E-Commerce Business Strategy - Essay Example

Ecommerce Business Strategy Contents Introduction 2. The Opportunity 3. Business Model adopted by the company 4. Interface 5. Marketing Communication 6. Branding 7. Implementation 8. Metrics 9. Convergence of Activities 10. Future of IT in the Airline industry 11. Conclusion 1. Introduction British Airways is one of the largest international carriers in the world. They fly to over 550 destinations across the world. British Airways Plc consists of the flagship company with a number of their subsidiaries as well. BA which was in a major financial strait about five years back has come out of it and recorded a huge profit making it the largest profit making airline in the world. It has even taken the domestic airline market by storm. All this has been made possible because of the major IT initiative taken by the airline and the approach they had. Let us look at the strategy in detail. 2. The opportunity To really appreciate the strategy, we need to look at the history of the airlines and the way they have modified themselves to suit the market needs. In the 1970s, it was conceived that distribution is the major activity that could leverage the profitability of an airline in the global operation that was just happening across the world. Every airline had travel agents sitting all over the world and they need to know when tickets are available and what the fares are. In order to ensure that this happens a network of systems on a copper wire cabling was done and the fare rates were brought to the desk tops of travel agents. The airline that had the higher reach won the market to larger extent. In the 1980s, it was the question of retaining the customer loyalty. The focus was slowly turning towards customers and the facilities that they could possibly get. Every airline started working out a frequent flyer program. So did British Airways as well. Better programs added up to the charm of the airline and thus made a marked difference to the number of customers the airline could rope in and hence, the profitability as well. Now, the loyalty programs or distribution alone are not the issues since most of the airlines offer all these. However, now it is customer friendliness or customer driven or customer enabled airline that is deciding on the operational comfort of the customer. This leads to enabling an higher and a better satisfaction among customers. This was identified by the airline and then a clear strategy to capitalize on this was done. The customer wanted to save as much time as he could before starting on his journey. He wanted to save as much Pounds as he could when he books his tickets. It is now two pronged. One, he needs to save time and two, he needs to save on cost. If the airline could provide both then that airline could be the winning one. This opportunity was identified and had to be capitalized on. 3. Business model adopted by the company The company decided to capitalize on it and work out a business model that would enable the company to make full use of this opportunity. It was decided to work out the methodology that will make the company a customer enabled airline. The customer should be able to do what he wants at the place he wants at the time he wants. This would essentially mean an anytime anywhere computing or support. The business model evolved also has to take care of the cost factor. To what extent can the cost of air travel be reduced Will the companies in the airline business ready to forego their profitability It has been repeatedly proven that there is no profit by reducing the price of a product in the market particularly when the company is trying to reduce its profitability. Price can be reduced when there is a major cost cutting. In order to reduce the price on the tickets, the company has to first reduce the cost of operation at the office. This would help in reducing the cost of the tickets to the customer. Strategy two will be to save cost and thereby offer customer a better deal. This two pronged approach line was drawn. Based on this approach line, a strategy to implement this was also put in place. It was the IT that made the revolution of distribution possible during the 1970s. It was again the IT that stepped in take stock of the frequent flyers program and provide the required support to implement the loyalty program as visualized by the managers of the company. Now again, IT comes to the fore in the form of the internet to make sure that this is achievable and the people realize benefits and the company becomes a customer enabled airline or as they call it 'Customer-enabled BA'. 4. The Customer interface The Customer-enabled BA, works on the internet and provides almost all the services that a customer might get if he walks into one of the offices of British Airways. It was also designed in such a way that the customer who 'walks' in need not be highly knowledgeable in operating their computers nor could they be experts in understanding how an airline works. So the pages that make up the BA web site where the customers could plan their travel, book their tickets, make changes in them, etc., need to be highly user friendly. One of the major criterion that the BA planned was to build a site that will be engineered for usability. Secondly, BA ensured that this would be a one stop solution for all the interactions that any customer might like to do with BA. Remote check ins and other associated services saved time for the customer and there was not need for them to come down to airport prior to the required time. This has a huge following among its customers. More than 600,000 passengers are checking in using this service every month. This confirms both the comfort factor of the application and the usability engineering of the site. Thirdly, the security that the site offers to the users are also pretty important when they are going to make payments. The confidence in the site builds up as the time progresses and no untoward incident is reported. We could obviously see from the fact that on line eticketing which was 41 percent grew to 76 percent and continues to increase. This also confirms the usability factor. All these issues were widely addressed and they sorted out the needs of the customers. The client interface was offered to them 24/7 and with all services at the comfort of their home. 5. Marketing communications The airline industry say a major change of track after 9/11. A study of the market situation by BA revealed that the customers expected a massive cost cutting; they just did not want to pay more. Or rather people who wanted to pay more were becoming averse to traveling. Naturally, a new class of people need to be attracted. Secondly, people just did not have time to spend on many of the security related formalities that were introduced in the wake of 9/11. But that just had to exist. So in order to save time for the customers and to keep them happy, other methodologies need to be adopted. Thirdly, they were not willing to stand in queues when they reach the airport and that meant providing specific technological initiative that could add value to the customers. All these points were brought out in the marketing communication, indicating that they had solutions for every one of them. Save money, save time and save efforts. Naturally, the marketing campaign was successful and provided all the results that they wanted. 6. Branding British Airways is already the flagship carrier for the country and it needed a different image to rope in more customers and hence profitability. With the change in the marketing tactic, it was also needed to alter the brand that BA had built in its long years of existence. BA decided to project the customer friendly attitude that the whole exercise is going to provide. They decide to call this exercise 'Customer enabling' and hence went on to create a brand that went with this philosophy: 'Customer-enabled BA'. This branding helped in two ways: 1. In building and altering the existing image of the company in the minds of the people specifically, the customers. 2. In influencing the employees in the company and informing them the way they should build their relationships with the clients. This will build a larger and better business by ensuring that the employees reflect the same customer enabled enterprise in their daily operations. BA also enabled an employee self service portal in order to strengthen and stream line the operations with in the company. This would enable the company to save several man hours which otherwise would have been spent in supporting its employee requirements. The employee self service portal has enabled a technology revolution with in BA across its worldwide operation. The Internet bubble that burst in the 1990s, did so after revolutionizing the travel industry. BA caught the tide when it was rising and made sure it reached the peak it wanted. 7. Implementation British Airways centered its entire IT policy on the internet and banked on its web site. The site was developed into a user friendly, service provider with the option to link it up to a touch screen kiosk for check ins at airport or in city points in hotels, etc., This ensured that the customer gained substantial amount of time and offered him the comfort of his home or rooms. They could also check in over the net. Then on the employee self service, a PC was put on every one of the employees table and took the status of all the relevant information to them. This helped them draw their conclusions much more transparently and work to a higher efficiency. 8. Metrics The proof of the pudding is in eating, of course. Metrics that were decided on in case of such implementations were finally the cost and profit implications. What happened to the company's bottom line The company which was literally going to the dogs three years back, started looking up and performed an immense turn around and a growth that was the highest in the airline industry. The pre tax profits of the company in 2000 was PDS 5 million which rose to PDS 415 million last year. This was again more than 80% growth in one year. Paul Cobby, Chief Information Officer of British Airways, said that they had put IT in the center of the entire improvement plan and that has resulted in cost savings for the customer and better service for the employee. Talking about the cost saving, he also remarked that the web site and the customer associated IT initiatives resulted in a large saving of PDS 100 million and that with reference to the employee self service has resulted in a cost saving of PDS 34 million. The methodologies adopted in terms of shifting the operating environments to the web has resulted in cost savings of over PDS 100 million on IT again. What this meant was, with reduced cost of working, the IT has reaped a better mileage. 9. Convergence of Activities The company employed IT to do a convergence of all activities over the net resulting in huge saving of time and therefore cost. The major businesses they brought over to the web based system includes: reservation system, passenger check-ins, flight planning, communication network, supply chain and engineering inventory. All these are critical time consuming efforts which once brought over the net people could see through their self service portals when and how their material is going to be available; or their reservations have been done; their entire flight plans and tour schedule. It was all in one place resulting in immense advantage for the users, customers and the employees. 10. Future of IT in the Airline Industry The airline industry is one of the most competitive industries. While they need to maintain a prime flying machineries, they need also to provide the same at unbeatable costs. The cost to service ratio should be optimal and unbeatable. This has been repeatedly proven in the industry a multiple number of times when players like Delta Airlines could bring in low priced tickets to beat the competition blue. But these strategies of bringing down the price by bringing down the service will not go for a long haul. Sooner or later the companies realized that this is not going to help them gain profitability or gain customers. Most customers value relationships based on not just the price but by customer friendliness. Therefore, it is imperative that the airlines realized what BA has done. Retain a high degree of service level at the same time reduce the cost for the customer. As a matter of fact, by employing techniques that they did, BA has immensely increased the service levels provided to the customers thereby making it a universal standard. More and more airlines have started adopting such practices across the globe, so much so that BA has decided to form a separate Airline IT advisory company from its IT team. When a company of the size of BA makes immense gains in its operations because of specific best practices then that gets adopted by everyone in the industry. IT will continue to leverage businesses particularly, travel business in the days to come to become more and more efficient. By turning efficient, they turn profitable and for the customer they provide better service at a lesser cost with least effort. On line selling of tickets have expanded the markets across the globe for BA and so it will for all others who adopt this technique. Internet brings down the fences and separations brought in by the distances and reduce them to enable businesses to grow. The future of Airlines is centered on IT. 11. Conclusion It is a known fact that all the companies airline or otherwise are adopting to IT and the internet for improving their performance, customer support and in enabling them more customer friendly. Any technology driven airline would move the way BA has moved, technology at its center. IT then enables them and enables the customers to realize the best for the least. In the words of BA's CIO Paul Coby, "Technology helped create us, and we use it to help re-invent ourselves every decade. It started with reservations, moved through Frequent Flyer and Global Distribution, to BA.com. Now customer-enabled BA and Employee Self Service are the leading edge. People are still the heart of our airline, but technology is the life-blood." Technology has enabled BA to turn into a customer enabled BA. 12 Reference 1. James Watson, 19 Jan 2006, "Turbulent Times for BA", Computing Business available at: http://www.computingbusiness.co.uk/computing-business/comment/2148682/turbulent-times 2. James Watson, 18 May 2005, "IT Strategy Propels BA profits Sky High", Computing, available at : http://www.computing.co.uk 3. Paul cobby, 15 Oct 2003, "IT will fuel the take off of airline customer services", Computing, available at: http://www.computing.co.uk Read More