Market and business analysis of British Airways

British Airways (BA) is the United Kingdom flag carrier airline established in September 1974 in international and domestic transport business and ancillary services (Datamonitor, 2008). It flies to over 300 destinations carrying over 33 million passengers with an annual revenue of £8.7 Billion in 2007/2008 with an employee head count of 42, 377 (British Airways, 2008).

After a while of operation under the labor government of London, BA was privatized in 1987 and has continued to grow though the ride of competition in the market. Recently, it was labeled the world first airline to take part in the scheme to reduce green house gas emissions and also had services that allowed passengers print online boarding passes.

Despite the hit of the recent economic crisis, BA’s future looks promising. With its aim of becoming the “world’s most responsible airline” great importance lies in developing achievable guiding principles and strategies to allow achievement of goals,

2.0 PROCEDURE

In order to make conclusions and recommendation about this report, I did primary research based on analysis and sourced some documents from a friend whose sister works with British Airways.

Some secondary documents like journals, newsletters, online databases and related articles were used to write this report,

3.0 FINDINGS

3.1 Marketing Objectives:

BA’s major objective is to maximize profits, strategies are put in place to achieve that

Aim: People Processes (Improve Brand Image and Profitability)

Objective: Improve service delivery, improve internal communication and implement effective monitoring of strategy

Measurable: Increase in customer recommendation by 10% by a following year, increase in repeat purchase and increase in profit margin either by 2%-3%

The other is:

Aim: Technological Advancement (Customer Loyalty and Market Share)

Objective: Defined Pricing strategy, develop market research to seek opportunities and provide internet service facilities.

Measurable: Install technological updated equipments, Implementing a new technological service and increase market share from pricing strategy

4.0 MARKET TARGET AND POSITIONING

4.1 Targeting:

The targeting strategy may involve the appropriate selection of segment of the target market, diversity in buying preferences, industry structure opportunities for competitive advantage organizational capabilities and resources and lastly, the product maturity period. All this factors are considered broadly in the marketing mix, but for the purpose of this discussion, BA operates in a differentiated market so we will identify the segment as the target. Differentiated marketing strategy is a process where companies decide to target different segments in a course of developing distinct market products or services with separate marketing mix for its customers. Below is a figure illustrating the relationship of all marketing mix to the target.

Services

Price

Business community

Price

Product

Place

Promotion

Supplier Marketing Mix Segment

Based on the target analysis, it can be seen that the marketing mix form a symbolic relationship with all target.

Selecting the target market is considered by what product you want to sell and where you want to sell this product.

While trying to evaluate the attractiveness of each market, we must put into consideration a lot of variables. The services rendered may be targeted at a particular audience for any social stratification with price determining the profit of it.

4.2 Positioning: Its objective is to create a distinct and advantageous position in the consumers mind. In order to position your company you should be offering a benefit your competitor does not possess. In trying to build a strategic position for BA, we will discuss some broad factors. These factors are Competitors and Origin. Based on competitors, BA customers will try to look at what cutting edge advantage it has got with its competitors, product attributes and experience compared to other airlines. Unique services and products BA may offer that may create a level of position in the eyes of competitors can be attributed to its level of customer service rendered. They invest a lot of money training staff towards outstanding customer services (British Airways, 2008). The origin of BA is a unique position over competitors. It is a cultural airline of London and lots of people recognize with that as a major reason to fly with the airline. Its quality of service is also part of its position options as well emotional benefits in terms of priority and promotional packages offered to customers.

5.0 STRATEGIES FOR GROWTH:

Growth strategy is marketing tool used to consider the ways to grow a business via new or existing products in existing or new markets (Ansof, I, 1957).

Product /Market

Present

New

Present

Market Penetration

Product Development

New

Market Development

Diversification

5.1 Market Penetration: This is the situation where companies market existing products to customers and will not alter the products. For Example would promote its product by designing coming up with loyalty programs for customers as a means of promotion to position the brand in the eyes of customers. Others are:

Reduce negative employee-customer relationship

Improve environmental requirements

In order to gain market share, BA must overhaul and modernize its brand perception

Emphasize focus on business class customers as a profitable segment for its business.

5.2 Product Development: These are new products marketed to customers either by developing or taking in new innovations to replace old ones. BA’s acceptance of newly innovated technologies in areas of customer services, whereby customer can check in online using the internet before arriving at the airport. Also, her purchase of bigger and more reliable aircrafts to improve services rendered to customers. This strategy is adopted are not saturated and bored with services offered. Some examples are:

Adoption of latest technologies, such as internet services

Provide other complimentary services such hotels and car rentals

5.3 Market Development: This involves the marketing of a new product range to a new market. They are same products but marketed to a newt audience to increase market share. Increasing its number of destinations, for instance non stop flights to China and India based on the level of economic activities in the region

5.4 Diversification: This is where the company markets new products to a completely new market. This could be related or unrelated, for BA, it will be a related diversification. Related diversification is new products introduced to a new market from in the same industry. BA introduced its holiday packages which fall in the hospitality and tourism industry. Examples can be:

Venturing into other transport business such as rail

Supply chain migration

The GE’s matrix is used to formulate its growth strategies and opportunities for growth in new markets and existing markets;

Competitive Strength

Market Attractiveness

High

Medium

Low

High

Asia Pacific

BA=1.1%

North America

BA=1.7%

Latin America

BA=1.9%

Medium

Eastern Europe

BA=2.2%

Western Europe

BA=6.9%

Middle East and Africa

BA=2.3%

Low

Australasia

BA=4.0%

Size of Circle = size of market (British Airways on 2006 data)

Width of Circle = CAGR Forecast Growth (2006 – 2011)

Source: Euromonitor (2008)

If BA is targeted at a market development strategy, location of competing airlines will be a prime market place for pursuit for profitability due to high growth of economic activities.

There some factors that may be considered by BA to attract market to its airline can be;

Pricing Trends

Market size

Segmentation

And to gain competitive strengths;

Cost (compared with competitors)

Customer loyalty

Market share

Acceptance of latest technologies

Strengths of assets and financial base.

6.0 DETERMINATION OF COMPETITIVE ADVANTAGE

Creating sustainable competitive advantage is essential for all companies. This entails placing attributes over competitors with available or yet acquired resources. This attributes may include highly trained key personnel human resources and embracing new technologies.

BA possess two major competitive advantages over competitors, they are;

Strategic Alliances with other airlines

Direct non stop flights to London and worldwide.

Served by its alliance with 13 other airlines like American Airline, Cathay pacific, BA is able to fly to over 550 destinations in the world.

BA also has the advantage of providing the fastest flights to London because of its non stop service. This may save customers time the hassle of changing flights.

In order to uphold its sustainable advantage, BA must carry out its value chain activities in way it will be difficult for competitors to replicate.

Other sustainable advantages that BA possesses are classified under resource based and competencies.

Resources:

BA offers additional services like the BA Holidays

They have Sole access to London Heathrow’s terminal 5 (BBC News, 2008).

It has a reputable global brand image because of its long existence.

They have a large customer database because customers perceive BA as an official London airline.

Competencies:

They were the 1st London airline to be recognized as a training center, qualifying all cabin crew with NVQ Level 2 (British Airways, 2008).

They have the ability to fly and manage passengers safely with is plan not to fly more than 64 passengers and a flight attendant to every 12 (British Airways, 2008).

BA has large economies of scale with suppliers.

7.0 MARKETING MIX

7.1 Product/Branding Strategies: A brand is referred to an offer in a market aimed at satisfying needs and wants. It is a major tool in analyzing the marketing mix because without it, there will be no place, no price and no promotion referred to as anything a firm can do to influence it’s target to demand for its product (Kotler and Armstrong, 2004).

Therefore, product strategy is vital to the success of every organization, so strategies need to be implored and managed carefully in order to achieve success. Some products of BA include, flying to different destinations across the world, long years of experience in the industry, flight services, different flying class (economy class, business class), security, speed and support facilities.

By adding value to customers, we look at Kotler’s five-level product theory with each level adding more value to the customer.

Firstly, one major benefit customers look at is why they really buy the BA tickets? And this is referred to as the core benefit. The customers buy BA tickets based on the need to fly to different destinations, either for business or pleasure.

The other level is the basic product itself. Customers book seats on scheduled flights to destination, with BA flying to over 98 cities in the world being one of the biggest airlines in the world.

Another is the expected product. This is the situation were buyers expect some certain conditions when tickets are purchased. For example, customers expect allocated seats, meals, drinks and on board entertainment.

The fourth is the extra services offered by BA such as the difference in on board class for different customer needs.

Lastly is the potential product. It is the augmentation and transformations BA products might undergo in the future.

Another major element in satisfying the needs and wants of customers is Branding. Branding is a major tool in the product strategy as a trade name used for product or services in order to distinguish from competitors (The American Marketing Association). BA’s brand trade is safeness, assurance, luxury and comfortableness which they have built over the years. The symbol of branding conveys six different meanings (Kotler P., 2002):

Attributes

Benefits

Values

User

Personality

Culture: It is an airline based in UK and represents the British culture of organization, reliability and kindness.

User: The brand speaks for its kind of consumers. For example, students will ordinarily not fly with BA, though they a class that can suit them.

7.2 PRICING STRATEGY: It is the only part of the marketing mix that generates revenue while product, promotion and place are all about marketing cost. Price is when a customer exchanges his/her money or donation in return for a satisfaction or utility (S. Dibb and L. Simkim, 2001). A company must set price in relation to its quality and service perceived by the customer.

BA has set its pricing strategies customers can select from in a range services they want based on choice and satisfaction.

For the different types of customers, BA has set different prices considering customers different needs in categories of executive class, middle class and the economy class. The pricing strategy is further based on:

Premium Strategy (High-Quality/High-Price)

Medium-Value Strategy (Medium-Quality/Medium-Price)

Economy Strategy (Medium-Quality/Low-Price)

The above strategies are used by BA to satisfy its different type of segment/customers giving them the opportunity to choose price in relation to service they get. This strategy also builds a position amongst competitors in the airline industry.

However under the competitive market, other airlines are getting more market share based on low cost. This has pushed BA to review its pricing policy considering new competitors. Some attributes of its policy are:

Select the price objective: BA has to change its pricing objective from maximizing profit to market share maximization

Determine the demand: Price will lead to different level of demand and therefore will have a different impact on the company’s marketing objective.

Cost Estimate: Estimating cost with quality of service they provide.

Pricing Method: Setting prices on perceived values.

Promotional Pricing: Promotional pricing strategies to invite potential customers and also retain old ones.

7.3 VALUE CHAIN STRATEGY: It is referred to as a chain of activities in a firm operating in a specific industry to gain sustainable competitive advantage (Porter, 1985). Such activities may refer to purchasing activities, manufacturing the products, distribution and marketing of the company’s product and activities (Lynch, 2003). In order to conduct a value chain assessment, the company is split into primary and support activities. The primary activities are activities related to production while the support activities are factors that make up the successful run of the company.

The Primary activities Support activities are further discussed in details discussed below relating with the operations of BA.

Primary Activities: According to Porter 1985, the primary activities are;

Inbound Logistics: They concerned with receiving materials from suppliers, storing them and controlled within the firm. In BA, these activities may include stock control, high quality training by city and guilds (British Airways, 2008) and ongoing relationship with supplier’s e.g. Gate Gourmet.

Operations: These are activities related to the production products and services. Some operations in BA are increased baggage security and quick check in services.

Outbound Logistics: This entails the distribution of final products to BA customers. This involves the large number of BA airport destinations which allows passenger reach all preferred destination

Marketing and Sales: The marketing and sales department of BA allows for a large budget to be spent on marketing communications thereby creating awareness to stakeholders.

Post Sale Service: The post sale service is used to communicate pre-sale or after sale services. British Airways uses this to update communications on other services and rewards customers with its loyalty club cards.

Support Activities: These activities include:

Procurement: This activity is responsible for acquiring materials necessary for the company’s operations. Due to BA’s historical relationship and alliances, it has increased its economies of scale leveraging suppliers where competitors have failed.

Technology Development: This is concerned with accepting new innovations to maximize its competitive advantage. Having added value to this category, BA employed innovative strategies over smaller companies.

Human Resource Management: BA invested in hugely in customer service training in 2007 thereby attracting the best of employees.

The value chain activities are meant to add value to BA, but faces some inefficiency that may reduce the amount of value added. For primary activities, issues like; lack of innovation in marketing communications and solidarity of BA employees and supplier employees have led to industrial actions by staff. Same for support activities in human resource management and failing to recognize new technologies which will make customers use other airlines.

7.4 PROMOTION STRATEGIES:

These consist of implored strategies (Promotional Mix) designed to influence a target audience. BA promotional strategies consist of; direct marketing, advertising, sales promotion, internet marketing, personal selling, public relations, sponsorships.

7.4.1 Advertising: it is a non personal paid form of advertisement on all forms of available communication media like TV, radio and prints. These strategies are used to communicate a brands product and services.

Picture A below is a print ad campaign for the new terminal opened by BA for its growing number of customers while picture B campaigns about a promotional activity going on.

Picture A Picture B

7.4.2 Public Relations: This involves developing positive relationships with customers through the media public and also a way of managing negative attentions. It involves publishing of press releases and articles on prints. With the action strike by cabin crew in March 2010, press releases have been put out to curtail a number of damage the industrial action may have caused.

7.4.3 Product Selling: Personal selling is the one-on-one product selling service. It involves the recruitment of temporal staff in some cases to approach potential customers and talk to them about services and products BA offers.

7.4.4 Direct Mail: This is a promotional strategy used to approach customers. BA spends a huge sum of amount to purchasing data base of numbers of a target segment and they send messages to these numbers marketing their products. Already existing customers receive such mails as well having filled in information in some forms while booking for tickets.

7.4.5 Direct Marketing: BA makes heavy use of promotional materials given out to customers or passed on to them by intermediaries. A major strategy in this function is given by in flight magazines in airline and brochures given out either by travel agencies or tourism agencies.

7.4.6 Internet Marketing: There has been increased rate of promotion on the internet as the world grows into a global village. The use of internet is seemed to be very viral and cheap to establish. BA, integrates banner ad’s that appear on related websites about its company.

8.0 CONCLUSION AND RECOMMENDATION

Based on the external and internal analysis, a number of strategic options were proposed and based on the current industry activities I have chosen a strategies discussed to consolidate BA’s position as market leader.

Due to its size and scope of BA’s operations, this report is focused on scheduled passenger flights. We would recommend further strategic analysis to implement the identified strategies.

Also, lack of primary research and inadequate company information limited my in findings and recommended strategy, however I believe that if the general direction of our suggested strategic intent is followed it will lead to the success of BA in the market.