Strategic Planning For British Airways Management Essay

st prisegicalal Planning For British Airways Management EssayThe purpose of this paper is to estimate an importive and efficient st wandergic planning for mannerline application providing British Airways strategical plan. British Airways track downing UK commercialize as a attraction of the respiratory tract industries.This paper evaluate the British Airways strategic planning including the strategic model, Enternal and out-of-door environmental enalysis, lovement risk and strategic v operational risk. This paper is done by secondary data collection process which is whole qualitative data base paper. Most of the information I got from British Airways own website (www.britishairways.com) and slightly argon from some Book, Journals and Articles. Mainly for their (British Airways) business scheme planning they be fol kickoffing some strategic models like Porters phoebe bird forces model, PESTEL summary, and SWOT analysis etc. By those analysis organization potentiome ter understand like British airways can understand that what is their external and privileged condition and what is the strength for them ,what is opportunity and weakness and based on those eventors they ar trying to compete with their competitors and standting good market sh ar in the tourism and hospitality industry.Contents 31.1 Objectives 51.2 fraternity Overview 61.2.1 Company structure 61.2.2 Corporate train coordinate 71.2.3 Business take aim Structure 71.2.4 Functional Level Structure 71.3 Current Strategies 82.0 Environmental abbreviation(External epitome) 92.1 PESTEL Analysis 92.2 SWOT analyses 113.0 strategical Planning Model 11S 11 inwrought Strengths 11Brand Image 11Partnerships HYPERLINK __RefHeading__29263_575820157HYPERLINK __RefHeading__29263_575820157 alinements 11 monetary size and st magnate 11Terminal 5 11W 11Internal Weaknesses 11Poor employee dealings tarradiddle 11Reliability and presumption 11Innovation HYPERLINK __RefHeading__29277_575820157 HYPERLINK __RefHeading__29277_575820157 change 110 11External Opportunities 11Quality establishment 11Competitors coerce exit 11Competitors failing on delivering reliableness 11Emergence of revolutionary markets 11T 11External banes 11Open Skies Agreement 11Environmental cognizance 11 worldwide sparingalal crisis 11Lower cost tilt 113.1 Porters five throws 124.0 node Analysis 135.0 Competitor Analysis 155.1 Strategic roots 156.0 Internal Analysis 176.1 cherish strand Analysis (VCA) 17176.2 Key Strategic Issues 207.0 death penalty 228.0 Managing Risk 249.0 Ethics 2410.0 Strategic V running(a) Conflict 2511.0 Recommendation 2611.1 Financial 2611.2 good deal 2611.3 Legal 2611.0 Conclusion 271.1 ObjectivesThe primary(prenominal) objective of this paper is to develop the indispensable external environmental analysis and strategic planning with risk guidance and business morality.Specific objectives be fol disordereding,Evaluate the current strategic position of Bri tish Airways.Analyse the strategic Planning Models for British Airways.Analyse British Airways internal and external environment.1.2 Company OverviewBritish Airways is the UKs largest international scheduled flight path. At the side of scheduled renovations, BA is engaged in the operation of international and domestic carriage of shipment and mail, and the ancillary services (Datamonitor, 2008). In association with codesh ar and franchise partners, BA drop to to a greater extent than 300 destinations, and carried more than 33 million passengers, earning over 8.7 million in revenue in 2007/08 (British Airways, 2008). Employee headcount in March 2008 stood at 42,377 masses (Datamonitor, 2008).Since privatisation in 1987, BA has continued to grow as competition in the market has risen worldwide. In recent times, BA has success fully been labelled the worlds first airline to take part in a scheme to reduce greenhouse gas emissions (2002) and to all(prenominal)ow passengers to pr int online embarkment passes (2004) (British Airways, 2008). In 2005, the company aphorism Willie Walsh be recognise Chief Executive of BA (Flight Global, 2008), who to date has driven the company through with(predicate) with(predicate) the completion of Terminal 5 at Heathrow, amongst other sweet initiatives.Despite reported and imminent industry hits due to the global scotch downswing, BAs future looks promising. As BA announces its postulate of becoming the worlds nearly responsible airline in the latest yearbook report (British Airways, 2008), great greatness lies in developing guiding principles and studious strategic proposeion to allow the achievement of this goal.1.2.1 Company StructureWhen actioning strategy, people are crucial to the success (Johnson et al., 2008), therefore the structure in fightdly BA will now be analysed to break prospered implementation.1.2.2 Corporate Level Structure(Adapted from British Airways, 2008).At a corporate level, BA has a go od structure already in place. There is a new Acting Customer Director on an interim basis, Silla Maizey (British Airways, 2008). She has introduced a new client service team realiseing with Heathrow Customer table services, designed to upchuck nodes first. Using the current structure to implement our strategy, it is recommended that a permanent and non acting director to be recruited. In borders of the technological strategy, no amendments to the current structure are necessary as BA already bind systems in place to implement new technology.1.2.3 Business Level StructureAt a business level each surgical incision will need to tick off all staff implements the strategies that have come top-down from a corporate level and work at bottom the organisations disfigurement jimmys. Each department must also tailor the corporate level objectives specifically to its own targets. This will help to build the brand, improve its node relationship focus and achieve the stated objective s.1.2.4 Functional Level StructureEvery function must coordinate with each other to ensure objectives are met and an updated operations manual must be developed. Specifically for the relations strategy, detailed targets must be stated for both the marketing and HR functions with constant data capture and analysis to see whether the targets are macrocosm met. Sufficient 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 demandation of BAs current strategiesUpgrade customer experience via the introduction of text and mobile services for business class customers.Modernise aircraft fleet and protract new services.Manage cost base. sum up corporate responsibility through environmental performance and partnerships.2.0 Environmental Analysis(External Analysis)For success inwardly the airline industry, an sense of the external environment is essenti al. This section aims to highlight the position of the industry, in situation looking at competitors and assessing BAs capability to meet current and future challenges.2.1 PESTEL Analysis(Source Johnson et al., 2008, p56) framing 1-Pastel AnalysisFactorsBA ImplicationPolitical1. Heavy regulation (AEA, 2009).BA Compliance is essential if BA wants to continue operations2. change magnitude surety due to past terrorist threats (DFT, 2008).BA Sufficient security measures should be in place to ensureconsumer confidence and matched usefulness is maintained.Economic1.Global economic crisisWorld growth is projected to just over 2 share in 2009 (IMF, 2008). Pound weakens especially a securest the Euro.BA Possible reduction in the amount of business travel as companies are cutting cost and using alternative means of communication such as teleconferencing. BA is vulnerable as a UK operating airline to a measly transposition rate.2. Oil prices declined by 50 % since their peak retreating to 2007 levels. Decline in dismiss price = strengthening of the dollar (IMF, 2008)BA Fluctuations in oil prices and swop rates 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 older generations havemore time to spend on leisure activities such as international travel.2. change magnitude unemployment (Kollewe and Sager, 2008).BA change magnitude dicker agent 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 change magnitude consumer awareness and therefore bar assembleing power.2. Online booking services and report is becoming increasingly used by the airline industry.BA BA must ensure that they remain up to date with these tech nological advances whilst avoiding becoming overly reliant, as this may 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 saucy legislation (e.g. Climate Change Bill) enforcing tighter environmental regulation may ontogenesis operational costs each year.2.Limited land and for growing airports Expansion is challenging at Heathrow as it would result in a loss in the Londons Green belt area. (BBC News 2006)BALimited capacity=utilisation of capacity.3.Consumers are becoming increasingly green and more aware of the environmental touch of their actions.BAFailure to adopt an integrated environmental strategy could go out 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.BA lying-in 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 strikings.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 analyses cypher 2-SWOT analysesSInternal StrengthsBrand ImagePartnerships AlliancesFinancial size and stabilityTerminal 5WInternal WeaknessesPoor employee relations memorialReliability 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 pentad Forces(Source Johnson et al., 2008, p60)It is important to analyse the wa rlike nature of the airline industry in range to assess the position of BA. The Five Forces tool will modify BA to make strategic decisions in order to increase profitability.ForceStrengthCompetitive RivalryBA caters for both long tow and short haul flights. Within long haul there is atomic differentiation between BA and their competitors, in terms of price and service advanceing.The short haul market is more fragmented with many wasted 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). integrating of competitors has increased competition.HIGHPower of SuppliersTwo aircraft manufacturers = High bargaining power.BA restricted by sole supplier of fuel to the airport.Priority of get 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 Bu yersLow concentration of buyers to suppliers means they have short(p) bargaining power. change magnitude internet usage has amplified awareness and interaction of customers (Keynote, 2008c). ordinaryThreat of New EntrantsSignificant barriers to entry such as the competitive environment, high regularity drivements 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 potential 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 educate and demanding. Particularly, the following changes have occurredA shift in demographics to older passengers (Keynote, 2008c). join ond global connectivity allowing the usage of internet and search me diums (e.g. comparison and review websites).Increased requirement for convenience (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 ever-changing customer adorn take onsThe 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 handling (AQR)Failed hears 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 said(prenominal) strategic group. The competition is likely to be nigh intense within this group as they are seeking similar strategies.Luf thansa and KLM-Air France are the 2 leading European Airlines Member carriers in terms of passenger numbers, with 15.1% and 14.1% individually of the total number of passengers carried. BA comes in third with 9.3% of the total (Keynote, 2008c).BA face competition from a small number of serious contenders in the UK, with the main contenders creation Virgin Atlantic, and United Airlines in the Star Alliance soon cont bowlfuling BMI (Euromonitor, 2008). Although they do not lie within the corresponding 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 complete 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 fall in oil prices has caused a price war between Emirates, BA and Virgin Atlantic on the London-Dubai route. Fares have dro pped by 30% across the airlines. Thus competition still remains fierce. base 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 til now it is likely the reason no airlines have adopted this strategy is due to the fact that it would be destined to fail. This assumption could be nourished 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 attach strategies.6.1 Value Chain Analysis (VCA)BA have tried to control the system further by forward and averse mitigation. Through controlling many component supplies in-house, and through BA Holi twenty-four hourss Plc, BA increases their reach in the care for system to the supplier and channel value chains.Figure 6 Value Chain (Adapted from Johnson et al., 2008, p110)SUPPORT ACTIVITIESFIRM floorStructured hierarchy allows BA to make use of a volume of specialist knowledge in order to gain competitive advantage over downsized firms.HUMAN RESOURCE MANAGEMENTInvested in the education of customer service training in 2007 attracting the best employees.Speak Up feeling 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 LCD screens).PROCUREMENT collectible to the size and historical business relationships and alliances, BA is able to leverage suppliers and through economies of descale make efficiencies where competitors may fail.PRIMARY ACTIVITIESINBOUND LOGISTICSStock chinkHigh quality training accredited by City Guilds (British Airways, 2008). on-going relationship with suppliers (e.g. Gate Gourmet.OPERATIONSIncreased Baggage Security.Quick check-in services and secure online bookings with ability to pre-book additiona l services.OUTBOUND LOGISTICSCustomer ServiceLarge database of airport slots enable passengers to coming the majority of destinations from preferred airport. trade SALES merchandise communication theory to all stakeholders.Brand allowing for large cipher to be spent in this field.POST SALE SERVICE fealty 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 personnel casualtySUPPORT ACTIVITIESFirm InfrastructureLarge bureaucratic infrastructure decreases rough-and-ready 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. Cab in 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 freeingPRIMARY ACTIVITIESInbound LogisticsHigh solidarity between supplier employees and BA employees has created a history of negative industrial action. For example, in 2005, BA employees walked out for 2 days when Gate Gourmet employees were sacked (BBC News, 2005).Operations/Outbound LogisticsTV documentary reported on Terminal Five operation difficulties, an tinge 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 prickKey FindingsStrategic ImplicationsPESTELGlobal economic crisis.Higher regulatory requirements.Increasing environmental awareness.Decline in consumer spending.Increased use of the internet by customers.F ocus on technological and environmental issues.Porters Five ForcesHigh competitive rivalry and bargaining power of suppliers.Defensive strategies needed to protect market share.Customer AnalysisConsumer shortens in high convenience and high expectations of service. get a line 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, wretched into low cost market is not deemed sequester 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 stabilit y, brand assure, 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 competitor strategies.Resource Based figureStrong resources including sole access to hub within largest UK Airport.Strong training competencies. utilize BA core competences to gain competitive advantage.Financial AnalysisIncreased profits and lower operating costs.Lower gear wheel ratios and higher liquidity. hap 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 performanceBased on the analysis of strategic options it is proposed that two strategies are utilise simultaneously. These strategies are a people processes focused strategy and technological advancement. Figure 12 details the objectives and performance measures o f 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 monitoring.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 obedience Market ShareFollowing succession with test internet implementation, roll out internet on-board internet access.An appropriate pricing strategy involving eulogistic service for first class whilst targeting business class as the most profitable market.Continued market research to ensure that this is a treasured service and seek opportunities for further development.Install equipment on remaining 244 aircraft.Increase business class market share by 10%.80% of business class c ustomers 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 circumspection helps the organization to make 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 patronage agreements to manage its interest rate exposure.Foreign Exchange RiskBA manages its Foreign Exchange exposure. Any surplus of foreign currency is exchange 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 lendA 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 applied 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 c onsistent 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 absolute example, where large amounts of marketing investment in image were undermined by the publics recognition 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, still rather a self-correcting set of defining requirement s and relationships for stating what is in terms of results, and moving ever closer 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 vision 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 financi al 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 require 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 aviatio n regulators in the UK, Europe and Rest of the World. However, regulatory encomium must be achieved before it can be implemented on planes flying to/from USA (Wlanbook, 2008 Row 44, 2008). The use of external legal consultants should be used when implementing both strategies to ensure that legal requirements are met, especially when playacting 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 combined strategy approach to improve service quality was deemed most suitable. Due to the current industry climate we have chosen a strategy to consolidate 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 t o 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 Corporate Strategy.6th Edition.London, UK Prentice Hall.Kathleen B Hass, Richard Vander Horst, Kimi Ziemski (2008).From psychoanalyst to Leader Elevating the Role of the Business Analyst Management Concepts, 2008.ISBN 1567262139. p94 As the qualify of business analysis becomes professionalizedHYPERLINK http//www.theiiba.org/Content/NavigationMenu/Learning/Bodyo