Swot Analysis Of British Airways Tourism Essay
As stated in the companys web site its mission is specifically as described as “Together with our customers and colleagues, we are determined to lead the industry towards finding innovative solutions. We will continually review how we fly, what we fly and what we buy to ensure we are the most efficient and responsible airline in operation.” For this reason the company is obligated to construct the strategies appropriate to succeed.
In order for companies to be successful in the industry they carry out activities and conduct a series of strategies in order to meet their goals and objectives that have been set by the directors and the head management of the organisation. According to Alvarez, (1998) “ a strategic analysis is a process you can us in order to determine the best way to achieve the result you or your company desire, by choosing the path of least resistance to bring about change. By doing a strategic analysis, your team will create alternatives to bring about the desired result by emphasizing the driving forces, and lessening the resistant ones”.
British airways employ a number of different strategies in order to adapt each one to different segments that influence the company’s success. There are many techniques in order to evaluate companies strategies the main of which are the SWOT analysis, PEST analysis and porters 5 forces. An example of the segments these tools are used for is to evaluate and differentiate from other companies concerning the product and service stipulation of routes and ground based and in flight customer.
2.1 SWOT ANALYSIS
According to Grant, M.(2002) , the SWOT analysis focuses on defining the most important internal-external factors in their business environment that have effect on the companies goals and objective accomplishment. The internal environment includes factors such as the strengths and weaknesses of the company whereas in the external environment the opportunities and the threats of the company are categorized. A SWOT analysis of British Airways is going to be carried out below in order to define the different strategies that are used by the company to conquer the top of the Airline industry globally.
It is not difficult to spot the strengths of the company taking under consideration the size of the company globally and the different accomplishments over the years. Over the last years the company has evolved from a loss-profit company into one of the strongest if not the strongest company globally employing over 60,000 and flying to airports all over the world. This is a result of the knowledge and analytical skills of the employees giving the business the opportunity to reach the top. Focusing strongly on the customers has developed an expertise round the customer areas and also by purchasing strong air service software gives a lot of strength and clearly defines the orientation of the business.
British airways have a strong customer loyalty scheme witch consists two parts, the so called “executive group” and the BA miles. The executive group is a program that focuses on frequent flyers. It has three different membership tiers and each one has different benefits. The gold and silver cards allow travellers to access airport lounges and also lines of dedicated reservations. In order to collect BA miles customers have to join the executive group first. The amount of miles that goes onto the travellers’ card depends on the distance that will be flown, the cabin the passenger will be in and the type of ticket you hold and the customer s executive club tier. An example of how miles go onto the customers card is placed on the companies web site ,” If you fly less than 500 miles, one way, on a flexible economy fare, you will earn a minimum of 500 BA Miles. On a discounted economy fare, this would be a reward of 125 BA Miles. Once you have collected enough BA Miles you can then start spending these on flights with British Airways and our partner airlines. You can book a flight, upgrade a booking or book and upgrade a flight using BA Miles or Part Cash Part Miles.”.
Despite the strong customer loyalty scheme the company has a problem attracting customers to it. Because of recent incidents such as the strike of the employees, the many flights delayed or cancelled and even the loss of luggage travellers have preferred other companies to travel with instead of B.A. "British Airways is commencing legal action in an attempt to protect customers from the massive stress and disruption threatened by (the union) Unite's decision to call a 12-day strike from December 22," BA said in a statement.
Despite the above, the main weakness of the company is the lack of a consistent marketing strategy that will attract customers and give the company a advantage against their competitors. B.A has all the fonts considering their customer loyalty schemes and their operational and management skills to reach the top of the market and have a strong advantage against their rivals. The poor communication that is spotted within the company and also the reliance on establishing revenue sources are also serious laybacks for the company’s success and drives the company away from its main business orientation which is nothing else that the customer satisfaction.
Over the years British Airways has been confronted with many threats in different parts of the company that have lead the business to huge losses in profit and market power. As stated in the official website of BBC on the 22nd of May 2009, B.A reported its biggest loss in profit since the company was privatized in 1987. The reason of this loss is no other than the weak pound and the increase of fuel costs because of the economic recession. A loss of 401m pounds was reported at the end of 2008 fiscal year whereas in the pas year their profits where approximately 922m pounds. The ways that the company decided to deal with that loss where based on the employees giving them the opportunity to work part-time or take unpaid leaves.
In the airline industry, competition between top companies is strong and for this reason companies have constructed strategies to remain in their current market positions and growth being the only objective. British Airways strategy in order to get through all the problems that the face and eliminate advantages competitors cultivate over them, try to differentiate their strategies and their market approach. According to Porter, M(1980) a differentiation strategy will incur additional costs to the company but it will help it cultivate a competitive advantage. B.A has a succeeded on differentiating their services towards the passengers offering class, comfort and care (BA 2007) and focus on passenger satisfaction. This strategy has as an outcome increase in revenue that comes entirely from sales.
In order for any company in this industry to remain in their current position in the market they have to exploit the opportunities that are introduced to them. As years go by, demands for transatlantic flights are increasing steadily. Because of that, B.A developed a strategy for its subsidiary Open Skies in which the company has launched flights from the U.K to U.S.A since June 2008. B.A original statement was that the company would only be available for business class passengers but later on changed their offers including three cabin models and business class passengers two because of the saturation of business class travellers. As Liana Dinghile reports for the Economic Times in January 2008, “BA is not the best at sustaining innovation,” she says. “A separate brand will give it a licence to innovate.” And by innovating and “connecting” the US with the U.K increase profits.
Also the alliance that was made between companies concerning the transatlantic flights helped B.A to enter this specific part of the market. The alliances came by the name One World and the policies of it are:
One world is a global alliance that brings together eleven of the world's biggest and best airlines, all committed to providing world-class service and value. With quality as our focus, one world is honoured to have been named the World's Leading Airline Alliance for the seventh year running.
Almost 700 destinations worldwide
Nearly 550 airport departure lounges
Exclusive Frequent Flyer benefits
Innovative fare products
3.0 PEST ANALYSIS
According to Armstrong, M.(2006) “PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.” This kind of strategic analysis is used by companies in order to give a specific picture of macro-environmental variables that the company has to take on board in order to apply them to their strategic approach to the market different segments.
The environmental crisis that the world is facing over recent years is a essential part in the strategic planning of British Airways designing programs in order to reduce the impact the company has on environmental pollution. By investing in recruiting “environmental friendly” aircrafts, focusing on catering ,offering training initiatives to employees and taking measures in order to reduce waste, B.A has taken many steps forward than other airline companies in raising the awareness of environmental problems that face our globe. B.A focuses on being the world’s most responsible airline and because of this; they have developed a strict series of goals and the want to achieve conducting their policy over environmental issues. In a nutshell, B.A has reduced the Carbon Dioxide pumps into the environment 28% (saving over 60 tonnes of industrial waste from harming the environment) from 1990 until today and the goal of the company is to reduce 25% more with the dedline of this goal being 2025.
B.A policies were also characterised by a community friendly approach. 10m pounds are given to UNISEF trough the programme “Change for Good” in which the customers are the ones who donate the money in order to benefit children around the globe. B.A through developing this social awareness have attracted over 800 students for work experience and over 7000 have learned and gained many advantages while working in the company developing skill over customer or environmental services. . By being sufficient and carrying out the majority of the statements in their environmental and social policies, B.A have been awarded with several awards such as “British Airways Assi Conservation” making the statement “if we are committed to change, change will happen”.
In order for any company to be successful in the airline industry and be consistent aiming always the top, they have to be innovative and continuously developing new and modern technologies. B.A through a series of technological developments has secured a position in the airline industry elite. Through alliances and constant raising awareness over other company’s developments or new technological equipment available in the retail market, the company has developed a strong technological image and is not willing to hold back but continue expanding. Recently B.A “'DAC II' combustors were used on Boeing 777-236 GE90 engines and new 'Phase 5' combustors on 30 of the 57 Boeing 747-400 RB211-524G engines.
In addition to that, because of the fact that we live in an Information Technology world where everything is communicated and controlled over the net, B.A has developed a strategy that will reduce labour costs and increase their revenues rapidly urging their customer to “do business” with the company online rather than through travel offices or other ways saving time and money. This strategy will of course bring some changes to the company’s work force by cutting approximately 6,500 jobs and reducing it by 12% as stated by the chief executive of the company Willie Walsh. According to the analysis of the company “Industry analysts point to BA's plan to continually develop its online business as a motivation for it to trim its large back-office personnel pool”
The economic recession has hit most marts of the global market. During the recession thousands of travellers have been prevented from travelling and we can see that clearly been stated in the Guardian on the 16th o June 2009 where there has been a reported 15% drop in transatlantic flights from and to the UK and a drop of 8.7% concerning domestic flights. This condition is especially dangerous for B.A because of the fact that the company mainly focuses on premium passengers and because of the situation competition has risen between premium airlines and the low cost airline companies such as Easy Jet and Ryan Air. Despite the economic turndown the company is not willing to decrease prices and continue to offer premium services to the passengers. This will only have as an outcome the constant breakdown of the company’s revenue and will have no way in increasing the profits in the near future. As stated by the chief executive Mr Willie Walsh in the guardian in May 2006 “"I don't think the economic environment will improve. We don't see any signs of recovery, nothing, right across the globe in all the markets we operate in,"
PORTERS 5 FORCES
Porters five force model was developed by Michael Porter in 1980 in his book “Competitive strategy: Techniques for Analyzing Industries and Competitors” and since their methodology has been proven to be essential to companies in order to develop their strategic structures. According to Porter competitive strategies should be driven by the understanding of how different industries are structured taking under consideration their constant changing environments. The five forces model consists of threats for new entrants, power of suppliers, power of buyers, availability of substitutes and competitive rivalry.
British Airways is a company which is established as one of the top airlines in the global airline industry, for this reason competitor rivalry is not that much of an issue if simply they continue to be consistent when it comes to customer services such as keeping the passengers travelling with the company satisfied and dealing with the pitfalls that the world economic situation poses.
As said earlier on the economic crisis has stopped or changed many of the company’s plans for the future and destroyed strategies developed for further developing and expanding in the industry. One of the issues that concern B.A is the constantly price rise of fuel that gives the opportunity for suppliers to “exploit” weaknesses of the company but the whole industries too. The catastrophe the company faces would become out of hand if suppliers took control of specific parts of the companies essential tools of structuring, that only B.A uses, but the whole industry is confronted with the fuel problem so the problem is mass and doesn’t specifically affect B.A. Although prices of the company have not risen because of the strategy the company is following to continue to provide services to premium passengers and providing top class services customers that have also been hit by the crisis prefer low cost airlines to travel instead of the premium services of B.A.
B.A does not only develop services in the airline industry but also expands their services. Other services that the company provides to their customers is holiday booking, car rental, hotel booking making the company a full service airline giving them advantage against their competitors that only rely on airline services giving them substitute ways of going on vacation or travelling without the need of “getting off” a plane. B.A by being a horizontal integrating company has many benefits against competitors and especially in a time period such as the one they are facing now.
As said earlier customer loyalty is very important for the company’s success and for that reason they have developed schemes in order to ensure travellers that they are given the respect they deserve and giving them the power they should have over and in the company. In companies that are customers orientated, the main objectives are to keep the customer happy by providing the products and services they need.
CONCLUSION - RECOMENDATIONS
As a conclusion both the development and the workshop phases of the exercise, highlighted the fact that developing strategy is a complex and iterative process, and that there are significant benefits to be gained by using structured processes combined with facilitation and creative problem solving techniques.
From the experience of applying Scenario Planning at British Airways, it might be concluded that the most important criteria for success in introducing Scenario Planning are:
· Gain support from the top level in the company and build it into the existing planning processes from the start.
· It is a major exercise: plan it well, take the time to do the design and research properly, and show progress along the way.
· Treat the exercise as a learning process. Consult as many people as possible in the development process so they feel a sense of ownership of the final product.
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