoming congested with the consent to obtaining more space for expansion not indicating any positive sign. Newer regulations and environmental issues pertaining acquisition of land will increase the costs of operation. Current consumers are becoming environmentally conscious and are looking for signs of ethical policies concerning the environment when selecting products and services. Environmentally-friendly policies are among the largest marketing trends of the current decade. Legal Legal issues have increased in the form of fixing of prices amongst like-minded competitors with the intention of counteracting the range in consumer preference in terms of pricing. Similarly, legal disputes as a result of strikes by cabin crew that occurred previously provide unstable legal environment for British Airways. The Open Skies agreement in 2009 was regarded as a chance for the company and the competitors to offer free aircraft transport between Europe and United States. The merger between British Airways and American Airline experienced several legal proceedings that are very expensive and causes unnecessary distraction from the main business objectives. Porte’s Five Forces Porter’s five forces is one the important tools in carrying out competitive analysis of an airline industry in assessing the current market position of British Airways (Porter, 2002). Similarly, the analysis will assist the airline in making strategic decisions so as to increase profit margins Strength Threat/ Force High Competitive Rivalry The company caters for both short and long haul flights. There is a small difference between British Airways and other competitors when it comes to pricing and service delivery The short haul is mostly fragmented with several small players Competitor consolidation has increased competition There is steep competition with virgin Airlines. Virgin airlines became aggressive where it could do anything to oppose any step by the BA in mergers High Supplier power There are two main aero plane manufacturers (Airbus and Boeing) with high competitiveness. This results to high bargaining power. British Airways is constrained with single supplier of fuel into the airport Landing slots favors historic rights of current uses The employees of British Airways use collective bargaining agreements through trade unions so as to increase their bargaining power Medium Buyer power Buyers low concentration to supplier is an indication that buyers have less bargaining power Increase use of internet has improved interaction and awareness of the customers Carriers with low cost strategy are looking at opportunities in customers as a result of economic condition Low Threats of new entrants Major entry barriers where the environment is very competitive and there is also high cost of capital requirements. There are exit barriers which restricts new entrants The failure of recent airlines like Zoom and XI is likely to stop new entrants Low Threats of Substitutes There are few direct substitutes There are no notable substitutes of Long haul flights Short haul flights (Ferries and Eurostar) Stakeholder analysis of British Airways Stakeholder analysis is an important aspect in measuring organization’s performance, since it aids an organization in understanding who their outputs, effects and results are shared with, and how. It therefore supports collaborative approaches used to measure performance. Stakeholder analysis can be carried out at any level within the organization and can be used both internally and externally. It gives the company an opportunity to understand their stakeholders and the nature of relationship with them. It also enables the company to ascertain how they need to collaborate with various stakeholders, therefore enabling development of various strategies of engaging with various stakeholders. Types of stakeholders What is involved in stakeholder analysis? Stakeholder clarifies the kind of relationship a particular group within the company has with stakeholders by analyzing the interests and power they possess over a common shared goal. All stakeholders will have different degree of interest and power. The figure below shows basic dimensions of the power-interest relationship that the company will have with its stakeholders. It demonstrates broadly the level of effort and the kind of relationship that requires to be kept with stakeholder of each type of relationship (Stanwick, 2008). Importance of British Airways Stakeholder Analysis Stakeholder assists the company in the following ways i. Provides the company with an all-inclusive picture of the environment of its stakeholders ii. Identifies types of stakeholders in the company’s environment iii. Enables the development of a plan to engage with various stakeholders iv. Identifies types of relationships between the company and the stakeholder. APPROACHES OF STRATEGY SELECTION AND EVALUATION ANsoff Product Market Matrix This is a strategic tool that assist a company in evaluating products together with its market growth strategy. The ANsoff matrix allows business growth by the virtue of the current or new product becoming successful in existing or a new market. The ANsoff product market matrix outputs various suggested growth strategies that provide direction to a company’s strategy through the following ways: The figure above shows the ANsoff product market matrix Market penetration It is a growth strategy which focuses on successfully releasing the current product in the current market through: Increasing or maintaining the present market share of the product. (Promotion and competitive pricing strategies) Push out competitors in well established markets. (Extensive advertising and other promotion strategies) Increase the number of customers through loyalty programs Market development i. Selling current strategies to fresh and new markets ii. Use of different channels of distribution iii. Marketing products in new geographical locations iv. Use of different pricing strategies for Trans-market customer pulling. In the case of British Airways, the company can penetrate the market through modernization and renovation of business approaches and the entire brand name. By implementing segment focus strategies, British Airways can take the advantage in the fact that profits are high in business class passengers Product Development According to Varbanova (2013), this kind of strategy requires taking new products into current existing markets. This strategy requires competent and appealing products which can penetrate the existing markets. In BA’s case, product development can be inform of introduction of internet services during flights, providing complementary services like car rental and hotel booking could be addition of value to its products. Diversification This strategy allows new products to be introduced into totally new markets. It allows a company to penetrate and dominate a market that did not exist before. This strategy involves a lot of risks and the companies that decide to take this route as a growth strategy needs to deep into their pockets to mitigate losses. As for British Airlines case, diversification strategy can be seen by the increase in the number of flights that major in large Asian economies like China and India Porter’s Generic Strategies According to Porter, (2002), this strategies involve three main strategic directions that organizations can consider so as to remain competitive in the market. These strategies include Leadership, differentiation and focus. Focus strategies can be further divided into two sections. One of the focus strategies is differentiation focus and the other is cost leadership. Cost leadership requires the company to design products and services that are cheaper than those of other competitors so as to gain market advantage over the others. Lon the other hand, differentiation strategy encompasses the need for an organization to distinguish its products and services in a manner that that creates a distinctively desirable product that achieves its own target market or strip off the products and services from the competitors for being distinctive and non-imitable. On the other hand, cost focus strategy involves offering certain product or a service to a niche market that has little or no competition. Splitting of focus strategy into cost focus and differentiation focus allows the company to decide whether to stress on cost reduction in a focused market (Martin, 2009). Porter’s generic strategies plays a significant way during the process of designing British Airway’s strategic exercise. Nevertheless, it could be important to note that this method cannot be regarded as fools-proof. It is impossible for a company to merely focus on differentiation strategy, it attempts to crafting ways towards differentiating its products and services to be more competitive that other brands. It is not possible for a company to focus on differentiation strategy in highly consumer driven market no matter how distinctive the products may be since consumers refuse a specific product because of its cost. STRATEGY IMPLEMENTATION Strategic leadership It should be noted that leadership and management are two different things; Management- deals with producing consistent and orderly results and managing it. Those in in management produces only orderly results not change Leadership-generates shared vision of where the organization wants to go to, and is tasked with formulation of strategies to introduce change so as to achieve desired vision Activities of leadership and management. Leadership Management Formulate strategy Implement strategy Motivates and inspires employees Plans and budgets Recognize and reward success Cope with complexity within the organization Deals with change Organizing and staffing to achieve strategy Both leadership and management play a critical role in the organization and are required to implement strategies. The leader is tasked with formulating strategies and motivating other staffs and will help in dealing with change within the organization. On the other hand, the manager is in charge of implementing strategies and organizing the employees so as to achieve the implemented strategies. Resources required to implement British Airways strategy Whether regarded as an expense or as an investment, the resources of meeting the implementation of a strategy include: Administrative and transaction costs-these are resources needed to support and manage biodiversity action. These may include costs incurred by the authorities in administering incentives to employees Opportunity costs­-these are revenues resulting from foregone as a result of implementing a strategy Time- it requires a lot of time to formulate a strategy. Human Resource- people are the greatest assets an organization can have. To formulate and implement a strategy in the BA requires the effort of both the leadership and the entire staff of the organization. Formulating a strategy alone cannot be effective unless it can be fully implemented. This processes of implementation requires human resource which involves all the levels of management within the company (Mcgrath, 2009). References Katsioloudes, M. I., 2006. Strategic Management: Global Cultural Perspectives for Profit and Non-profit Organizations. London: Routledge. Keegan, W., 1998. Global Marketing Management. s.l.:Prentice Hall International Editions,. MARTIN, T. &., 2009. Strategic Management and Practice. London: Sage. Mcgrath, 2009. Basic Managerial Skills For All. NY: PHI Learning Pvt. Ltd.. Metz, E., 2004. Managing change: Implementing productivity and quality improvements.. National Productivity Review,, pp. 303-314.. Porter, M., 2002. The Five Competitive Forces That Shape Strategy. The Harvard Business Review, pp. 234-236. Sadler, P., 2003. Strategic Management. s.l.:Kogan Page Publishers. Sekhar, G. V. S., 2009. Business Policy and Strategic Management. s.l.:I. K. International Pvt Ltd. Stanwick, A. &. S. D., 2008. The determinants of corporate social performance: an empirical examination’,. American Business Review, , 16(1), p. 86–93. Varbanova, L., 2013. Strategic Management in the Arts. s.l.:Routledge. Z., C. I. a. P., 2013. Strategic Perspectives,. second ed. s.l.:McGraw Hill . Read More