Evaluation of Strategies of British Airways

Question :

The term strategic management is evaluated as planning of business activity in order to achieve the set business goals & objective. This is valuable factor for business for achieving competitive business advantage in relation to their competitors. The below mentioned questions are answered in relation to the concept of strategic management

  • Evaluation of strategies of British Airways that have been used by them for developing their competitive position
  • Determine competitive strategy used by British Airways for developing their positions composing of limitations and advantages in the current business environment.
Answer :
Organization Selected : British Airways

INTRODUCTION

Strategic management is defined as the process which focuses on developing certain strategies of an organisation so that goals and objective are met. Formulation of strategy refers to understanding and evaluating all business operations and its functions in better manner. Strategic management is the development and implementation of main initiatives which has been taken by organisations' higher authorities which is based on consideration of resources (David, 2011). This will also provide accurate direction to the firm which clearly specify the company goals, objectives, plans and policies for achieving desired goals and objectives. Along with this, strategic management are associated with various concept of making strategic operations and conceiving strategy for plan. The report is based on British Airways which is largest airline industry which is situated in United kingdom. The British airways are established by British government which manages the two nationalised airline associations such as British Overseas Airways and British European Airways. The main motive of this project is to focus on corporate objectives, external and internal analysis of the firm. The main target of the British Airways is to cut down the cost and highlighting these with the help of best service offerings which is the major purpose of this airline company.

MAIN BODY

The Company – British Airways

British Airways is one of the leading global premium airlines and is largest international carrier operating in United Kingdom. It is a part of International Airlines Group. Its home base is situated in London Heathrow which is renowned as busiest international airport in the world. This conveyance provider is known to cover more than 200 destinations and in 75 countries all round the world. The frequency of aircraft of British Airways takes off from somewhere in every 90 seconds in the world and has a fleet of more than 280 aircraft.

According to Graham Bolton this airline has the capacity to carry 145,000 customers on daily basis and 45 millions customers in a year. They are employing large number employees, about 45,000 in which 16,500 employees are working as cabin crew and 3,900 are pilots. They offers great job opportunities to eligible and suitable candidates as they have more than 145 places for apprentices every year. On 25th August, 2019, British Airways will celebrate their 100th Anniversary (Hollenbeck, Noe and Gerhart, 2018) . Their heritage collection is an extensive document which records the formation, development and operations of British Airways and their predecessor companies as well as their memorabilia and artefacts. They have preserved a large collection of around 130 uniform form 1930s till recent times and also have collection of aircraft models and pictures.

PESTEL Analysis

It is an effective tool to analyse different factors such as Political, economical, environmental, social, technological, legal factors, etc. Following is the PESTEL Analysis of British Airways:

Political factor: British Airways is one of the major airlines that flies across the world at several destinations. Therefore, it is necessary for them to have political stability and safety perception by the population as these two elements have a major impact on the company. For example; stability and safety attract the customers of foreign market which aids in maximizing the revenue of an association. According to Clark, it is identified that currently airline industry is trying to control terror attack by implementing extra security at various places. this has caused political instability and imbalance. This has greatly impacted confidence of customers on airlines due to these terror attacks in past 10 years. This has lead to strictness in safety laws in United Kingdom and European skies for airlines.

Economic factors: There are several factors such as inflation, currency exchange rates, overall economic climate of UK has direct impact on the performance of British Airways. Another critical factor that has significant impact is costs of fuel. British Airways use millions tonnes of jet fuel every year . However, previously major global downturn was affected British Airways in following ways:

  • It has increased the prices of oil and other services.
  • UK faced exceptional financial crises.

Other factor impacting airlines business and consumer's confidence are rising unemployment, falling of house prices, capital markets, etc.

Social factors: People who travel, whether they are business passengers or an individual passengers mostly prefer trusted airlines for their smooth journey. But recession in the market and emergence of competition has compelled the passengers to become concerned about airline prices (Moutinho, 2011) . They prefer airlines which provide more value to their money and high quality services at low costs. With this, they try different airlines to get better value against their money. They may compare prices on internet before booking their tickets .

Technological factors: Customers uses internet and mobiles to check prices of different airlines and bookings of tickets. It is necessary for British Airways to maintain their websites an continuously update them with recent prices and offers for passengers so that they can be persuaded to avail the services. BA have used latest and recent technologies in order to increase engineering and service quality of the flights so that they can influence demands. To satisfy customer needs, organisation must understand external and internal situation which includes customers, market and their capabilities so that sustainability of business could be achieved.

Environmental factors: British Airways have to face climatic changes and trying to cope up with that changes in proper manner. Government has made certain policies in order to limit the growth of radiation and emissions which are to be adhered by this organisation so that reputation of this business could be enhanced. With all other airlines, British Airways has to follow ranges of national, international and local environmental regulations.

Legal factors: The major impact is caused by trade unions on British Airways. They have suffered many strikes and are fully awarded about implications that can be caused by trade unions . Basically, legal laws are enforce selected firm to impose major norms at workplace for minimizing the possibilities of wrongful activities (Hittand Duane Ireland, 2017).

PORTERS FIVE FORCES

By conducting Porter's five force analysis, company can determine its position in market and in airline industry. Following is brief description of different aspects of this model8:

Threat of new entrants: There are various entry barriers in airline industry and one of the major barrier is huge investment. They may also face challenge to enter due to increasing number of affordable long haul carriers. Other threat is the similarity of airline industries and little product differentiation. It become difficult for them to build competitive edge in the airline industry. Maintenance of costs and unavailability of distribution channel are other barriers which are to be countered by a new entrant in this industry. Therefore, it can be identified that there no threat of new entrants in this industry.

Threat of substitute: This threat is not significant as other modes of transportation will not be able to replace airways due to its speed and comfort offered. Although there are other modes of transportations for air travel such as vehicle, train, buses, sea transports, air travel re,mains the fastest and most convenient options for customers. From this point, it is clear that substitution to air planes is not significant. They have moderate level of threat of substitutes for BA.

Bargaining power of buyers: Buyers have high bargaining power as they have multiple options when it comes to choosing airlines at low costs and are providing quality services at minimum prices. There are any airlines who provide their services at reasonable prices and it increase the bargaining power of buyers. Switching cost to other airline is zero, unless customers are very much loyal to British Airways and are highly satisfied with their services (Ward, 2012) . So bargaining power of buyer is high in case of British Airways.

Bargaining power of supplier: Suppliers of BA supplies air plane manufacturers, fuel, spare parts as well as engineers. There are less suppliers in air plane industry especially in the case of British Airways because they can not function without an aeroplane. They also cannot fly their planes without fuel or crew (Hittand Duane Ireland, 2017). So it is necessary for them to develop good and long term relations with their suppliers. So bargaining power of supplier is high in case of BA.

Industry rivalry: British Airway has to face challenges and intense competition at local and international level. Monopolistic competition become more intensifies at international level on different grounds such as price, convenience and services they provide. So it has become their necessity to maintain their quality of services in order to maintain their place in industry as well as their market value (PESTEL Analysis of British Ariways, 2018) .

SWOT Analysis

STRENGTHS:

  • British Airways has strong brand image in airlines industries and has large number of loyal customers.
  • They have started their own subsidiaries under the name of Open Skies, they offer only business class to passengers between US and major European countries.
  • They have the largest air plane base at London Heathrow which have huge capacity for air planes.
  • They have merged with Iberia in order to become second largest airline company after Air France of Europe.
  • They have excellent brand presence in all round the world which assures that stability in income is achieved.
  • They have fleet size of over 260 aircraft which is unmatchable when compared with rival firms.
  • Company is having their excellent marketing and advertising across the world. They have over 170 destinations in more than 70 countries at international marketplace.
  • They serve approximately about 40 million customers in a year alone in United Kingdom.

WEAKNESSES:

  • Tough competition form other succeeding airline industry.
  • Intense competition leads to limited market share for British Airways.
  • Downturn in economies of US and UK has greatly impacted BA and they have become more vulnerable to financial instability (SWOT analysis of British Airways, 2018) .

THREAT:

  • Increase in fuel costs can reduce profit margins.
  • Rise in labour costs.
  • Enhancement of European market is influencing the market share of British Airways.
  • Tensions in employee can lead to service disruptions.

OPPORTUNITIES:

  • They can integrate with India's aviation policy.
  • They can concentrate more on marketing and consumer centrality.
  • They can expand their operations in newer territories and countries because demand of consumer are get maximized in current days.

VRIO and Strategic capabilities

VRIO Framework is an effective tool which is used to analyse internal resources and capabilities of organisation in order to find out if they can be a source of sustained competitive advantage. VRIO is basically an acronym for four question framework of Value, Rarity, Imitability and Organisation. It is mentioned in brief below:

  • Value: This question asks if a resource adds value by enabling a firm in order to exploit opportunities or defend themselves against threats. Resources are necessary for organisation in order to increase the perceived customer value (British Airways PESTEL Analysis, 2018) . This can be done by decreasing the price of product and by increasing differentiation. If any resource is unable to meet this, ultimately leads to competitive disadvantage.
  • Rare: Resources that can be acquired by one or few organizations are considered as rare. Rare and valuable resources provide company with temporary competitive advantage such as; advantage through loyalty sessions, one world alliance and so on.
  • Costly to Imitate: A resource become costly to imitate if other organisation does not have it and are unable to imitate, but or substitute it to reasonable price. Imitation can occur two ways, that is by directly imitating (duplicating) the resources or substituting the comparable product or service. If any organisation is having resources that is rare and costly, then they can achieve sustained competitive advantage. For example; loyalty programmes can easily support an association in maintaining their long term relations.
  • Organisation: The resources do not confer itself any advantage for a company if it is not organised to capture the value form them. It is necessary for firm to organise its management systems, processes, policies, organisational structure and culture to be able to fully realize the potential of its rare, costly and valuable in order to imitate resources and capabilities (Porter's 5 forces of British Airways, 2018) .

VRIO ANALYSIS

Resources

Value

Rareness

Imitability

Organisation to exploit

Physical resources

Yes

Yes

Yes

Airlines industry

Runway Slots

Yes

No

Yes

Yes

Geographical Locations

Yes

Yes

Yes

Yes

Digital Platform

Yes

No

Yes

Yes

Fleet

Yes

No

No

Yes

Human resources and Capabilities

Yes

No

Yes

Yes

Management

Yes

Yes

No

No

Staff

Yes

No

Yes

No

Organisation resources and Capabilities

Yes

Yes

Yes

Yes

Collective agreements

Yes

No

No

No

History

Yes

Yes

Yes

Yes

Partnership

No

No

No

No

Financial Resources

Yes

Yes

Yes

Yes

Public Funding

Yes

No

Yes

No

General Financial States

Yes

No

Yes

No

Henceforth, this can state through observing the above discussed table that company's financial and human resource and capabilities are valuable but that rely on the consequences whether these are rear or not. On the grounds of these, its imitability is determined in relation to British Airways. This can be state that there are numerous practices which are imitable and several are not. Some of the technologies are launched or initiated by British Airways that makes them unique but some are being adopted and delivered by each organisation to function their business operations adequately.

Strategic capabilities: It is capability and ability of a business to successfully employ competitive strategy that help them to survive and increase their value over time. For example; aids an association in attaining maximum sales volume by grabbing market opportunities.

More to read: Business Environment

SAFE ANALYSIS

SAFE framework can be used for evaluating and measuring correct future strategies of British Airways. This analysis seen the firm can used for adopting right strategy which help them in gaining higher profitability. SAFE are described as under:

  • Suitable – In this, market penetration strategy is best suitable for British airways company so this will help company for entering into market along with their services or products.
  • Acceptable – In this, market penetration strategy is acceptable for British airways which is highly able for adopt such progressive and modern applications for rising their production capacity.
  • Feasible – Market penetration is the feasible strategy which can be used by British airways for future time period. The firm has high range of scope for enter in the market zone to new nation. For example; customer choice or preferences are fluctuating due to changes in various other factors like norms of government are modified as per environmental demand.
  • Enduring – Market penetration is enduring therefore British airways require to research for new product development and making new target market. It is the cost influential strategy and company need to invest huge amount of funds in this strategy for gaining competitive advantage (A Marketing Analysis Of British Airways Marketing Essay, 2018).

STRATEGIC OPTIONS

Strategic options are alternative action oriented responses to the external situations that is faced by organisation. They take advantage of facts and actors, trends, opportunities and threats related to outside world. This tools helps in identifying and making a preliminary screening of alternative strategic options or perceptive. Apart from all the above various strategies are identified which helps an organization in attaining their company objectives such as; product development, VRIO model and so on. Every scheme is having their own way of handling situation as well as outcomes are also differ from each other.

KEY FINDING

By going through from above mentioned report there are various things which has founded and analysed. This can be identified that advanced tools and techniques help in making appropriate decisions of British airways. Such methods or tools are PESTLE and SWOT analysis that will assist in making accurate decision regarding company higher growth and profitability. Another is porter five force model used by firm which help them in examining competition of business against various other organisation. Also find out strategic options that are used for analysing issues and problems which occur by th

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