The Strategic Blunders of British Airways at the Heathrow Airport, in Terminal Five - Case Study Example

Introduction: Strategic management is a concept that is not new, in the view of professional managers. In his analysis of the concept of strategic management, Barney and Hesterly (2006) explains that it is a process and approach whereby the objectives of an organization are specified, developed and planned for purposes of attaining and achieving the laid down goals under consideration. Under this definition, Barney and Hesterly (2006) is able to expound on this concept of strategic management by examining the process of the allocation of resources for purposes of implementing programs and policies. This paper analyzes one of the managerial blunders that were taken by a company. This is in regard to the construction of terminal five, at the Heathrow Airport, in Terminal Five. The company that was responsible for constructing this terminal was British Airways. British Airways is the largest airline carrier in the United Kingdom. This is based on the number of fleets it operates, the size of the company, and the international destinations of the company. The intention of the company in constructing this terminal was that it should give it the capacity of increasing its revenue, and improving its public status and image. However, this turned out to be one of the strategic blunders of British Airways. This paper would examine this blunder, in relation to the theories of strategic management. Content and Analysis: Analysis of the Organizations Actions: Initially, the air transport industry was a government owned and managed industry. This is in almost all the countries of the world. However, because of the emergence of capitalism, and liberalization of the economies, various governments began to liberalize the airline industry, and allow for private ownership. This includes countries such as the United Kingdom which has allowed for the private ownership of the airline industry (Barney and Hesterly, 2006). For example, the British Airports Authority is a private company that manages and operates six airports in the United Kingdom, and this includes the London Heathrow Airport. It is at this airport that British Airways decided to construct the terminal five, which was to enable it expand its operations, and increase the number of its passengers. It is important to explain that the airline industry is driven mainly by profits, and this makes it to be one of the most competitive business industries in the world (Fojt, 2006). This is the reason why there is an emergence of other airline companies operating in the United Kingdom, and they include Virgin Atlantic, British Midland International etc. There is also an increase in the operations of other multi-national airline companies such as Malaysia Airlines and Singapore airlines in the United Kingdom (Bluffield, 2014). This is because of an increase in the overall demands of air transport; hence these companies have emerged, to bridge the gap, in the supply of these services. Globalization has also played a role in ensuring that that there is an increased competition within the airline industry. Because of globalization, many people around the world are able to travel, and one of the busiest airports in the world is the London Heathrow Airport. For example, the Heathrow airport is currently servicing about half a million airplanes per year. This includes approximately 65 million passengers within a year, and it has four terminals, which are strained beyond their capability (Vandermeer, 2001). It is based on this factor that British Airways decided to build a fifth terminal at the Heathrow airport. It is important to explain that British Airways is the largest user of the terminals at the Heathrow Airport, and therefore their strained capabilities were not conducive for the company. This is because the company would be losing a losing a lot of passengers, to its rival companies, hence the need of expanding its terminals, so that they may have the capability of increasing the capability of the company, into serving more people. It is based on this issues that the company came up with a strategy of building another terminal at the Heathrow airport, so that it may serve its own passengers, and interests. Hence the building of the fifth terminal, which later turned out to be one of the strategic blunders made by the company. One of the theoretical frameworks, that can best explain this action by the management of the company, is referred to as the strategy into action model (Fojt, 2006). Strategy into action is a theoretical framework that seeks to embed the business process of an organization, by deploying thee strategic goals of an organization. This is at the same time, aligning itself with the leaders of the organization, and its employees. This is for purposes of helping the organization to achieve its strategic intention. One of the major principles of this theoretical framework is the notion that any strategy developed by an organization has to be implemented or translated into action (Walsh, 2011). Before implementing a strategy, an organization has to focus on the process that it would use in implementing the strategy under consideration. For example, the British Airways developed a strategy whereby it sought to increase the number of passengers its terminals could hold. This meant that the company had to identify the processes and mechanisms to use in the building of another terminal, which could have the capability of increasing the number of visitors, whom the company could host in its terminals. This led to the development and the design of Terminal 5 at the Heathrow airport. It took the company a period of 19 years, from the development of the plan, to the actual completion of the terminal. Furthermore, it took the company an actual 6 years, to construct and complete this terminal 5. In implementing a strategy, one of the most important steps is the identification of the vision, and goals of an organization (Bluffield, 2014). The vision of the company is to become the most responsible airline company in the world, while its goals are to be a profitable company, that has the capability of efficiently and effectively serving the needs of its clients. It is based on these goals, that the company made a decision to build and develop terminal 5 at the Heathrow airport. The major goal of this terminal was to be the major hub whereby approximately 70% of all international flights operated by British Airways will use. This would help the company increase its revenues, as well as to meet its costs of operations. Furthermore, the development of Terminal Five would help in reducing congestion, hence making the airline company to efficiently and effectively serve its customers. This means that the company would manage to achieve its goal, of becoming the most responsible airline company in the world. Another important element of thee strategy into action theory, is that the strategy developed, has to be aligned to the goals and vision of the company (Fojt, 2006). This is well explained in the above statement, which denotes that the airline company decided to construct terminal five, for purposes of easing congestion at Heathrow airport, and increasing the number of passengers it could serve. This is for purposes of generating profits. Bluffield (2014) explains that communication also plays a vital role, in ensuring that the strategy of an organization is effectively implemented. For purposes of putting this strategy into action, British Airways involved a number of stakeholders. These included the government, British Airport Authority, its employees, etc. The company communicated this strategy of building a terminal for purposes of increasing its revenues, and limiting congestion at Heathrow airport. However, its communication abilities were not good enough, and this is one of the major factors responsible for the failure of this strategy (Sen, 2008). This is because the management refused to listen to its employees and other stakeholders during the construction of the terminal. This resulted to the construction of a terminal that was not good enough and effective in serving the needs of its customers and clients. Hence, the failure of the project, making it one of the most expensive strategic cooperate blunders in the world. However, it is important to explain that the major reason for the construction of the terminal is to help in decongesting the existing terminals at the Heathrow Airport. Strategic Capability and Competitive Advantage: Strategic capability is a theoretical framework which denotes that a business organization has the capability or ability of effectively and successfully employing the competitive strategies which would allow it to increase its value, and survive, over a given period of time (Vandermeer, 2001). It is important to understand that strategic capability normally does not take into consideration the strategies that a business organization uses. However, it focuses mostly on the resources, market position, and assets of the organization, and how well the organization is able to use these resources for purposes of facilitating its business operations. Furthermore, there isn’t any single method that can be used for purposes of measuring the strategic capability of an organization. British Airways has an enormous strategic capability, and its major strength is the number of airplanes that the company is able to operate. The company has more than 200 aircrafts, and they are able to fly to more than 500 destinations of the world (Reddy and Appannaiah, 2010). Furthermore, the company has training schools, which is responsible for training pilots, its cabin crews, and other members of staff. Because of the existence of these schools, the company had the capability of training its employees, and imparting in them, the required skills, to help in advancing the interests of the organization. Employees of an organization play an important role, in ensuring whether the organization under consideration succeeds or fails. Without an efficient workforce, chances are high that the company may not get the capability of achieving its objectives. Hence the need of creating schools, that could help in training its employees on the required skills. On the other hand, the high number of fleets under its control means that the airline can carry many passengers, and hence it could be limited on the terminals where the company could allow its passengers to use. Because of the large number of the fleets under its operation, British Airways managed to use most of the Terminals at the Heathrow airport, hence the need of building another terminal to carter for its interests (Bluffield, 2014). The use of these resources enabled the company to achieve a sense of competitive advantage over its peers or rivals. This is because companies such as Virgin Atlantic did not possess the manpower, or the financial capability of British Airways, to effectively challenge the company in its domestic routes. Furthermore, because of its large size, British Airways had the capability of attracting capital at a cheaper rate. This is one of the major reasons that the company was able to raise approximately 4.3 billion pounds in the construction of Terminal Five, at the Heathrow Airport. Therefore, the major competitive advantage that the company had, against its rivals, is the large number of airplanes under the control of the company, and the large number of destinations that the company’s airplanes are going to. Organizations Performance: Benchmarking. On the inception of Terminal Five, the project was unable to solve the problems of decongestion at the airport. For example, the escalators of the building refused to work, baggage workers were also understaffed, resulting to a backlog of baggages, and there was a delay in flights. This means that the construction of the terminal was a failure, and this was mainly attributed to the inefficient communication strategies of the organization. Bluffield (2014) explains that for this to be a success, there was a need of the company engaging in benchmarking initiatives or activities, as these would have enabled it, to come up with good and better strategies of correcting the blunders associated with the construction of the terminal. Benchmarking is a process whereby a company would compare its performance as per the established metrics, and initiate ways of improving the performance under consideration (Walsh, 2011). This process is specifically used under strategic management, and it is efficient in identifying the various weaknesses of the organization, and coming up with policies and methods of correcting these weaknesses, while at the same time, improving on its strengths. Conclusion: The construction of Terminal Five was one of the strategic blunders by British Airways. This is because the major aim of its construction was to reduce congestion at the airport. However, at the inception of the project, the facility experienced a series of malfunctions that made it difficult to reduce congestion at the airport. In fact, because of the malfunctions, there was an increase in congestion. This is because there were delays in flights, accelerators were broken, and it was difficult to clear baggage’s, at the entry and exit of the airport. This means that the facility failed to meet the aims and objectives of the company. However, before the development of the facility, British Airways was the dominant company at the airline, and it occupied most of the terminals at the Heathrow airport. The company had a strong strategic capability, of its large number of airplanes, and the large number of destinations that its planes transport passengers. Through its size, the company managed to gain a competitive advantage over its rivals, and it was easy for it, to raise capital, for purposes of transacting its operations. However, poor planning and communication of its strategies, resulted to the failure of thee Terminal Five, and hence there is a need of proper benchmarking procedures to correct these errors. Bibliography: Barney, J., & Hesterly, W. (2006). Strategic management and competitive advantage: Concepts and cases. Upper Saddle River, NJ: Pearson/Prentice Hall. Top of Form Bottom of Form Bluffield, R. (2014). Over Empires and Oceans Pioneers, Aviators and Adventurers – Forging the International Air Routes 1918-1939. Havertown: Tattered Flag. Top of Form Bottom of Form Fojt, M. (2006). The airline industry. Bradford, England: Emerald Group Pub. Top of Form Bottom of Form Reddy, P., & Appannaiah, H. (2010). Business management (Rev. ed.). Mumbai [India: Himalaya Pub. House. Top of Form Bottom of Form Sen, M. (2008). Business management. Jaipur, India: Oxford Book. Top of Form Bottom of Form Vandermeer, R. (2001). The Heathrow Terminal Five and associated public inquiries:Topic report 1 : The need for terminal five. London: Dept. for Transport, Local Government and the Regions. Top of Form Bottom of Form Walsh, C. (2011). Airline industry strategies, operations and safety. New York: Nova Science. Read More