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The concise Oxford English dictionary defines the term strategy as a plan designed to achieve a particular long term aim. According to WebFinance Inc.(2010), Corporate strategy is defined as an approach to the future that entails examination of the current and anticipated factors associated with customers and competitors and the firm, envisioning a new or effective role for the firm in a creative manner and, aligning policies, practices and resources to realise that vision.
Business environment is dynamic. There are changes in the environment which may affect the firms' policies and practices. These changes require effective adjustments and realignment of the corporate strategy of the organisation. The changes necessitate the management to have a plan of action on how they are to be effected and adopted in the organisation, this entails strategic change management.
Strategic change management is defined by Silas (lecture slides-2010) as, 'A structured approach to transitioning individuals, teams and organisations from a current state to a desired future state. A systematic approach to dealing with change, both from the perspective of an organisation and on the individual level, including adopting to change controlling change and effecting change.
In this report I will focus on strategic change management in relation to British airways merger with the Spanish airline Iberia which resulted to the formation of The International Airlines Group. The need for change and factors driving need for change will be analysed. Change management and the models of implementing change will be discussed among other important aspects.
According to the company website www.britishairways.com (2010), British airways is the United Kingdom's largest international scheduled airline that flies customers to various destinations in the world. The company regards itself as one of the leading global airlines, with the principal place of business being London Heathrow, Gatwick and London city airport. The main activities of British Airways Plc and its subsidiary undertakings are the operation of domestic and international schedule for the carriage of passengers, freight and mail and the provision of ancillary services. The company serves more about 150 destinations and operate a fleet of more than 240 aircrafts. It extends its networks to more than 300 destinations via code sharing relations with other international airlines like American Airlines and other members of Oneworld global marketing alliance such as Iberia and Qantas. British Airways faces competition from other airlines both nationally and internationally. Among the major competitors is domestic airline Virgin Atlantic which flies to most destinations as British airways, Air France, KLM, and Lufthansa among other global competitors.
In April, 2010 British Airways and Spanish airline Iberia signed a deal to merge and create one of the biggest airline groups. This strategic change was envisaged to be of benefit to the shareholders, employees and customers alike. The consolidation was finalised in September 2010 with the new company know as International airlines Group but the British Airways and Iberia Brand still continue to operate under the same names. This Strategic change of British airways was triggered by many factors in the environment. This report will focus on strategic change management of the British Airways merger with Iberia.
Need for strategic change in an organisation.
Any organisation formed for profit or non profit making motive is subjected to continuous changes in the environment. In order to survive in this rapid and dynamic environment, the managers of such organisations must continually evaluate the organisations strategies to match them with the changes in the environment.
There are various reason why an organisation will take measures towards strategic change. Some of these are explained below:
Change in market;
Any change from on market to another might call for strategic change in order to adopt to the market conditions and requirements in the new market. Different markets will require different approaches in order to gain a market share and maintain a competitive edge.
Economic downturns. - The recent credit crunch crises affected many organisations and forced managers to take drastic steps towards sustaining their organisations in the economy. Many organisations have reported high loses of revenue and others forced to close due to the deep recession experienced in most countries in the developed world including the UK and USA. Economic downturns will force managers in an organisation to review the strategies and make necessary changes in order to ensure survival of the organisation.
Customer expectations - An organisation is able to remain in the market and be competitive if it meets the customer needs. Constant study and analysis of customer needs and expectations is a vital procedure for organisations wishing to maintain their market share. Managers are forced to change the strategies of the organisation in order to meet various customer expectations and enable their organisations to remain in the market.
Legislation changes.- New rules and regulations introduced by the government may necessitate the change of strategy. Managers are forced to adjust and conform to the changes in legislation by adopting strategy change, in order to reap benefits of the legislation change or to avoid fines and penalties if they fail to comply.
New technologies- There is rapid change in technology in the world today, this has greatly affected peoples way of life and business operations. Continuous research and development in organisations has led to innovation and discovery of new better and cost effective ways of performing tasks in organisations. This has forced managers to adopt changes in strategy so as to reap the benefits of new technology. Ignorance of technological changes may lead to higher cost of operation in an organisation compared to its rivals who have adopted to change of technology and changed their strategy.
Competitive edge- Business organisation need to constantly evaluate their performance and compare with other players in the market. This is necessary to help managers know the organisations position in terms of market share, and trigger them to work towards maintaining high performance and improvement. Any fall in competitive edge of an organisation is a major trigger to strategic change. Failing to adopt appropriate strategy to maintain competitive edge may in the long run lead to an exit from the market.
Among the above mentioned factors, the management of British airways have been driven by some of them to initiate strategic change. These are analysed below:
[analyse case of British airways in relation to economic downturn and completive edge]complain of managers of hight loses, need to cut spending and claim of ba making loses. Merger as a means to form stronger base to face rivals .- rivals seen to follow suit.
Factors driving the need for strategic change.
There are a number of factors that may lead to strategic change in an organisation. These factors which are also referred to as change drivers will vary from one organisation to another.
According to Andrian and Alison, The strategic management of organisations, FT Prentice hall page 55.pearson education 2001. It is observed that some of the potential reasons for change is due to increase in competition. The world has become a smaller place and threats are not only posed by local firms but also companies thousands of miles away. Trade barriers have been minimised by formation of international trading regions such as the EU and transport costs have reduced, again increasing the potential for global competitors to enter domestic markets.
Some of the change drivers are discussed below:
Legal factors - change in legislations may invariably affect the business operating environment, and may necessitate a review of the current strategy and subsequent change. New regulations will force the management to change and adapt to the requirements of the law. Deregulation will likewise have a similar effect to an organisation strategy as the managers will want to take advantage of any business opportunities presented to them.
Economic factors - Change in the economy will call for management to review the strategy of the organisation. During unfavourable economic times, example during recession, the management may have to adopt strategies to cut spending while during recovery and boom periods, the management may want to spend on further investment projects and expansion of business.
Social factors - The social set up in which an organisation operates within, determines the strategy to be adopted by that organisation. Factors like culture , demographic layout, taste and preferences of customers will be among major social factors to be considered when formulating strategies. Changes in these factors will result to change in strategy.
Competition - The need to be competitive raises the call for change in strategy. Andrian and Alison noted that increased competition can stimulate change, and these was noted with British airways which undertook major organisational and cultural change programme due to increased completion from other world carriers.
New markets- An entry to a new market is likely to require change of strategy so as to suit the needs of that market.
Write a paragraph relating case of BA merger with Iberia and other alliances to change of strategy to remain competitive.
Give a comparison of other airlines in similar alliances and the threats they pose to BA.