The Strategic Planning Of British Airways

The purpose of making this report is to provide British Airways (BA) with a strategic plan for future improvement. In the airline sector British Airways known to be the UK market leader, but for the last decade British Airways has been challenged by other competitors, resulting in wearing down in their market share. The report in detail analyzes the overall environment of British Airways. This report also describes the organizational structure and other important aspects of the organization. In this report through strategic assessment, recommendation has been given to British Airways to concentrate on their primary qualities like service delivery in order to re-establish their competitive advantage. There are two strategies which British Airways will have to implement, one is related with the HR development strategy and the other is to concentrate on technological improvement.

In the UK British Airways Plc (BA) is the biggest international scheduled airline. It flies to more than three hundreds destinations and carries more than thirty three million passengers. According to British Airways annual report 2008 approx £8.7 billion of revenue was earned and according to (Data monitor, 2008) total numbers of employees as of march 2008 stays at 42,377. Along with the passenger flights British Airways engaged in the operation of domestic and international carriage of mail and shipment. Regardless of the global economic downturn, British Airways’ future seems promising. According to latest yearly report (British Airways, 2008) which stated that British Airways’ objective is to become world’s most dependable airline.

Strategic Corporate Development History:

British Airways came into picture after the merger of the British European Airways and British Overseas Airways Corporation. After the merger, British Airways had faced numerous problems and issues such as the cultural difference. British Airways was facing noticeable problems in cross national operations and acquisitions. According to Lubatkin & Calori it was the different organizational culture and organizational culture entrenched in different national culture which was coming together (Very, Lubatkin & Calori, 1996).

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Problem arose when employees from different organization, different background and culture had to interact with each other and when one culture had to adopt the practices of the other culture (Schneider and DeMeyer, 1991). The main reason of the problem was the mind-set of employees, different employees would think in different ways. So, coming on the same page was little difficult for the employees. Another difficulty or problem faced by British Airways is in terms of its obligatory management system.

British airways have compliance with its strict policies and regulation like status difference in an organization due to various dress codes. Too much rule oriented in the management is creating problem among staff. Along with those problem another problem was arose by the new management, they were unable to identify the proper need and want of the customer. Because company has given importance on its internal management approach and focus on holding its diverse routes which resulted on unsatisfied customers.

Effects of Conflicts:

These problems and conflicts between management had a bad and harmful effect on the new company. British Airways has been considered as the most disreputable company because of its poor service.

In addition, the organization’s operation has been pretentious and in 1980 the company had been regard to have the worst timekeeping record all over European carriers flying from UK and named as the airline to circumvent. This resulted in the extensive loss for the company.

Management Change at the British Airways:

After being named as the airline to avoid, British Airways had to look for some changes within the organization. As a result they considered vital management changes, called change management. Some big changes were made by John King who was appointed as the chairman of British Airways by British Prime Minister Margaret Thatcher in 1981. The new appointed chairman had made some changes like closing many routes, selling off the freight system and aircraft, along with these actions he also lay off approximate twenty thousand employees.

According to Carlopio change may be called as the implementation of an innovation, it can be done through an adaptation of practices in which improvement will be seen in the output (Carlopio, 1998). British Airways has recognized the need for change in order to gain competitive advantage. Colin Marshall took charge as the Chief Executive Officer of British Airways in 1982. In this period British Airways was making its first surplus, but this was happening in the effect of the changes made by John King in which he tried to cut the cost.

Colin Marshall wants to know about the staff and what they deliver to the customers, so he hired consultant. Later Marshall found out that there is a huge gap between what the employees are delivering and what the customer actually need. For this reason, Marshall took initiative in changing the system from staff oriented to customer oriented company through the formation of “customer is king” policy culture within the British Airways.

This approach of satisfying customer continued until the late 1990s and to keep the employee motivated, Marshall introduced Award for Excellence in 1987. The main objective of this strategy is to appraise high performers and motivate employees to efficiently do well in satisfying customers and fulfil customer’s needs. Another good change made by Marshall for employees was to work with Lancaster University to provide MBA course for British Airways’ employees. Additionally, the organizational structure of British Airways also changed to a much flatter and smartest structure.

Five sectors of the company are directly reporting to the CEO and eleven profit hubs were formed. These structural changes aimed to boost the staff assimilation and communication within British Airways. Extra pay scheme and appraisal system was also introduced by the management on the basis of satisfying customers and being consistent at work. It included key investments in planes, ground facilities and Information Technology in order to stick to the needs of its customers. All the major changes were happened after privatization of BA in 1987 and took over British Caledonian Airways in 1988.

Changes Helped the Organization:

The main goal of all the changes which are imposed by British Airways is to make the industry sustain its position in the marketplace and become competitive in the airline sector. The result of the changes were positive, the company had become more customer oriented by giving excellent services. All the hard work and dedication of the management paid off when British Airways was nominated to receive the “world’s best Airline award in 1989”. It was a prestigious award for British Airways and it helped the organization to be efficient and productive. Without HR effective strategies, it is difficult to be strong and competitive in the market, so in this case Human Resource Management strategies were the key elements to help the company achieved competitive advantage and the prestigious award.

Problems Due to Management Change:

Like in any other organization whenever there is a change in the management; problems and issues arises, same case with British Airways during and after the management change, it faced different problems. At one side these changes were able to give British Airways the position it deserved in the market and on the other hands this management change was causing some problem. The problem wasn’t related with the employee performance or its achievement, this problem tends to be associated with the employee. The problems were recognized was the behaviour of a number of employees which causes internal problems to the operation of the company.

Response of the British Airways to Problems:

British Airways was outstanding in 1999; in that year it faced so many problems and conflicts and used effective approaches to solve such issues. British Airways introduces e-commerce strategy to increase online sales. (BA) was also offering flat beds, laptop, and for business class passenger they offered email, phone and fax facility to provide full satisfaction to its on board customers. British Airways focuses on having good employee relationship and customer relationship, so it brought back its policy of putting “People First”. By doing this they had satisfied millions of customers and employees as well. This strategy of putting “People First” had made a great impact on the mind of their customers in a positive way.

Current Strategic Situation:

Corporate Level Structure:

At a corporate level, BA has a good quality structure. There is a fresh Acting Customer Director on a provisional basis, Silla Maizey (British Airways, 2008). She has initiated a fresh customer service squad working with Heathrow Customer Services, intended to put client first.

Utilizing the present structure in order to apply recommended strategy, it is suggested that an enduring director must be hired. In reference to technological strategy, no adjustments in the present structure are needed because current system of BA is accordance with the technological aspects.

Business Level Structure:

At a business level all division are bound to make such policies which will implement strategy effectively and efficiently, all the staff should be bound to follow strategic rule accordingly. Every division should also adapt the corporate level goals specifically to its own aims. This will assist to make value for brand, perk up its client relationship and help to accomplish the settled goals.

Functional Level Structure:

Each function should be harmonized with each other to achieve organizational objective effectively in a synchronized manner. All the strategies and functional objective should be aligned as well it will help each function to determine whether these functional departments are in lined with the corporate department. Adequate instruction on the fresh involved technology will be needed on continue basis to make certain that workers are completely know to that service.

Organisation and Stakeholder Power

It is significant to assess the expectations of diverse stakeholders and the degree to which they are likely to influence over BA’s strategies. Followings have interest & power on company;

Charity Organizations

Government/Regulators

Customers

Creditors

Workers

Rivals

Suppliers

Financial Associations

Shareholders

Stakeholder Map:

INTEREST

LOW

HIGH

POWER

HIGH LOW

Charity Organizations

BA give cash to some of listed aid organizations in UK (British Airways, 2008) – smallest impact on the strategies.

Government/Regulators

Fresh legislation (if initiated) will have a large impact on the company.

Customers

Customers give the entire sale but show less curiosity in how the corporation is administered. But they have a large impact therefore; the basic objective is to create more customer satisfaction.

Creditors

Should be kept knowledgeable due to cash yet to be paid though this will not impact on the options implemented at BA as they have an excellent credit ranking (Financial Analysis).

Workers

Are the important parts of BA, likeness workers having the power to satisfy customers. Workers have a vested awareness as BA gives their financial safety. The personnel’s at BA are deeply unionised, this add to the power of the workers.

Rivals

BA’s key competitors within their strategic group have a large interest and power in manipulating BA’s strategy. The oligopolistic character of the marketplace will have an effect on the choices BA takes.

Suppliers

Two airline suppliers, Boeing and Airbus. Both have a high interest and power upon BA, as BA is a giant source of earnings for both suppliers and BA also rely upon them for supply. In short suppliers are more focused toward BA strategies.

Financial Associations

Monetary support perhaps will be required from Financial associations to finance these strategies and yet despite the fact that BA has lesser it’s gearing ratio and enlarged its liquidity. In the present circumstances the associations have large power over BA and can reject monetary assistance.

Shareholders

Shareholders have a large interest as to gain financial profits. They have large input in choosing board members and approving fresh strategies. The shareholders have to be well educated about the threat of new strategy and expected profitability about the firm.

PESTEL Analysis

Internal Analysis:

It is now necessary to examine the internal environment in order to devise appropriate strategies.

Value Chain Analysis (VCA):

SUPPORT ACTIVITIES

FIRM INFRASTRUCTURE

Structured hierarchy let BA to utilize multitude of expert knowledge in order to achieve competitive advantage over downsized companies.

HUMAN RESOURCE MANAGEMENT

Spend in the advancement of customer service training in 2007 drawing attention of the most excellent workers.

‘Speak Up’ view surveys give confidence workers to give opinions (British Airways, 2008).

TECHNOLOGY DEVELOPMENT

BA has supplemented value in this category over minor corporations, due to relaxed resources that can improve the presentation of service (e.g. LCD screens).

PROCUREMENT

Due to the volume and past business dealings and coalitions, BA was capable to influence suppliers and by economies of scale create efficiencies where rivals might loss.

PRIMARY ACTIVITIES

INBOUND LOGISTICS

Stock handling

Far above the ground quality training credited by City &Guilds (British Airways, 2008).

On-going association with suppliers (e.g. Gate Gourmet.)

OPERATIONS

Baggage security has been increased.

Rapid check-in services and safe online bookings with capability to pre-book added services.

OUTBOUND LOGISTICS

Customer Service

Huge database of airport slots allow travellers to access the bulk of destinations from favoured airport.

MARKETING &SALES

Marketing conversation to all stakeholders.

Brand permitting for large budget to be used up in this field.

POST SALE SERVICE

Allegiance club card.

Update conversation on other services

BA has tried to organize the system additionally by forward and backward alleviation. Through handling numerous component supplies in-house, BA boosted their reach in the value system to the supplier and channel value chains.

Resource Based View (RBV):

It is considered that corporation competitive advantage and greater performance is resulted from its distinguishing capabilities (Johnson et al., 2008 p95). The resource based view highlight BA’s resources and competencies as below:

RESOURCES

COMPETENCIES

THRESHOLD CAPABILITIES

Threshold Resources

Tangible

245 aircraft flying over 550 different places (British Airways, 2008).

Supplementary services (e.g. BA Holidays &The London Eye Company (Datamonitor, 2008)).

Intangible

Worldwide Customer Database.

Joint ventures &coalition with ‘one world’ (incl. American Airlines), code share/franchise partners, and subsidiaries.

Threshold Competencies

Training of ground school, flight simulators, and cabin security training (BAFT, 2009).

Economies of Scale from suppliers.

Capability to fly passengers securely to various routes and handle passengers (Davies, 2000).

CAPABILITIES FOR COMPETITIVE ADVANTAGE

Exclusive Resources

Tangible

Sole access to London Heathrow Terminal five (BBC News, 2008).

Intangible

Highly regarded brand image. BA is familiar worldwide as a good reputation brand, toughened by its long-standing survival within the business.

Core Competencies

Open Skies’ subsidiary’s aircraft never have above than 64 travellers per flight, with 1 assistant per 12 customers (British Airways, 2008).

Initial UK airline known as a training centre by the City &Guilds, qualifying all cabin crew with NVQ Level 2 (British Airways, 2008).

SWOT Analysis:

It is significant that strategic formulation is reflective of BA’s strengths and weaknesses comparative to competitors and the opportunities and threats presented by its outside environment (Pitts & Lei, 2003).

Internal Strengths:

Brand likeness

Joint ventures & coalitions

Financial volume and steadiness

Internal Weaknesses:

Bad worker relations history

Dependability and trust

Modernization & modification

External Opportunities:

SkyTrax Quality structure

Rivals forced exit

Rivals deteriorating on delivering dependability

Appearance of new markets

External Threats:

Open Skies accord

Environmental consciousness

Worldwide economic crisis

Lesser cost competition

Different Aspects of Proposed Strategies:

PESTEL

Worldwide economic crisis.

High regulatory requirements.

Growing environmental consciousness.

Turn down in consumer expenditures.

Greater than before utilization of the internet by consumers.

Centre their attention on technological and environmental matters.

Customer Analysis

Consumer tendency in far above the ground expediency and elevated expectations of service.

Make certain changing customer needs should be tackled and fulfilled

Strategic Group Analysis

Strong rivalry within strategic group and tendency for consolidation.

The major other intimidation comes from low cost airlines.

Though low cost airlines are the major threat to BA, stirring into low cost market is not believed suitable based on earlier unsuccessful attempts.

Airline Quality Review

BA = bad baggage managing poor on flight amusement and low customer contentment.

Service excellence requires to be enhanced to achieve a competitive advantage

The Value Chain

BA adds value; financial volume and steadiness, brand likeness, business expertise, and joint ventures and coalitions.

BA loses value to rivalry; worker relations and performance, marketing delivery, dependability, and slow modernization.

BA requires addressing the areas where worth is being missing to avoid offensive rivals’ strategies.

Resource Based View

Tough resources including sole access to hub inside largest UK Airport.

Tough training competencies.

Make use of BA core competences to get competitive advantage.

Financial Analysis

Greater than before profits and lower operational costs.

Lesser gearing ratios and elevated liquidity.

Option of a loss in 2009 as a result of the economic recession.

Investment resources on hand greater than before inspection on strategic projects for risk evaluation.

Strategic Direction for the Future

TOWs Matrix

A range of strategic options will now be formulated using the TOWs matrix to resolve the strategic issues highlighted from the analysis.

External

Opportunities

Threats

Skytrax- star structure of excellence

Rivals forced exit

Rivals deteriorating on delivering dependability

Appearance of new markets

Open skies accord

Environmental consciousness (Climate change bill)

worldwide Economic Crisis

lesser cost rivalry

Internal

Strengths

Brand likeness

Joint ventures and coalition

Financial volume &steadiness

Terminal 5

Strategies for strengths to meet opportunities:

Division focus.

Supply chain migration.

Introduction of admiring services.

Present Broader service

Strategies for Strengths to defend threats:

Reformation of brand likeness.

Expand into other transport markets.

Weaknesses

Deprived worker relations history

Current negative attention on dependability &conviction

Rapid modernization and modification

Strategies for opportunities to overcome weaknesses:

Enhanced people processes.

Technological improvement

Strategies for Weaknesses not to expose threats:

Enhanced environmental position

Ansoff’s Matrix:

Strategy Linked to Ansoff

Strategic Options

Explanation

1. Market Infiltration

1. Enhancement to people processes

Decrease present tension from harmful worker and customer relations.

2. Enhanced environmental position.

Go over and beyond the present environmental needs.

3. Reformation of brand likeness.

Reformation and modernization of brand likeness in an effort to gain market share.

4. Division focus

Giving centre of attention on business class consumers as the most Lucrative segment of the business.

2. Product Growth

5. Technological improvement.

Opening of internet access on flights to perk up the overall excellence of service.

6. Introduction of admiring services.

Presenting of admiring services such as car rental or hotels.

3. Market Expansion

7. Present broader service

Add to number of places BA fly to, put centre of attention on places of growth

Such as India and China.

4. Diversification

8. Expand into other transport markets.

Broaden your horizons into substitute services such as rail, in an effort to preserve competitive advantage.

9. Supply Chain integration.

Vertical integration in the supply chain. I.e. Gate Gourmet or Boeing.

Strategy No.1:

People Processes

Aim: Enhanced stakeholder brand likeness & productivity

Objectives:

Make use of databases.

Perk up service delivery effectiveness.

Develop internal communication.

Put into practice efficient review monitoring.

Performance Measures:

Income margin add up to of 2 – 3%.

Amplified repeat purchasing by 25%.

Enlarged consumer recommendation from 58% (2007/08) to 69%.

Improve worker survey rate from 34% (2007/08) to 79%

Strategy No.2:

Technological Advancement:

Aim: Customer Loyalty & Market Share

Objectives:

Following progression with test internet execution, roll out internet and on-board internet facility.

A suitable pricing strategy involving admiring service for first class whilst targeting business class as the main lucrative market.

Constant market research to make certain that this is an appreciated service and seek chances for further growth

Performance Measures:

Put in equipment on 244 aircraft which were left.

Amplify business class market share by 11%.

79% of business class consumers buying internet usage.

Pursuing R&D put into practice 1 new technological service.

Future of British Airways:

The corporation is still in front of great problems in spite of its plans and modification imposed. In this case, the Gate Gourmet increases up in the cause of the troubles in terms of the BA’s brand likeness. Such argument has shaped up a concept that the business practices imposed by British Airways is not pertinent to what it demonstrate in its company images. With this, the administration is now trying to look for some strategies and methods to resolve these troubles with different strategy and along with these marketing communications will be utilized as well. In addition, the present administration also understands that the lack of leadership and entrepreneurial capability have been the root cause of all the troubles faced by the corporation.

Recommendations:

It appears that the main reason of the troubles faced by British Airways is due to the unplanned management transformation imposed. Additionally, the troubles also occurred because of the insufficient awareness about the strategic management system and along with the other administrative system. Strategic management is the course of identifying an organisation’s intentions, creating policies and plans to attain these intentions, and assigning resources, so as to execute the plans. It gives overall track to pursue to the whole enterprise (Abell, 1999). It can be “sighted as a set of theories, frameworks intended to give details of the issues underlying the performance of corporation and to help managers in viewing, planning and acting tactically” (Campbell, Evans & Stonehouse, 2002).

Conclusion:

As the main objective of this assignment was to study Longitudinal Strategic Development of company for that reason one of the best airline of UK has been selected, as per requirement different analysis has been made with reference of the British Airways which includes Strategic Corporate Development History, Current Strategic Situation and Proposed Strategic Direction for the Future. Different methods were used to analyse and review British Airways current strategic situation for instance SWOT Analysis, Resource Based View (RBV), Value Chain Analysis (VCA), PESTEL Analysis, and Stakeholder Map.

For Proposing Strategic Direction for the future, TOWs matrix to resolve the strategic issues highlighted from the analysis. As an outcome of the external and internal examining a number of strategic options were given. It was stated that a collective strategy method to perk up service quality was considered most appropriate. Due to the present business climate the most appropriate strategy is to consolidate BA’s status as market leader. Due to lack of primary research and limited access to corporation information there might be some lacking in findings and proposed strategies, if the general direction of recommended strategic intent will lead BA to victory.