Corporate Strategy Assessment: British Airways - Essay Example

?Corporate Strategy Assessment: British Airways Products, Services, Geographic Scope of British Airways British Airways (BA) is reportedly a full-service global organization that focuses on serving the needs of diverse clientele who travel through air. The organization boasts of offering competitively low airline fares and having access to strategic parts of the world. BA books flights to destinations that range from general geographical categories such as Africa, the Caribbean, Europe, Far East and Australia, the Indian Ocean, the Middle East, North Africa, North and South America, South Asia and the UK (British Airways, 2012). In addition, the organization offers travel packages that include hotel accommodations, car rentals and choiced options to avail of popular or unique travel experiences. The full service business model was explained as part of the airline business model in an article published by the Air Transport and Airport Research (2008) headed by Prof. Dr. Johannes Reichmuth. As disclosed, BA, being classified as a “full service network carrier” (FSNC) is “an airline that focuses on providing a wide range of pre-flight and onboard services, including different service classes, and connecting flights” (Air Transport and Airport Research, 2008, p. 5). From a strategy standpoint, BA could actually afford offering lowest airfares, as compaired to other airlines due to their application of the full-service business model. As explained, “as the number of origins and destinations offered rises, load factors do the same, yielding lower unit costs per passenger (economies of density). If higher demand justifies the use of larger equipment, unit costs per seat decline (economies of scale)” (Air Transport and Airport Research, 2008, p. 7). Thus, BA could capture the cost-conscious target market, as well as families who include their children in travelling to tourist spots or vacation destinations. Critical Internal Analysis of British Airways Micro (internal) analysis The internal strengths of BA include: (1) ability to offer low-fare due to its application of the full service business model; (2) its fly route that reaches more than 400 destinations (British Airways 2011) and therefore, could cater to a larger number and diversity of clientele across the globe; (3) its home base is in UK, regarded as “one of the largest premium travel market” (British Airways, 2011, p. 2) and therefore ably caters to a predominantly large percentage of clientele who could afford airline fares; (4) validated customer satisfaction as a result of improvements made in terms of punctuality and allegedly attaining baggage targets (British Airways 2009); (5) ability and resources to invest in more efficient and flexible fleet of new aircrafts (British Airways 2009); and (6) ability to adapt and adjust to the demands of the external environment through re-designing strategies and re-aligning organizational SMART goals. On the other hand, there were weaknesses noted in BA’s previously implemented strategies regarding identity branding (Balmer, Stuart and Greyser 2009) where, through the course of its history, BA’s identity misalignments have been perceived by various stakeholders as evolving from being explicitly categorized as “appalling, adjusting, appealing, adoring, astonishing, and affirming” (Balmer, Stuart and Greyser, 2009, p. 9) depending on the its historical timeline. These identity misalignments significantly influenced the organization’s performance, including the exemplified behavior of various stakeholders and how the public acknowledged the different images that they ultimately projected. Structure of the company In 2009, BA revealed in its annual report that the organization was then restructuring its personnel and management portfolio through streamlining. It was disclosed that in 2008, there were managers who voluntarily left under a severance scheme that slashed the management workforce by a third of the total managerial team. As such the organizational structure of the restructured management team appears as Figure 1. The implication of this strategy is that BA focuses on cost minimization and maximizing the potentials of a fewer and leaner management team that would enable them to channel the funds, previously allotted for compensation and benefits of managers, to other strategic areas such as intensifying efforts for exemplary corporate service and “better governance and leadership” (British Airways, 2009, p. 35). To note, this strategy was most useful during the strike that ensued in 2010 and BA had to maximize the potentials of the personnel who were left to man stations and operations that were understaffed pending resolution of the stikers’ demands. Figure 1: Organizational Structure, British Airways Source: British Airways: Annual Report and Accounts, 2009 Current strategy of the company The current strategy is designed to achieve the organization’s vision of becoming the “world’s leading global premium airline” (British Airways, 2009, p. 35). Termed Compete 2012, which as announced in the organization’s annual report in 2009, management indicated that it aimed to create “a leaner organisation with a distinctive, highperforming culture through our flagship change programme, Compete 2012” (British Airways, 2009, p. 35). As the term symbolized, BA was intent to be known as the leader in the global airlines industry, which is currently lead by Qatar Airways (World Airline Awards, 2012). It therefore designed a more effective competitive strategy that would focus on customer service and in cost minimization to generate greater profits. Viewing the same ranking from World Airline Awards (2012), it was evident that BA’s ranking in 2011 was number 44 and was increased to number 28 in 2012. From a strategy standpoint, it was therefore evident that from their identified flagship Compete 2012 program that started in 2009, the ranking in the World Airline Awards (2012) have attested that their vision is slowly being attained. The rationale for the success is a collaboration of streamlining efforts which was instrumental in developing efficiencies in their workforce and processes, as well as in enhancing customer service and satisfaction. This also corroborates Porter’s (1996) discussion on the need to distinguish and differentiate their services from other airlines. Since most of the global airlines companies all fly using the full-service business model, the competitive advantage that BA promoted included providing customers with the exemplary service and value for their money they demand, instead of promoting low prices. From the discussion presented by Gilbert and Strebel (1987), BA apparently employed the strategic shift of focusing on the dynamics of rejuvenation. This strategy has recognized that customers are looking more on the value that they perceive to be getting from a full-service airlines, such as BA, without having to stress the low-cost strategy, that it previously promoted. Likewise, this strategy was most appropriate given that BA was already in the maturity stage of its growth cycle. Having existed since 1919, or for more than 90 years, the rejuvenation strategy is most crucial to spur an intensified drive and infuse new energy to the whole organization. Culture of the company The culture of BA that was supposedly being projected was exemplifying a model of efficiency and professionalism in undertaking the responsibilities required of their personnel’s jobs. Apparently, when the financial crisis, which began in the United States in 2008, affected the global markets, including the UK, through spiraling costs of fuel, the need to streamline operations, retrench personnel, and cut-back on compensation, several employees who are members of a union went to strike. This situation rocked the culture of the organization and created job insecurity, tension, anxiety and low morale. Despite the apparent intent to improve BA’s financial condition and competitive advantage through the flagship program that it announced in 2009, the developments in the external market significantly affected its planned strategies and its operations. Its 2009 annual reports even indicated that the company aimed to create a “high performing culture” (British Airways, 2009, p. 35) which was disrupted by the strike of 2010. From a strategic perspective, these scenarios are indicative of BA having to contend with pressures imposed by the external environment. Despite having designed a competitive strategy that aimed to improve their overall performance and achieve market leadership, forces beyong the organization’s control just had to be addressed. It was at this point that the leaders and the executive members of the management team had to devise responding strategies that would counter the negative effects of the strike and still project a positive image to the public. A culture of perseverance and commitment to the vision was evidently applied. Marketing of the company After the strike, and with the merger with Iberia forged and completed, BA focused on a marketing and promotional campaign that focused on the 2012 London Olympics. Joining the bandwagon, it utilized social media to promote the services being offered. Consistent with Patsioura, Vlachopoulou and Manthou’s (2009) article, BA employed corporate advertising web sites and social networking sites such as Facebook, YouTube, and Twitter, to promote the advertisement campaign entitled “Home Advantage” (Callari, 2012). Again, the organization is banking on the competitive advantage of being an official flyer airline to the London Olympics. The implication of using corporate advertising web sites is to establish virtual relationships with clients through a medium that is predominantly being used. As such, it is banking on the strength of the strong appeal for various clients to use social networking sites, such as Facebook, Twitter, and YouTube, to provide updates and relevant information crucial to the organization’s current strategies. This strategy is thereby related to both context and content as it embarked on its strengths (internal) and the opportunities (external) presented by the London Olympics. Stakeholders Stakeholders for BA are all shareholders, management and personnel, customers, suppliers, external private and public agencies, and the members of society, which have direct and indirect interests to the organization. One of the most crucial strategies implemented by BA is its thrust and commitment to corporate social responsibility (British Airways, 2011). Through promoting their ideals and principles for implementing the Flying Start program, BA actually announced strategies in specific categories such as the environment, the community, their marketplace, and the workplace though programs that look into preserving and conserving the environment, helping local and international communities through supporting educational programs, “recycling, carbon offsetting and supply chain sustainability” (British Airways, 2011, p. 5), and committing to a “One Destination, One Corporate Responsibility programme” (British Airways, 2011, p. 5) that promotes a more unified BA in achieving their defined goals. From a strategy standpoint, the implementation of these action programs indicate the firm commitment to showcase their strengths and competencies in addressing external issues such as climate change and global warming through environmental programs and in sharing to the community. These moves are designed to improve corporate image after the negative setbacks of the 2010 strike. Likewise, the strategies are crucial to address external factors in the macro environment which would prove to the world that they intend to achieve their original vision of becoming one of the global airline leaders that provide value to the customers. History The history of BA was disclosed to have commenced in August of 1919, more than 90 years ago, when the organization’s forerunner company, “Aircraft Transport and Travel Limited (AT&T), launched the world's first daily international scheduled air service between London and Paris” (British Airways: Explore our past, n.d., par. 2). A series of mergers of smaller airlines have paved the way for the organization to assume corporate names such as British Overseas Airways Corporation (BOAC) in 1939; and combining BOAC with British European Airways (BEA) in 1974 eventually creating its corporate name: British Airways (British Airways: Explore our past, n.d). Concurrently, it has just announced that its merger with Iberia was recently concluded and, as indicated, the merger resulted in making the joint organization “Europe's third largest scheduled airline” (British Airways: Stronger together, n.d., par. 1). As abovementioned, the recent strategy of merging BA with Iberia was consistent with the practice of contemporary large organizations that opt to venture into acquisitions and mergers in order to minimize the number of competitors within their scope of operations. As revealed, the implication for implementing such strategy is “to boost profits not by driving down costs but by raising prices. Buying up rivals softens competition and enables firms to charge more” (Land of the corporate giants, 2012, par. 9). Resources The financial results revealed by Thomas (2012) disclosed that BA failed to reach financial targets after Iberia apparently obtained losses from its operations. As noted, “BA made an operating profit of €592m for 2011, but Iberia was nursing losses of €61m at the year-end” (Thomas 2012). The implication of this is that the merger strategy that aimed to strengthen the combined organizations’ foothold in the global airlines industry failed to materialize. Instead of the merger pulling BA to the uptrend, a negative outcome ensued. The sources of the losses sustained by Iberia were pinpointed to be “soaring fuel costs, industrial strife in Spain and continued weakness in the Eurozone” (Thomas, 2012, par. 6) – all external factors beyond the control and internal resources of BA. External Analysis The results of the current research have identified several external factors that impinged on the current operations of BA. First is the global financial crisis of 2008 that started from the United States affected various economies worldwide, including the UK. As such, spiraling costs of fuel caused tremendous strain on the financial performance and net profits of BA. This necessitated the organization to streamline its management force and led to the job insecurity of other personnel. Likewise, external factors such as global warming and climate change forced management to implement environmental strategies to preserve and conserve natural resources, especially promoting their commitment to “air quality, aircraft noise, waste management and fuel efficiency” (British Airways, 2011, p. 5). Pressing need from members of the community in terms of support for educational programs,charity partnerships, and other community service provide them greater strengths in terms of promoting a positive and responsible corporation that shares their resources, as deemed necessary. The implications of these strategies include the provision of a positive corporate image that exhibits commitment to go beyond focusing on financial performance to serving the needs of the society and the world, as a whole. When it announced its vision to become the “world’s leading global premium airline” (British Airways, 2009, p. 35), BA applied the strategic shift which centered on the dynamics of rejuvenation, as abovementioned. There was a need to solidify their corporate strategy and show that they have a competitive advantage over other global airlines through providing value to the customers: serving their holistic needs. The use of appropriate resources in applying strategies on their products or services; in changing their strategy from focusing on low-fare to emphasizing premium and value to the customers; by using promotional campaigns through contemporary medium that have proven to be effective; and by expanding their destinations to other areas through merging with Iberia, BA has continued to exhibit that it is an organization that designs its strategies according to their strengths (internal) and the opportunities or threats (external) that affects its various facets of operations. Until contemporary times, external factors continue to provide challenges that leaders and workers have to contend. In sum, the essence of applying the most appropriate strategy lies in the organization’s ability to re-evaluate their current resources and to adjust and adapt to the changing environment. Reference List Air Transport and Airport Research. 2008. 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