British Airways Strategic Review

Here’s the sample assignment of strategic review of British Airways 

Introduction

In the current business environment, the role of strategy planning is important. It can be defined as a process that allows the company to make the effective coordination between the various organizational resources. Strategic planning is a part of the strategic management that is one of the effective methods that allows the company to minimize or mitigate threat and risk and develop and implement plan and strategic in order to achieve the competitive advantage (Clark, 2014). This report analyses the strategic planning of British Airways by analyzing the internal and external environment of the company. In the context of this, this report contains the PEST and Porter’s five force analysis. Further, this report also conduct the value chain analysis and Cultural Web or Handy’s organizational cultures to indentify the company activities that provides the competitive advantage and organizational internal environment. This report also conducts the Stakeholder mapping and matrix, SWOT and TOWS to indentify the stakeholder and strengths, weakness, opportunity and threats.            

Company Background

British Airways

British Airways is one of the largest Airlines in the UK after the Easy Jet. The company was established in March 1974 and its parent company is international airline group. The company is headquarters in the waterside, harmondsworth in UK. In the financial year 2016, the market revenue of the company was recorded £11,443 million and its net income was £1,473 million (British Airways PLC, 2017).     

Purpose of British Airways

The main purpose of British Airways is to offer best quality of services to customer in order to target them to large extent. A British airway is most powerful and leading airline business that provides their flight service in more than 300 countries (British Airways PLC, 2017). The vision of British Airways is become world’s best and most responsible airline. At the same time, the mission of British Airways is to develop its own image, goodwill and reputation by providing customers with wishful services. In simple words, British Airways mission is to make ensure that customer feel satisfied and confident with their services.

The objectives of this airway are to meet five competencies that help in achieving organizational goals efficiently. The five competencies are customers, colleagues, excellence, partners and performance that help organization to sustain in competitive market for long period. Moreover, airway also focuses on developing a strategy that provide best customer services like providing luxury and premium services so that customer feel satisfied.    

External Environmental Analysis

Macro Environment

Marco external environment of the UK airline industry can be judged on the basis of PEST analysis as below:

PEST

Figure 1: PEST Analysis

Political

·       High certainty and stability in the UK politics

·       Range of trade agreements

·       BREXIT impact as trade barriers

·       BREXIT impact as new trade agreements

 

Economic

·       Improvement in consumer and business confidence

·       Economic uncertainty after BREXIT

·       Increase in disposable personal income

·       Low oil prices

Social

·       Business class population

·       Increasing tourism (37.6 million in 2016 with 14% increase)

·       Demand for travel tends to increase

 

Technological

·       Emergence of advanced technologies

·       Use of internet to book flight tickets

·       Technological advancements for increasing facilities like video conferencing, etc. in airline

·       Cyber attack

·       High investment in establishment of new technologies and training

 

 

[Source: Hill, 2014]

Political: There is high stability and certainty in the UK politics that may be effective for the airline businesses to expand their business due to favorable trade policies. Apart from this, recent BREXIT may also cause both opportunities and threats for the airline business. The country may make new trade agreements in European zone and other countries across the world that may open new doors for the airline industry (Clark, 2014). But, the country may face trade barriers from Eurozone after BREXIT that may affect the business of airline companies in the UK.

Economical: However, people of the UK are expecting better results after BREXIT that may be fruitful for the UK businesses. But, uncertainty in the UK market due to BREXIT may affect the airline business due to less interest of investors. Apart from this, increasing disposable income of the UK people may increase the demand of airline services in the UK due to positive influence on consumer spending on such services. In addition, decline in fuel prices may also positively influence the profitability of the airline firms due to reduction in the operational costs 9Peppard and Ward, 2016).

Social: The UK is known for its corporate aspects as there is high number of business class people in the country. They travel inside and outside the country via airline. At the same time, increasing tourism may also positively impact the demand for travel in the country.

Technological: The emergence of advanced technologies may create better business opportunities for the airline industry as the use of internet facilities may access large number of customers and create the best travelling experience for the customers (Graham and Kaye, 2015). But, it may also require high investment on establishments and training requirements.

Micro Environment

Porter’s Five Forces

Porter’s 5 forces framework is a valuable framework for analyzing the aspects related to industry and competition in the market:

Figure 2: Porter 5 force analysis

Porter 5 forces  
Bargaining power of suppliers High
Bargaining power of buyers Moderate
Threats of new entrants Moderate
Threats of substitutes Low
Industry rivalry High

 

Bargaining power of suppliers: High

There is high dependency on airports, pilots and engineers that increase the bargaining power of the suppliers. Apart from this, there is less number of aircraft manufacturers in the UK market that also increase the power of suppliers affecting the business of British Airways (Wheelen and Hunger, 2017).  

Bargaining power of buyers: Moderate

There is less differentiation in airline services that reduces the bargaining power of the customers. But at the same time, price sensitivity is also a significant factor that enhances the bargaining power of the customers while selecting airlines. In addition, information regarding several offers is provided by different airlines as switching costs of the customers is low (Iverson, 2013).

Threats of substitutes: Low

Threats of substitutes are low in the UK airline industry because there are no direct substitutes for long distance travelled airlines. But, growing trend of video conferencing among business customers may cause threat for the airlines by declining the demand of business tours (Rothaermel, 2015).

Threats of new entrants: Moderate

There are moderate threats of new entrants in the UK airline industry. Growing entrepreneurship demand in airlines is a significant factor that causes threats of new entrants for the airline. But at the same time, complicate requirements in labor and capital and legal aspects may reduce the threats of new entrants (Low, 2012).

Industry Rivalry: High

There is high rivalry in the UK airline industry as several firms such as Virgin, British Airways, Easy jet, etc. are competing with each other based on price and quality of services. Apart from this, product differentiation is low as it is so difficult for the airliner service providers to offer the airline service in differentiated way. In addition, high fixed cost conditions and high exit barriers also make this industry highly competitive resulting in declining profits and market share (Peteraf et al., 2014).

Internal Environment Analysis

Internal environmental analysis is quite important for analyzing the internal environment of the firm to evaluate the competitiveness of the firm in the industry.

Competences and Resource analysis

As per the resource based view, it is effective for the firms to have adequate resources and capabilities as they play an important role in determining profitability and competitiveness of the firm in the industry. Resource based view framework can be a useful tool to determine the resources and capabilities of the firm and resulted competencies in the market (Mack, 2014). For British Airways, this framework can be presented as below:

 

 

Threshold capabilities Threshold Resources

·       Next generation aircraft

·       more than 1,000 destinations to over 150 countries

·       Additional services

Threshold Competencies

·       Training on diversity, ground school, flight simulators and cabin safety

·       Economies of scale

·       High safety

Competitive advantage Unique resources

·       Refreshed interior of 18 Boeing 747 aircraft

·       The First Lounge at Heathrow Terminal 5 and lounges at London Gatwick and Dubai.

·       updated and renovated premium customer lounges at key airports

·       strong brand image

Core competencies

·       The quick service as check in

·       Use of advance technology

·       subsidiary’s aircraft Never goes 64 traveler in a flight

·       1 assistance on the 12 passenger  

 

 

 

 

 

(Source: British Airways PLC, 2017)

SWOT

Strengths

  • More than 90 years experience in aviation industry
  • Strong brand image
  • Backed up by UK Government
  • Highly tech-savvy company (Lange et al., 2015)

Weaknesses

  • Under penetration in the worldwide market
  • Large unionized workforce

Opportunities

  • Expanding the market
  • High entry barrier

Threats

  • Change in government regulations
  • Fierce competition
  • Alternative transportation (Ethiraj et al., 2016)

Value Chain

The value chain analysis is a systematic approach that is able to analyze the internal activities of the company that plays important role in the making the value. Under the value chain analysis, activities of the firm are evaluated in the two types such as primary and supportive activities (Long, 2015).. The findings of the value chain analysis are below:
British Airways Strategic Review

Primary activity

Inbound logistic

In the context of the inbound logistic activity, it is found that company has a strong relationship with its supplier that makes enables the company to take the advantage of the efficient soppier service.

Outbound logistic

Due to company is dealing in the service industry with taking a big customer base, it has to maintain the large customer base in the 80 countries. In the outbound service company focuses on the efficiency that helps to minimize the cost (Mills, 2017).

Operation

The operation activity of BA depicts that comply provides its service on more than 400 airports. It shows the company has wide business area that provides the company sufficient sales. The company gets the competitive advantage through the providing security, luggage and quick check in service. 

Marketing and sales

The marketing strategy of the company is aimed to communicate the message directly within the audience. The company directly target is customer by using the different advertising channels. The marketing strategy of the company contains the different attributes such as the reliability, safety and convenience (Marshall and Piper, 2013).       

Service

The post sale service of the company is also effective in order to achieve the competitive advantage. By the help of the technology, BA developed its service very flexible for the clients that enable them to make book, cancel, equerry and refund such service by the phone.      

Supportive activities

Firm Infrastructure

The organizational structure of the company is hierarchy that enables the BA to manage the all essential activities by the hand of the skilled employees. Under the hierarchy organizational structure, BA uses a multitude of specialist knowledge that helps the company to generates competitive advantage (Mello, 2014).

Human resources

The company hires the skilled and qualified employees by following the special procedure where company evaluates the skills of the employees. At the same time, company also provides the sufficient training them to improve and develops the skills. It is effective to achieve profit over the competitors.    

Technology Development

In the context of the technology, it is found that company contains all the advance technologies in the business operation. It improves the efficiency and provides the quick response to the customers.

Procurement

BA is a service provider from the last long time and it is maintained the good relationship with its supplier by the economics of scale. It enables the company to bring the efficiency in the business operation where mostly companies become fail.   

Stakeholder mapping and matrix

The stakeholder analysis is critical processes in order achieve the aim and objective of the project. Stakeholders are those persons which have interest in the organization decision. It is because stakeholders are affected by the organizational decision. In this, the main stakeholders of the company are its employees, customers, shareholder, government, board of member, competitors and managers (Sleutjes, 2012). These stakeholders can be decided into their interest and power in the organization. According to interest and power, the below are some categories;   

  High Power Low Power
High interest ·       Government/Regulators

·       Shareholders

·       Rivals

·       Workers

 

·       Customers

 

 

Low interest ·       Financial Associations

·       Suppliers

·       Charity Organizations

·       Creditors

       

The above tables shows that stakeholder of the company are divided on four types on the basis of the level and power. In this, it is identified that the high power and interties group, BA includes the government/ Regulators, shareholders, rivals and workers. These stakeholders have high interest in t organizational decision and have high power to affect the organizational decision. At the same time, it is also found that financial associations and supplier come in the low interest and high power group (Sucky, et. al., 2015).  In this, these stakeholders of BA have power to influence the decision but they don’t take much interest. In the same concern of this, customers are also essential stakeholder of BA business process. Each decision of the company directly and indirectly affects the interest of the customer. But, customers have not much power to influence the organizational decision. The customer group comes in the group that has low power but has high interest in the business. In the same concern of this, the last stakeholder group is related to low power and low interest. In the concern of BA, charity Organizations and Creditors come under this group. These stakeholders have low interest in the business process and low power to influence the organization (Egan & Thomas, 2010).     

Cultural Web or Handy’s organizational cultures

The organization defines the overall organization activities and its features. Each organizational culture has some characteristics and features that are known as the value of and beliefs that are developed on the business process of the organization. The organizational culture determines the ways employees in which employees in the organization maintain their relationship. Charles Handy’s is known as the specialist in the organizational culture that divided the organizational culture in the four types (Ferrell & Hartline, 2010). In this first is power, in this kind of the organizational culture power of the decision making has in the hand of the few employees and remaining employees follow the decision. Another organizational culture is task culture, in this kind of the organizational culture, the formulation of the organization structure is based on achieving the target and objectives. In this, everyone have objective to achieve the target. Next is person culture where employees and organizations both believe that employees are more important for the organization. The last one culture is role organizational culture. In this kind of the organizational culture, in this kind of the organization culture, every employee is allocated a different task according to its specialization (Fifield, 2012).

In the context of BA, it is found that company follows the person organizational culture that enables the company to understand the need of the employees. Under this organizational culture, a company provides the flexibility to the employees. It enables the employees to feel that they are important assets for the organizational. Employees in BA are dedicated to improve their skills in order to enhance the organizational performance.

TOWS ANALYSIS

TOWS ANALYSIS
Internal factors
 

 

 

 

 

 

 

 

 

 

External factors

Strengths

·       More than 90 years experience in aviation industry

·       Strong brand image

·       Backed up by UK Government

·       Highly tech-savvy company

 

Weaknesses

·       Under penetration in the worldwide market

·       Large unionised workforce

 

Opportunities

·       Expanding the market

·       High entry barrier

·       The experience of the company can provide benefit in the business explanation

·       Strong brand image can also help to get the market share

 

·       Using the different explanation strategy company can expand its business

 

Threats

·       Change in government regulations

·       Fierce competition

·       Alternative transportation

·       It is backed by the UK government that is why it can operate effectively by ignoring the change in govt regulation

·       High tech savvy and string brand image can reduce the negative impact of the alternative transportation

·       Under the changing government regulation, it can develop strategy to start new business 

 

Conclusion  

From the above discussion, it can be concluded that the strategic planning is a significant process that allows the company to identify that internal strength and external opportunity in order achieve the competitive advantage. At the same time, it also enables the company to identify the organization weakness and external to mitigate the risk in order to expand the business. 

References

 

British Airways PLC (2017) Online available at: https://www.britannica.com/topic/British-Airways-PLC

British Airways PLC (2017) Online available at: https://www.britishairways.com/en-gb/information/about-ba 

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