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Corporate Strategy - Assignment Example

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Corporate Strategy

While Alitalia, a two-third state-owned enterprise was beset with labour union problems and was almost teetering near bankruptcy with net losses of 519 mn in the close of 2003 (its auditors refusing to certify its results!) (Source:ICFAI), BA was also consistently making loss in the 1980's until an ambitious privatisation programe slowly changed its fortunes by the onset of the Gulf War. BA also suffered extreme negative publicity due to some failed campaigns against competitor Richard Branson's Virgin Atlantic, facing lawsuits worth 3 million (Soure:Wikipedia), not to mention trade union problems, strikes etc. which continue until this day.
The scenario is far more encouraging today. British Airways despite some steady hurdles like high oil prices, and a strong pound, have maintained profits since privatisation and quite consistently, since 2002. Its net profit for March 2006 stands at 529 mn (Source:Hemscott). With the relentless pursuit on upgrade of fleet and service management, the loss-making Giant has transformed into a lean, mean machine. As for Alitalia, losses are down at 200 mn in 2006 amid continued shutdown fears. (Airwise)
Turnaround roadmap
Organisationally, both airlines have changed for the better. While the British Airways is a newly-revived private major, Alitalia also has reduced government stake from two-thirds to about 49% (Airwise). Over 23,000 jobs were slashed in the 1980's during BA's get lean mission (Wikipedia). As for Alitalia, its decision in Sept 2004 to cut down over 5000 jobs brought it to a standstill due to a more hostile labour union, although the management announced March 2006 that its cost-cutting measures were 80% over. Alitalia, in 2001 became member of Europe's conglomerate Sky Team Alliance, as is eventually bracing for a merger with Air France and KLM (wikipedia). BA has reinvented itself around localising itself in the Asian market, by launching in 1995 a subsidiary called British Asia Airways in Taiwan replacing its traditional Union tailfin for a Chinese character emblem. BA also launched a low-cost airline called Go in 1998, and is thus better prepared, organisationally, to lead itself into the future (wikipedia).
Most corporate strategies swiftly achieve results after what is known as situation and SWOT analysis, and brainstorming for a solution. BA started conducting "scenario workshops" in Feb 1994 (Moyer, K). The task at hand was to capture current scenario so that future strategy could be planned. Over 40 interviews were conducted with senior managers, and then with academics, engineers and aircraft manufacturers on a host of topics from IT and air transport regulations. All this culminated into developing teams writing the "official future" of the airline. Simultaneously, data on passenger traffic, economic growth and aircraft ...Show more

Summary

This case study revolves around the turnaround stories of two of Europe's flagship airlines that are nothing short of national emblems; British Airways (BA) and Alitalia of late, have faced stiff competition, from low-cost airlines abroad…
Author : abbie28
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