Company strategy of british airways
British Airways is the flagship airline of UK. It operates from main hub at London Heathrow is the most modern fleet of any air line in the world. It was founded in 1924 as Imperial Airways, and operated under that name until 1935, when several smaller UK air transport companies merged to form British Airways, Ltd. In 1939, the airline was nationalized to form the British Overseas Airways Corporation (BOAC). In 1972, BOAC and BEA were combined under the British Airways Board, and came together as British Airways in 1974.
Question – 1: Strategic Corporate Development History
Strategy can be defined as the long term plan for any organization which will help them to be prepared for the coming future. Strategic planning helps in using the resources up to the fullest. British Airways is one of the leading Airlines in UK, considering the size of the organization one must assume that there will be a strong strategic planning in place to operate and deliver good services. Few activities involved are the operations of international and domestic carriage of freight and mails other than the regular passenger (Simmons, 2000)
BA has grown very large considering the amount of competition in the market. Strategies such as implementing a scheme to reduce greenhouse gas emissions in the year 2002 and allowing passengers to print online boarding passes from the year 2004 (British Airways, 2008) helped BA acquire the position what they have today in the Airlines industry. In its annual report for the year 2008 BA announced of becoming the world’s most responsible airlines which clearly reflects that importance of developing guiding principles and careful strategic direction to allow the achievement of this goal.
BA had a strategic approach towards their consumers by paying attention to the customer and responding to their need was there fundamental approach. It was in the year 2000 BA had a strategy to get new cabin traveler plus which would offer, this would be offer more space and facilities to the customer travelling on full world traveler fare. The company went with the innovative idea of to putting meals on short flights were easier to deliver and unwrap. This was the part of strategy from BA which speaks about putting people first program which was to create that same vital concern in individual BA employees (Scribd, 2010)
By reducing the number of staff working on BA planes had a very good effect on the cost. There was a drop in the cost with the respectable departments which lead the income grow leaving behind more staff in plane maintenances. In the year 1983 and 1990 BA had a very big potential loss because of the lack of strategic planning. This was due to the misunderstanding in between the management and the professional engineers. In order move on BA had to win the employees positive involvement and support. BA had to achieve a totally different relationship through demand and totally different approach from middle managers which is said to be biggest challenge. (Hillary, 1995)
There was implementation of Skills for quality improvement (SQI) within the organization which has conditions such as basic situation appraisal, problem analysis decision analysis and managing involvement. The process began moving very fast, until the use of the K-T tools became imperative, with active management support.
It was in the year 2000 BA planned to go for acquisition which was successful with acquiring 9% of shares in Iberia at a total of 41billion. British Airways and Cathay Pacific signed an agreement adding Cathay’s CX code on British Airways flights between Heathrow with Belfast, Edinburgh, Glasgow and Manchester. Later on six major world airline companies including British Airways formally announced a company which can create and operate on internet marketplace linking airlines worldwide which helped in selling airline related goods and service (Scribd, 2010)
In the year 1991 the concept for Total quality management was introduced in the airlines industry. This not only had an effect on BA’s overall finances, but the job preservation philosophy. The number in staff was again down size this was 800 people over 60 more important a very strong collective sense of urgency developed out of the black days in January and February 1991 (Simmons, 2000)
In the year 2005 BA had strategies to increase more number of flight service in entire week. This was started with the London Heathrow and Shanghai’s Pudding airport operated by Boeing 777 aircraft. Services from London Heathrow to Beijing increased from four to six times per week and from 17 to 21 times a week to Hong Kong. BA launched a new voluntary scheme which enabled the customer to offset the emission of excess carbon dioxide this helped in building environment trust among the consumers.
In the year 2001 British Airways launched a trial offering on line check in for its top corporate customers via the British Airways extranet. This strategy was a new revolution and made the customer of BA special. The system allowed customers to check in and select seats from home before 24 hours departure. The strategy of British Airways such as the 50, 000 Club class tickets up for Executive Club members was an attempt of promotion to get people flying more. This enabled them to take a companion free. Five million cut-price tickets also went on sale to destinations all over Europe with children able to fly for free (Scribd, 2010)
Question – 2: Current Strategic Situation
Product strategy: Product is the most important thing for any organization without a product there will not be a need for place, no pricing strategy required, no promotion, and this will lead to no business. The product for British Airways is offering service products, flights across destinations in the transportation industry. Product strategy is important for the organization’s success. It needs to be developed and manage very careful in order to be successful. British Airways product strategy has flight services, quality of flights, various destinations across Europe and the world, executive class, business class, speed, security, support facilities and years of experience (Simmons, 2000)
Pricing Strategy: Pricing strategy is nothing but putting a tag to the product as per the product cost company requirement and market demand. Pricing is an important strategic issue because it is related to the product positioning.
Those three strategies used by British Airways in order to satisfy the three different types of travelers and give them the opportunity to choose the price they want in relation with quality of the service they would like
Medium price strategy
Low price strategy (British Airways, 2008)
British Airways in order to satisfy different type of customer give them the opportunity to choose the price they want in relation with quality of the service they would like. It as well shows how the competitors’ pricing strategy is attacking the market. British Airways has split its pricing strategy in order to cover the three possible segments. The premium strategy gives high quality in high prices for executive and business users. With this strategy British Airways attacks the business class of its competitors in overseas and international flights like Virgin, American Airlines and Lufthansa (R Green, 2008).
The medium price strategy gives medium quality, less than quality than the premium strategy and more quality than low price strategy in medium prices. The low price strategy has been developed to gives the basic product as the low cost airlines such easy jet and Reynar with some more extra benefits which add more quality plus the advantage of the brand image of British Airways. The current strategic situation of British Airways can be analyzed by the factors effecting the organization both externally and internally.
External factors: These factors are basically termed as opportunities and threats for a company. BA has opportunity on competitors getting the exits signal from the market. The new star quality system in effect with the BA will help its quality performance way ahead than its rest of the competitors. This will help in supply chain management, introduction of complementary services with new policies and broader the service offerings to the consumers. In terms of technology BA has the advantage on its competitors. Threats will be the open skies agreement which is common for everyone in the Airline industry. Global economic crisis which will affect the schedule of flights is not very much in controlled of humans, but yes the cost competition is very much in controlled of BA. In order to deal with the cost competition BA is focusing to improve the performance of the service which shall level up for the consumers in terms of cost of the flights (Scribd, 2010).
Internal factors: Factors which are called as the strengths and weakness of the company. British Airways have a brand image which is BA as the name that is the prime strength for BA. Getting partnerships going with Alliances will definitely help BA in stability and performance. The financial size of the BA is huge which will add the benefits to the internal factors. In latest is the expansion of the Airports having the much awaited Terminal 5 into action will definitely make a difference in the performance of BA. Having poor employee relation will add negative points to the reliability and trust within the consumers (British Airways, 2008)
British Airways in the year 2009 had their objectives and strategic planning designed around various different strategic goals these strategic options can be analyzed. In order to achieve high standards BA has strategic planning towards the improvement of airlines service from consumer point of view and management skills that included the following
Upgrade services for Business class customer by introducing mobile services.
Modern Aircrafts fleet and new improved services.
Encourage corporate responsibilities through performance and partnerships.
Expansion of Terminals.
Upgrade customer service.
Business more cost effective
Record fuel prices and the global downturn meant (R Green, 2008)
In order to implement the above BA had Strategic analysis done within the organization and then strategic evolution and in the last was the strategic implementation.
Strategic Analysis: Strategic analysis will show us the clear and relevant goals, improvising in quality decisions, and will definitely give you safe future options. The external environment plays a very vital role in determining the strategic analysis. During the external analysis BA found out that they must increase the security measurement to ensure that consumer confidence is maintained. Reduced the cost of business travel to encourage more consumers to avail this service and introduced latest technology elements for the consumers. Development at terminal 5 was considered to transform the operational performance and consumer service (Hillary, 1995)
BA wanted to become the airlines of choice for the customer so that they can get the trust of the customer this was one of the policies of customer retention. BA always wanted to deliver an outstanding service for the customer to be called as world class airlines. This was achieved by training their colleagues on the ground and in the air. Another key strategy of BA was to grow the presence throughout the key global cities.
Strategic implementation: Implementing any new strategy shall require flexibility and willingness for everyone in the company to adapt the change. This change where in the new strategies and policies are put into action through the development of programs, budgets, and procedures. (Simmons, 2000)
Improvements in consumer service: British Airways have been criticized for its bad customer service often which includes issues like poor bad handling, delay management and disapproval of employees handling cases. The people processes strategy can improve the brand image of BA and increase the confidence level in the stake holders for British Airways. BA has very poor employee relation history.
British Airways current strategies is to motivate, engage, support and develop employees, alongside improving baggage handling and delay management in the home town airports (British Airways, 2008). BA must try and increase the internet usage for the more customers making n and independent services reviewing which is sharing feedback. This strategy is to improve the customer relationship.
Improved Environment forecasting method: Environment issues are becoming very critical for any Airlines industries; BA must have a strategy to build an improved environmental stance that shall go beyond the requirement of regulation to forecast the climatic changes. BA must try to benefits from a sound brand image which would be further enforced by this strategy. This would ensure that BA remains a strong global competitor by ensuring they are meeting changes in socio-economic behavior. Consumers are becoming more environmentally friendly and this strategy would at least ensure that BA’s market share is not compromised if competitors move in a similar direction (Labich, 1992)
Good customer service: In Airlines the long haul premium customers are considered to be the key of profit. British Airways has a strategy design to understanding the necessity of this customer. The product at BA is designed as per the consumer choice, network and service. BA has a strong presence maintained in the cargo, economy and short haul segments which has a critical supporting role. British Airways plans to build on the thought of revolution in the way to lead, train and reward so that every customers enjoy a premium experience. BS has invested in both improvements targeted at premium customers which are service style training, and in those benefiting all customers (Kennedy, 2007)
Expand the presence: We aim to provide the best global connectivity for our customers. We will build our presence in the top tier global cities, either directly or through our expanding network of airline partnerships. Whilst the established global cities such as London and New York remain critical, we will place a special emphasis on developing our position in the global cities of tomorrow (Kennedy, 2007)
Leadership position: London is our home city, the emotional and financial heart of our business. It is also the world’s biggest and most competitive international air market. Ensuring Heathrow remains a world-class hub is vital to give us a strong London base to serve the largest international long haul markets. To support this, we will look to influence government policy decisions, and work with the airport owners on the continued development of the infrastructure. Airline revenue streams will always be the core of our business. However, we will look to augment this by building profitable ancillary services that offer customers great value and re-enforce our brand. We will explore how we can develop new products and services which exploit our assets and capabilities, and meet the needs of our core customers and enhance loyalty (Labich, 1992)
Technology: The technology demand for the Airlines industries are continuously increasing day by day. Improvement on the flight services will definitely help in securing more consumers and leading increase in the long term revenue. Things like in flight entertainment facilities, improved internet facilities etc.
Question -3: Strategic direction for the Future
Based on the study British Airways should try and implement people focus strategies and technological advancement for better growth of the company. People process is to improve the stake holder’s sale and brand value which will increase the profitability at the end. Better pricing strategies involving complimentary services for both first and economic class will definitely strength the profit margin. Development and growth are continuous hence BA like other airlines should have strategies for growth and improvement (British Airways, 2008)
In order for the chosen strategies to be successful effective implementation f strategies are very much essential that will get success and will help in managing the company and will bound to impact BA. When implementing strategy people are the main assets to the success therefore the structure within BA should analyze to ensure successful implementation (Kennedy, 2007)
At a corporate level British Airways has structure at a very nice position. British Airways introduced a new customer service team working with Heathrow customer services. This team has been designed to put customer’s needs at the first place and this will help in providing better quality. In order to use the present structure and to implement the strategy it is necessary that a permanent director is assigned and not an acting director to be recruited. In terms of the technological strategy no amendments to the current structure are necessary as BA already have systems in place to implement new technology
At a business level t is very important that each department should ensure that all staff implements the strategies right from the top order. This strategy must extend to the corporate level and work within the organization’s brand values. Each department must also tailor the corporate level objectives specifically to its own targets. This will help to build the brand improve its customer relationship focus and achieve the stated objectives (British Airways, 2008)
In British Airways every function must coordinate with each other to ensure objectives are met on daily basis. There must be operations manual developed specifically for the relations strategy. There has to be précised targets stated for both the marketing and HR functions with constant data capture and analysis to see whether the targets are being met. Sufficient training on the new onboard technology will be necessary on an ongoing basis to ensure that employees are fully familiar with the service.
British Airways must try and lower the knowledge gap within the organization so that quality is met on frequent basis. It has been seen that BA has successfully made the extensive market research in recent time. This is right from the start of understanding the customer and adapting in the fast changing environment which is necessary in order to remained sustained (British Airways, 2008)
The company must design the strategic plan so that it favors to fill in the loop hole with in the organizations. The latest technology is very much recommended, this will help in better understanding of current service designs to meet customer needs in terms of operational management. In order to measure the performance of the company BA must invest in research which will help them to understand the employee’s needs. After the needs are identified this should be responded with new and reversed HR policy and internal marketing. Developing a strategy which addresses the external communication will make a huge difference in future policies of BA.
Time factor: The implementation of various new strategies will need time for both improvement of people and processes this will not be immediate. It is often seen that internal surveys within the employees will take time to get design, analyze and implemented. Approximately the time figure shall be more than a year. There should be an urge of customer orientated approach for immediately auctioned which shall result in gaining competitive advantage over their competitors. As this approach start internally it completely depends upon staff and the team member how well and quickly they adapt this customer oriented approach. Data capture and using this within the marketing activities could take up to two years before the full benefits are reached (British Airways, 2008)
Scope of strategy implementation: A medium degree of change is needed in implementing a people processes strategy. New systems will need to be implemented and surveys will have to be performed to assess satisfaction. Training is needed to improve customer relations. A new/reinforced firm culture needs to be implemented as a result of extensive employee satisfaction research. A low level of internal change is needed for the introduction of full internet access across the fleet. A medium level of change maybe required when it comes to carrying out research to ensure it is a valued service and in seeking opportunities for development (Scribd, 2010)
Capability: talking about the corporate level it’s the directors who have the knowledge and skills to implement both strategies. The senior and the middle managers plus the employees will need to be further educated. External consultants may be required for the people processes strategy and will be required for the improved technological stance strategy (Scribd, 2010)
No matter how strong and justified strategies have been created within the organization but there are a number of issues which BA should take into consideration when implementing the proposed strategies which are
BA should not have much trouble in implementing these strategies. Since British Airways has an increasingly lower gearing ratio and better liquidity ratio under this circumstances they should be able to secure some funding from financial institutions and obtain the rest from retained profits. In the current economic conditions it will still be difficult to obtain funding and BA will not want to increase its gearing up to largest extend (British Airways, 2008)
In order to apply the recommended strategy and to improve relations with consumers will require full support from BA’s workforce. British Airways has a reputation of having a high organized workforce the possibility of successfully changing the employment relationship will be determined by BA’s ability to work efficiently with each recognized union. In regards to implementing change BA must acquire the policy of quick adapting to the changes. Improvements to customer relations may be hindered by lack of workforce and basically bad cooperative staff which can hamper the importance of ongoing training and support. A technological stance will require BA’s employees to develop service knowledge, and it is imperative for the organization to support them in doing so on a continual basis (British Airways, 2008)
The implementation of latest technology such as use of WIFI on planes is already allowed by the aviation regulators in the UK, Europe and Rest of the World. Fly Emirates are one of the Airlines which has adapted this and implemented the WIFI on board system. The use of external legal consultants should be used when implementing both strategies to ensure that legal requirements are met especially when performing internal and external surveys and the confidentiality of data
As analyzing both external and internal factors effecting BA there are wide range of strategic options opened. A combined strategy approach to improve service quality is more suitable in the present scenario of BA. Due to the current industry climate this strategy will help in uplifting BA’s position as market leader. It is also necessary that BA operations must focus on scheduled passenger flights, better customer service, improved technology application and competitive pricing strategy.Order Now