Case Study British Airways
Introduction
Each Industry is subject to various elements and factors that have significant effect on their business performance. To be able to identify how these aspects affect the industry, marketing tools are needed. Primarily, the main goal of this paper is to analyse British airways using marketing tools and also evaluate its stakeholders.
Overview of the Industry
British Airways is an airline industry which is involved in air service operations both in the domestic and international airfreight. The airline industry provides different services from passengers, cargo freights, commercial, and mail services and also auxiliary services. This industry primarily operates their business in United States as well as European regions which employs more than 42,000 people in all their departments.
British Airways facilitates flight reservation for their passengers and also booking through their online service in which their passengers can easily access. The airline industry aims on maintaining their integrity to be the number choice and the best airlines in the global market with focus in quality and customer satisfaction. As of today, British Airways are out with 570 airports in about 134 nations.
Mission Statements
British Airways has been able to show the redefining their vision, and ensuring that it is successfully carried out all over the industry, are significant to corporate success. As their competitors became aware that service mattered as well as geared their procedures to suit, British Airways as an airline industry has leapt forward again, now defining their target audience as being the ‘undisputed global leader in the airline industries.
The mission of the industry is considered as wider than being simply an airline industry with good customer or client relations as well as service. Even though they are aware of the inherent danger of being too widely and broadly defined, the mission is suited to an age when the face of travel is dramatically changing. With the stiff competition in the market, more and more airfares come down, but this has not eased competitive pressures in the airline travel companies. Accordingly, airline industries are seeing less and less profit per person, which leads to a necessity to find new ventures as well as hold on to existing clients through loyalty programmes. The new mission of the industry gives the management with a new mandate on being more than just an airline industry. As noted, the mission of the industry is to set new industry standards in terms of customer service and innovation and provide the best financial performance. In addition, their mission is to evolve from being an airline industry to a world travel business having the flexibility to stretch and expand their brand in new business portfolios.
Whether the industry expansion of their market in virtual travel is a moot point, innovation is certainly one of their main approaches to meet these needs. The innovation that the industry considers include reliable electronic bookings, more comfortable seats, new schedules, new services in lounges as well as new customer loyalty programmes may be more realistic expectations in the immediate goals. On the other hand, short-term goals will also consider diversification.
Such was hinted by the CEO of the industry who noted that the industry cannot afford to stand still. He said that they have to maintain their lead through even greater innovation, in order to offer outstanding products as well as service quality in which people will alter their travel plans to enjoy. In line with the perception of investors, the new mission of the industry presents a new and contemporary confidence within British Airways which can only be beneficial. In addition, it is the signal that British Airways business efficiency programme from last September as well as its recently conducted research regarding the future of world travel were not one-offs, but part of their vision for this generation.
Analysis
This section will analyse the position of the industry. Based on the current condition of the industry, the strategic position of the airline industry has been challenged because of the changing conditions of the market environment. To be able to ensure that the industry will not be left behind, the industry has been able to involve themselves into their expansion to technological advancements and developments as well as quality services This part will analyse the social environment of the industry in terms of their strengths, weaknesses, opportunities and threats.
Being one of the most competitive airline industry British Airways has many strengths One of these is the state of the art and first-rate new fleet of aircrafts to be able to accommodate convenient travel for their passengers to ensure customer quality service and satisfaction. In addition, the industry’s operation magnitude allows them on grow over their rival airline industries by providing services to wider variety of passengers as well as customers. In addition, British Airways has knowledgeable and skillful employees and staffs which enable British Airways operational research to perform their best by the member of the industry and employees become its strengths. In addition, the wider orientation provides expertise in passenger and clients areas can also be considered as their strengths and the industry uses online marketing approach to reach international clients easily. Although there are some strengths, BA has also their weaknesses. One of these is the lack of marketing strategy which will enable in reinforcing their competitive standards, to have customer satisfaction and loyalty. In addition, the industry seems to lack more enhanced market schemes to attract more clients. Moreover, the employees of the industry have limited knowledge of simulation development as well as software, which is lost through high degree of internal personnel moves and their inability to select software which tends to result in complexities in improving specialist airline software.
The opportunities of the industry include the availability of immense airline products and services pose great opportunities to use it properly for their advantage. In addition, global transitions and changes can be an opportunity for the industry to work with and virtual reality through online marketing could give a new utilization for simulation, gaining network software and share expertise by special interest professionals. Moreover, the latest hubs and trends in information technology can provide ample chances and opportunities to various business domains like British Airways.
It can be said that the inner threats of the industry is its being centralized as well as bureaucratic system and also poor decision-making. In addition, the orientation on local and national issues is also posing significant threat since much more conflicts and issues that it neglect can be noted in the global market. The threat of neglecting global issues instead of deeply giving emphasis on the local and national level is yet another threat for the industry. It gives tremendous threats when industries will ignore such and the aspect of globalization which can be a strength as well as opportunity but can also be a threat if not to be observant and keen of its treachery and tricks. Lastly, technological changes as well as clients’ behavior can also be a threat if the management will interpret it wrongly.
Pest Analysis
This part will analyse the external environment that affects British Airways which include the political, social, environmental and technological aspects. In terms of political aspects, operating restrictions that should be given attention which include the monopoly of other nations in terms of airline industries can be one of the aspects that can influence the operation of the industry. In addition, political benefit includes the bilateral agreements that all members of alliance where British airways belong can utilise. In terms of economic aspects, the ability of European market to outstrips demand that results to rate wars and conflicts that equates to lower yields for industries can affects British airways. In addition, the alliances can result to a greater manipulation in terms of capacity which reduce the competition and enhance revenues. Moreover, such code sharing airlines will have the ability to split costs and enter the markets and provide services but this can lead to having less aircraft at airports, hence less space are needed.
In line with social environment, it can be said that social aspects are strong from an employer staffing aspects. British Airways and its alliances can reduce costs by using only one airline’s staff and cultural diversity of the social network is considered because of international operations. Technologically speaking, it is said that technology in the airline industry is very expensive and fast moving; hence, alliances can give opportunity for British Airways for having joint ventures when it comes to technological aspects.
Stakeholder Analysis
The most dominant strategic or effective management paradigm in recent years is known as the strategies model (David, 2001). Porter (1998) claims that the intensity of competition in an industry is neither a matter of coincidence or bad luck. Rather, competition in any business industry is rooted in its underlying economic structure and goes well beyond the behaviour of current rival companies. In general, strategy refers to the long-term plan of actions which is established to enable companies to achieve their organizational goal. It is the basis which will serve as a standard for the industry to efficiently achieve their goal.
Based on the give case, it can be said that the main strategic approach of the industry is with regards to their ability to transform the entire corporation into a industry that provides the high quality services in the airline industries. The goal of the management is to build an industry with the agility and alertness to find strategic opportunities when they arise, with the notion to anticipate and intervene challenges through the use of modern wisdom (Drejer, 2002).
With the mission of the industry to provide the highest quality content through the most convenient of distribution channels among various customers, the industry has been able to provide quality and state of the arts media services and productions that suits the needs of the people in the global market.
This type of analysis is used to recognize all stakeholders in a certain situation: in this case all stakeholders involved in British Airways will be analysed. The stakeholder analysis is a method that the researcher can use to recognise and evaluate the significance of key people, groups of people, or institutions that might extensively persuade the success of British Airways. The findings of the stakeholder analysis can provide early and essential data about who will be affected by the operation of British Airways positively or negatively, who can influence the failure or success of the industry, which individuals, groups and agencies would be involved in the business operation and how and whose capacity needs to be built to enable those individuals or group of individuals to participate. Thus, the analysis of stakeholders will provide a foundation and structure fro the participatory planning and monitoring that will follow.
In this case, the key stakeholders of the industry includes, the management of the industry under the control of British Airways the employees and staffs, the customers (local residents and tourists), communities, government institutions and other shareholders, and rivals. These stakeholders are one of the key factors why the British Airways has been able to sustain it competitive advantage.
The management skills and abilities of the leaders of the industry, specifically their CEO have made British Airways become the largest airline industry and in the world. Further, the loyalty of the customers and the trust it gave to the industry has helped the industry maintain its competitiveness. The role of the staffs and employees are the ones that make the industry continuously achieve the needs and demands of the customers. Other stakeholders support can be considered as additional factor that makes the industry what it is right now.
Financial Statements
The financial information of the British Airways can be said to be in line with the International Financial Reporting Standards (IFRS) as well as included in the International Accounting Standards (IAS) with the standing interpretations which are issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB which was adapted by the European Unions. The industry’s financial reporting is Financial Accounting which is for the advantage and sake of the supplier, the government, employers, employees, and the bankers and other stakeholders of the company who are interested in its financial statements. The preparation of the financial statements is the historical cost for the tradition in the excerpt to the specific financial liabilities and assets that includes the derivative of the financial instruments as well as the available-for-sale in the financial assets which are being measured by the fair value. The carrying value which are being noted assets and its liabilities are the subject of the fair value hedges and they are adjusted in recording the changes and transitions of the fair values which attributes the risk and being utilised as the supportive measure.
There are also two formats that the British Airways is using, the business and market segments which are based on the structure of the internal management as well as the system of the internal financial reporting. These are also the reflection of the components of the group with the distinguishable and defined costs and assets the revenues, and the subject to the risks. On the other hand, the geographical segments are the origin of turnover through the allocation of the revenue in the sales area (British Airways, 2008).
Financial statements are annual statements that summarize a company’s activities for over the last year (Fried, Sondhi & White, 2003). They are audited by certified public accountants (CPAs), who interpret whether or not the firm’s financial conditions have been fairly presented in the statements. Balance sheets provide the details of the company’s assets, liabilities and owner’s equity at a particular date, which is usually the last day of the accounting period. Most people describe it as the “snapshot” of the financial condition of a company.
It is said that the shareholder and stakeholder is regarded as the central stakeholder of each industry. Placing the shareholder and stakeholder at the focal point of business activity is simply recognizing the fact that firms that do not satisfy shareholder and stakeholder requirements increase their risk of capital flight, higher interest rates and pressure from the board of directors, takeovers, and lower productivity. Organizations that create long-term shareholder and stakeholder value simultaneously create relatively greater value for all stakeholders. Thus, value-creating organizations appear to operate with the following objective function in mind: Maximize shareholder and stakeholder wealth subject to satisfying remaining stakeholder requirements. And in order for British Airways to meet such requirement the company has been able to identify an effective way for this concept.
In the year in the initial years of this half decade operations, British Airways had focused increasing the unrealized capital gains of its shareholder and stakeholders through buyback programs. Especially in the years 2001 and 2002, this strategy was set to calm down shareholder and stakeholders amidst its disposal of some of its relatively unrelated subsidiaries like gardening products to concentrate in its core businesses and minimize its debts. In effect, earnings per share increased that made its shares attractive for investors. The buyback program suggested that the firm is confident in the future cash generating capability of a lean but mean business.
Conclusion
Based on the given analysis, it can be noted that the management must be able to know what is happening in the internal and external as well as social and market environment of the business industry. This is also done to know if changes and transitions are needed to meet the needs of these factors and to avoid problems in terms of the management functions. One of the factors that affect the industry is their stakeholders and in order to ensure that the industry will still be competitive in the future, the management should give emphasis on the needs of their stakeholders.
References:
British Airways 2007/2008. Annual Report of British Airways 2007/2008
David, F.R. (2001). Strategic Management: Concepts and Cases. 8thed. Prentice Hall, Inc: Upper Saddle River, NJ
Drejer, A. (2002). Strategic Management and Core Competencies: Theory and Application. Westport, CT: Quorum Book
British Airways Plc – SWOT Analysis (2008). www.marketresearch.com. Retrieve June 16, 2009.
British Airways Management (2006). www.thinkingmanagers.com. Retrieve June 16, 2009.
British Airways SWOT Analysis (2006). www.coursework.info. Retrieve June 16, 2009.
Porter, M. E. (1998). What is Strategy? Harvard Business Review, November-December, pp.61-78.
Robinson, S (1998). ‘Developing A Simulation Strategy for British Airways OR.’ Proceedings of the 1998 Winter Simulation Conference. United Kingdom
Appendix
Consolidated Income Statement of
British Airways
2007
2006
Other Revenue, Total
611
651
Total Revenue
8,492.00
8,213.00
Cost of Revenue, Total
6,150.00
5,807.00
Gross Profit
1,731.00
1,755.00
Selling/General/Admin. Expenses, Total
1,054.00
Research & Development
–
–
Depreciation/Amortization
714
715
Interest Expense, Net – Operating
–
–
Interest/Investment Income – Operating
18
-19
Interest Expense(Income) – Net Operating
18
-19
Unusual Expense (Income)
–
–
Other Operating Expenses, Total
-46
0
Total Operating Expense
7,890.00
7,519.00
Operating Income
602
694
Interest Expense, Net Non-Operating
-183
-214
Interest/Invest Income – Non-Operating
164
127
Interest Income(Exp), Net Non-Operating
-38
Gain (Loss) on Sale of Assets
47
27
Other, Net
–
–
Net Income Before Taxes
611
616
Provision for Income Taxes
173
152
Net Income After Taxes
438
464
Minority Interest
-14
-16
Equity In Affiliates
–
–
U.S. GAAP Adjustment
–
–
Net Income Before Extra. Items
424
448
Accounting Change
–
–
Discontinued Operations
-134
3
Extraordinary Item
–
–
Tax on Extraordinary Items
–
–
Net Income
290
Preferred Dividends
–
–
General Partners’ Distributions
–
–
Miscellaneous Earnings Adjustment
–
–
Pro Forma Adjustment
–
–
Interest Adjustment – Primary EPS
–
–
Income Available to Com Excl ExtraOrd
424
448
Income Available to Com Incl ExtraOrd
290
451
Basic Weighted Average Shares
1,141.13
1,116.18
Basic EPS Excluding Extraordinary Items
0.372
0.401
Basic EPS Including Extraordinary Items
0.254
0.404
Dilution Adjustment
0
0
Diluted Weighted Average Shares
1,151.94
1,138.55
Diluted EPS Excluding ExtraOrd Items
0.368
Diluted EPS Including ExtraOrd Items
0.252
0.396
DPS – Common Stock Primary Issue
0
0
Gross Dividends – Common Stock
0
0
Total Special Items
-47
-27
Normalized Income Before Taxes
564
589
Effect of Special Items on Income Taxes
-13
-7
Inc Tax Ex Impact of Sp Items
160
145
Normalized Income After Taxes
404
444
Normalized Inc. Avail to Com.
390
428
Basic Normalized EPS
0.342
0.383
Diluted Normalized EPS
0.339
0.376
Source: Annual Report of British Airways
Credit:ivythesis.typepad.com
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