Operations Management for Market Leadership

Chapter 1: Introduction

1.1: Overview

Operations management is deemed to be an integral part of the day-to-day business process and services delivery of organizations irrespective of the industry in which they are operating as argued by Slack et al (2005)^[1]. This makes it clear that the effective use of the resources and technology in order to ensure prompt delivery of the promised services to the customers is not only elemental for the sustainability of the business but also the core deliverable that can be achieved only through effective operations management (Slack et al, 2006^[2]). Tourism in the global market has seen tremendous growth with the increase in the affordability and the demand for new destinations in the market from all levels of the market (Yu, 1997^[3]). The increase in the level of package tours and the number of holidaymakers visiting places abroad since the dawn of the twenty-first century justifies the aforementioned (Dempsey and Gesell, 2007^[4]). It is further evident from the arguments of Dempsey and Gesell (2007) that the increase in the tourism industry is mainly influenced by the level of affordability and convenience provided through flight services across the globe mainly in the form of economy flights. This makes it clear that effective operations management in the tourism industry especially in the airways business segment of the industry is a key element that has a direct impact on the tourism industry in a given geographical location (Barnes, 2007^[5]). The growth of economy and low fare flight services to a variety of destinations across the European Union and across the Atlantic further makes it clear that a airline operator cannot achieve market leadership through pricing strategies but only through distinguishing itself from others through quality of service offered. In this report a critical analysis on the use of effective operations management practises to achieve competitive advantage through improving business operations at British Airways Plc is presented to the reader.

1.2 Aim and Objectives

Aim – The aim of this report is to present a critical analysis on the use of operations management concepts to achieve sustainable market leadership and growth at British Airways in the Tourism Industry.

Objectives

The above aim is accomplished through focusing the report on the following research objectives

1. To present a literature review on the key concepts associated with the operations management in the tourism industry focusing on the airlines business.
2. To present a company profile on British Airways and the company’s operations management.
3. To present a discussion on the areas of development for British Airways and the implementation of the Operations Management concepts presented in the literature review.

1.3: Research Scope and Methodology

The scope of the research is restricted to the airlines business segment of the tourism industry as opposed to the airways operations as a industry in itself. This is due to the fact that the case of former involves the operations management from a quality of service perspective whilst the latter also involves the industry standards and regulatory aspects of the business.

The research methodology is qualitative in nature as the application of the operations management concepts at British Airways to actually test its viability and the results of the implementation requires higher level of commitment from the company which is unavailable for this academic research. The research hence uses secondary research resources to deliver the research on the chosen topic.

1.4 Chapter Overview

Chapter 1 – Introduction

This is the current chapter that presents the research aim and objectives alongside a brief introduction on the nature of the research being conducted.

Chapter 2 – Literature Review

This chapter presents the key concepts of Operations management and their role in the tourism industry focusing on the airlines business segment. The purpose of this chapter is to present an insight on the Operations Management concepts at a theoretical level prior to conducting the company profile of British Airways in chapter 3.

Chapter 3 – Case Study

This chapter commences with a company profile on British Airways (BA) Plc followed by a detailed analysis of its business operations and the current operations management strategies deployed. The aim of this chapter to present a critical analysis on the issues faced by the operator in the UK and the global market in terms of effective operations management to deliver quality service to its customers.

Chapter 4 – Discussion

This chapter presents a discussion on the theories and the research presented in the chapters 2 and 3. The discussion presented aims to justify whether the theory discussed in the literature review can be accomplished in case of BA. This chapter also aims to present a discussion on the benefits that can be realised through the implementation of the operations management concepts as part of the BA business operations’ management.

Chapter 5 – Conclusion and Recommendation

This chapter presents a review of the objectives initially to assess the relevance of the research conducted in relation to the set objectives. This is followed by the conclusions drawn on the research and recommendations for both the intended audience and for further research.

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Chapter 2 – Literature Review

2.1: Introduction

Operations management in the tourism industry is a major aspect that is not only integral to the business of the organizations in the industry but also the core element that dictates the mere existence of the competing organization (Barnes, 2007). This is naturally because of the fact that the operations management forms majority of the service management strategies of any organizations (Barnes, 2007). The prompt and effective delivery of the services promised to the customers is deemed to be the key for achieving competitive advantage in the tourism industry as well as t he hospitality industry as a whole (Fenn, 2008^[6]). This makes it clear that the operations management in the strategies of the organizations in the tourism industry where travel by both the holiday makers and professionals are fused together, is critical for successful delivery of the products and services. Unlike retail/wholesale manufacturing industries, operations management in the tourism industry does not have a physical product for delivery through the use of logistics mechanisms but actually depends on the logistics and transportation strategies for customising the products and services to the intended customer (Fenn, 2008). This is naturally because of the fact that the tourism industry is integral to the transportation and logistics management for both the travellers/tourists and baggage handling as argued by Baxter (2007)^[7]. This makes it clear that the operations management in the tourism industry mainly in the air-travel business segment is dependant on the application of the logistics and transportation management concepts from a services delivery perspective as opposed to merely delivering the products using a Just-in-Time or similar delivery strategy (Fenn, 2008).

Core concepts of Operations management

Clark and Johnston (2005)^[8] argue that the overall operations management in a given organization predominantly revolve around the following core concepts

1. Product and Service Management
2. Quality Management
3. Inventory Management
4. Logistics and Transportation Management
5. Facilities Management
6. Configuration Management

These are discussed in the subsequent sections of this chapter in the light of operations management in the airlines industry.

2.2: Product and Service Management

The product and service management in the world of operations management is mainly concerned with the configuration and delivery of the services post purchase by the customer (Wild et al, 2005). This makes it clear that the product management in the case of operations management is the actual process of defining the timelines associated, costs and the service level agreements associated for the delivery of the product as an operations’ service to the customers by a given business organization. For instance, in a online retail scenario where the delivery of the goods purchased by the customers over the Internet is delivered using a logistics service provider by the retailer, the service level agreement of the retailer with the supplier must ensure that the guarantee to the customer is achievable under typical operational conditions of the business (Baxter, 2007).

In case of the airline industry the major aspect associated with the delivery of the aforementioned products/services is that the product sold is in itself is realised as a service rendered to the buyer/customer. This makes it clear that the effective management of the operations by the airline operator is critical to ensure that the services purchased by the customers are delivered effectively. For example, a ticket or package tour purchased by a customer as a product is also the service experienced by the customer during the course of the journey. This further makes it evident that the operations management is not merely prompt delivery of the product but actually its appropriate planning and implementation in case of the airline operations in the tourism industry.

The product and services management in the operations management of any organization involves three major aspects as discussed below:

1. Definition – The definition of the product or service intended to sell to the customer is the first and most critical element associated with the product and service management as argued by Slack et al (2006)^[9]. The product definition in the tourism industry involves the definition of the scope of the product and its intended value addition for the customer or the buyer as argued by Fenn (2008).

The product definition also involves the process of ensuring that the requirements of the customers are met with by the service provider in case of the tourism industry. This is because of the fact that the services offered are measured by the customer who directly experiences them as part of the delivery of the product or service as argued by Fenn (2008). This first-hand response element of the customer feedback and their perception associated with the tourism industry is the major element that attributes to the need for a stable product definition. The airline operations in particular is one of the business segments where the first-hand response of the customer is not only part of the services offered but also in terms of the delivery of the service and associated tasks like the baggage handling, check-in and in-flight services including food and beverages offered as argued by Baxter (2006)^[10].

Yet another element associated with the operations management in the airline industry as part of the product definition is the extent to which the service provider is prompt in the delivery of the services defined as part of the product. In case of the airline industry this is a critical aspect owing to the fact that the tourists and other travellers using the airline service depend entirely on the effectiveness of the operator in handling the safety and security of the passengers as well as their belongings in terms of checked-in baggage, hand baggage etc. As the traveller on holiday using the airline service to reach the destination will require his/her checked-in baggage in order to continue with their vacation without hindrance, the aforementioned justifies the need for a stable product definition.

Another critical aspect associated with the product definition in the tourism industry is the need to ensure that the customer requirements are not only catered for but also to ensure that the services delivered as part of the business process is managed effectively at the operational level as argued by Baxter (2007). As mentioned before the case of tourism industry in general mainly involves the customer experiencing the services delivered first-hand. In other words the operations management in the tourism industry is not a behind-the-screen process but performed in front of the customer itself (Baxter, 2007).

2. Design – The design phase of the product or service involved in the airline industry of the tourism business is a key aspect that involves a variety of long-term, short-term and day-to-day operational decisions as argued by Clark and Johnston (2005). The design phase of the product or the service is deemed as the actual planning involved with the scoping and delivery of the product or service defined at the product definition. In the case of airline operations business, the key elements that influence the design include from long-terms aspects like infrastructure, location, facilities up to day-to-day operational activities like the provision of food and facilities in-flight as well as the handling of baggage at the airport terminals both at departure and arrival ends of the journey as argued by Baxter (2007).

The long-term decisions in the operations management of the airline operations involve

• Location – The location of the airport and the associated infrastructure to ensure the flight handling on a day-to-day basis without affecting the domestic life of the general public is the critical element associated with the product design for the airline operators on a long-term basis. This is evident from the case of many airlines managing the infrastructure and operations of the international airports of key destinations. Lufthansa’s role in managing the Frankfurt Airport in Germany, the management of Dubai International Airport by Emirates and responsibility of managing key international airports in the UK by British Airways including London Heathrow airport are classical examples for the aforementioned.
• Infrastructure – The infrastructure associated with the setting-up and the continuous maintenance of the airport is the second long-term element that influences the effectiveness of the tourism operations management by any airline operator in a given location. The infrastructure maintenance includes the installation of the security, baggage handling, staffing and mainly the handling of flight take-off and landing at airport terminals to ensure the smooth transfer of passengers from or into the aircraft as applicable (Dempsey and Gesell, 2007).

Apart from the aforementioned, the key long-term element associated with the product design is the ability to improve and accommodate to changes in the external business environment in order to cater for the demands from the customers (or travellers) in the target market. The increase in the prominence of cheap flight services for the trans-Atlantic and European Union destinations for tourism is an example that justifies the aforementioned. With the increase in cheap flight services, the density of air-travellers in the western nations to various foreign destinations for vacation has increased tremendously (Baxter, 2007). This increase in the passenger density through airports which is also due to the growth in the affordability and the rising economic growth across the globe as a result of out-sourcing is one of the key long-term elements that influenced the construction of Terminal 5 at the London Heathrow airport. The opening of the Terminal 5 at the Heathrow airport has provided the British Airways flight operator the opportunity to utilise the infrastructure to consolidate the operations of all BA flights (long and short-haul) from a single Terminal at the Heathrow airport thus establishing the company’s brand identity effectively in the UK and global commercial aviation market.

3. Delivery – The delivery of the services in the airline operations industry is the final and the most critical element in the case of the product and service management as argued by Slack et al (2006). Apart from the fact that the customer experiences the operations management strategy first-hand as part of the journey travelled, the delivery element also accompanies the services and facilities offered to the customers as part of the operations and their ability to meet the customer requirements (Slack et al, 2005).

Footnotes

^[1] Slack, N.; Chambers, C.; and Johnston, A.B.R (2005), Operations & Process Management: Principles and Practice for Strategic Impact, Prentice Hall

^[2] Slack et al (2006), Operations Management, Prentice Hall Ltd

^[3] Yu, G (1997), Operations Research in the Airline Industry (International Series in Operations Research & Management Science), Kluwer Academic Publishers

^[4] Dempsey and Gesell (2007), Airline Management: Strategies for the 21st Century – 2^nd Edition, Coast Aire Pubns

^[5] Barnes (2007), Operations Management, Cengage Learning

^[6] Fenn, D (2008), Travel & Tourism Market – Market Review 2008, Key Note Ltd

^[7] Baxter, J. (2007), Travel & Tourism Market – Market Review 2007, Key Note Ltd

^[8] Clark, G; and Johnston, R (2005), Service Operations Management: Improving Service Delivery, Prentice Hall

^[9] Slack, N.; Chambers, C.; and Johnston, R.; (2006), Operations Management, Prentice Hall

^[10] Baxter, J. (2006), Travel and Tourism Market – Market Review 2006, Key Note Ltd