Strategic Planning For British Airways Management Essay

Strategic Planning For British Airways Management EssayThe purpose of this paper is to pass judgment an hard-hitting and efficient strategical planning for airline assiduity providing British Airways strategic plan. British Airways jumper cable UK market as a leader of the airline industries.This paper evaluate the British Airways strategic planning including the strategic model, Enternal and external purlieual enalysis,management risk and strategic v operational risk. This paper is done by secondary data collection process which is totally qualitative data base paper. Most of the information I got from British Airways own website (www.britishairways.com) and some atomic number 18 from some Book, Journals and Articles. Mainly for their (British Airways) business schema planning they be following some strategic models like Porters five forces model, PESTEL analysis, and SWOT analysis etc. By those analysis organization can understand like British airways can understand that what is their external and internal condition and what is the strength for them ,what is opportunity and weakness and establish on those factors they are trying to compete with their contenders and getting good market share in the tourism and hospitality industry.Contents 31.1 Objectives 51.2 confederacy Overview 61.2.1 Company organize 61.2.2 Corporate Level organize 71.2.3 Business Level Structure 71.2.4 Functional Level Structure 71.3 Current Strategies 82.0 Environmental Analysis( away Analysis) 92.1 PESTEL Analysis 92.2 SWOT breaks 113.0 Strategic Planning Model 11S 11 inside Strengths 11Brand Image 11Partnerships HYPERLINK __RefHeading__29263_575820157HYPERLINK __RefHeading__29263_575820157 Alliances 11 financial size and stability 11Terminal 5 11W 11Internal Weaknesses 11Poor employee relations history 11Reliability and perpetrate 11Innovation HYPERLINK __RefHeading__29277_575820157HYPERLINK __RefHeading__29277_575820157 change 110 11extraneous Opportunities 11Quality S ystem 11Competitors forced exit 11Competitors failing on delivering reliability 11Emergence of untested markets 11T 11External Threats 11Open Skies Agreement 11Environmental awareness 11world(a) frugal crisis 11Lower cost ambition 113.1 Porters Five Forces 124.0 Customer Analysis 135.0 Competitor Analysis 155.1 Strategic conclaves 156.0 Internal Analysis 176.1 comfort Chain Analysis (VCA) 17176.2 Key Strategic Issues 207.0 Implementation 228.0 Managing Risk 249.0 Ethics 2410.0 Strategic V Operational Conflict 2511.0 Recommendation 2611.1 Financial 2611.2 People 2611.3 Legal 2611.0 Conclusion 271.1 ObjectivesThe main bearing of this paper is to develop the internal external environmental analysis and strategic planning with risk management and business ethics.Specific objectives are following,Evaluate the modern strategic position of British Airways.Analyse the strategic Planning Models for British Airways.Analyse British Airways internal and external environment.1.2 Company O verviewBritish Airways is the UKs largest international schedule airline. At the side of scheduled services, BA is engaged in the operation of international and domestic carriage of freight and mail, and the ancillary services (Datamonitor, 2008). In familiarity with codeshare and franchise partners, BA fly to more(prenominal) than 300 destinations, and carried more than 33 million passengers, earning over 8.7 billion in revenue in 2007/08 (British Airways, 2008). Employee headcount in March 2008 stood at 42,377 people (Datamonitor, 2008).Since privatisation in 1987, BA has continued to grow as challenger in the market has risen worldwide. In recent times, BA has successfully been labelled the worlds first airline to take part in a scheme to reduce greenho engross gas emissions (2002) and to allow for passengers to print online embarkation passes (2004) (British Airways, 2008). In 2005, the company saw Willie Walsh become Chief Executive of BA (Flight Global, 2008), who to dat e has driven the company through the completion of Terminal 5 at Heathrow, amongst other clean initiatives.Despite reported and imminent industry hits due to the global economic downturn, BAs future looks promising. As BA announces its aim of becoming the worlds around responsible airline in the latest annual report (British Airways, 2008), great importance lies in developing guiding principles and careful strategic civilizeion to allow the achievement of this goal.1.2.1 Company StructureWhen implementing outline, people are crucial to the success (Johnson et al., 2008), thitherfore the structure indoors BA allow now be analysed to train successful implementation.1.2.2 Corporate Level Structure(Adapted from British Airways, 2008).At a corporate level, BA has a good structure already in place. on that point is a new Acting Customer Director on an interim basis, Silla Maizey (British Airways, 2008). She has introduced a new client service team working with Heathrow Customer Se rvices, designed to put customers first. Using the stream structure to implement our strategy, it is suggested that a permanent and not acting director to be recruited. In scathe of the technical strategy, no amendments to the current structure are necessary as BA already remove systems in place to implement new technology.1.2.3 Business Level StructureAt a business level each department leave alone need to ensure all staff implements the strategies that have come top-down from a corporate level and work within the organisations brand set. Each department must also tailor the corporate level objectives specifically to its own targets. This volition help to build the brand, improve its customer kin focus and achieve the stated objectives.1.2.4 Functional Level StructureEvery function must consecrate with each other to ensure objectives are met and an updated operations manual must be actual. Specifically for the relations strategy, detailed targets must be stated for both(p renominal) the marketing and HR functions with constant data capture and analysis to see whether the targets are being met. ample training on the new onboard technology will be necessary on an ongoing basis to ensure that employees are fully familiar with the service.1.3 Current StrategiesThe paper will be designed in consideration of BAs current strategiesUpgrade customer experience via the introduction of text and mobile services for business stratum customers.Modernise aircraft fleet and cover new services.Manage cost base.Increase corporate responsibility through environmental performance and partnerships.2.0 Environmental Analysis(External Analysis)For success within the airline industry, an awareness of the external environment is essential. This section aims to highlight the position of the industry, in particular looking at competitors and assessing BAs capability to meet current and future challenges.2.1 PESTEL Analysis(Source Johnson et al., 2008, p56)Figure 1-Pastel An alysisFactorsBA ImplicationPolitical1. Heavy regulation (AEA, 2009).BA Compliance is essential if BA wants to continue operations2.Increased security due to past terrorist threats (DFT, 2008).BA Sufficient security measures should be in place to ensureconsumer confidence and competitive advantage is maintained.Economic1.Global economic crisisWorld growth is projected to just over 2percent in 2009 (IMF, 2008). Pound weakens especially against the Euro.BA Possible reduction in the numerate of business travel as companies are acid costs and victimisation alternative means of communication such as teleconferencing. BA is vulnerable as a UK operating airline to a slimy exchange rate.2. Oil prices declined by 50 % since their peak retreating to 2007 levels. Decline in fuel price = strengthening of the dollar (IMF, 2008)BA Fluctuations in oil prices and exchange pass judgment will directly affect BAs cost base.3. UK consumer spending saw its sharpest decline for 13 years between July and September 2008 (Channel 4, 2008).BA More intense competitionSocial1.The UK has an aging population (see appendix 3) (National Statistics Online, 2008).BAPotential opportunities for growth as senior(a) generations havemore time to spend on leisure activities such as international travel.2. Increasing unemployment (Kollewe and Sager, 2008).BA Increased negotiate power as an employer.Technological1.A recent survey revealed that 34% of online consumers plan to use price-comparison sites more in 2009 (NMA, 2009).BA Increased consumer awareness and therefore bargaining power.2. Online booking services and sign in is becoming increasingly used by the airline industry.BA BA must ensure that they remain up to date with these technological advances whilst avoiding becoming overly reliant, as this whitethorn isolate certain consumer markets (i.e the elderly) who dont feel comfortable using such technology.Environmental/Ethical1.Noise pollution controls,and energy consumption controls ( DFT, 2008).BA forward-looking legislation (e.g. Climate Change Bill) enforcing tighter environmental regulation may join on operational costs each year.2.Limited land and for growing airports Expansion is difficult at Heathrow as it would end in a loss in the Londons verdancy belt area. (BBC News 2006)BALimited capacity=utilisation of capacity.3.Consumers are becoming increasingly green and more aware of the environmental strike of their actions.BA disappointment to adopt an integrated environmental strategy could lead to a detrimental effect on the BAs reputation and income.4.Cancellations of flights and loss of baggage (Channel 4, 2008).BA Such ethical issues could have a detrimental effect on reputation if left unresolved.Legal1.Collusion and price fixing.BARestriction on mergers will have an impact on BAs proposed alliance with American Airlines.2. Recognition of trade unions and industrial action e.g. Cabin Crew strikes.BAGood employee relations are essential if BA wants to avoid industrial action and interrupted operations.3.Open Skies Agreement (AEA, 2009)BAOpportunity for BA and its competitors to freely transport aircraft between the EU and US.2.2 SWOT analysesFigure 2-SWOT analysesSInternal StrengthsBrand ImagePartnerships AlliancesFinancial size and stabilityTerminal 5WInternal WeaknessesPoor employee relations historyReliability and trustInnovation change0External OpportunitiesQuality SystemCompetitors forced exitCompetitors failing on delivering reliabilityEmergence of new marketsTExternal ThreatsOpen Skies AgreementEnvironmental awarenessGlobal economic crisisLower cost competition3.0 Strategic Planning Model3.1 Porters Five Forces(Source Johnson et al., 2008, p60)It is important to analyse the competitive nature of the airline industry in order to assess the position of BA. The Five Forces tool will enable BA to puzzle strategic decisions in order to increase profitability.ForceStrengthCompetitive RivalryBA caters for both hanker haul an d short haul flights. Within long haul there is little differentiation between BA and their competitors, in terms of price and service offering.The short haul market is more fragmented with many small players.Direct competitive rivalry is fierce, e.g. Virgin has a website opposing the proposed strategic alliance between BA and AA No Way BA/AA (Virgin Atlantic, 2008).Consolidation of competitors has increased competition. elevatedPower of SuppliersTwo aircraft manufacturers = High bargaining power.BA restricted by sole supplier of fuel to the airport.Priority of set down slots is given to historic rights of existing users (IATA, 2008).BA employees use collective bargaining through trade unions in order to increase their bargaining powerHIGHPower of BuyersLow concentration of buyers to suppliers means they have little bargaining power.Increased internet usage has amplified awareness and interaction of customers (Keynote, 2008c).MEDIUMThreat of New EntrantsSignificant barriers to en try such as the competitive environment, high regularity requirements and high capital cost requirements.Barriers to exit are in place which deters new entrants.The failure of recent airlines such as XL and Zoom is possible to deter new entrants (Times Online, 2008).LOWThreat of SubstitutesThere are few direct substitutesShort haul flights the Eurostar or a ferry.Long haul flights no notable substitutes.LOW4.0 Customer AnalysisOver the past decade there has been increasing complexity in customer needs, as the customer has become more educated and demanding. Particularly, the following changes have occurredA shift in demographics to older passengers (Keynote, 2008c).Increased global connectivity allowing the usage of internet and search mediums (e.g. comparison and review websites).Increased requirement for doojigger (e.g. new destinations, quick check-in).Price has become more of a prioritySegments have become more defined within their needs.Evidence that BA is failing to respond to the changing customer landscape includesThe amount of BA customers recommending their services reduced from 61% in 2006/07 to 59% in 2007/08 (British Airways, 2008).BA have been criticised for slow innovation (Doganis, 2006, Pg 165).Poor reliability and baggage discussion (AQR)Failed attempts to target the price conscious consumer through low cost airline operation (Eirma, 2008).5.0 Competitor Analysis5.1 Strategic GroupsFigure 3 Strategic Group Analysis (Source Johnson et al., 2008, p73-77.)Figure 3 illustrates that BAs direct competitors are those who operate similar services and lie within the aforementioned(prenominal) strategic base. The competition is likely to be most intense within this group as they are seeking similar strategies.Lufthansa and KLM-Air France are the 2 leading European Airlines Member carriers in terms of passenger numbers, with 15.1% and 14.1% respectively of the total number of passengers carried. BA comes in third with 9.3% of the total (Keynote, 2 008c).BA face competition from a small number of severe contenders in the UK, with the main contenders being Virgin Atlantic, and United Airlines in the Star Alliance soon controlling BMI (Euromonitor, 2008). Although they do not lie within the same strategic group as BA the advent of low-cost air travel has changed the face of the airline industry. Airlines such as Ryanair and EasyJet have established themselves among the leading carriers in Europe, whilst the more established long-haul carriers such as BA have struggled to keep up with their counterparts growth rates.Moreover the economic downturn and sharp feed in oil prices has caused a price war between Emirates, BA and Virgin Atlantic on the London-Dubai route. Fares have dropped by 30% across the airlines. and then competition still remains fierce.Based on the strategic group analysis it could be argued that there is a gap in the market for a low cost airline operating a high breadth of service however it is likely the rea son no airlines have adopted this strategy is due to the fact that it would be destined to fail. This assumption could be supported by BAs failed attempt to enter this market in recent years (Telegraph, 2002).6.0 Internal AnalysisIt is now essential to analyse the internal environment in order to formulate distinguish strategies.6.1 Value Chain Analysis (VCA)BA have tried to control the system further by forward and backward mitigation. Through controlling many component supplies in-house, and through BA Holidays Plc, BA increases their excrete in the value system to the supplier and channel value chains.Figure 6 Value Chain (Adapted from Johnson et al., 2008, p110)SUPPORT ACTIVITIESFIRM INFRASTRUCTUREStructured pecking order allows BA to make use of a multitude of specialist knowledge in order to gain competitive advantage over downsized firms.HUMAN take inry MANAGEMENTInvested in the development of customer service training in 2007 attracting the best employees.Speak Up opin ion survey encourages employees to provide feedback (British Airways, 2008).TECHNOLOGY developmentBA has added value in this category over smaller companies due to slack resources that can be employed to innovate the service (e.g. individual liquid crystal display screens).PROCUREMENTDue to the size and historical business relationships and alliances, BA is able to leverage suppliers and through economies of scale make efficiencies where competitors may fail.PRIMARY ACTIVITIESINBOUND LOGISTICS straining ControlHigh quality training accredited by City Guilds (British Airways, 2008).Ongoing relationship with suppliers (e.g. Gate Gourmet.OPERATIONSIncreased Baggage Security.Quick check-in services and secure online bookings with ability to pre-book additional services.OUTBOUND LOGISTICSCustomer Service astronomic database of airport slots enable passengers to access the majority of destinations from preferred airport.MARKETING salesMarketing communications to all stakeholders.Brand a llowing for large budget to be spent in this field.POST SALE SERVICELoyalty club card.update communication on other servicesWhilst the Value Chain highlights the primary and support activities that add value to BA, there are a number of inefficiencies within these activities that arguably reduce the amount of value provided (see figure 7 and 8).Figure 7 Support Activities Value LossSUPPORT ACTIVITIESFirm InfrastructureLarge bureaucratic infrastructure decreases effective communication and increases inertia.HRMBAs employee opinion surveys attracted a mere 35% response rate in 2007 (British Airways, 2008).Due to high collective bargaining capabilities, BA has contended a number of highly publicised employee relations issues (e.g. Cabin Crew strike over pay, sickness absence, and staffing in 2007 (BBC News, 2007).Technology DevelopmentBA has failed to gain recognition for new innovation.Figure 8 Primary Activities Value LossPRIMARY ACTIVITIESInbound LogisticsHigh solidarity between s upplier employees and BA employees has created a history of negative industrial action. For example, in 2005, BA employees walked out for two days when Gate Gourmet employees were sacked (BBC News, 2005).Operations/Outbound LogisticsTV docudrama reported on Terminal Five operation difficulties, an emergency landing at LHR, poor baggage handling and flight cancellations (Channel Four, 2008).Marketing SalesA lack of innovation in their marketing communications (e.g. Virgin gaining value over BA).6.2 Key Strategic IssuesAnalysis ToolKey FindingsStrategic ImplicationsPESTELGlobal economic crisis.Higher regulatory requirements.Increasing environmental awareness.Decline in consumer spending.Increased use of the internet by customers.Focus on technological and environmental issues.Porters Five ForcesHigh competitive rivalry and bargaining power of suppliers.Defensive strategies needed to protect market share.Customer AnalysisConsumer trends in high convenience and high expectations of ser vice.Ensure changing customer needs are understood and metStrategic Group AnalysisIntense competition within strategic group and trend for consolidation.The biggest other threat comes from low cost airlines.Although low cost airlines are the biggest threat to BA, moving into low cost market is not deemed appropriate based on previous failed attempts.Airline Quality ReviewBA = poor baggage handling, poor on flight entertainment and low customer satisfaction.Service Quality needs to be improved to gain a competitive advantageGE MatrixHighest growth markets Asia Pacific and Eastern Europe.BA has a strong opportunity for market development in Asia and Eastern Europe.The Value ChainBA adds value financial size and stability, brand image, industry expertise, and partnerships and alliances.BA loses value to competition employee relations and performance, marketing delivery, reliability, and slow innovation.BA needs to address the areas where value is being lost to avoid attacking competito r strategies.Resource Based ViewStrong resources including sole access to hub within largest UK Airport.Strong training competencies.Utilise BA core competences to gain competitive advantage.Financial AnalysisIncreased profits and move operating costs.Lower gearing ratios and higher liquidity.Possibility of a loss in 2009 as a result of the economic downturn.Investment resources available.Increased scrutiny on strategic projects for risk assessment.7.0 ImplementationBased on the analysis of strategic options it is proposed that two strategies are employ simultaneously. These strategies are a people processes focused strategy and technological advancement. Figure 12 details the objectives and performance measures of these two strategies.Figure 12 dodge OverviewStrategyObjectivesPerformance MeasuresPeople processesAim Improved stakeholder brand image profitabilityUtilise databases.Improve service delivery efficiency.Improve internal communication.Implement effective review monitori ng.Profit margin increase of 2 3%.Increase repeat purchasing by 25%.Increase customer recommendation from 59% (2007/08) to 70%.Improve employee survey rate from 35% (2007/08) to 80% (Value Chain).Technological advancementAim Customer Loyalty Market ShareFollowing chronological succession with test internet implementation, roll out internet on-board internet access.An appropriate pricing strategy involving complimentary service for first class whilst targeting business class as the most profitable market.Continued market research to ensure that this is a valued service and seek opportunities for further development.Install equipment on rest 244 aircraft.Increase business class market share by 10%.80% of business class customers purchasing internet usage.Following RD implement 1 new technological service.In order for the chosen strategies to be successful effective implementation is essential to organise and enable success and to manage the changes that will impact BA.8.0 Managing RiskRisk management helps the organization to identify and address the risks facing their business and trying to increase the probability of successfully achieving their businesses objectives.Types of risk business need to faceStrategicComplianceFinancialOperationalThree main risk factors affecting all airline are volatility in jet fuel price, foreign exchange and interest rate risks.Interest Rate RiskBA utilizes swap agreements to manage its interest rate exposure. immaterial Exchange RiskBA manages its Foreign Exchange exposure. Any surplus of foreign currency is sold at spot or forward for US dollars.9.0 EthicsAn ethics strategy should be concerned with ensuring that all corporate activities are ethical, legal, and within all regulatory guidelines.An ethics program is more likely to be considered effective if it includes the following components1)Statement of ValuesThe creation and communication of a statement of organizational values is considered to be necessary guidance.2)Code of pick outA code of conduct or an ethics policy that communicates a commitment to ethical behavior throughout the organization, and explains how these values are to be utilize in representative situations.3)Executive Leadership and a SystemA plan and systems for the communication, monitoring, and enforcement of the Code of Conduct. Important consideration in this respect, includeRichard Bransons success in forcing British Airways into adopting a Code of Conduct is a warning to companies that do not have a code that they ought to consider adopting one and to those that do that they should make sure it works. Without an effective ethical policy, a company cannot be sure that ethical judgments made by employees are consistent with the strategy of the company and are made at an appropriate level within it.Ethics protects the reputation of the company. British Airways is a classic example, where large amounts of marketing investment in image were undermined by the publics perception of its actions.British Airways experience shows that management may be deluding themselves if they consider that all employees in a company will adopt their values and the strategic importance of ethicality by absorbing knowledge from superiors.10.0 Strategic V Operational ConflictWhile strategic and operational planning both offer beneficial aspects, there are some key differences that should be understood. Strategic planning is the formal process of defining the requirements for delivering high payoff results, and for identifying what, and how, to get from current realities to future ones that add value to the organization. It is not rigid nor lockstep, but rather a self-correcting set of defining requirements and relationships for stating what is in terms of results, and moving ever imminent to what should be the results and payoffs.Strategic Planning is long term planning undertaken by senior management (i.e. the executives). It involves making decisions which will work toward reaching an organisations mission and imagination statements.Operational planning is day to day planning undertaken by front line managers. They report to middle management and enact the leg work of the strategies developed by middle management to achieve strategic goals.11.0 RecommendationAlthough strong and justified strategies have been created within the confines of the report there are a number of issues which BA should take into consideration when implementing the proposed strategies. These are considered briefly below.11.1 FinancialBA should not have much trouble in implementing these strategies. With an increasingly lower gearing ratio and better liquidity they should be able to secure some funding from financial institutions and obtain the rest from retained profits. However, with the current economic conditions, it will still be difficult to obtain funding and BA will not want to increase its gearing too much.11.2 PeopleThe recommended strategy to improve relations will r equire full support from BAs workforce. As a highly unionised workforce, success in changing the employment relationship will be determined by BAs ability to work efficiently with each recognised union. In regards to implementing change, due to BAs history and size the company may experience organisational inertia or myopia. Again, improvements to customer relations may be hindered by an uncooperative workforce, highlighting the importance of ongoing training and support. Similarly, a technological stance will require BAs employees to develop service knowledge, and it is imperative for the organisation to support them in doing so on a continual basis.11.3 LegalThe use of Wi-Fi on planes is already allowed by the aviation regulators in the UK, Europe and Rest of the World. However, regulatory approval must be achieved before it can be implement on planes flying to/from USA (Wlanbook, 2008 Row 44, 2008). The use of external legal consultants should be used when implementing both stra tegies to ensure that legal requirements are met, especially when performing internal and external surveys and the confidentiality of data.11.0 ConclusionAs a result of the external and internal analysis a number of strategic options were proposed. It was concluded that a feature strategy approach to improve service quality was deemed most suitable. Due to the current industry climate we have chosen a strategy to unify BAs position as market leader.Due to the scale and scope of BAs operations it was decided that the focus of this report would be on scheduled passenger flights. We would recommend further strategic analysis to implement SBU level strategies.Due to lack of primary research and restricted access to company information there may be limitations in our findings and recommended strategy, however we believe that if the general direction of our suggested strategic intent is followed it will lead to lead to success.ReferenceJohnson, G.and Scholes, K (2002) Exploring Corporat e Strategy.6th Edition.London, UK prentice Hall.Kathleen B Hass, Richard Vander Horst, Kimi Ziemski (2008).From Analyst to Leader Elevating the Role of the Business Analyst Management Concepts, 2008.ISBN 1567262139. p94 As the discipline of business analysis becomes professionalizedHYPERLINK http//www.theiiba.org/Content/NavigationMenu/Learning/Bodyo