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23329171-British-Airways-Strategic-Plan

23329171-British-Airways-Strategic-Plan

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Sections

  • 1.1 Report Objectives
  • 1.2 Company Overview
  • 1.3 Current Strategies
  • Figure 1 - Business Map (T-O £8.32bn)
  • 2.0 External Analysis
  • 2.1 PESTEL Analysis
  • 2.2 Porter’s Five Forces
  • 2.3 GE Matrix
  • 3.0 Customer Analysis
  • 4.0 Competitor Analysis
  • 4.1 Strategic Groups
  • 4.2 Airline Quality Review (AQR)
  • 5.0 Internal Analysis
  • 5.1 Value Chain Analysis (VCA)
  • 5.2 Resource Based View (RBV)
  • 5.3 Financial Analysis (Source: British Airways, 2008)
  • 6.0 Summary
  • 6.1 SWOT Analysis
  • 6.2 Key Strategic Issues
  • 7.0 Strategy Formulation
  • 7.1 TOWs Matrix
  • Figure 11 - Preliminary Comparison of Strategies
  • 8.0 Analysis of Strategic Options
  • 8.1 Strategic Option 1 - Improvement to People Processes
  • 8.2 Strategic Option 2 - Improved Environmental Stance
  • 8.3 Strategic Option 3 - Improved Technological Stance
  • 8.4 Strategic Option 4 - Segment Focus
  • 8.5 Strategic Option 5 - Broader Service Offering
  • 9.0 Implementation
  • 9.1 Company Structure
  • 9.2 Service Quality Gaps Model
  • 9.3 Managing the Change
  • 9.4 Gantt Chart
  • 9.5 Stakeholder Map
  • 9.6 Control Systems
  • 9.7 Balance Scorecard
  • 10.0 Critique

Strategic Report 2009 Group 10A

Candidates: 706523 , 412805, 802050, 464929

Executive Summary This report was produced for the purpose of providing British Airways Plc (British Airways) with a strategic plan to implement over the next three years. British Airways is the UK market leader in airline operations, however has faced increasing competition over the last decade resulting in erosion in their market share. The report begins by analysing the current internal and external environment of BA. Through strategic evaluation we have recommended that BA focus on their fundamental service delivery to restore their competitive advantage within the industry. This will require implementing a combination of two strategies; a people processes strategy and a strategy focused on technological advancement. The people processes strategy was derived from a number of industry sources outlining BA’s decline in customer satisfaction. The technological advancement strategy coincides with the renewal of BA’s aircraft fleet and will further improve the overall customer experience.

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Table of Contents

Table of Contents...........................................................................................................................................3 1.1 Report Objectives.....................................................................................................................................4 1.2 Company Overview..................................................................................................................................4 1.3 Current Strategies.....................................................................................................................................4 Figure 1 - Business Map (T-O £8.32bn)........................................................................................................5 ........................................................................................................................................................................6 2.0 External Analysis.....................................................................................................................................7 2.1 PESTEL Analysis ................................................................................................................................7 2.2 Porter’s Five Forces ............................................................................................................................9 2.3 GE Matrix ..........................................................................................................................................10 3.0 Customer Analysis.................................................................................................................................11 4.0 Competitor Analysis ..............................................................................................................................12 4.1 Strategic Groups.................................................................................................................................12 4.2 Airline Quality Review (AQR)..........................................................................................................13 5.0 Internal Analysis....................................................................................................................................14 5.1 Value Chain Analysis (VCA).............................................................................................................14 5.2 Resource Based View (RBV).............................................................................................................16 5.3 Financial Analysis (Source: British Airways, 2008)..........................................................................17 6.0 Summary ...............................................................................................................................................18 6.1 SWOT Analysis .................................................................................................................................19 6.2 Key Strategic Issues ..........................................................................................................................19 ......................................................................................................................................................................21 7.0 Strategy Formulation .............................................................................................................................22 7.1 TOWs Matrix ....................................................................................................................................22 Figure 11 - Preliminary Comparison of Strategies...................................................................................23 8.0 Analysis of Strategic Options.................................................................................................................24 8.1 Strategic Option 1 - Improvement to People Processes.....................................................................24 8.2 Strategic Option 2 - Improved Environmental Stance. .....................................................................25 8.3 Strategic Option 3 - Improved Technological Stance. ......................................................................26 8.4 Strategic Option 4 - Segment Focus...................................................................................................27 8.5 Strategic Option 5 - Broader Service Offering...................................................................................28 ......................................................................................................................................................................30 9.0 Implementation.......................................................................................................................................31 9.1 Company Structure.............................................................................................................................32 9.2 Service Quality Gaps Model..............................................................................................................34 9.3 Managing the Change.........................................................................................................................35 9.4 Gantt Chart.........................................................................................................................................37 9.5 Stakeholder Map................................................................................................................................38 9.6 Control Systems.................................................................................................................................39 9.7 Balance Scorecard..............................................................................................................................40 10.0 Critique.................................................................................................................................................41

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1.1 Report Objectives
The objectives and structure of this report will consist of four main sections which will enable a strategic direction to be recommended to BA: 1 2 3 4 To To To To research in to the current strategic position of British Airways. critically analyse British Airways’ internal and external environment. design a selection of strategic options utilising the internal and external analysis. evaluate the most appropriate option for British Airways and discuss implementation.

1.2 Company Overview British Airways Plc (BA) is the UK’s largest international scheduled airline. Alongside scheduled services, BA is engaged in the operation of international and domestic carriage of freight and mail, and the ancillary services (Datamonitor, 2008). In association with codeshare and franchise partners, BA fly to more than 300 destinations, and carried more than 33 million passengers, earning over £8.7 billion in revenue in 2007/08 (British Airways, 2008). Employee headcount in March 2008 stood at 42,377 people (Datamonitor, 2008). Since privatisation in 1987, BA has continued to grow as competition in the market has risen worldwide. In recent times, BA has successfully been labelled the world’s first airline to take part in a scheme to reduce greenhouse gas emissions (2002) and to allow passengers to print online boarding passes (2004) (British Airways, 2008). In 2005, the company saw Willie Walsh become Chief Executive of BA (Flight Global, 2008), who to date has driven the company through the completion of Terminal 5 at Heathrow, amongst other new initiatives. Despite reported and imminent industry hits due to the global economic downturn, BA’s future looks promising. As BA announces its aim of becoming the ‘world’s most responsible airline’ in the latest annual report (British Airways, 2008), great importance lies in developing guiding principles and careful strategic direction to allow the achievement of this goal. 1.3 Current Strategies The report will be designed in consideration of BA’s current strategies (British Airways, 2008): 1 2 3 4 Upgrade customer experience via the introduction of text and mobile services for business class customers. Modernise aircraft fleet and offer new services. Manage cost base. Increase corporate responsibility through environmental performance and partnerships.

Although BA does operate in a number of areas such as cargo, we are choosing to focus our report on the scheduled passenger market due to the size and opportunities that BA has in this market (Figure 1: BA Operations).

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Speedbird Insurance Company..219 ml The Americas = £1. Middle East & Indian subcontinent = £821 ml Far East and Australisia = £659 ml Domestic Travellers: (by sales) UK = £4. BA Holdings.9% Intermediaries Online websites Direct Sales BA. DFT Research and Interest Groups Component Suppliers Aircraft Suppliers: Boeing and Airbus SAS Airports: Heathrow and Gatwick.357 ml Independent Customer Review: Skytrax rates BA as a 4* airline. Lufthansa. Air Miles Travel Promotions Cargo = 7. Openskies Passenger = 86. Iberia.2%* Non-scheduled services BA Holidays BA Service Portfolio Other Airline Operators: Ryanair.0% Mail +freight diplomatic bags Scheduled BA Cityflyer. 13. Continental Investments (equity owned) Associates: Iberia S.697 ml Africa. Computer and Communication Services and Consulting Services Alliances: Quantas.Business Map (T-O £8.com Travel Agents Customers International Travellers: (by sales) Continental Europe = £1.A. CAA.8% Cargo Handling. BA Cash Management. BA Interior Engineering. BA Capital. 5 Adapted from: British Airways (2008) (* percent of operations) . Easyjet. Virgin Atlantic. Speedbird Cash Management. Aer Lingus… Other = 6.Figure 1 . Comair Ltd 10.32bn) Industry Regulators And Influencers Member of: AEA UK Government BAA. AA. Air France KLM.15% Avaliable for sale: Flybe Group Ltd 15%. Other Suppliers: Food Suppliers… Support Provider Subsidaries BA Avionic Engineering. Airframe Maintenance. BA Maintenance Cardiff BA Leasing..

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2009). PESTEL Factor Political Key Points Heavy regulation (AEA. 2. Increased consumer awareness and therefore bargaining power. Social Technological Environmental/ Ethical Failure to adopt an integrated environmental strategy could lead to a detrimental effect on the BA’s reputation and income. Climate Change Bill) enforcing tighter environmental regulation may increase operational costs each year. 7 Open Skies Agreement (AEA. 2008).0 External Analysis For success within the airline industry. New legislation (e. Increasing unemployment (Kollewe and Sager. Cancellations of flights and loss of baggage (Channel 4. Economic Global economic crisis: World growth is projected to just over 2 percent in 2009 (IMF. Recognition of trade unions and industrial action e.g. Limited land and for growing airports – Expansion is difficult at Heathrow as it would result in a loss in the London’s Green belt area. p56) Figure 2 – PESTEL Analysis An analysis of the macro-environment has been carried out using PESTEL (Figure 2). Restriction on mergers will have an impact on BA’s proposed alliance with American Airlines. Fluctuations in oil prices and exchange rates will directly affect BA’s cost base. BA is vulnerable as a UK operating airline to a poor exchange rate. 2008). Cabin Crew strikes. 2008. Limited capacity=> utilisation of capacity. 2009). Online booking services and check-in is becoming increasingly used by the airline industry. Oil prices: declined by >50 % since their peak retreating to 2007 levels. Such ethical issues could have a detrimental effect on reputation if left unresolved. Good employee relations are essential if BA wants to avoid industrial action and interrupted operations. Legal . an awareness of the external environment is essential. The UK has an aging population (see appendix 3) (National Statistics Online.. 2008). Increased security due to past terrorist threats (DFT. and energy consumption controls (DFT. BA must ensure that they remain up to date with these technological advances whilst avoiding becoming overly reliant. Collusion and price fixing. More intense competition Potential opportunity for growth as older generations have more time to spend on leisure activities such as international travel. 2008). A recent survey revealed that 34% of online consumers plan to use pricecomparison sites more in 2009 (NMA. Increased bargaining power as an employer.e the elderly) who don’t feel comfortable using such technology.g. 2008) UK consumer spending saw its sharpest decline for 13 years between July and September 2008 (Channel 4. as this may isolate certain consumer markets (i. Opportunity for BA and its competitors to freely transport aircraft between the EU and US. in particular looking at competitors and assessing BA’s capability to meet current and future challenges. Sufficient security measures should be in place to ensure consumer confidence and competitive advantage is maintained. 2008). 2009) Implications for BA Compliance is essential if BA wants to continue operations. Decline in fuel price = strengthening of the dollar (IMF. 2008). Noise pollution controls.1 PESTEL Analysis (Source: Johnson et al. 2008). This section aims to highlight the position of the industry. Pound weakens especially against the Euro.2. (BBC News 2006) Consumers are becoming increasingly ‘green’ and more aware of the environmental impact of their actions. Possible reduction in the amount of business travel as companies are cutting costs and using alternative means of communication such as teleconferencing.

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• BA employees use collective bargaining through trade unions in order to increase their bargaining power Power of Buyers • Low concentration of buyers to suppliers means they have little bargaining power. high regularity requirements and high capital cost requirements. 2008.‘No Way BA/AA’ (Virgin Atlantic. • The short haul market is more fragmented with many small players. • BA restricted by sole supplier of fuel to the airport. • The failure of recent airlines such as XL and Zoom is likely to deter new entrants (Times Online. Strength HIGH HIGH MEDIUM LOW LOW 9 . 2008). o Long haul flights: no notable substitutes.g. 2008c). • Direct competitive rivalry is fierce. Power of Suppliers • Two aircraft manufacturers = High bargaining power. • Increased internet usage has amplified awareness and interaction of customers (Keynote. Force Competitive Rivalry • BA caters for both long haul and short haul flights. 2008).2. in terms of price and service offering. Virgin has a website opposing the proposed strategic alliance between BA and AA . • Barriers to exit are in place which deters new entrants.2 Porter’s Five Forces (Source: Johnson et al.. • Consolidation of competitors has increased competition. 2008). p60) It is important to analyse the competitive nature of the airline industry in order to assess the position of BA. Threat of Substitutes • There are few direct substitutes: o Short haul flights: the Eurostar or a ferry. Within long haul there is little differentiation between BA and their competitors. e. • Priority of landing slots is given to historic rights of existing users (IATA. The ‘Five Forces’ tool will enable BA to make strategic decisions in order to increase profitability. Threat of New Entrants • Significant barriers to entry: such as the competitive environment.

. Figure 5 – GE Matrix Competitive Strength Market Attractiveness High High Medium North America BA=1.2.2% Australasia BA=4. due to low growth and intense competition.7% Latin America BA=1. 2008.) The GE Matrix (Figure 5) provides evidence of opportunities for growth through market development in new markets and market penetration in existing.3 GE Matrix (Source: Johnson et al. it is evident that if a market development strategy was to be pursued by BA. Asia Pacific and Eastern Europe would be prime markets for profitability due to high growth (Appendix 5/6).1% Western Europe BA=6.9% Low Medium Asia Pacific BA=1. 10 .9% Middle East and Africa BA=2. p280. Western Europe.0% Size of Circle = size of market (British Airwayssed on 2006 data) Width of Circle = CAGR Forecast Growth (2006 – 2011) Source: Euromonitor (2008) From the analysis above.3% Low Eastern Europe BA=2. It may also be a requirement to build defence strategies in BA’s core market.

0 Customer Analysis Over the past decade there has been increasing complexity in customer needs. new destinations. • • • Increased requirement for convenience (e. Particularly. 2008). 2008c). as the customer has become more educated and demanding. Poor reliability and baggage handling (AQR) • Failed attempts to target the price conscious consumer through low cost airline operation (Eirma. Pg 165). BA have been criticised for slow innovation (Doganis. Price has become more of a priority Segments have become more defined within their needs. 2008). Evidence that BA is failing to respond to the changing customer landscape includes: • • • The amount of BA customers recommending their services reduced from 61% in 2006/07 to 59% in 2007/08 (British Airways. 2006. 11 . quick check-in).g. the following changes have occurred: • A shift in demographics to older passengers (Keynote.g. • Increased global connectivity allowing the usage of internet and search mediums (e. comparison and review websites).3.

g.0 Competitor Analysis 4. Thomson Lufthansa and KLM-Air France are the 2 leading European Airlines Member carriers in terms of No-frills passenger numbers. PalmAir Mass Service Providers e. NonFigure 3 illustrates that BA’s direct competitors are those who operate similar services and lie within Local e. This assumption could be supported by BA’s failed attempt to enter this market in recent years (Telegraph. Thus competition still remains fierce.g. 15.. and United Airlines in the Star Alliance soon controlling BMI (Euromonitor.g. 2008c). Ryanand 14. withe. Ryanair and EasyJet have established themselves among the leading carriers in Europe.1 Strategic Groups Figure 3 – Strategic Group Analysis (Source: Johnson et al. 2008.1% respectively of the total number of passengers carried. Virgin. Based 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 however it is likely the reason no airlines have adopted this strategy is due to the fact that it would be destined to fail. 2008).4.) LOW PRICE HIGH Specialist e. 12 . Moreover the economic downturn and sharp fall in oil prices has caused a price war between Emirates.1% BA comes in third with 9. Although they do not lie within the same strategic group as BA the advent of low-cost air LOW travel has changed the faceBREADTH OF SERVICE Airlines such asHIGH of the airline industry. BA and Virgin Atlantic on the London-Dubai route.g. schedule Lufthansa. Easy Jet BA face competition from a small number of serious contenders in the UK. The BMI competition is likely to be most intense within this group as they are e. the same strategic group. p73-77. Fares have dropped by 30% across the airlines. BA. whilst the more established long-haul PRICE FOCUSED MIDDLE MARKET carriers such as BA have struggled to keep up with FOCUScounterparts’OFFERINGS their ON SERVICE growth rates. AirFrance KLM seeking similardstrategies.3% of the total (Keynote. 2002). with the main contenders being Virgin Atlantic. Air.g.

whilst Virgin Atlantic is.2 Airline Quality Review (AQR) Skytrax is an independent website and therefore gives an objective view of BA’s quality of service in comparison to its competitors and may highlight strategic issues that need to be addressed. BA needs to improve upon its interaction with its passengers across all classes in order to outperform its nearest competitor Virgin Atlantic. Six competitors hold a five-star rating with the independent evaluator. Its major competitors all scored 4 apart from KLM. Figure 4 – Competitive Spider Index Created using data sourced from Skytrax. BA needs to look at improving its online services by providing additional services all with a more personal touch. General customer reviews have shown a common theme: poor in-flight entertainment which regularly breaks down. ‘Slow baggage recovery at T5’ (SkyTrax. 2008). BA needs to improve its baggage delivery service. BA is not a Quality Approved Airline. which scored 3. • • • • • • • • The overall Airline Rating for BA was 4. BA and Virgin Atlantic are virtually identically marked in all categories with the rest less highly rated.4. 2008. 13 . Website 5 Overall Rating 4 3 Responding to Requests 2 1 Interaction with Passengers 0 Assisting Families/Children British Airways Virgin Atlantic Air France KLM Service Efficiency Cabin Safety Lufthansa Handling Delays/Cancellations Check-In Services Quality of Meals Inflight Entertainment Seat Com fort All ratings taken from the website are based on scale of 1 to 5 with 5 being the highest.

and through BA Holidays Plc. BA increases their reach in the value system to the supplier and channel value chains. TECHNOLOGY DEVELOPMENT BA has added value in this category over smaller companies due to slack resources that can be employed to innovate the service (e. 5. This is what will differentiate itself between its main competitors. 14 . Quick check-in services and secure online bookings with ability to pre-book additional services.1 Value Chain Analysis (VCA) BA have tried to control the system further by forward and backward mitigation.0 Internal Analysis It is now essential to analyse the internal environment in order to formulate appropriate strategies.• For BA to become a 5 Star Airline emphasis needs to be placed on the quality of its customer service delivery at all levels. individual LCD screens). which it has lacked in the past. Loyalty card. p110) FIRM INFRASTRUCTURE Structured hierarchy allows BA to make use of a multitude of specialist knowledge in order to gain competitive advantage over downsized firms. Customer Service Large database of airport slots enable passengers to access the majority of destinations from preferred airport. club SUPPORT ACTIVITIES Update communication on other services Whilst 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). 5. Increased Baggage Security.g. PRIMARY ACTIVITIES INBOUND OPERATIONS OUTBOUND MARKETING & POST SALE LOGISTICS LOGISTICS SALES SERVICE Stock Control High quality training accredited by City & Guilds (British Airways. Brand allowing for large budget to be spent in this field. 2008). BA is able to leverage suppliers and through economies of scale make efficiencies where competitors may fail. Figure 6 – Value Chain (Adapted from: Johnson et al. Through controlling many component supplies in-house. 2008).. Ongoing relationship with suppliers (e.g. HUMAN RESOURCE MANAGEMENT Invested in the development of customer service training in 2007 attracting the best employees. 2008. PROCUREMENT Due to the size and historical business relationships and alliances. Gate Gourmet. Marketing communications to all stakeholders. ‘Speak Up’ opinion survey encourages employees to provide feedback (British Airways.

BA has contended a number of highly publicised employee relations issues (e. BA has failed to gain recognition for new innovation. BA’s employee opinion surveys attracted a mere 35% response rate in 2007 (British Airways. 2008). and staffing in 2007 (BBC News. Cabin Crew strike over pay. For example. 2008). an emergency landing at LHR. Due to high collective bargaining capabilities. BA employees walked out for two days when Gate Gourmet employees were sacked (BBC News. in 2005. 2005). Virgin gaining value over BA).Figure 7 – Support Activities Value Loss SUPPORT ACTIVITIES Firm Infrastructure HRM Technology Development Large bureaucratic infrastructure decreases effective communication and increases inertia. 2007). poor baggage handling and flight cancellations (Channel Four. A lack of innovation in their marketing communications (e. Figure 8 – Primary Activities Value Loss PRIMARY ACTIVITIES Inbound Logistics Operations/Outbound Logistics Marketing & Sales High solidarity between supplier employees and BA employees has created a history of negative industrial action. sickness absence. TV documentary reported on Terminal Five operation difficulties.g.g. 15 .

Intangible • International Customer Database.2 Resource Based View (RBV) It is suggested that an organisations competitive advantage and superior performance is resulted from its distinctive capabilities (Johnson et al. 2000). qualifying all cabin crew with NVQ Level 2 (British Airways. flight simulators. BA is recognised globally as a reputable brand. • Economies of Scale from ongoing suppliers. • Partnerships & Alliances with ‘oneworld’ (incl. and subsidiaries. 2008). codeshare/franchise partners. American Airlines)..5. RESOURCES Threshold Resources THRESHOLD CAPABILITIES Tangible • Fleet of 245 aircraft accessing over 550 destinations (British Airways. • Ability to fly and manage passengers safely on various routes (Davies. 2008 p95).g. 2008). ADVANTAGECAPABILITIES FOR COMPETITIVE Core Competencies • OpenSkies’ subsidiary’s aircraft never have more than 64 passengers per flight. 2009). Unique Resources Tangible • Sole access to LHR’s Terminal 5 (BBC News. 2008). 2008)). reinforced by its longstanding existence within the industry. COMPETENCIES Threshold Competencies • Training of ground school. The resource based view highlighting BA’s resources and competencies is outlined below. with one attendant per twelve customers (British Airways. 2008). • 16 . and cabin safety training (BAFT. BA Holidays & The London Eye Company (Datamonitor. Intangible • Reputable brand image. First UK airline recognised as a training centre by the City & Guilds. • Additional services (e.

BA’ online booking/reservation service helped reduce agency costs leading to a £77 million decrease in selling costs. Operating costs have risen steadily over the past 5 years and this is in-line with the increase in fuel prices and increase in landing fees/en-route charges as the company expands.055 million and increased landing fees. BA managed to reduce costs through a reduction in the number of employees by approximately 3000 people.878 million which is a 1% decrease over the prior year despite increase in fuel costs to £2. an increase of 128% over the prior year. PBT. BA’s earning per share increased. BA gearing ratio was at 27% in 2007/08. This could also be due to the fact that they have paid some of it back.5. BA made post-tax profits of £694 million. with increased liquidity to 21% from 19%. especially with the current economic crisis. reaching 59p per share. BA has performed well in managing and reducing costs. In 2007/08 BA had operating costs of £7. which is a reduction from the prior year. Also. Figure 9 – BA’S Turnover. In 2007/08.3 Financial Analysis (Source: British Airways. handling/catering charges with Terminal 5. The difference is mainly caused by the loss from discontinued in operations in 2006/07 of £134 million. the doubling in profits is also attributed to a decrease in operating costs and no credit arising on changes to the pension scheme or provisions made for settlement of completion investigations. BA efficient control of all these costs has helped put them into a strong position in relation to its competitors. PAT 17 . 2008). BA is a strong position in the current economic crisis and is more likely to have better relations with its suppliers and financial institutions going forward. This was due to the increase in profit before tax and the reduced corporation tax rate. This reduction shows that less debt is being taken on by the firm. In 2006/07 profits were £304 million. However.

Despite a fall in oil prices. At the end of the 2007/08 financial year they were in a good position to withstand most shocks and this has been the case. compared to its competitors it still remains in the healthiest position and will have to weather the difficult future ahead and may report losses in 2009. However.0 Summary 18 .Figure 10 – BA’s Fuel and Operating Costs Overall BA remains financially stronger than its competitors. They have stated that they expect an operational loss of £150 million for the 2008/09 year (IHT. due to the trading conditions and fall in value of the pound. the cost of fuel for BA will remain approximately the same due to the devaluation of the pound and the fact that fuel is bought in dollars. 6. 2008).

2008. 2003): Internal Strengths • Brand Image • • • Partnerships & Alliances Financial size and stability Terminal 5 VCA Refer to: RBV Financial Analysis Internal Weaknesses • Poor employee relations history • • Reliability and trust Innovation & change External Opportunities • SkyTrax Quality System • • Competitors forced exit Competitors reliability failing on delivering AQR Porter’s Five Forces GE Matrix • Emergence of new markets External Threats • Open Skies Agreement • • • Environmental awareness Global economic crisis Lower cost competition PESTEL Strategic Group Analysis 6.1 SWOT Analysis (Source: Johnson et al..2 Key Strategic Issues 19 .) It is important that strategic development is reflective of BA’s strengths and weaknesses relative to competitors and the opportunities and threats presented by its external environment (Pitts & Lei. p81.6.

Lower gearing ratios and higher liquidity. Defensive strategies needed to protect market share. 20 . • Increased use of the internet by customers. • Resource Based View • • • • • Utilise BA core competences to gain competitive advantage. • Increasing environmental awareness. and partnerships and alliances. brand image. reliability. Asia Pacific and Eastern Europe. financial size and stability. Possibility of a loss in 2009 as a result of the economic downturn. BA loses value to competition. Ensure changing customer needs are understood and met Although low cost airlines are the biggest threat to BA. Increased scrutiny on strategic projects for risk assessment. • Decline in consumer spending. • Intense competition within strategic group and trend for consolidation. • Highest growth markets. poor on flight entertainment and low customer satisfaction. • The biggest other threat comes from low cost airlines. Strategic Implications Focus on technological and environmental issues. BA needs to address the areas where value is being lost to avoid attacking competitor strategies. Financial Analysis Investment resources available. • BA adds value. industry expertise. Service Quality needs to be improved to gain a competitive advantage BA has a strong opportunity for market development in Asia and Eastern Europe.Analysis Tool PESTEL Porters Five Forces Customer Analysis Strategic Group Analysis Airline Quality Review GE Matrix The Value Chain Key Findings • Global economic crisis. and slow innovation. Strong resources including sole access to hub within largest UK Airport. • BA = poor baggage handling. moving into low cost market is not deemed appropriate based on previous failed attempts. Increased profits and lower operating costs. employee relations and performance. Strong training competencies. • High competitive rivalry and bargaining power of suppliers. • Consumer trends in high convenience and high expectations of service. • Higher regulatory requirements. marketing delivery.

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A preliminary analysis will be made. Strategies for Weaknesses not to expose threats: • Improved environmental stance..7. Supply chain migration. Broader service offering. 22 . Threats Open skies agreement Environmental Awareness (Climate change bill) Global Economic Crisis Lower cost competition Strategies for Strengths to defend threats: • Renovation of brand image.1 TOWs Matrix (Source: Johnson et al.star system of quality Competitors forced exit Competitors failing on delivering reliability Emergence of new markets Internal Strengths Brand Image Partnerships and Alliances Financial Size & Stability Terminal 5 Strategies for strengths to meet opportunities: • • • • Weaknesses Poor employee relations history Recent negative attention on reliability and trust Quick innovation and change Segment focus. Introduction of complimentary services. • Diversify into other transport markets. leaving the 5 most appropriate strategies to be further analysed for consideration. Technological advancement. Figure 11 below gives a brief explanation of each strategic option and classifies them within Ansoff’s matrix. Strategies for opportunities to overcome weaknesses: • • Improved people processes.) A range of strategic options will now be formulated using the TOWs matrix to resolve the strategic issues highlighted from the analysis. This will lead to the elimination of options that are not considered suitable for BA. p367. scoring each option using a number of defined performance indicators. External Opportunities Skytrax.0 Strategy Formulation 7. 2008.

Introduction of internet access on flights to improve the overall quality of service. Market Penetration         5 3 5 5 3 5 1 5 5 3 19 21 3. 1 = Bad 3 = No change 5 = Good 5 Effect on competence 1 = Bad 3 = No change 5 = Good In accordance with current strategy? 1 = No 5 = Yes 5 Level of risk involved? 1 = High 3 = Medium 5 = Low Score Accept for further consideration? Strategy linked to Ansoff Strategic Option Explanation 1. Diversify into other transport markets. Renovation and modernisation of brand image in an attempt to gain market share. Segment focus 5. 3 3 5 5 3 3 1 5 1 3 13 19 1 3 3 1 1 9 4. 7. Product Development Reduce current tension from negative employee and customer relations. 4. Diversification 1 3 5 1 1 11 23 . Introduction of complimentary services.e. 9. Improvement to people processes 2. 2. Focusing on business class customers as the most profitable segment of the business. focusing areas of growth such as India and China. Offering of complimentary services such as car rental or hotels. Vertical integration along the supply chain. 5 5 20  3 3 5 5 3 3 5 1 3 3 19 15 1. Go above and beyond current environmental requirements.Preliminary Comparison of Strategies Do BA have the financial resources? 1 = No 3= Possibly 5 = Yes 5 Effect on Brand Image. Increase number of destinations BA flies to. Improved environmental stance. Renovation of brand image.Figure 11 . Gate Gourmet or Boeing. Supply chain migration. Diversify into substitute services such as rail in an attempt to maintain competitive advantage. i. 3. Technological advancement. Market Development 6. Broader service offering 8.

Access to such data could assist BA in market research and customer relation development based on findings. The RBV and SWOT identified BA’s public criticisms for poor bag handling and delay management.Improvement to People Processes Brief Outline: The analysis highlighted recent negative attention both internally and externally. and are likely to gain support from this external body when strategically developing employee relations.0 Analysis of Strategic Options Based on the analysis performed in figure 11 the five most viable strategic options will now be considered further in terms of suitability. FEASIBILITY The Resource Based View (RBV) illustrates an international customer database holding. Therefore.1 Strategic Option 1 . ACCEPTABILITY Employees and customers are likely to invest high interest into the development of their relations with the organisation due to the negative past experiences. increasing the potential of high returns (Skytrax. 2008).8. support and develop employees. Increase in internet usage. Skytrax highlights that customer relations is an important measure for customers when selecting airlines for travel. acceptability and feasibility. The industry and organisation is highly unionised. the threat of industrial action and resignations are less likely at this time. Better customer relations may improve such reviewing mechanisms. BA’s current strategies are to motivate. and disapproval following a number of negatively handled employment related cases. unemployment is increasing (PESTEL). Given the current economic environment. 2008). SUITABILITY Poor employee relations history and recent negative attention on BA’s reliability and trust (SWOT). engage. A people processes strategy may rebuild brand image and stakeholder confidence. with more customers and independent services reviewing and sharing feedback (Porter’s five forces). SUPPORTS STRATEGY?     SUPPORTS STRATEGY?   SUPPORTS STRATEGY?   24 . 8. alongside improving baggage handling and delay management at their resident airports (British Airways.

This would ensure that BA remains a strong global competitor by ensuring they are meeting changes in socio-economic behaviour. SUPPORTS STRATEGY?   SUPPORTS STRATEGY?   SUPPORTS STRATEGY?   25 . Brief outline: As identified within the PESTEL analysis. as investing in environmental policies may not increase returns. this strategy will ensure that BA is identifying and meeting customer demands. especially when coupled with a low degree of uncertainty. it would be beneficial for BA to be the first mover in the industry and make changes before any of its competitors. As the requirements of environmental regulations are frequently increasing (PESTEL).2 Strategic Option 2 . ACCEPTABILITY Changes in customer preferences indicate a heightened concern for the environment (PESTEL).Improved Environmental Stance. SUITABILITY BA benefits from a sound brand image (RBV) which would be further enforced by this strategy. Consumers are becoming more environmentally friendly and this strategy would at least ensure that BA’s market share is not compromised if competitors move in a similar direction (PESTEL). environmental issues are becoming increasing important. FEASIBILITY Resources may be better employed elsewhere. therefore this strategy is low risk. BA must be confident that it will be able to successfully pursue such a strategy as if it fails it would be open to public scrutiny which could damage its currently strong brand image (RBV). Furthermore.8. A reactive strategy therefore could be to build an improved environmental stance and go beyond the requirements of regulations such as the climate change bill.

2008).8. BA can modernise its image whilst maintaining traditional values (AQR). SUPPORTS STRATEGY?     ACCEPTABILITY Extensive testing has found the internet connection to be reliable. Many of BA’s main competitors are beginning to introduce basic internet capabilities on selected flights. BA also needs to compete with other modes of travel. 26 SUPPORTS STRATEGY?    . from both leisure and business fliers. BA has the slack resources in the technology department needed to implement this strategy (VCA). BA must successfully deploy this technology first time. Brief outline: The technological capabilities of an airline is increasingly affecting consumer choice of airlines. Greater improvement of the in-flight services will enhance their overall service. Eurostar. with loss of connection only occurring for a couple of seconds during adverse weather conditions. which already have internet capabilities (AQR).3 Strategic Option 3 . New York (Shephard. e. SUPPORTS STRATEGY?   FEASIBILITY Ownership of the operations is much less costly and more reliable than the abandoned ‘Connexion’ service offered by Boeing (DailyWireless. BA is currently testing the service on one flight from London City Airport to JFK. 2007).Improved Technological Stance. increasing long-term revenues.g. SUITABILITY The in-flight entertainment facilities need to be greatly improved and become more reliable. Delivery time of the project – Implementation takes only 1-3 days per plane (Row 44. Therefore it is in its interest to keep up with the competition and exceed it by rolling out internet access on all flights. otherwise it will receive serious criticism and could ruin its long-term image. This will lead to a long-term growth in the number of passengers (AQR). 2009). By implementing the strategy.

the profitability and sustainability of the customers demand provides incentive for market share growth. FEASIBILITY Competition such as Virgin. SUPPORTS STRATEGY?    SUPPORTS STRATEGY?    27 . BA may have already missed the first mover initiative with specialists such as Virgin being so successful. The recent 8. increasing BA’s failing customer service (AQR).8. SUITABILITY The company overview shows this strategy aligns with the existing BA strategy to improve the customer experience. 2008c). SWOT). however with the brand reputation of BA and the expertise within the firm can ensure success (RBV). Stakeholders may view this strategy as competitor narrow focus as BA would be targeting their prime domestic competitor and challenging Virgin Atlantic at their own core competence (Competitor Analysis). Although the business segment is not growing as significantly in long haul as in short haul.Segment Focus Brief outline: Focus and tailor tactics to the business segment to combat Virgin Atlantic’s market share growth. SUPPORTS STRATEGY?      ACCEPTABILITY In relation to other strategies the benefit to cost ratio may not be as great. The development of database marketing in line with BA’s loyalty club card in order to segment and target these business users will increase relationship marketing operations.4 Strategic Option 4 . the imitation BA would offer may gain little credit (Competitor Analysis. (Keynote.6% drop in BA’s business class passengers suggests a need to address the current strategy (Milmo. 2008). as there is no immediate urgency or threat (Competitor Analysis). The benefits should also be sustainable through increase brand image and preference (RBV). have made head way in segmentation development. The time frame to implement the strategy is achievable through resource allocation. Through focusing on one segment BA may lose their advantage in other segments (see appendix 8).

BA has just restarted services to some destinations in the middle east after a decade of a turbulent political environment (Tradearabia. SUITABILITY Utilises the core capability of BA.com).8. The resources required for a successful strategy are within the capabilities of BA (Financial Analysis). SUPPORTS STRATEGY?      ACCEPTABILITY Extending markets and their opportunities allows BA to capitalise on low competition as the first mover advantage is gained (GE Matrix). SUPPORTS STRATEGY?   FEASIBILITY Funding for the current strategy can be extended more easily for this aligned strategy. There is an increasing demand for new destinations to be reached directly by domestic and international travellers (Customer Analysis). although the difference in benefit to the current strategy may be doubtful in relation to other strategic options.Broader Service Offering Brief outline: Extend flights and services to new destinations past that of BA’s current strategy. To gain significant share in the most profitable markets in the short term it may be worth focusing on a few markets as is outlined in BA’s current strategy. BA’s brand strength accommodates globalisation and a higher probability of acceptability by new countries (RBV). The benefits far outweigh the costs. the economic advantage to travelling to other destinations is found (PESTEL). their service portfolio. Against local competition BA’s brand strength may not be enough to achieve the demand needed (RBV). in their core long haul market (British Airways business map).5 Strategic Option 5 . and a phrased approach to increased destinations may be the best (GE Matrix). SUPPORTS STRATEGY?    Based on the analysis of the strategic options it has been decided that before growth strategies are pursued BA should focus on defending its current market position and achieving fundamental service 28 . Also the demand level of many markets is still unclear. The risk to some destinations is still present and BA may not wish to take on the security risks. As the pound continues to fail against the Euro.

Based on this the people processes and technological advancement strategies are deemed most appropriate for implementation. 29 .quality.

30 .

Figure 12 details the objectives and performance measures of these two strategies. Continued market research to ensure that this is a valued service and seek opportunities for further development. Implement effective review monitoring. 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.9. • • Improve service delivery efficiency.0 Implementation Based on the analysis of strategic options it is proposed that two strategies are implemented simultaneously. roll out internet on-board internet access. Figure 12 – Strategy Overview Strategy People processes Aim: Improved stakeholder brand image & profitability Objectives • Utilise databases. • • Following R&D implement 1 new technological service. • Increase repeat purchasing by 25%. Improve internal communication. These strategies are a people processes focused strategy and technological advancement. • Improve employee survey rate from 35% (2007/08) to 80% (Value Chain). • Install equipment on remaining 244 aircraft. 31 . Following succession with test internet implementation. • Technological advancement Aim: Customer Loyalty & Market Share • • • Increase business class market share by 10%. Performance Measures • Profit margin increase of 2 – 3%. An appropriate pricing strategy involving complimentary service for first class whilst targeting business class as the most profitable market. • 80% of business class customers purchasing internet usage. • Increase customer recommendation from 59% (2007/08) to 70%.

There is a new Acting Customer Director on an interim basis. Silla Maizey (British Airways. At a corporate level.1. 9. it is recommended that a permanent and not acting director to be recruited. people are crucial to the success (Johnson et al. 2008).9.1 Corporate Level Structure (Adapted from British Airways. detailed targets must 32 .1 Company Structure When implementing strategy. 2008). She has introduced a new customer service team working with Heathrow Customer Services. This will help to build the brand. therefore the structure within BA will now be analysed to ensure successful implementation. Each department must also tailor the corporate level objectives specifically to its own targets. 9. 2008). BA has a good structure already in place.. Using the current structure to implement our strategy. 9.1. designed to put customers first.1.3 Functional Level Structure Every function must coordinate with each other to ensure objectives are met and an updated operations manual must be developed. improve its customer relationship focus and achieve the stated objectives. Specifically for the relations strategy.2 Business Level Structure At a business level each department will need to ensure all staff implements the strategies that have come top-down from a corporate level and work within the organisation’s brand values. In terms of the technological strategy. no amendments to the current structure are necessary as BA already have systems in place to implement new technology.

be stated for both the marketing and HR functions with constant data capture and analysis to see whether the targets are being 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. 33 .

Our recommendation is to incorporate the latest technology. BA will soon renew their fleet (British Airways. 2008). responding with an adaptation in HR policy and internal marketing culture.9. Our recommendation is for BA to invest in research to understand the employee’s needs. A future recommendation and development strategy would be to address the external communication and ensure the promises of delivery previously corrected reach and penetrate the relevant target market. and our assessment suggests in this fast changing environment. Figure 13 – Application to BA Service Gap The Knowledge Gap Current Priority Low Strategy status Current Strategy in practise BA has completed extensive market research into understanding the customer (British Airways. This will address the current service design’s failure to meet customer needs in terms of operational efficiency. that it needs to be sustained. The issue with the service delivery is for BA to maintain satisfied employees. 2008). BA appears to be losing value in the marketing delivery over competitors such as Virgin and EasyJet. The Design and Standards Gap Medium Current & recommended The Performance Gap High Recommended The Communications Gap Medium Future 34 .2 Service Quality Gaps Model The Service Quality Gaps Model demonstrates the long-term strategy to improve service quality (Appendix 4).

2008. as this is done on an incremental basis it is relatively low risk. p520. Adaptation will be necessary.9. The specific areas of change are looked at in more detail in figure 15. The shaded area of figure 14 reflects the nature and scope of change that the proposed strategies will require of BA.. 35 .3 Managing the Change Figure 14 – Types of Change Scope of Change Realignment Transformation Incremental Nature of Change Big Bang Adaptation Evolution Reconstruction Revolution Source: Johnson et al.

Scope A medium degree of change is needed in implementing a people processes strategy.g.G. Internal surveys across employees will take time to design and analyse and be implemented. and Whittington. Training is needed to improve customer relations. senior/middle managers and employees will need to be further educated. New systems will need to be implemented and surveys will have to be performed to assess satisfaction. A new/reinforced firm culture needs to be implemented as a result of extensive employee satisfaction research. Readiness Employees will need training and education on the strategy to realise the importance of managing customer relationships and to implement the new systems. Power The current top level management structure will provide the power to implement these strategies. Technological Advancement. which feeds down into customer relations team. Refer to Gantt Chart for a full break down. Middle managers must be given enough power to ensure some autonomy in the firm. However. A low level of internal change is needed for the introduction of full internet access across the fleet. K. A medium level of change maybe required when it comes to carrying out research to ensure it is a valued service and in seeking opportunities for development. Capacity An Acting Customer director is already in place at a corporate level. 36 Adapted from: Johnson. . the directors do have the knowledge and skills to implement both strategies..Figure 15 – Contextual Features of Strategic Change Time The improvement of people processes will not be immediate.. 2006. p523. Scholes. Diversity As the nature of change is incremental and the scope of change is adaptation for both strategies. Data capture and using this within the marketing activities could take up to two years before the full benefits are reached. People Processes... the diversity risks are minimal. It will take longer than a year. and good communications within the firm. External consultants may be required for the people processes strategy and will be required for the improved technological stance strategy. R. 2008. however as this approach stems from an internal marketing philosophy full implementation may take over a year. e. Page 508 Capability On a corporate level. ‘Exploring Corporate Strategy’. Measures will be taken to preserve the employees. Prentice Hall. Employees who have direct contact with customers must be given the power to obtain direct feedback. a permanent position over the next 3 years is recommended to ensure successful implementation. The capacity for the improved technological stance already exists. Adapted from Johnson et al. Certain employees within the flight operations/general operations/cabin crew department will have to be trained to be familiar with the new technology if anything does go wrong mid-flight. Perceptions of the firm will take time to change. Preservation The traditional brand image of BA will be maintained whilst also being modernised by an improved technological stance. revised pension schemes. A customer orientated approach is needed immediately to gain competitive advantage. However.

Managers/MRT 37 . Managers Marketing/PR/HR department MRT/HR Control Systems and reviews CBD/dept. Promotion. Evaluation On-going research and feedback CBD/dept. Managers Strategy formulation Financial and resource allocation Finance/CBD Implementation Process designs Operations/CBD Coordination of individual departmental strategies Internal and external communications e. reduced vertical measures.g.9.4 Gantt Chart Stage Planning Activities Market Researchinternal and external 2009 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Responsible Parties Market Research Team (MRT) (in-house or outsourced) Corporate Business Development (CBD)/dept.

9.5 Stakeholder Map It is important to assess the expectations of different stakeholders and the extent to which they are likely to seek influence over BA’s strategies.) 38 . Figure 16 – Stakeholder Map (Source: Johnson et al. p156. 2008..

The workforce is heavily unionised. BA must keep the local communities satisfied as they can severely damage BA’s brand image. High High Keep Satisfied Government/Regulators New legislation if introduced can have a great impact on the organisation but is not individualised to BA specifically. this increases the power of the employees. Boeing and Airbus. With the current conditions the institutions have great power over BA and can refuse finance. They have a vested interest as BA provide their financial wellbeing. Shareholders Shareholders have a high interest due to aspiring to gain financially. Key players Employees Due to service being a key part of BA’ image employees have the power to influence customers. They have high input into selecting board members and authorising new strategies. They still have a high impact as the goal is to attract more customers. Customers Customers provide all of the sales but have low interest in how the company is managed. 9. Competitors BA’s main rivals within their strategic group have both a high interest and power in influencing BA’s strategy.6 Control Systems Strategy Technology Review Guidelines Review the Expected Competitor reactions Premium 39 Contingency in place BA will partner with a Resource Allocation People – . OnAIr Internet Service BA is currently testing the use of the OnAir internet service (Inmarsat. However they have little power as BA could move to its competitors (Row 44/Air Cell). they too have a high interest and power over BA. This is also true for BAA the airport operator. Financial Institutions Financial support maybe required from Financial Institutions to fund these strategies and even though BA has lowered its gearing ratio and increased its liquidity. 2008) . The oligopolistic nature of the market will affect the decisions BA make.INTEREST Low POWER Low Minimal Effort Charities BA donates money to a number of registered charities in the UK (British Airways. Keep Informed Creditors Must be kept informed due to money owed however this would not impact on the choices adopted at BA as they have a good credit rating (Financial Analysis). 2009). Suppliers Two airline suppliers. With only one supplier of fuel.minimal impact on the strategies. Local Communities BA continues to show corporate social responsibility including environmental issues and has a high power over its direction. They have a high interest and power over BA as BA is a big source of income for them and BA in turn relies upon them. By expanding and utilising their service across the fleet would positively impact OnAir therefore they have a high interest. The shareholders must be well informed of the risks of the strategies and length of time before returns are expected and the size of those returns. which have already shown positive results.

and offer benefits. As competitors may take steps to head hunt BA employees. technology provider ensuring that they are the leaders for quality. Technology – Combine existing and new hardware. monitoring. and hence need further resource allocation or a red flag to adapt the strategy. People – Service secondments in third parties Technology – Use service blueprints to outline processes. Information – Providing manuals to users and promotion. internal communications. and form alliances with either the same supplier or a cheaper manufacturer. 2008). Installing and maintenance.progress of the strategy in line with competitor intelligence. A traffic light system is utilised to categorise areas of success. and that BA’s relationship is exclusive. it additionally focuses attention to areas which may be failing. This will turn internal customer ‘Mercenaries’ or even ‘terrorists’ into Advocates (Jones and Sasser. and customer feedback every 6 months. People Processes As the processes of implementing an internal marketing culture are complex. 9. training.7 Balance Scorecard The Balance Score Card (Appendix 7) is used as a tool to analyse the progress of the strategy in the review occurring every six months (Johnson et al. Whilst it highlights the strategy achievements. Internal research => meet employee needs (strong pension/ shareholder schemes and internal marketing of the brand). and decision making.. Competitors such as Virgin are already advanced in this area. Introduce technology team. 1995). If imitation occurs BA will take steps to communicate the quality and take the early adopter advantage. 40 . Although any measures competitors will make will be faster and more effective to implement due to their small size. imitation is unlikely. Finance – Market research Information – Promotion. although many other competitors may look to imitate. and the culture of BA will remain unique. Finance – R&D.

it will still be difficult to obtain funding and BA will not want to increase its gearing too much.0 Critique Although 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. and it is imperative for the organisation to support them in doing so on a continual basis. 10. 41 . 10.1 Financial BA should not have much trouble in implementing these strategies. improvements to customer relations may be hindered by an uncooperative workforce. 2008). The use of external legal consultants should be used when implementing both strategies to ensure that legal requirements are met. regulatory approval must be achieved before it can be implemented on planes flying to/from USA (Wlanbook. Again. 2008. These are considered briefly below. However. In regards to implementing change. With an increasingly lower gearing ratio and better liquidity they should be able to secure some funding from financial institutions and obtain the rest from retained profits. Similarly. However.2 People The recommended strategy to improve relations will require full support from BA’s workforce. highlighting the importance of ongoing training and support. with the current economic conditions. Europe and Rest of the World. As a highly unionised workforce. due to BA’s history and size the company may experience organisational inertia or myopia. 10. Row 44.3 Legal The use of Wi-Fi on planes is already allowed by the aviation regulators in the UK. especially when performing internal and external surveys and the confidentiality of data.10. success in changing the employment relationship will be determined by BA’s ability to work efficiently with each recognised union. a technological stance will require BA’s employees to develop service knowledge.

Due to lack of primary research and restricted access to company information there may be limitations in our findings and recommended strategy. 42 . It was concluded that a combined strategy approach to improve service quality was deemed most suitable.11. however we believe that if the general direction of our suggested strategic intent is followed it will lead to lead to success. Due to the current industry climate we have chosen a strategy to consolidate BA’s position as market leader. We would recommend further strategic analysis to implement SBU level strategies. Due to the scale and scope of BA’s operations it was decided that the focus of this report would be on scheduled passenger flights.0 Conclusion As a result of the external and internal analysis a number of strategic options were proposed.

2008 43 .Appendices Appendix 1 – Real GDP Growth and Trend Appendix 2 – Jet Fuel and Crude Oil Price Trends Source: IMF.

2009) 44 .Appendix 3 – Ageing Population (Source: National Statistics Online.

Appropriate physical evidence and servicescape Zeithaml.Knowledge Gap Closing this gap requires: Understanding and listening to customers (Market Research) Building relationships with customers Filtering feedback through vertical channels of communications PERCEIVED SERVICE Internal Environment SERVICE DELIVERY GAP 3: Delivery Gap To close this gap: Internal Research HR Policies Match supply and demand GAP 4: Communications Gap To close this gap: Horizontal Communications Integrated marketing communications Management of Customer Expectaions EXTERNAL COMMUNICATIONS TO CUSTOMERS GAP 2 Standards Gap To close gap: Customer defined standards TRANSLATION OF PERCEPTIONS INTO SERVICE DESIGN & PRECOEDURES MANAGEMENT PERCEPTIONS OF CUSTOMER EXPECTATIONS Approved service design.4 will help meet customers expectations and close gap 5 GAP 1 . 2009) 45 . A. M. J. & Bitner.Appendix 4 – Service Gaps Model External Environment EXPECTED SERVICE GAP 5: Service Gap Closing Gaps 1 . V. (2003) Appendix 5 – Tourist Arrivals (Source: Datamonitor.

2009) 46 .Travel expenditure by region (Source: Datamonitor.Appendix 6 .

47 .

Increase spending in R&D Customer orientated .Time efficiency services of check-in service Innovation and learning perspective CSF Measures .Quality control Quality of airline service Customer service .Sales growth Improved . 2003.Share price .Profitability of airline competitors in the new markets Investment into technological innovation Highly skilled staff .Profitability and liquidity ratios Shareholder value .) Financial Perspective CSF Measures .Positive speed of feedback check-in .Staff Integration of UK motivation and emerging market cultures ..Customer feedback .Dividends per share Customer Perspective CSF Measures .Appendix 7 – Balance Score Card (Source: Garrison et al.Customer feedback .Customer questionnaires and feedback .End of year financial financial performance accounts .Increased passenger volumes Increased brand awareness Internal Perspective CSF Measures Security and .Increased sales volumes .Spending on staff training Expansion into new markets 48 .

Easy Jet Domestic Low Short-Medium Haul Focus of Service Provided Long Haul 49 .Appendix 8 – Airline Segmentation Matrix Price Premium Virgin Medium BA First Choice. Thomas Cook… Ryan Air.

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