Business Strategies of British Airways - Case Study Example

Business Strategy – British Airways and its Strategy Name of Student Course Tutor Date The process of Strategic planning The concept of “strategy”, and vision, mission, goals, objectives and core competencies of British Airways Strategy is a concept that was derived from the Greek word ‘strategia’ that means ‘generalship’(Nickolas 2012). It is the means by which policies are effect (Nickolas 2012). According to Henry Mintzberg, strategy can related to a plan, a pattern of actions over a period of time, a position, or perspective of doing things. As a plan, strategy acts as a means of moving from one point to another. It is a position in a sense that it reflects decisions to make concerning business activities and it is perspective because it serves as vision and direction to an organization (Nickolas 2012). Strategy materializes over time as intentions of an organization accommodate and collide with a change in reality (Nickolas 2012). However, Shapiro (2001) defines a strategy as a general approach, based the performance of an organization and the problems to be addressed. The vision of BA is to become the leading global premium airline in the world. This means that BA wants to break the record of being the best quality service provider in the airline industry across the world (British Airways 2012). Its mission is to meet customer needs across the world on a timely basis through provision of exceptional products and services while ensuring cost efficiency (British Airways). It means that BA exists because of customers and therefore is committed to ensuring that they get the best from the company. The goal of the company is to achieve cost efficiency while its objective is to differentiate itself from competitors. Core competences for BA include innovation and increase use of new technology (British Airways). Through innovation and use of new technology, the company is able to develop new products for their customers. Issues involved in strategic planning Strategic planning is a crucial activity in an organization and therefore it has to be based on an appropriate strategic framework that an organization can understand where it is, where it is going, and why it is going there (Shapiro 2001). Defining strategic framework involves understanding the vision, values, mission, overall goal, immediate objective, and key results areas an organization intends to achieve. Also, there is need to adequately cover the background of the strategic business plan by defining the essential input, clarifying problem analysis and planning parameters, as well as identifying critical issues to be addressed (Johnson 2004). The strategic planning process itself must be planned by clearly stating the time frame, people to be involved, and making the agenda or process known to all people concerned. According to the Pennsylvania State University (2009) when developing a strategic plan, both the plan and the planning process must be communicated to all parties concerned. This involves allowing people know why the organization is taking the decision and the possible long-term impact of the plan. In addition, all or representative groups should be engaged in the planning process by getting their input through avenues, such as meetings and surveys (Dooris, Kelley and Trainer 2004). Ultimately, the strategic plan should be aligned with the goals of the organization considering trends in the environment and the direction of the organization. Strategic planning techniques and application to British Airways Strategic planning techniques are devices used to support planners in all phases of strategic planning. They include specialty techniques, power techniques, blunt techniques, and rudimentary techniques (Afonina and Chalupsky 2013). Specialty techniques have low level of utilization and high level of satisfaction and include customer value analysis and profitability analysis. Power techniques include SWOT analysis, Porter’s 5 forces, market segmentation, PEST analysis, BCG Growth-Share Matrix, and price analysis (Aldehayyat, Khattab and Anchor 2011). Blunt techniques comprise of benchmarking and customer’s defection analysis. While rudimentary techniques comprise portfolio analysis, Balanced Scorecard, ABC analysis, GAP analysis among others (Afonina and Chalupsky 2013). The British Airways (BA) may use the BCG Growth-Share Matrix in developing its strategic plans. The BA can use this technique to manage portfolio of its various strategic business units and product lines by considering different categories, such as Cash Cows, Stars, Question Marks, and Dogs in order to achieve its goals (Business Tools and Template 2009). BA should increase the numbers of flights to Dubai and Riyadh (Stars) so to increase profitability. Since these markets are growing rapidly, BA will need to continue investing in them to maintain its leadership in these markets (Business Tools and Template 2009). However, BA should be careful investing in Libya, Jordan and Lebanon as they appear to be ‘dogs’. Having a low market share in these markets implies that investing in them will have less benefit to the company. Formulating Strategy Internal organizational audit of British Airways Organizational audit of BA shows that is experiencing some strengths and weaknesses which it has to utilize and improve respectively. The strengths include wide product range, use of high technology, and being one of the largest companies in the Airline industry (British Airways 2012). Availability of a wider range of product implies that the Airline can develop a broad customer base across its markets. On the other hand continuous use of technology will help the company cut on its costs. The weaknesses of the company include existence of industrial disputes and high employee costs (British Airways 2012). Industrial disputes, such as strives affect the operations of the company leading to disruption and cancellations of flights, as well as re-scheduling of flights. This damages the reputation of BA and causes financial losses. High employee costs affect the profitability of the company. BA beliefs in quality and customer satisfaction as evidenced in its vision statement. Thus, it strives at being different from other companies in the industry. Compared to other Airline companies, BA is the 3rd largest airline group in terms of annual revenues across the world and it is ranked 2nd largest in Europe (British Airways). Although the company may be more affected by industrial disputes than other companies, it appears to grow at a high rate than its counterparts which is an added advantage. External environmental analysis of British Airways The external environment analysis of BA using PESTEL reveals opportunities, such as availability of new market in South Korea, Libya, Jordan and Lebanon, as well as increase in customers in Seoul, Middle East, Dubai, and Riyadh (British Airways). These opportunities, if well utilized will help the company increase its market share and profitability. The threats to the company include economic instability and increase in competition (British Airways). Difficult economic environment forces the company to reduce the number of employees and this affects its performance. On the other hand high level of competition is a threat to the market share of BA. Porter’s 5 forces analysis states that the profitability of a business firm in the a given industry depends on five forces including competitive rivalry, threats to new entrants, threats to substitute products, bargaining power of customers and suppliers’ bargaining power (Luxinnovation 2008). The level of competition in the industry is high and BA focuses on differentiating itself from competitors by providing various product lines in the market (British Airways 2012). The cost of entry, company reputation and technical standards is a threat to new entrants to the industry. In addition, providing variety of products exposes BA to less threat of introduction of substitute products by other airline carries. Stakeholder Mapping Technique and importance of undertaking stakeholder analysis Stakeholder mapping process involves four phases which include identifying, analyzing, mapping, and prioritizing (BSR 2011). This can also apply to BA and by identification its stakeholders include owners, customers, employees, industry, community, environment, government, and civil society organizations. In particular, investors, shareholders, direct customers, current employees, suppliers, competitors, media, government regulations and labour unions are useful to BA in one way or another, in respect to the level of engagement, legitimacy, contribution, influence and involvement (BSR 2011). However, in terms of priority, customers and employees are more important to the company, followed by investors and the other groups of stakeholders. It is important for BA to undertake stakeholder analysis so to organize produce a prioritized list of stakeholders with more value to the company (BSR 2011). It saves the time and cost of dealing with stakeholders since the process allows the company to generate a robust, relevant and prioritized list of stakeholders at any given time, thus preparing engagement activities (BSR 2011). Approaches to strategy evaluation and selection Possible alternative future strategies of British Airways The company can pursue different growth strategies in future so to maintain its position in the industry. The strategies can be substantive growth, limited growth, or retrenchment depending on the business situation in future. In substantive growth, BA can pursue related diversification. Using this strategy, the company can introduce new product lines in the new markets in the South Korea and others across the world, but it would be a costly and risky venture, though extremely profitable (Cornell University, 2011). BA can also pursue growth through market penetration, market development and product development. Through penetration, the company can improve the quality of its services and lower price for its products so to attract customers from both its domestic and international competitors (Cornell University, 2011). In product development, the company may introduce new product for its loyal customers, such as corporate customers without necessary looking for new customers. Market development strategy is very appropriate for the company especially when it wants to increase its market share. Here, BA may introduce the existing products to extremely new markets, such as Libya, Jordan, Lebanon, and South Korea (Cornell University, 2011). Retrenchment is not the best strategy for the company to undertake, but it may be forced to reduce the number of its workforce if the business is decline following difficult economic situation in future. Appropriate future strategy for British Airways using Porter’s Generic Strategies Among Porter’s Generic Strategies, the most important approach BA can undertake is to focus on reducing competitive rivalry in the industry (Luxinnovation 2008). Given that it is one of the market leaders in the industry, BA should struggle to maintain its power. The level of competition in the industry is likely to change based on the level of development and diversity, as well as availability of barriers to entry (Luxinnovation 2008). Currently, BA continues to compete with both domestic and international airlines on short-haul and long-haul routes (British Airways). Thus, it has to understand its competitors well in terms of their products, brands, strategies, market shares, and strengths and weaknesses to outfit them by doing things differently and uniquely. The intention to differentiate from other air carriers is well thought as it will help BA to achieve its vision of being a leading global premium airline across the world. For example, launching flights to Seoul in South Korea will help the company achieve its goals and objectives. Strategy implementation Roles and responsibilities of the managers and (project) team members in implementing strategy Both managers and project team members play an important role in implanting strategy. It the managers who direct the procedure for implementing strategy by installing planned change in the company (Ikavalko 2005). They provide the necessary resources to be used to implement the planned change. On the other hand, project team members ensure that the project runs as expected by performing various activities that would enable achievement of the strategy (Whittington 2003). Although, managers may not directly involve in the implementation process, they are held accountable for project success. For example, in undertaking the strategy of launching flights in Seoul in South Korea, managers at BA would initiate the strategy by ensuring that all plans are in place and will be in forefront on the day of launching the project as a sign of commitment and support for the initiative (Ikavalko 2005). They will also set goals to be achieved within a specified timeframe and rules and procedures to be followed by project team members. The role of team members will be to ensure that project runs as expected and adheres to set rules and procedures (Whittington 2003). Resources required to implement a new strategy for British Airways Definitely, BA will require different resources to successfully implement its strategy. These resources fall into four main categories including financial, human resources, time, materials and equipment (Wilson and Jarzabkowski 2004). Launching flights to Seoul and increasing the number of flights on Dubai service in the Middle East requires huge amounts of money. This means that make available enough funds to implement the strategy. It is necessary for the company to have enough employees who are well skilled and competent to provide services to customers. Therefore, additional employees will be required to be deployed in Dubai and Seoul. It will require some time to implement the new strategy, for example, buying new flights, introducing them on the routes, and allowing the business to gain momentum. Lastly, the company will be required to buy new equipments and preferably new technology equipments including flights so to compete favorably in the industry. Generally, BA will have to invest dearly into the project because purchasing equipment, employing new staff and managing the entire process requires funds. Targets and timescales to realise British Airways strategy British Airways would require a period of eight months to increasing the number of flights on Dubai service in the Middle East. This timeframe will be enough for the company to put in place all the necessary resources and implement the project successfully. It would take approximately two months to acquire the competent employees and at least six months to acquire new equipments, such as flights. The new recruits may require training and this has to be incorporated into the strategy. Employee training would take one month. After acquiring the necessary facilities, the company may take an extra month to test the new strategy by introducing new flights on Dubai services. Actually this will be a way of implementing the new strategy. Therefore, the company would expect to fully implement the new change after eight months. After implementing the new strategy, it will be necessary to evaluate and monitor the progress of the project (Whittington 2003). The project team members would be expected to assess the performance of the new flights on the Dubai service in terms of efficiency and effectiveness. Also, flights should be checked for quality service provision. The performance of staff on the flights should also be monitored and evaluated to see whether they meet expectations of quality service provision. Reference List Afonina, A., & Chalupský, V. (2013). Investigation of Strategic Management tools and techniques, 61(4), pp. 833-840. Aldehayyat, J, Khattab, A and Anchor, J 2011, ‘The use of strategic planning tools and techniques by hotels in Jordan’, Management Research Review, 34, pp. 4: 477–490. British Airways and its Strategy Case study British Airways Plc, 2012, ‘Annual Report and Accounts: Year ended 31 December 2012’. BSR, 2011, ‘Stakeholder Mapping’, http://gsvc.org/wp-content/uploads/2014/11/Stakeholders-Identification-and-Mapping.pdf Business Tools and Template, 2009. ‘Boston Consulting Group (BCG) Growth-Share Matrix: Ms-Excel & Ms-Word Templates User Guide’. Cornell University, 2011, ‘Ansoff’s Growth Strategy Matrix’, Accessed on December 11, 2014 from http://www.ecornell.com/wp-content/uploads/2013/07/Ansoffs-Growth-Strategy-Matrix1.pdf Dooris, Michael J., Kelley, John M., and Trainer, James F., Eds 2004, ‘Successful Strategic Planning’, New Directions in Institutional Research. Ikävalko, H 2005, ‘Strategy process in practice: practices and logics of action of middle managers in strategy implementation’. Johnson, S 2004, Exploring Corporate Strategy: Texts and Cases, London, FT Prentice Hall. 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