Abstract
After an extensive study on pertinent issues on British airways, the report brought to book strategic commercial challenges facing the BA Company particularly after profits started plummeting after 11 September attacks. commercial challenges facing the giant BA company include, turbulent global economic times, competition from cheaper Asian airlines, unpredictably rising fuel prices, environmental, mass industrial actions by employees as envisaged in a BBC news report(2010), strategic management plans, and threats from other cheaper alternatives such as railway transport.
It was reportedly determined and recommended that company employees be treated fairly and be included in decision-making according to (Marketing plan strategy and objectives,1997).
Elimination of wastes, was recommended and that management strike a balance between sustainability and environmental issues, improved strategic planning for sustainability, employee productivity, and sustainability and increased performance as coined by (David, 1989). In addition, the report presents a SWOT analysis of the company to help determine the diagnosis for problems plaguing the company especially on employee unrests (Thinking Managers, 2010).
Introduction
Synonymous with air travel, British Airways is a strong international brand that has been in the air travel business since its inception in 1947. The company, a key player in the industry has undergone radical changes, made high profile decisions at managerial levels deemed controversial and at times attracted mass industrial actions by its employees.
In addition, it has had to go through periods of dispute resolution in the industry. The company faces diverse strategic challenges that the report evaluates and provides a diagnostic approach to the challenges, and reports on how decisions made affects the company, employees, the environment, and as a player in the transport industry.
In addition, the report analyses the key strengths, weaknesses, opportunities, and threats for the company and looks at ways to address these issues while maintaining a strong customer base, a large market share, and market lead. It analyses the company’s corporate social responsibilities, and emphasizes on the worth of these issues in relation to the global economic and environmental challenges as determined by (Bazerman and Moore, 2009).
Problem Statement
Commercial challenges facing the British Airway company including turbulent economic times, rising fuel costs, environmental issues, substitutes, and employee strikes calls has caused it to experience reduced customer base, employee dissatisfaction, and plummeting profits.
Evaluation of the Challenges and Practical Solutions
Challenges
The British Airways is a company that has been in business for a long time since its inception in 1947. With innovative business minded executives, the company has undergone changes both at management and employee levels.
The company’s strategic business interests are global. Despite that, it faces a host of internal and external commercial challenges related to its operations, market position, employee retention, fading customer numbers, cheaper Asian competitors, stringent landing rules in other countries, and environmental issues; all these challenges translating to reduced profitability and market share.
Quinn (1980) determined that these challenges call upon management to make radical decisions to steer the giant company to a realize profits, stay in the market and maintain the lead it has enjoyed over the years. According to Gincell (2004), external challenges faced by the company include alternative and cheaper means of transportation, such as the railroad, and road travel, and turbulent economic times.
For the company to remain successful in the market and continue raking in profits, it has to integrate a strategic plan for that purpose (Plan Your Marketing Strategy, 2010). A strategic plan would make the company win in the current economic times. Quinn (1998) asserts that a well-formulated strategy helps a company win against economic challenges such as plummeting profits, a reduced customer base, and unnecessary costs.
A well-formulated strategy entails certain elements that steer a company to win. BA is resource intensive. Quinn (1998) asserted that a good strategy must be extensively formulated and opponents do a lot of strategizing. In addition, if the management of BA formulates strategies relevant and realistic to the global down turn of many economies and reduced household incomes. It would enable the company utilize its resources efficiently without incurring wastes, according to Baker (2008).
Strategies and Policy goals
Quinn(1998) identifies five levels of strategies, including policy goals, which require that a statement of what the management wishes to achieve both in the short term and long term be laid out. In this case, besides profitability, the airliner has to competitively stay in the market despite the turbulent global economic times.
In addition, the company should formulate policies regarding reduced extravagance on the available resources generated from profits, and adds that a link of strategy and performance was vital (Prescott, 1990). BA is a company that has been in business for many years, to determine whether the new strategies formulated can be measured against profitability of previous years and identify whether they have eliminated wastes or not as explained in the Strategic Management of British Airways Company (2008).
Non-executive directors of the company should also contribute constructively challenge the current strategies and constructively contribute to the development of new and well-formulated strategies.
Quinn (1998) concludes that by implementing well-formulated strategies at the five levels in the company, challenges of economic down turn could be combated to allow the airline stay in the market. These levels of strategy include, policy goals, overall goals of the business concern in line with the global economic down turn where each strategy should work towards achieving the laid down objectives, and that the goals of the BA company be well spelt both at management and employee levels.
According to Dibb, Simkin, Pride and Ferrell (2008), goals and objectives of the company should be specific, well formulated, achievable, within a properly laid down period, while keeping the interests of the company at heart according to (Marketing plan strategy and objectives, 1997).
Measurable objectives
In addition, the objectives set should be measurable to eliminate waste and induce profitability at this difficulty economic times. It was also noted that the goals set by the company be measurable and attract all employee participation to elicit quick response from the management down to employee levels, then to the community.
This done, the management should look at those policies that cannot be compromised and those that cannot be compromised. The paper, Marketing plan strategy and objectives (1997) asserts that managers should be keen about when to implement those policies, strategies put in place to test the strategies if they have worked, where they need adjustments as noted by (Prescott,1990).
BA management should decide on the cost of implementing cost-cutting policies and determine to what extent they have to be implemented and the level, to which they have to be implemented. Some policy decisions are place a business at an awkward position, particularly the decision to cut on salaries or lay off employees.
The management, faced with that cost cutting strategy, at times is in a dilemma. The impact of those decisions have implications of poor decisions on the brand name of the company which translates to reduced profitability, a bad image, consequently leading to a reduced market share and profitability which in the end translates to reduced profits. One decision sparks a chain of events in a business organization.
It is vital for management to make long-term projections of their strategies, and integrate logistical support for their implementations. Despite the economic down turn, there is growth potential for the company. This could result from appropriately formulated strategies, use of efficiently skilled work force to implement the company’s strategies.
Strategic planning
According to Edward and Heller (2006), to steer the company and vigorously make it a leader in the market, a strategic plan could enable it develop a large overall ambition for the company. According to Investor relations (2010), Management at the same time should come up with operational plans that answer the question on how the company should win while operating is an economic environment that is pushing profits down, so uncertain, and facing other competitors in the market.
According to the article, Corporate planning case (1996), the report affirms that the company should endeavor to determine how it will be organized resourcefully to stay afloat, how to respond to challenges such as reduced passenger bookings by initiating intensive marketing campaigns to attract more customers, how to face competitors in the business.
SWOT analysis
According to article on Strategic Management (2002), the company should develop and conduct an internal and external analysis of the company. In addition, the Value Based Management (2009) asserts that despite the strengths, weaknesses, opportunities, and threats faced by a company, it should positively and effectively and analyze its internal and external SWOT.
The management of BA should embrace the five stages as asserted by the Value Based Management (2009), including setting long-term performance targets for the company, form the right product matrix, which includes, the suppliers of fuel, and a right marketing mix. By investing on the activities correctly, the company may realize an upper hand against its competitors in the market as is determined in Marketing Plan Now (1997).
It determines that management has to invest in those activities that steer and crest a good reputation for the company. In addition, the company needs outsource other activities that are not core to the business of carrying passengers in the global scenario.
Challenges of employee treat met also play a role in negating on the BA business activities. Management should reduce employee discrimination and grant them equal opportunities. Reducing employee discrimination could reduce largely to which employee find them demoralized, but rather motivate them.
Employees
Despite British airways (BA) being a key player in the air travel industry, it has had to undergo a series of problem that eventually escalated to mass industrial action by its employees. BA has faced internal and external challenges over time.
Some of the problems are self-inflicted while others stem from the environment. One of the self-inflicted problems included the decision to scale down employee salaries. This reduced to low employee morale and attracted mass industrial actions with disastrous consequences. It had adverse effects on customer retention. The company lost many customers who opted for alternative and cheaper means of transportation.
The company is capital intensive. Its operations are expensive in the current economic turbulent times. Fuel for the fleet of its aircrafts comes from an unstable Middle East region. In addition, profit realization depends on the ever-changing prices of fuel in the oil market. In the recent past, fuel prices have soared, causing increased transport costs. This too influenced the number of customers travelling by BA. This could reflect on administrative activities of the company as defined on the article (What is Business Administration, 2008)
Well-implemented practical innovative solutions remain the key to maintaining the position of the Airways Company. Employee satisfaction contributes to a successful business organization. Satisfied employees remain motivated as the worries and anxieties associated with retrenchment, salary reduction, and other forms of lay offs, be they temporary or long term influence employee productivity.
A satisfied and fear free employee may be expected to give the best to the employer by way of productivity and innovation. Dissatisfied employee in business organizations may undermine organizational activities that lead to loss in profitability consequently negating any gains made by the business organization.
Resolutions of worker’s grievances need timely attention. Management may engage employees in speedy grievance resolutions that would curb scenarios like mass industrial action that translates to loss of income in the way of profits. In addition, the brand name of an organization whose employees settle their disputes in the way of mass industrial actions and other forms of boycotts suffers reputation.
BA management has to make deliberate efforts to listen to employee disputes and create excellent channels of communicating their grievances to the management in a timely manner to avoid disputes spiraling out of control (Strategic Management of British Airways Company, 2008).
Alternative Measures
Another challenge facing BA are the alternative low cost airways and the global economic crisis. Profits have ever been plummeting as passengers search for alternative low cost means of travelling. To help address these, the airline could opt for a merger with other air transport companies.
As Sekaran (2004) argues, this universal approach coupled with cost cutting approaches such as using smaller aircrafts on shorter routes could address the threat from substitutes. The report call for a radical shift in its external environment policies could revive its profit margins and make the airline more profitable. Policy formulation could provide a framework on a balanced implementation of its strategies (Policy Formulation & Analysis, 2001).
According to potter’s five forces model, the management has to lay a strategy based on the five forces. These are based on suppliers. For the case of BA, the suppliers are those who sell the company fuel for propelling the jets, suppliers of its fleet of aircrafts, spare parts, and other components essential to efficient operation of the fleet. A good and stable relationship with suppliers could place it at a strategic advantage over fuel prices against competitors.
Long-term contracts for the supply of fuel at stable prices from reliable companies could place it at an upper in profit generation and maximization. The company may form long-term agreement with fuel suppliers at a concessionary rate than the actual market price. In addition, potter asserts that new entrants, buyers in this case who are customers and substitutes, consist of industry competitors determine the extent of rivalry in the industry.
New entrants
One strategy of facing and dealing with new entrants is to provide incentives to customers, use of hard selling concepts, luring customers by offering price discounts at a competitive rate to the new entrants, and establishing long term relationship particularly with those customers who use the airline frequently. Customer needs need to be assessed to tailor make air travel needs, to suit customer needs. Good listening to customers is also another important marketing strategy.
Substitute routes exists such as road and rail transport. These need critical evaluations. The marketing and administrative management need to identify the need that drives customer to use alternatives of rail and road transport as opposed to air travel. According to the findings, the report recommended that the company conduct a SWOT analysis to determine its strengths, weaknesses, opportunities and threats.
According to the report, the key strengths of the company revolved around a strong brand name, strong customer focus, experienced staff, and use of modern technology. In developing a SWOT analysis, the management should first seek to capitalize on the weaknesses of their competitors, eliminate the weaknesses that plague the company, seize the opportunities available for the company to turn it round and generate more profits.
According to the report Management executives, had to ask questions about newcomers, and their potential to cause a stir in the market. New entrants might be more powerful and create greater competition in the market. In addition, research established that the SWOT analysis called upon executives in the company to identify technology related issues of its fleets, and communication technologies that are more efficient and reliable.
Rivals in the market presented another challenge to the company. Further recommendations were that management strategizes on how to be ahead of rivals by diverting from being capital-intensive. Further, the airway’s business plan emphasize more on profitability, quick decision-making, employee retention and inclusion in decision-making, and set both long term and short-term business plans.
On the issue of weaknesses, further recommendations were that the companies focus more its strengths such as a strong brand name, which was synonymous with air travel, and its efficient staff according to the report by the article Marketing (2010).
New Markets
According to QuickMBA (1999) on marketing, various opportunities existed for the company to exploit in addition to new markets. A new market comes with its own challenges. Inclusive are legal requirements and other stringent rules by the host country.
In addition, old competitors in that environment of newfound opportunities, tax requirements, and other hurdles may present a challenge for the airline in exploiting them particularly in the Asian markets asserts Baker (2008). To counter this, it was recommended that the management of BA form business alliances with other smaller companies in the markets to ensure the smooth movement of customers from one destination to the other according to The New York Times Company (2010).
Quinn (1980) says that BA should have a strategic plan to change quickly with the changing environments. Their plans emphasized on operational management. It however was recommended that the company establish plans of action flexible to the rapidly changing customer and the environment and embrace business process reengineering concepts (Value Based Management, 2009).
Conclusion
in view of the above discussion, BA is facing a host of challenges that include the current global economic down turn that has impacted on its profits, new competitors from the Asian markets who offer cheaper alternatives, rising fuel prices, environmental issues, substitutes, and employee strikes. To counter threats, the report recommends that the company formulate a strategic plan to counter all those threats by conducting a SWOT analysis, identifying its strengths, weaknesses, opportunities, and threats.
It further recommends that the company emphasize on its key strengths to defeat threats and carry out other cost cutting measures to allow it face the challenges profitably according to the British airways annual report2008/2009, in addition to factoring environmental factors (Environmental Factors Affecting British Airways Essays and Term Papers, 2010).
The figure is a scenario of a workshop of a process strategic planning
Taken from: corporate planning case British Airways.
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