Strategic and SWOT Analysis of British Airways
Strategic planning is the process that an organization undertakes to ascertain its mission and way forward. Strategic planning helps an organization provide a direction to implement and achieve its objectives both in the short and the long run. It is nevertheless very significant to comprehend and distinguish that every plan that is chalked out by the organization cannot be termed as strategic. For that reason it is very important that the strategic intent of an organization is entrenched on the actions and policies that will have a deep effect on future positively in an organization. Seeking out new markets customer attraction or the expansion of business operations are some pointers which an organization look forward to strategically. (Schneider and De Meyer, 1991)
Mintzberg and Waters (1985) assert that in order to realize a strategy the initial phase of strategy formulation should be error free, otherwise the strategy would not be executed in a befitting manner. Therefore the strategy development process should follow a pre-designed path to achieve the objective. This can be illustrated in the following figure.
As a result the strategy can be regarded as the behavior of a business. Like every behavior, a strategy is also influenced by factors that are interior and also exterior. The internal values of any organization are the controllable factors and the culture and capabilities of an organization determine the strategic course. In this era of globalization the resources which a particular organization have is not the only aspects influencing an organization strategy, it is also strongly influenced by external factors which is a significant factor in molding an organizations services and products and its eventual acceptance by the consumers. (Bourgeois, 1985) said that the main theory in strategic management is that a match amid environmental conditions and organizational capabilities and resources is of paramount importance to an organizations performance, and that a strategist’s job is to find or create this match. The types of plans are long, medium and short term plans to make them work and effectively put into practice the organizational strategies Mintzberg et al (2005). These different plans are then used to line up all organizational activities for a positive way forward. (De wit et al, 2004). Another important element of strategic planning is to position the business in a way that it thrives for a longer period of time. The Strategic Planning Model is as follows:
A brilliant strategic plan that is conceived in a realistic way might be ineffective for the reason that of ineffective implementation. This proper implementation relates to the internal capabilities of an organization that takes account of the resources, the workforce and other technical support to maximize the effectiveness of a strategy. In general it takes several years for an organization to make optimum use and benefit from a strategy. (Child, 1972). The reason being that economic conditions or the poor market conditions in a particular industry have a strong bearing on the success of a strategic approach.
The organization chosen to study in the light of the resource based theory and its evaluation with regards to its strategic capabilities is ‘British Airways’.
A brief intro of British Airways (BA), it is the flag carrier airline of the United Kingdom& the largest airline in the UK based on fleet size, international flights and international destinations. British Airways was considered the largest UK airline by passenger numbers from its creation in 1974 until 2008, when it was displaced by low-cost rival Easy Jet. (History of British Airways, 2011). It is in the process of merging with Spanish airline Iberia. It is a member of the one world alliance together with Iberia, American Airlines and others.
The strategic planning in the airline industry can range from the implementation of lean management programs to empowering employee to make the customer service better. In addition, the airline industry has witnessed the mergers and strategic alliances between airlines to strengthen their position in the market. The modern marketplace has also emphasized on the airlines being responsible to the community. This has surfaced up as a feature that can facilitate the organization to expand the competitive advantage.
The goal of British Airways is to present better-quality service to its customers, stakeholders and employees alike. The workforce of British Airways is a significant positive feature that strives to offer utmost advanced and pleasing service to its consumer. Their mission statement also retells their aim to achieve the status of the best airline universally.
To be successful, the administration of British Airways has to show commitment to their business and believe in it more than anyone else. An essential facet of British Airways in conducting a thriving business is to correspond each and every portion of their business purpose to all the stakeholders.
This stimulate them in order to get the superlative out them in view of the fact that information is authority and British Airways expand by empowering employees and other stakeholders so that they can counteract the danger of competitors.
As stated in the annual report a good example is how British Airways makes sure that the departure is always on time. This is one of the foremost determinants of a good client services relationship management in the airline industry. (BA annual reports 08/09)
Resource Based Theory:
The Resource-based view of strategic management deals with resources and capabilities of an organization which allows the organization to make profits and a sustainable competitive advantage in the market it’s operating in.
As explained by Capron et al, in the resource based theory the foremost source of competitive advantage is the firm and not the industry. (Capron et al, 1999) A firm’s competitive advantage is based on the firm’s resources in the form of assets and its inherent abilities to do better than its competitors. (Barney, 1991)
The resource based theory view for British Airways competencies and resources are, with regards to resources, BS has a fleet of 200+ aircrafts over 500+ destinations worldwide (http://www.britishairways.com/travel/bafleet/public/en_gb),BA providing extra services such as Holidays and London eye name change.(http://travelwithkids.about.com/od/londonwithkids/ss/londonsightsee_7.htm).
BA has the sole access to London Heathrow terminal 5 and also the image of BA counts as it a globally known brand and its long standing in the industry.(http://www.britishairways.com/travel/terminal-5-changes/public/en_gb?gsLink=searchResults)
With regards to BA competencies in view of resource base theory, it has training schools for customer service and simulators and cabin members training. (http://www.bestaviation.net/school/british_airways_flying_club/ Also there comes the safety aspect as it fly and manage passengers in a safe manner in different destinations they operate in. It is recognized as a training centre by the City and Guilds, by qualifying all cabin crew with NVQ Level 2 and being the 1stUK airline to be granted such status. (http://press.ba.com/?p=334)
SWOT Analysis of British Airways:
The strengths of BA are its brand image, alliances, its size and stability and its sole access to LHR terminal 5. The weakness are its reliability and trust aspect, laggards in terms of innovation and change and its employee management. The opportunities that BA has to grow more as a favored airline is its emergence in new markets, its quality system (SkyTrax) and competitors failing to deliver. The external threats with which BA is faced with are open skies agreement, its environmental awareness, global economic crises and lower cost competition by Ryan air, Easy Jet etc. (www.britishairways.com)
PESTAnalysis of British Airways:
Political: The BA has to comply with government heavy regulation to continue its operations. Due to war on terror the security has to beefed up with advanced measures so as to keep the consumers safe and confident in relation to their continued travel with BA as a preferred airline.
Economic: The world going through severe crisis, so in order to manage fluently the BA should have cost cutting measures in place like reducing company travel to cover the loses also it is in a poor light with regards to the weak exchange rate of Pounds against Euro. The Oil prices are fluctuation which in turn affects BA operational cost and finally the crisis has reduced consumer spending to a large extent. (British Airways Corporate Responsibility Report)
Social: The UK has an ageing population as stated in 21st century challenges, which gives BA the chance to tap in as older people has more time in hand to travel and for leisure.
Technological: BA is investing in new technologies, its good from BA perspective as it must make sure that they remain updated to compete also they should beware of the strict new legislation with regards to environmental regulations. (British Airways, Technology, 2011)
Environmental: BA takes care of environment seriously and in this regard as BA recognizes that in providing the economically and socially vital service of air transport they have an impact on planet and that is why in 1992 we became the first airline to report our environmental performance.(British Airways Environment, 2011)
Legal: Good employee relations to avoid any legal wrangling and regulation of trade unions to avoid any strikes, also it has an open skies agreement.
British Airways Business Performance since 2008:
It says in the BA annual report 08/09 that BA is re-inventing the way it worked and the intent is to create a leaner organization with a culture based on performance and a culture through the flagship program i.e. Compete 2012. (BA annual report, 08/09, the way we run Business)
Compete 2012 is a strategic initiative taken by BA through which it intends to achieve its vision of becoming the world’s leading global airline. This plan entails a 360 degree approach as in focusing in issues pertaining to the environment, relationships with suppliers and a new note and the BA tradition of supporting consumer friendly initiatives.
The sponsorship in sporting events is a huge business with its existence globally. Events like Olympics and World Cup Football are the mega events that entice the organizations to align themselves with the event. British Airways has bagged the rights to be the official sponsor of the Summer Olympics to be held in Londonin 2012 as well as the Paralympics games. The airline is also entitled to use the logo of the London Olympics.(British Airways official carrier for London Olympic Games 6 February, 2008.)
British Airways has also started a campaign known as Compete Me 2012 program. This program is instituted in conjunction with the London Olympics 2012. The underlying idea of initiating this program is to tell the audience about the way employees approach their work at British Airways. The very core of this program is to instill the spirit British Airways team have in pursuing a task. (BA Annual report 08/09)
In the wake of independent auditors report with respect to the statement of the group and the company, it is to be seen that British airways failed to meet their financial target for the reason that of the unprecedented downturn in trading conditions. On the other hand, the move to Terminal 5 saw a step-change in BA operational performance and we achieved record-breaking punctuality and customer recommendation scores. Operating margin is the main way we measure our financial performance. BA in 2002 set the target of achieving a 10 per cent operating margin through the economic cycle and in 2007/08 and delivered this for the first time in its history. (BA Annual Report 08/09)
Source: BA Annual Accounts Report 08/09
With respect to the operational bit of BA as mentioned before the move to Terminal 5 has delivered record-breaking levels of operational performance. Terminal 5 Ready to Go performance for 2008/09 averaged 46 per cent with a record high in March 2009 of 64 per cent. The ‘Ready to Go’ deals with how many of British Airways flights are all set for leaving at three minutes before the scheduled or planned departure time and spotlight on the feature of the departure procedure.
As good performance at Heathrow drives good performance across the network, BA delivered its highest ever network-wide Ready to Go performance of 53 per cent. This translated into record levels of flights departing on time and within 15 minutes, as well as record levels of customer satisfaction with punctuality, as recorded by our GPM survey. (BA Annual Report 08/09)
Source: BA Annual Accounts Report 08/09
With respect to Porter 5 forces after studying the annual report, BA competitive rivalry, is High, as in Long haul flights the distinction is minimal with regards to pricing and services and in short haul there are many players, BA power of suppliers, it is restricted by operational costs and a sole dependence on supplier for fuel, also as seen in the recent strikes the employees use trade unions to increase their bargaining power, which gives it a standing of High in this area. Power of Buyers, BA have little bargaining power and increased internet use by consumers have made them aware of the deals and situations, it is rated Medium.(BA Annual Report 08/09)
The Threat of new entrants, the strength of BA is Low in this segment as, airline industry is a hard environment to break in as a new entity due to the costs associated with it. Also there are sufficient and strict barriers for exit which in reality kills the chance of any new entrant. The Threat to substitute is also Low, in view of the fact that it has very limited substitutes for long haul flights however for short haul flights there is a substitute available i.e. Ferry or Eurostar.(BA Annual Report 08/09)
BA potential future strategy for the organization to grow its position in international and global markets:
The study of BA various functions and practices as an organization from the strategic perspective it can be stated that British Airways prioritize its major functions, or in another words the resources that would help them to increase revenues are given due consideration, like the 2012 Olympics in London. Prioritization involves focusing on the particulars that really matters. For that reason it is crucial to prioritize things so that the company may not lose focus on issues that need urgent attention. For a business to be flourishing it is important that it must be able to decide what resource should be devoted and what not (Bailey and Johnson, 1995). The decision on what is important is key to prioritization.
The planned stride of British Airways demonstrates a thriving position for the airline. British Airways has shown that their planning for the future is tactical and the marketing and management disciplines are intact accordingly. The alliance that British Airways has made is a strategic approach and the need of the moment. This will not only assist British Airways to curtail cost, it is also an excellent step to get hold of more customers. The planned objective in addition gives them the alternative to make the most of their assets in venture that would provide more benefits.
London Olympics 2012 would give British Airways a chance to showcase their product to a larger audience. This strategy is an excellent platform that can reignite a new image of British Airways among the people. Furthermore as the business would increase during the Olympic Games, there is every likelihood for British Airways to increase the market share. However this should not be a strategy that might be pursued in the short run. The task might be intricate, but British Airways must try to convert the first time customers in to loyal customers.However for the aforementioned goal to achieve, British Airways will have to demonstrate dedication, preparation and implementation. Owing to the worldwide economic crisis unpredictable challenges tackle the airline industry. British Airways will also feel the pressures of the market forces.
The alterations are the typical in airline industry that is very vulnerable to financial, regulatory, safety, environmental and extra exterior strains that are ahead of the entire control of management. The flourishing airlines will axis on well-situated basics when defining their upcoming groundwork. The catch is to be acquainted with what consumers require and how the airline can act in response to the recessionary situation.
British Airways strategic initiative is a vital element in the idea of budding a business uniqueness of British Airways. This approach development all the plans that are executed from the viewpoint of all the stakeholders of the British Airways. They must make sure that all the employees channelize their effort for the identical objective, i.e. the productivity of the airline. On the other hand, this success is not only calculated in financial expressions. British Airways has revealed to the humanity that they are in addition paying attention to be extra answerable and contribute to the public in special ways.
After considering each and every strategic plan started by British Airways, they have opted for motivating and significant actions. The present situation of British Airways gives a general idea of sound decision that adds to the airline’s approach formulation. The airline’s approach in addition facilitates to enlarge an outlook picture of the kind of strategic options that are or can be functional in prospect.
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