Effective Management of British Airways - Case Study Example

CASE STUDY By Name Course Instructor Institution City/State Date 1.0 Executive Summary British Airways (BA) remains to be among the largest international airlines in the world with its headquarters at Heathrow Airport in London. British Airways is Heathrow airport’s main operator, managing almost half of flights to and from the airport, and based on international destinations, international flights and fleet size British Airways is the biggest airline in United Kingdom. BA operates over 300,000 flights annually and over 34 million passengers were carried between 2011 and 2012 to almost 150 destinations. Through the case study strategic analysis, it has been recommended that for BA to restore their competitive benefit in the aviation industry, they have to concentrate on their key service delivery. This will necessitate using numerous strategies; a strategy concentrating on technological development and a public processes strategy. In this case, the public processes strategy should concentrate on customer satisfaction and regaining of competitive advantage. The strategy for technological development corresponds with customer satisfaction through the regeneration of British Airways’ aircrafts. The case study will further review strategies espoused by British Airways for effective management of customer demand and satisfaction, and of perceived operational challenges. Finally, key opportunities and threats facing British Airways in terms of dealing with customers and suppliers, given the current global political and socio- economic environment will be reviewed. Table of Contents CASE STUDY 1 1.0 Executive Summary 2 Table of Contents 3 2.0 Introduction 4 3.0 Body 4 3.1 Strategies for effective management of customer demand and satisfaction 4 3.2 Strategies adopted for effective management of perceived operational challenges 6 3.3 Key opportunities and threats 7 4.0 Conclusion 9 5.0 References 10 2.0 Introduction In theory, customer satisfaction is generated from the experience of the customer towards the service as well as the perceived quality of service (Negi & Ketema, 2013, p.110). Customer satisfaction as mentioned by Taherikia and Zaibaf (2013, p.490) is the outcome of a contrast between the customer expectations and service received with regard to the service offered. The foremost requirement for increased customer satisfaction is thus to properly comprehend and set the customer expectation all through the whole lifecycle as well as to deliver without fail not in favor of this expectation (Ferrell & Hartline, 2012, p.302). British Airways management understands that numerous groups of customer with dissimilar expectations must be satisfied during lifecycle of the service. So as to get a rational view between customer satisfaction and service offering, all element of service at British Airways (operations, processes, applications) have been connected to expectations of the customer and the connections have been maintained all through the service lifecycle (Graham et al., 2012, p.210). Basically, here subsist various opportunities and threats facing British Airways when dealing with both suppliers and customers. An Opportunity includes high quality system that will improve the quality of service delivered while threats include fluctuating exchange rates, uncertain fuel costs resulting in high ticket price, and terrorist attack. 3.0 Body 3.1 Strategies for effective management of customer demand and satisfaction In the present milieu, management of customer demand may be seen as a means of negating, mitigating or reducing the social impact of service reductions, by looking for optional ways of delivering the results needed buy the customers. At British Airways, managers are aware that any re-configuration or reduction of services on the side of supplies inexorably impacts and influences demand. The issue is not whether the nature of demand should be influenced by managers, but instead whether they manage demand ‘by accident’ or by ‘by design’. Furthermore, with no lasting as well as holistic view of customer demand, British Airways risks offering false economies where provision reductions in one section lead to increases somewhere else. To manage customer demand, British Airways first comprehend the needs of their customers and the value-add needed so as to meet that need. One thing that British Airways management understands is that the way the customers view the world is different from the way they see it. For British Airways, achieving a better knowledge of what drives customer behaviours is consequently the basis for any customer demand management strategy. From British Airways point of view, customer demand management is: handling unjust expectations through changes in communication as well as process and making certain that over-supply is reduced. At British Airways customer demand management is based on forecasting as well as synchronizing, and the strategic process consists of sub-processes, which are intended for designing a resourceful operational system for matching demand and supply (Mendes, 2011, p.43). Essentially, there is a profusion of technology in the aviation market that helps British Airways managers with elements of the customer demand management process. The created team for customer demand management is tasked with determining how the airline will make use of technology in managing customer demand, and how information systems should be integrated with other supply chain members to make the process possible. It is imperative that the technological solution be compatible with the anticipated benefits and so a number of airliners will need to invest more in IT as compared to others. At British Airways, managers critically focus on the customers as well as the procedures making the technology successful and not to depend only on the technology. With regard to effective management of customer demand, British Airways has established an all-inclusive business strategy and have defined strategic goals for managing their operations. By managing customer satisfaction, British Airways make certain that any strategies they implement truly serve to improve the airline. By examining the characteristics resulting in high customer satisfaction, levels, British Airways has managed to refine its strategy to concentrate on improving the loyalty and experience of the customer. This has been achieved by creating a comprehensive plan indicating milestones, initiatives, as well as budget, which as a result has made achieving customer satisfaction a main concern at British Airways. Devoid of strategic direction, British Airways efforts could have fail bearing in mind that research on hospitality industry shows that many businesses fail because of poor management of strategic orientation in measurement of customer satisfaction. Another strategy used by British Airways is defining the most favorable customer experience for all transaction the airline performs. Considering that customer satisfaction may connote a number of distinct things, like the business relationship, satisfaction with service quality, meeting the expectations, or the price (Negi & Ketema, 2013, p.111). Besides, the airline has established objectives for its customer satisfaction management by well comprehending needs of the customer, learning how the airline’s competitors satisfy the expectations of the customer, analyzing trends as well as creating standards founded on what customers want. 3.2 Strategies adopted for effective management of perceived operational challenges At British Airways, the process team at the operational level carries out the forecasting as well as synchronization as intended for the strategic level (Mendes, 2011, p.43). Scores of businesses view variability as the adversary of planning considering that planning for the average is easier, but the variations from the norm bring about the challenges. Managers use significant money and time trying to manage the outcomes of demand variability. At British Airways, managers do two things to reduce the variability negative impact; first, they minimize the variability itself, and secondly heighten the flexibility to respond to it. A key customer demand management component at British Airways is a current endeavor intended for reducing variability and increasing flexibility. Basically, increasing flexibility as mentioned by Packowski (2013, p.437) assists a company to respond hastily to external and internal incidents and minimizing variability of customer demand helps in reducing operational costs and consistent planning. Therefore, management must foremost seek to reduce variability and after that handle the inevitable variability by integrating flexibility. British Airways believes that gaining flexibility enables an orgnaisation to well manage variability in the system that is hard to be removed by flexibility. When British Airways introduces its new ticket prices, demand should increase the amount projected, and this can be achieved if management develops a flexible system that cannot have an effect on customer service. British Airways understand that increasing flexibility may impact the operational cost, quality, and reliability. Therefore, to overcome the perceived operational challenges, British Airways at first find out how much flexibility is required. For the reason that building a flexible system is time and again costly, therefore the airline make certain that the level of flexibility developed is at one with the supply chain needs (Tarasi et al., 2013, p.122). In order to make this willpower British Airways have to completely understand customers’ demand patterns needs, as well as the entire supply chain capabilities. For decades, the price of the tickets has be the main reason for reduction in demand. Heightening number of air travellers, on the other hand, have absolutely led to the increase of ticket price. Ash cloud form the Icelandic volcanic made lots of travellers to be stranded at many airports and this heavily impacted British Airways operations. Lack of emergency strategy to handle this challenge resulted in over-loading of airline capacity and a number of air travellers faced additional charges for rebooked flights because of the ash cloud. In contrast to other big carriers in Europe, British Airways is believed to have the lowest fuel hedging system. Certainly, increase of oil prices since 2008 has heavily impacted British Airways making it a big casualty resulting to fall in shares. This led to its winter capacity reduction, grounding of aged airplanes, an increase in prices of ticket as well as adjustments of schedule. The fuel prices increase resulted in increased airlines’ operational costs attributed by high-ceiling prices of jet fuel (Milmo, 2011). In this case, the continued increase in oil prices has inevitably resulted in an increase in ticket prices; thus impacting customer satisfaction. 3.3 Key opportunities and threats Evidently, coping with the intricacy of modern business environment is not about reducing risk or predicting the future, rather it is about developing the capacity, in the business, workers, as well as the organization to adjust always and learn quickly, so as to capitalize on the existing opportunities. In this case, British Airways enhances management of customer and capitalizes on revenues with information conveyed by business objects. The airline market is undoubtedly more competitive with strong need for profitable routes for business travelers attributable to capacity limitations at key European airports as well as low cost entrants providing low-priced flights for the leisure traveler. As a leader in UK airline, British Airways should seize the opportunity of business intelligence (BI). British Airways should seize the opportunity of using the online analytical processing tool (OLAP) for accessing, analyzing as well as sharing information amassed in data warehouse of British Airways. Besides that, British Airways should work hard to extend the process of decision making across the world through the business intelligence tool. Already having developed a BI infrastructure which is supporting the process of decision making all through the British Airways head office, the airline should at the moment seek to widen its customer base across the globe through the Intranet. As mentioned by Amason (2010, p.98), technological investment as well as advancement in IT is an opportunity that may largely aid a company to cut its operation cost. In this case, British Airways may depend on IT to provide its customers with more friendly services and as well offer its customers with additional services like internet while travelling. This can make the travelers pay extra money for the services thus heightening the airline’s profit margins. Climate change is a menace but may come as an opportunity for British Airways, by exploring new destinations whose rich cultures are yet to be explored. Considering that climate change impact heavily, British Airways should lead the way in looking for radical and real means of tackling this menace. They must set themselves industry-leading targets so as to reduce their own emissions, and be strong supporters of carbon trading as well as make certain that aviation is part of a global scheme on emissions trading (Sjöstedt & Penetrante, 2013, p.213). This will make the airline earn favor not just from the government but also from customers who will see the airline as an organisation that cares for their wellbeing. By showing commitment in reduction of greenhouse gas emissions, then British Airways will also have the opportunity to promote tourism and as a result increase its annual revenues. With regard to threats, the financial conditions that prevailed all through 2009/10 heavily impacted the airline. Because of the worst economic depression, their aviation industry experienced a series of lasting structural changes, which have considerably decreased the airline profit margin in the short term as well as have enduringly altered the economics of operating a premium airline. British Airways faces a number of threats of its own such as increased finance during a continued crisis in the debt markets; change in working practices, where trade unions are at their necking demanding increase in salary and allowances for their staff, and the climate change issues. Due to climate change, a number of tourists’ destinations have been endangered thus reducing the number of tourists visiting those locations. Besides, a number of terrorists like Islamic State, Taliban, al-Qaida and Boko Haram have openly disallow the western practice considering that most tourist come from the western countries. These pose a threat to the tourism and aviation industry, due to risks such as abduction and kidnapping of tourists, or shooting down of airplanes like the MH17 Malaysia plane crash in Ukraine. Political unrest, tensions and uprising also pose threat to pose threat to British Airways, simply because its plane with passengers on board can be hijacked and passengers used for ransom or to intimidate the western countries. 4.0 Conclusion In conclusion, it has been argued that since services may not be stored, short-term imbalances in demand and supply offer a complex challenge for British Airways managers. Intending to manage demand and supply is somewhat key factor for development of an airline. Therefore, management of customer demand plays a crucial part in the growth as well as development of airline through competition. Ever since the competition grew stiffer, aviation industry has turned out to be more and more complex. Customer demand management as argued in the case study is a vital element of successful management of supply chain. A carefully planned execution as well as flawless implementation of the customer demand management process may have considerable benefits on the airline through, for instance, improved asset utilization, reduced inventory levels, as well as better product availability. However, as mentioned in the case study it is not sufficient to forecast creatively and have a high-quality system for operations planning. Therefore, management of customer demand and satisfaction have to include means of increasing operational flexibility, decreasing demand variability as well as putting into practice an excellent contingency system of management in order that the airline may hastily respond to unexpected issues. In order to develop this form of high-functioning supply chain, the following best practices should be espoused by British Airways: implement a consumer-centric, demand-driven approach to forecasting as well as planning; allow its planners to concentrate more on strategic demand management and less on statistical analysis; work closely together in real-time with suppliers and customers; use technology for performance management so as to achieve value from information; and integrate supplier-managed inventory programs into its processes of planning. 5.0 References Amason, A., 2010. Strategic Management: From Theory to Practice. New York: Routledge. Ferrell, O.C. & Hartline, M., 2012. Marketing Strategy, Text and Cases. New York: Cengage Learning. Graham, D.A., Papatheodorou, D.A. & Forsyth, P.P., 2012. Aviation and Tourism: Implications for Leisure Travel. Farnham, Surrey: Ashgate Publishing, Ltd. Mendes, P., 2011. Demand Driven Supply Chain: A Structured and Practical Roadmap to Increase Profitability. New York: Springer Science & Business Media. Milmo, D., 2011. British Airways: 'high oil price may mean higher fares'. [Online] Available at: http://www.theguardian.com/business/2011/feb/25/british-airways-oil-price-higher-fares [Accessed 22 November 2014]. Negi, R. & Ketema, E., 2013. Customer-perceived relationship quality and satisfaction. African Journal of Economic and Management Studies,vol. 4, no. 1, pp.109 - 121. Packowski, J., 2013. LEAN Supply Chain Planning: The New Supply Chain Management Paradigm for Process Industries to Master Today's VUCA World. Boca Raton, FL: CRC Press. Sjöstedt, G. & Penetrante, A.M., 2013. Climate Change Negotiations: A Guide to Resolving Disputes and Facilitating Multilateral Cooperation. New York: Routledge. Taherikia, F. & Zaibaf, M., 2013. Effect of perceived service quality on customer satisfaction in hospitality industry: Gronroos service quality model development. Journal of hospitality marketing & management, vol. 22, no. 5/6, pp.490 - 504. Tarasi, C.O., Bolton, R.N., Gustafsson, A. & Walker, B.A., 2013. Relationship characteristics and cash flow variability: implications for satisfaction, loyalty, and customer portfolio management. Journal of service research, vol. 16, no. 2, pp.121 - 137. Read More