Strategic management of British Airways
British Airways Plc is the largest scheduled airline at international level in the United Kingdom. British airways (BA) operate its services in scheduled airway transportation services, domestic and international carriage of mail and freight and miscellaneous ancillary services (Datamonitor, 2013). With more than 300 destination flights, BA works in collaboration with franchise partners and codeshare to carry around 34 million passengers in a year. The annual report suggests its yearly revenue as 8.99 billion pounds and also boosts about having largest employee count in the UK with approximately 42,655 people.
BA became private in the year 1987 and since then, it continued to rise against the fierce competition in the airways industry. BA is successfully identified as the airlines who adapted to green technology and for its valuable environmental friendly strategic decisions. BA was greatly affected by the economic collapse in 2008 which affected it marginally in terms of revenue generated. Strategic analysis of BA suggests that there is lot of scope for it to grow in Europe and in the world market. Annual reports of British airways stresses that the company would strive hard strategically to become the world’s most responsible airline. In order to strive for its strategic objective,
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The present essay discusses strategic review of British airways by conducting both external and internal analysis. Porters five forces, Porters valuable chain, TOWS matrix, industry life cycle etc will be used to measure strategic analysis of BA in this essay.
SECTION 1- EXTERNAL ANALYSIS
1.1. Porter’s Five Forces Porter’s five forces is one of the important strategic tool used in the analysis of competitive nature of British airline industry. Porter’s five forces will help in assessing the strategic position of British airways in the airline industry and also helps to design strategic decisions for the company to increase the profits. There are three major strategic directions that companies can take through this analysis in order to achieve competitive advantage over their competitors. The three strategies which are taken include differentiation, focus and cost leadership.
Differentiation strategy involves the need for BA to differentiate its services and products in a way that they are unique and is able to achieve the target market share on its own or by staving off the products and services of the competitor by being non imitable and unique. In addition, focus involves the need to offer a service or a product which serves the niche market, which has little competition in a distinct manner. The focus strategy is again differentiated into differentiation focus and cost focus where the companies decide either on minimisation of the costs for their services or products in the market or to differentiate a service or product in a market that is focussed to receive them. Cost leadership strategy allows BA to create the services to be cheaper than that of the competitor in order to gain advantage over its competitors in the market.
Porter’s generic strategies form an important way for BA to design its strategic management exercise. It is however not a fool proof method and is realistically impossible for BA to focus only on one aspect described above. The reason for which it cannot adapt to these strategies is that when a company follows this strategy, attempts will be made to differentiate products and services, whereby competitive advantage can be gained over their competitors but as this is consumer driven industry, BA cannot focus only on differentiation strategy by ignoring cost leadership strategy. This is because the cost leadership strategies are essential to reduce costs of the services, a primary attribute which the consumers consider while considering the services, no matter how unique these products are.
STRATEGY FORMULATION THROUGH TOWS MATRIX
Through detailed analysis of BA’s SWOT, it can be suggested to British airways to look at some possible strategic options for perusal in order to allow the company to go forward in the right direction and to improve itself in terms of any identified drawbacks which they face in current situation. In order to identify the right strategic options for British airways, a TOWS matrix will be formulated so as to learn the formulation process.
Two strategies will be applied in formulation of TOWS matrix tools. The first strategy is to use the internal strengths of British airways and thereby applying these strengths to improve the external threats and opportunities. By applying this strategy, the strengths of the company will be used to improve BA’s external factors. The second strategy that is applied in the TOWS matrix is to consider the weaknesses of the company with the opportunities and threats of BA. This allows picking and eliminating the underlying grounded weaknesses of BA.
Strengths – Opportunities
British Airways can attempt towards market segmentation through the boasting brand image and through the Skytrax star system of quality rating which are grounded attributes for its recognition at the international level. Through the focus on market segmentation, the goals and objectives of the company are focussed towards the quality, which is the main business generator. Market segmentation also allows BA to achieve quality in short period of time by increasing its network and distributing its resources.
In similar terms, the supply chain migration can also be used for strategic improvement where supply chain migration will be used to help British Airways to be differentiated in a stronger way through its mergers and from competition through many small airline services. In the present market, many small competitors fail to reach the mark of providing high quality, timely and reliable services and BA helps these competitors to reach their hallmark by merging with them. This indirectly helps BA in improving its services through definitive complementary services. New emerging markets also help BA to offer a broad range of variable services.
Strengths – Threats
At present, there is increasing threat for BA from the environmental conscious consumers and strict environmental policies which is serving as a major drawback for its growth. The environmental policies place high priority on environmental protection and CSR whereby BA is required to completely renovate the brand image in order to provide environmental friendly premium services for its consumers. This is however a complete means of renovating its services and is a costly affair. Instead of bringing these environmental policies into action, remodelling the brand into all operational aspects into an environmental predecessor will save the environment also build the reputation of the brand in the global market through new waves of environmental friendly consumers.
This strategy was successfully implemented before by Toyota through Toyota Prius in the USA. This implementation was done in the world market and fetched good positive results for its growth. in order to reduce the competition to operate, the costs can be recommended to be lowered marginally and this should be taken as strategic advantage by the BA. The main resource which the company has a successful edge of addition when compared to its rivals is the utilisation of the remodelling services, whereby BA can achieve diversification in to other forms of transport markets also, while maintaining the cost effectiveness.
Weakness – Opportunities
Within BA, change is recommended to be brought about by managing people, managing employees in particular. The leaders for the company should be chosen in such a way that they are more adaptable to transformational styles of leadership and can adapt their leadership style to current fierce competition. There have been many incidents of poor relationship between employees in the past which has been witnessed by the news paper incidents and this relations history can be countered through improved people process management where people working in the company are treated at personal level. In addition, recommendations should be made to improve technological services in order to adapt more towards innovation and technological change. Use of technology will help BA to address the issues concerned to growth, customer relationships and pricing in more affective way with increased trust and reliability.
Weakness – Threats There are some strategies which can be implemented in such a way that the weaknesses of BA will not become threats nor harm the company’s growth. One such strategy is to remodel and renovate the environmental stance of the company which can help to reduce the negativity which arouse from increased environmental damage.