Business Policy and Strategic Management - Case Study Example

British Airways BRITISH AIRWAYS Overview of the Company British Airways is one of the largest airline in the United Kingdom. Other than scheduled services, the company is also involved in the operations of domestic and international carriage of mail and freight, and the subsidiary services. British Airways flies to over 300 destinations together with franchise and codeshare partners- carrying nearly 30 million passengers. With profits of over eight sterling pounds, British Airways boast of being the largest employer in the UK with over 40,000 employees Since the company was privatized in 1987, British Airways has continuously grown along with the rising competition in the airline sector over time. Currently, British Airways has been branded as one of the first airlines in adaptation of green technology and environmental friendly strategies. British Airways was among the leading companies to be among the schemes of European Countries decreasing greenhouse emissions. In addition to the innovative improvements towards the ways in which passengers fly, the company has also undergone huge revolutions. The passengers can print their own boarding pass thanks to British Airways. Among other developments initiated by the airline is the ongoing developments in Heathrow airport which is the busiest airport in the United Kingdom The 2008 economic crisis affected the airline in terms of revenue. Nevertheless, with the recent mergers changes and in air trade regulations and policies, the company’s future is bright and there are a positive sign for British Airways both in domestic and foreign markets. The annual report of the company has always emphasized on how much the company would wish to become one of the best responsible airlines in the world and designing of the guiding principles together with careful strategic direction will ultimately allow the achievement of the desired goals (Porter, 2002) British Airways falls under airline industry. Some of the company’s stakeholders include: Customers-even though customers are the greatest source of the company’s profits, they have less impact on how the company is being managed. British Airways wants to maintain the existing customers and attract new customers. Employees-they have the ability to influence the customers. The reduction the company has to make, though, leads to employee dissatisfaction. The cabin crew have mostly expressed their demands through strikes and go-slows Competitors-British Airways is the leading airline with a turnover of £8.99 billion per year. Though British Airways is the market leader, airlines that adopt low cost strategy can affect decision making of the company Suppliers-Airbus and Boeing are the key suppliers of the company. They have many interests and a huge effect on the company and vice versa. British Airways has only a single supplier of fuel which shows that it has some power in decision making process. The company also depends on online travel agents like expadia.co.uk, cheapflights.co.uk and lastminute.co.uk. In most instances people buy from such websites since they are always convenient and cheaper (Sekhar, 2009). Media- the media has some impact on the company’s corporate image, mostly when covering cabin crew strikes. The company is trying to be in a good relationship with the media so as to be in good terms with the public. Environmental factors of PESTLE Political factors In my opinion, this refers to the political stability of any business environment and the attitudes of political movements or parties. It is mostly seen in the influence that the government has on tax policies, or the involvement of the government in trading agreements. Political factors are unavoidably intertwined with legal factors like mergers and monopolies rules, consumer protection, national employment laws and international trade regulations and restrictions. According to me, the difference between political and legal factors is that political factors majorly deals with approaches and attitudes, while legal factors on the hand are those which have become laws and regulations. Legal regulations have to be adhered to while political represents restrictions, influences, opportunities or restrictions, but they are not requisite Economic factors This represent the entire economy and may include levels of employment and unemployment, growth rates, cost of raw materials such as petrol and steel, energy, interest rates, inflation rates, exchange rates, exchange rates and monetary policies. These varies within various countries Socio-cultural factors It represents the culture of the society in which an organization operates. It comprises of age distribution, demographics, population growth rate, wealth distribution and social class, education level, lifestyle and living condition. Technological factors This refers to new developments and inventions, changes in information and mobile technology, government spending on research, changes in internet and e-commerce. There is a tendency to emphasize so much on technology developments on internet and digital related areas, but it also include new methods of manufacture and material development, distribution and logistics Environmental Impacts-include issues like waste disposal, scarce natural resources and procedures of recycling. Environmental factors that might affect the performance of British Airways Economic According to me, the global recession experienced in 2008 affected several businesses in UK and also airline industry. Since 2008, the worldwide annual growth was expected to be 2%. The weakening of the pound against Euro affected UK based British airline. There was a decrease in oil prices by almost 50% during the year 2007. Since UK was the first superpower nation to be hit by the collapse of the economy together with US, consumer spending also sharply contracted in a period of 13 years. This trend has never changed for the past five years. Cost reduction measures by both individuals and businesses has lowered the number of passengers for the past five years (Porter, 2002). Political Air control and safety security has improved in safety and anti-terrorism actions from September 11, 2005 at the time of London bombings and the US hijacking. In addition, full airline restrictions and regulations on scheduled passenger over UK region has affected most airlines in operation within Europe. Conforming to new rubrics is very critical if British Airways need constant and profitable operations. Similarly, security measures is a vital portion since consumer’s confidence in an airline is to consider the ability of the airline’s to assure safe journey without anomaly incidences like hijackings and bombing Technological A recent survey carried out showed that 34% of online customers are anticipating to utilize price comparison places more with online services increasing since 2009 (Sekhar, 2009). Likewise, online booking and check-ins services are growing amongst the standards of the industry where several competitors are using it. British Airways have to be eventually technologically aware in order to avoid over reliance on technology that is based consumer marketing at the expense of other markets. The company should put in mind the fact that even the old generation comprises of people who purchase tickets and check-in procedure in the offline way Social UK has an elderly population an indicator which is not good. Similarly, the world’s economic depression has led to the high rate of unemployment that has never been seen in United Kingdom for some years. I think with the growing elderly population, British Airways can identify an opportunity in that the older generation comprising of older people who are willing and able to travel and take long vacations. With the increase of the unemployment rate, price bargaining and comparisons across the competitors are expected to increase. Environmental/ Ethical factors New environmental policies like energy consumption and control of noise pollution was introduced between 2009 and 2010. Heathrow airport, which is British Airways home turf and the busiest airport in the world is becoming overcrowded with the permission to finding more space for expansion not showing any positive sign. Newer environmental issues and regulations pertaining acquisition of land will upsurge the costs of operation (Sekhar, 2009). Existing consumers are becoming environmentally conscious and are looking for signs of ethical policies concerning the environment when selecting products and services. Environmentally-friendly policies are among the largest marketing trends of the current years. Legal factors Legal concerns have increased in the form of setting of prices between like-minded competitors with the aim of responding the range in consumer preference, in terms of pricing. In the same way, legal disputes that comes as a result of industrial actions by cabin crew that happened before creates unstable legal environment for the company. The Open Skies agreement in 2009 was regarded as a chance for the company and the competitors to offer free aircraft transport between Europe and United States. The merger between American and Airline British Airways saw several legal proceedings that were costly and caused unnecessary disruption from the main business objectives (Varbanova, 2013). How the companies should respond to external environmental factors Considering the effects of the external environment is one of the vital aspects of any organization and it comprises of how organizations adapt to uncertain conditions, purchase external resources and compete with others in the market. Since British Airways operates in an environment affected by political, environmental, legal and ethical issues, I propose that the policy makers should prioritize in adaptability over a functional and rigid strategy. Furthermore, the company should adopt a low cost strategy so as to benefit from a simple and fixed operational approach to its activities. Considering the external environment is an important aspect of organizational design. According to complexity theory, organizations have to adapt to an environment which is volatile. In an uncertain environment, the company should prioritize adaptability at the expense of rigid and functional strategy. Acording to Stephan Kaiser, wwhile carrying out external analysis, the company should consider the aspect of competition. Steep competition requires different organizational structures to outdo the completion while focusing on the strength of the company. The company has to carryout environmental monitoring so as to identify the potential shift in the macro-environment. The aim of undertaking environmental monitoring is to gather enough information to determine the past and also the future direction of the company so as to assist in the estimation of potential strengths. Scanning, therefore, assists in the identification of critical trends and prospective events. In order to manage the external environment, the organization should forecast the future by ascertaining the future trends. Policy makers within the organization have to read the gathered information pertaining the environment and use their judgment to estimate the direction, scope, speed, and intensity of change in events and trends. Future performance of British Airways The company has seen its future which includes customer service totally transformed by data to come up with a more convenient and personal interactions between the brand and the consumers. When it comes to technological factors, British Airways spend several years trying to cage all the data pertaining its passengers from over 200 sources into one central database. Its aim is to utilize that information to make the experiences of the customers with the airline rich with value and more convenient. The company will adopt technological approaches like online customization showing direct flights first and this will be tailor-made to suit the customer’s choice. When it comes to legal factors, British Airways anticipates that the government will not have a lot of ownership and government support of airlines. Several countries will have their own identifiable flag carrier brand. Iberia and BA will survive as brands in a mother company. When it comes to social issues, I think the company is having a brighter since it has aging population who are willing to take vacation. Increase in rate of employment enhances a lot of bargaining and price comparison which influences buying behavior of the consumer. References Porter, Michael. "The Five Competitive Forces That Shape Strategy." The Harvard Business Review (2002): 234-236. Roney, Curtis W. Strategic Management Methodology: Generally Accepted Principles for Practitioners. Greenwood Publishing Group, 2004. Sekhar, G. V. Satya. Business Policy and Strategic Management. I. K. International Pvt Ltd, 2009. Stephan Kaiser, Max Josef Ringlstette. "Strategic Management of Professional Service Firms." Journal of Theory and Practice (2009): 231-240. Varbanova, Lidia. Strategic Management in the Arts. Routledge, 2013. Read More