Strategic Situation And Recommendations For British Airways

Discussion

Introduction:

British Airways is one of the largest airlines in the world and the largest airlines operator in the United Kingdom with its huge fleet size. The headquarters of British Airlines id based in Waterside in Heathrow Airport. It has a fleet size of 272 and flies to over 183 destinations all over the world. British Airways was formed in 1974 after the establishment of the British Airways board and with the tie up of several British aviation companies, namely, British Overseas Airways Corporation, British European Airways, Cambrian Airways and Northeast Airlines (britishairways.com 2018). British Airways was privatised in 1987 and is now the largest Boeing operator in the world. The traces of its origin go long back to birth of the civil aviation it can called one of the oldest aviation organizations in the world. The maintenance and operations of such a big company requires strategic planning and development in order to survive in a highly competitive market. Several business planning and techniques are the key aspects of its success over the years. The purpose of this discussion is to determine the strategic situation of the British Airways using different macro, micro and internal environmental analysis tools.

STEEPLE analysis:

Social factors: The social factors are very important when it comes to the determination of strategic situation for old aviation companies like British Airways. The British Airways needs to keep in mind the huge number of commuters that travel with them. There are demands to low cost airlines due to the emergence of new companies offering lower prices (Vidovi?, Štimac and Vince 2013). The British Airways while keeping in mind to review their prices regularly should also maintain their brand image which is their primary appeal to the customers who choose them over other airlines. Moreover, the social and cultural factors differ in different locations and as British Airways flies to many foreign locations and attract a huge number of foreign customers they should keep in mind the cultural values of those customers.

Technological factors: The airlines industry requires to develop everyday with the regular up gradation of technology. In the age of advanced technological development, the British Airways should focus more on research and development. The prime factors that technological factors focus are advanced security systems and the sustainable use of resources. British Airways is on a comfortable position with the use of upgraded engineering and better in flight comfort with the use of technology (ba-mro.com, 2018). However, as the customer requirements change every day with more technological developments, the aviation organization should constantly upgrade to meet the demands of the customers. Tie-ups with more technology firms and more investment in the research and development sector can keep British Airways always ready for the future.

Economic factors: The economic factors around the globe play a huge role in determining the strategic situation of the aviation organization. The British Airways is one the largest airlines in the world with a huge customer base. It is in a comfortable position considering its yearly turnover (britishairways.com 2018). However, the globe is always facing economic crises at one place or the other and British Airways should be prepared for these economic challenges. Moreover, the decision of BREXIT has already put the British economy in a challenging position and the British airways should be prepared these type of challenges (Gerrard 2017). The rising fuel prices all over the world also poses a challenge to the organization to maintain a steady customer friendly price while sustaining its profits.

STEEPLE Analysis

Political factors: The political factors around the globe are important factors that determine the successful operation of aviation companies like British Airways. Rising terrorism all around the globe poses threat for the aviation companies. Hijacking and destroying planes with lots of passengers are a favourite tool of the terrorist outfits to put global pressure for different purposes. The British Airways should be highly aware of these situations and develop higher and tighter security systems to monitor and track these activities and provide safety to its customers so that they can feel safe while travelling in their airlines. The British Airways have already shut down its services to several Middle Eastern destinations to prevent these type of threats (britishairways.com 2018). These has resulted in huge revenue loss for the company.

Legal factor: The legal factors can cause serious troubles for aviation companies. The British Airways must be aware of such factors in order to operate more smoothly. There are several laws regarding the airspaces of different countries which if violated can lead the airlines company into serious legal trouble. However, British Airways being one of the oldest companies has the capacity to tackle legal problems like this. Another legal factor that comes as a barrier for British Airways is the power of its trade unions. It had faced serious strikes from its workforce in 2010, which led to the cancellation of many flights over the period of three days the strike lasted (Batty 2010). Similar incidents have occurred several times. British Airways should find out a solution to these type of problems in order to avoid revenue loss and tarnish the brand image.

Environmental factor: British Airways, being one of the largest airlines company, has a corporate responsibility towards the environment. Moreover, as the company runs on the use of fuels whose emissions are harmful for the environment, British Airways requires to develop methods in order to reduce their carbon footprint in the environment. British Airways has already focused on the research and development on advanced engines which would be sustainable regarding fuel consumption and emissions (ba-mro.com, 2018). British Airways has reduced their fuel consumption compared to the last two decades. It also focuses on more efficient operations and alternative fuels. It has tried to reduce the noise level of engines to lower noise pollution created by them and has focused on cutting down carbon emissions (ba-mro.com, 2018). This type of improvements can help them do their corporate responsibilities towards nature and also preserve their brand image of being an environment friendly airlines company.

Porter’s Five Forces analysis:

The Porter’s five forces model can analyse the position of the British Airways in the market of the airline industry. It analyses the five external forces that might effect a company’s operation (E. Dobbs 2014).

Threat of New Entrants: Airlines industry is not a small industry. Its scale is large and requires huge investments. Moreover, there are a huge number of guidelines that needs to be followed to be a part of the airlines industry which requires patience and commitment. Secondly, there are already a number of established airlines companies. British Airways being one of the largest airlines companies faces very negligible threat from the possibilities of new entrants.

Porter’s Five Forces Analysis

Threat of Substitutes: British Airways faces a moderate threat when it comes to the substitutes. People travel on planes due to their priority basis. There are no other transports which can help the travellers to reach a place faster. However, substitutes such as trains, buses or other vehicles may draw customers due to their cheaper rates. Customers have a different outlook regarding this issue. Those who value money might choose other modes of transport but those who choose time or airlines travel will choose British Airways.

Bargaining Power of Buyers: The customers or the buyers have an upper hand when it comes to bargaining due to a lot of competition in the market. Prices offered by other airlines companies might vary and the customers always have the inclination to go for the affordable rates. This reflects that British Airways faces a lot of bargaining issues from the side of the customers.

Bargaining power of Suppliers: When it comes to airlines industry, the suppliers also have an upper hand in the bargaining. There are a relatively lower number of suppliers in the aviation industry as they have to adhere to a lot of guidelines. Hence, in a high demanding industry like the aviation the lesser number of suppliers ought to have upper hand in bargaining. Maintaining long term deals and a good relationship with the suppliers can help to solve this case. However, due to the market trend, British Airways faces these types of problems easily.

Industry Rivalry: British Airways faces a high level of competition both in the domestic and the international market. In the international market, it faces a severe competition due to the presence of huge organizations such as Virgin Atlantic or Etihad Airways (Ruddick 2016). The competition that British Airways faces is in terms of service, price and convenience which differ always with time. Hence, British Airways faces high industrial rivalry.

Competitor Analysis:

British Airways faces a healthy competition due to the presence of several big airlines companies which operate on similar routes as does the British Airways. Similarly, differences in price and services are also the factors which are taken into consideration. The chief competitors of British Airways are:

• Pan Am Airlines
• Air India
• Virgin Atlantic
• Etihad Airways
• Air France

Internal Environmental analysis using Porter’s Value Chain:

Primary Activities:

Inbound Logistics: British Airways being an age old company has a competitive advantage due to long term relationships with suppliers and use of professional systems.

Operations: British Airways has a huge operational structure with its large number of flight destinations and a huge fleet size.

Outbound Logistics: British Airways operates in more than 80 countries which lets it carry a smooth operational system regarding outbound logistics.

Marketing and Sales: British Airways has a huge brand value which lets it reach out to a lot of customers. Its brand influences a lot of marketing which automatically draws customers.

Service: British Airways provides one of the most sophisticated services in the aviation industry globally. Its huge investment for the regular up gradation of it services has a huge appeal among the customers.

SWOT Analysis of British Airways:

Strengths:

• One of the oldest aviation companies in the world
• One of the largest aviation industries in the world and the largest in UK.
• One of the most trusted brand names in the aviation industry.
• It receives the support of the UK government, though it has been privatised.
• British Airways has its own Research and Development wing which looks after the regular up gradation.
• British Airways uses technology for better services to its customers.

Weakness:

• British Airways is more dependent on the UK market than the international market.
• British Airways faces huge problems from Trade Unions.
• British Airways lacks the robustness of expansion like the other large airlines companies.

Opportunities:

• British Airways can expand its market to develop and earn extra revenues.
• British Airways can incorporate new services for expansion and development.

Threats:

• High competition due to the large aviation companies.
• Government policies and international regulations.
• Increasing fuel prices.
• Development of modern technologies.

Key Challenges of the British Airways:

• The economic factors such as global crises and BREXIT can have huge effect on British Airways (Gerrard 2017).
• The political factors such as rise of terrorism have a huge effect on British Airways.
• The British Airways requires expanding and developing more to attract more foreign customers and earn more revenues.
• The rising fuel price is an important challenge that the company faces regarding its sustainability.
• The British Airways should develop ways to tackle the problems due to the trade unions in order to run the business smoothly and preserve its brand image.

Development of Strategies and Functional policies:

Strategic objectives and Functional planning are very important for the smooth operation of a business and the development of future plans to tackle new challenges and sustain the organization throughout the years to come. The top managers devise the strategies based on the analysis and the audits of the company’s present condition and future challenges. The functional chiefs on the hand devise these strategies into operations through different levels such as research and development or new market planning.

The relation between development of strategies and Functional policies requires being a sustainable one in order to make the company succeed in the longer run. These types of co-operation and compatibility remove the line between the top executives and the functional chiefs (Flouris and Oswald 2016). All of them together turn into strategists who plan and develop ideas for the future of the organization.

British Airways also has some strategic objectives that have been developed from the discussed analysis.

• British Airways requires attracting a larger number of foreign customers and earning their trust in order to earn long time revenues from them. This strategy requires developing newer choices of products, services and flights to more destinations (britishairways.com 2018). Besides passenger flights, the company requires to make its presence in cargo airlines and which also provides huge revenue and also makes strong relationships with large organizations.
• British Airways should develop newer service methods to be more customer friendly where the customers can meet their requirements very easily. This strategy requires enhancing the already developed customer service of the British Airways which has a reputation of addressing the customers in the most suitable manner (britishairways.com 2018). However, with increasing markets and different segments, investments must be made on the training and development of a more advanced customer service operation for the benefit of all types of customers.
• The British Airways requires making their presence all around the world. The maximum number of customers that the British Airways draw is from the UK. However, to make a global presence, the British Airways must expand outside London. London might the headquarters but building offices and customer service desks in different cities around the world can help the British Airways gain a global popularity. This requires advanced government policies as the British Airways is backed by the UK government and the co-operation with airport owners of other countries so that they can peacefully do business in those territories. Moreover, development of partnerships with foreign based airlines and organizations can help them to emphasis on their growth and also appeal to the cultural and societal aspects of the target locations.
• The British Airways requires developing new strategies to tackle the increasing fuel price and also not affect the customer prices and company revenues (Gegg, Budd, and Ison 2014). This strategic objective requires the development of new revenue system. Higher revenues are always profitable for the company. In order to maintain constant revenue, the company need to retain its customers. However, the increasing fuel prices have led the company to a position where they require increasing the charges for service. This might have a negative effect on the customers who may seek other options. In order to avoid this situation, the British Airways must pursue the government to intervene and regulate the fuel prices so that they can do a sustainable business by not affecting their customer base (Neslen 2016). Policies such as these require long term planning and proper strategic objective. Moreover, re-enforcing the brand and new products can open further revenue for the company.
• The British Airways faces serious troubles sometimes due to trade unions. Proper strategic development requires to be done to reform the system so that such problem does not appear in the future (Calder 2017). In order to achieve this, the British Airways requires developing an advanced employee redress cell. The unsatisfied employees can then directly address the organization about their problems. This can lead to a better interaction between the company and the employee. The issues faced by the employee can be directly solved by the company (Bamber, Gittell, Kochan and Von Nordenflycht 2013). The employee then does not require relying on the trade union to forward its issue. Non-involvement of trade unions in the employee-organization relationship can reduce the number of strikes and let the company operate smoothly. This can help the company provide better service to its customers and retain its brand value and earn higher revenues.

Review of two Strategic Options:

Strategy 1:

The first strategy comprises of developing newer services for enhancing the brand value of the company and also drawing more customers towards the company. British Airways has a very good customer service structure and it provides world class services to its customers. However, in the tourism context, in order to expand, the British Airways need to focus more on the attraction of the foreign customers. Presently, British Airways has the customer base largely in the UK, but in order expand and develop, the customer base should increase and comprise of people all over the world. Tourism is a rising industry which is in a high demand in the present scenario. If the airlines can develop newer services that appeal to the foreign services then the number of foreign tourists who would be attracted by the new services can choose British Airways over other companies.

The Suitability factor in this strategic option is very high, because considering the present market status it is very essential to develop and enhance the brand value of the organization by making it a global brand and appealing to the population worldwide. This can help the organization take a huge leap towards the next step and give it an increased customer base.

The Feasibility factor in this strategic option is also good as British Airways is one of the oldest and largest airlines in the world. It might not have a large number of foreign customers compared to UK customers, but its brand value can be recognized due its long presence in the market. In case of application of newer strategies and services, new tourists and customers can be easily drawn towards the brand as they are already aware of the brand of British Airways. They can easily identify the brand and trust it to provide good facilities.

The Acceptability factor in this strategic option has a good prospect. In this world of globalization, it is suitable for the company to create a global brand value and attract customers worldwide. This includes partnering with new organizations worldwide to develop world class operational services. The development and training of newer skill sets to cater to the newer tourism activities creates a higher acceptance in the new customer base

Strategy 2:

The second strategic option requires the British Airways to formulate new ways to cope up with the increasing fuel price. Fuel price has been on the constant rise due to the terrorism crises in the Middle Eastern countries. This crises is putting the company in serious trouble as the expenses are increasing but they are not being able to increase the fares in the fear of losing customer’s to competitive organizations. To cope up with this problems the British Airways must approach the government to regulate the fuel prices so that they can develop a sustainable structure to deal with the challenge (Neslen 2016). The British Airways can also introduce different secondary services which can help them fill up the gap in the revenues left by the rise in expenses.

The Suitability factor regarding this option is good as the British Airways is backed by the UK government. The government in order to help the British Airways can regulate its policies regarding fuel prices. Moreover, British Airways being the largest UK airlines operator can invest in new services which can fill the gap in the revenues.

The Acceptability factor in this strategic planning is also high as the current situation demands immediate action or the British Airways can possibly suffer huge revenue losses due to the lower fares and higher expenses. This can hinder the development of the organization and tarnish its brand value.

The Feasibility factor in this strategic planning corresponds highly to the needs of attracting tourism. Lower fare charts instead of high expenses and new services can give the British Airways an upper hand over its competitors and place the organization in a comfortable position in the future.

One of the most important Strategic Option that needs to be recommended for the development of the British Airways in terms of tourism and planning is the requirement of the global presence of the British Airways in the major cities in the world (Cornelissen 2017). Currently, the airlines company has its headquarters in London, in Heathrow Airport from where it operates such a huge number of flights all over the world (britishairways.com 2018). However, the customer base of the British Airways mainly remains UK customers. In order to make a mark in the global tourism sector, the British Airways requires to make a global expansion. The presence of the organization in the major cities of the world can help them interact more with the local cultures and local community. This can help them draw a varied customer base from different parts of the world.

The process would be easier because being one of the largest airlines company, people all over the world can easily identify with the brand and be attracted towards it. This type of robust expansion can be done by tie ups with regional organizations which can boost the investments and also drive the development in the local communities. Attraction of tourists and involvement in the tourism sectors of the foreign locations can help British Airways generate larger revenues and develop a better future.

Objective	Tactics	Success Criteria	Time Frame	Resources
Global Expansion in major cities of the world	The British Airways requires to form alliances with foreign organizations to bring in foreign investors.	High	5 to 6 years	Business contacts, High brand value, High Investments
Alliances brings in foreign investors and helps the company in thinking about new services that can be offered in the local markets. Moreover, such alliances can offer regulated sustainable packages for the customers, which can include various customer benefits (britishairways.com 2018). Alliances with local airlines can help the use of common lounges, passenger transfers and better customer services and valuation.	High	5 to 6 years	Business contacts, High brand value, High Investments
Another type of alliance that the British Airways can use is the forming of franchisee. Franchising can help in the sharing of workload and operations while promising a continuous revenue generation from the markets.	High	2 to 3 years	Business contacts, High brand value, Low Investments
British Airways has a number of franchise partner airlines. Longair in the UK, the South African Cornair, and the Scandinavian organization Sun Air (britishairways.com 2018). These three franchise carry over 2.3 million passengers annually to over 38 destinations. Moreover, travelling by these airlines helps the customers to get smoother transfers to the British Airways.	High	2 to 3 years	Business contacts, High brand value, Low Investments

The British Airways besides development and expansion in foreign markets should also develop systems to monitor the strategic actions and determine their success in the long run. The British Airways should set up a monitoring board to inspect the expansion objectives and monitor their growth rates.

The Brand reputation is very important for the British Airways. A particular event or a series of events can severely affect the erosion of brand reputation of the company (britishairways.com 2018). While operating in a foreign market the company should regularly monitor its activities and the partner activities to monitor the actions, customer services and the leadership position that they hold in the market. This can help the customer maintain a standard of customer satisfaction and can make a stronghold in the tourism sector. This can lead to a sustainable revenue generation and maintain higher profitability.

Conclusion:

The British Airways is one of the largest airlines in the world with a huge fleet of Boeing and Airbuses. It operates in flights in many countries of the world. However, it has a huge customer base which belongs to the UK. In order to develop the situation and make a presence in the global tourism sector it is essential to under the company’s current situation and what strategies it can take to bring the development. The above discussion identifies several factors such as Economic, Political. Social, Legal and Environmental which affect the development of the British Airways. However, being one of the oldest airlines in the world, British Airways has a huge revenue turnover and one of the most iconic brand values. Based on these analysis, it has been identified that a robust expansion is required by the company to make its global presence. Key alliances, franchising and investments in foreign cities are key to the global expansion that British Airways can look up to. Implementation and monitoring these strategic actions are the prime steps that the organization can take up for its future development.

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