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British Airways

This report consists of four sections to analyse the opportunities and threats present in an organisation and ways to deal with these factors using effective strategies. For the purpose of this report, BRITISH AIRWAYS (BA) has been selected as the organisation based on which the analysis has been completed.

Section 1 consists of external environment analysis, which has been carried out using PEST and PORTER’S FIVE FORCES framework. On the application of these frameworks, it was identified that BA has been affected mostly by the external factors related to the PEST, which affects its profitability largely.

Section 2 has analysed the opportunities and threats with the based on the analysis of PEST and PORTER’S FIVE FORCES framework. Political and technological factors have been identified as the key drivers in this section based on which BA should formulate its strategies to ensure maximum profitability.

Section 3 has presented the critical analysis of ANSOF’s MATRIX to evaluate the strategy for BA based on the key drivers. After that, BALANCED SCORECARD was applied according to the SMART objectives to evaluate the effectiveness of strategy based on the identified key drivers.

Finally, section 4 has presented the KUBLER-ROSS change management model to ensure strategic change management in BA with the implementation of the strategy based on the key drivers.

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Introduction

The aim of this paper is to discuss the external environment of British airways along with their functioning and opportunities or threats this environment brings to the firm that the managers have to understand and deal with. Looking at the current situation of the firm, British Airways has a market share in different regions of the world where the airways operate in North Atlantic, Far East and the whole of Europe (Britishairways.com, 2020). The airline does not have a set number of competitors but the competition varies route to route were depending on the route they face competition in quality of service being provided and prices. Therefore, there exists a long-haul market and a short-haul market where for short-haul flights especially in Europe the airline faces competition in terms of ground travel like rail travel (Britishairways.com 2020). Whereas for long haul flights, the airline faces completion from new entrants who are operating from different parts of the world and are increasing operational capacity from London Heathrow (Britishairways.com 2020). Therefore, section 1 highlights the external environment of the company to evaluate the external factors which affect the performance and strategic actions of the firms, while section 2 analyse the opportunities and threats based on these external analyses to focus on new strategies for the business. Section 3 has presented the rationale for choosing the strategy and finally, section 4 critically evaluates the change management of the organisation based on the selected strategy.

1.1 The Current Situation

British Airways is one of the top airline company in the UK with its flight operations in more than 300 destinations. Founded in the year 1974, BA has become the flag carrier airline of the UK that offers low rates and excessive support to the customers. The company has merged with Iberia forming International Airlines Group (IAG), which ranks on the third in terms of annual profits due to its flight operations. As a result of this, BA has become one of the highest revenue-generating airline company in the UK with net profits of £1,952 million (Airways, 2017). However, the net profit fluctuated, the lowest profit recorded in 2012 at £114 million and the peak value recorded in 2015 at £2.5 billion. In 2019, the net profit was £1.1 billion. The current situation of British Airways is not that lucrative since the airline has stopped its operations in few parts of the Middle East and various other locations due to the terrorism and violent behaviours in those countries. Not only that, but the airline has taken a setback due to the environmental policies since following the regulations, have affected the profitability of the company and hinder the company’s aim to provide air travel at comparatively low flight. As a result of this the report, Coller et al. (2016.) Has evaluated the latest rankings of the BA in which it has dropped down to 19th position in the world ranking with a major loss in its customers outside Europe. However, Fedosova (2016) has reviewed the policies of BA in which the company is introducing various flight classes for its customers in Europe to compensate for this loss and has even eliminated the inflight food for short fight travels. On the other hand, Tan (2019) analysed that BA has introduced flight meals only for the long flight operations to ensure customer satisfaction during the long haul. This has enabled the company, to attract different food brands to contract with the airline industry for food delivery during short-haul, which is aimed at improving the profitability of the company.

1.2.1 PEST ANALYSIS

Political Factors: In recent years the Covid 19 and Brexit are the two important aspects that have potential impact on UK political framework. The changing policies and regularity framework in UK, impact the overall business operation, marketing strategies and management process of British Airlines (Ibrahim and Sadam, 2017). Following are the potential changes in UK political framework that pose potential impact on business activities of BA. The fastest spread of COVID 19 pandemic in UK, pose adverse impact in every industry. Airline industry is one of the potential victims of this disease. UK government has ceased the services of all international and domestic airlines including British Airways that makes the airline the industry to face high economic crisis. As mentioned by Iacus et al. (2020), due to overspreading of corona virus in community, governmental strategies and policies are criticised that pose huge pressure on government to prioritise their focus on protecting people from this pandemic. Government pose travel restriction on airline industry that makes this industry to face huge economic slowdown. British Airways has been pressurised to announce retirement of more than 747 fleets that leads to official termination of many airline staffs. The stability of political system is also somehow is impacted by this pandemic that intern impact in the overall decision and regulation taken for the airline industry. Although now all the international and domestic flights are permitted to open their service but the overall adverse impact of COVID 19 on entire business operation British Airlines as well as on other airlines would take high times. Brexit poses both the negative and positive impact on the overall UK political system that also has impact on the business operation of airline industry. As mentioned by Gössling et al. (2020), due to Brexit, UK government becomes free from taxation policies of EU, that assist UK government to reduce the taxes on British Airways and other airline companies. On the other hand, Brexit makes UK government free from political obligations posed by EU government. That indirectly impact on airline industry. The exit from EU union assist UK government to enjoy the political liberty, that assist this UK government to take fair as well as growth-oriented regulation for airline industry. In this context, British airline would get political advantages in developing their business by gaining proper political support from UK government. Th negative aspects of Brexit that impact UK policies are lower budget, risings cost and extra administration cost that makes its obligatory for the UK government to develop such strategies that can reduce the overall experiences of government. This can be highly threatful to British airlines as, UK government can pose taxation burden as well as can reduce the overall budget located to airline industry that can pose negative impact on overall business operation and market profit of British airlines.

Economic Factors Moving on to the economic environment that British airways function in is extremely important to assess, where the current economic environment deemed extremely difficult especially due to the surge of Coronavirus (Jackson Sand Tozer 2020). Due to COVID 19 Pandemic, airline industry along with British Airways has faced severe slowdown in overall economic growth as well as annual profit that not only impact on the entire business operation of BA, but also impact on the overall economic situation of many airline staffs at individual level. British Airways currently faces huge challenges in terms of managing economic crisis that occurred due to the surge of corona virus. As mentioned by Ibrahim and Sadam (2017), another economic factor that impact adversely on overall economic growth of British Airways is US-China trade. UK economy is a potential victim of US china war, which will reduce the production of many UK based company that operate their business in China and US, which reduces the overall market profit of these UK companies. These economic slow down will rise the overall market of different necessary goods in UK that will makes it difficult for consumers in invest in airline industry. Therefore, British Airways will face huge economic slowdown due to reduces number of customers. In the other hand British Airways also faces frequent staff strike due to the termination and low remuneration, which affect badly the entre brand reputation as well as business operation of this airline company. In addition to due the economic slowdown that is the result of Brexit in UK, British Airways faces several economic changes such as lack of EU fund which was previously the main sources of running the overall, business expense of BA and lack of profit that was generated through he number of EU customers. Therefore, it can be stated that, British Airways faces sever economic challenges due to the above-mentioned aspects such as COVID 19, US-China War, Brexit and BA strikes.

Social Factors The overall social perception in UK has been changed with several consequences such as COVID pandemic, Brexit and economic slowdown in the country. Due to surge of corona virus in community, many people have lost their jobs that impact on their perception, behaviour an attitude. As mentioned by Sobieralski (2020), due to Brexit and corona surge UK people have changed their attitude and consumer behaviour towards investing in airlines. People generally avoiding travelling, which pose adverse impact on overall economy of British airline as well as the entire airline industry, recently, British Airways faces severe economic crisis, as there is huge reduction in the number of customers in past four months. On the other hand, Brexit although provides political liberty to UK government, in case of economic framework, it makes difficult for many UK based industry, especially airline to get huge fund from EU government. As a sheer portion of economic fund was generated through EU customers, after Brexit, UK face huge fund shortages that increases prices of essential goods and services, that makes society people to avoid luxury expenses such as travelling through airlines. This is another potential reason why British Airways faces high econio0mic crisis in recent years.

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Technological Factors Lastly, looking at the technological environment for British airways, huge investments are done every year for research and development to improve the technological capacity of the organization and accommodate growing technological trends (Airways 2017). Technological advancement in UK, provides huge advantages for British Airways to improve its service by using useful technical devices and machines. As mentioned by Adiga et al. (2020), technical advancement assists airline industry to install new software, application programmes, operating system and animation graphics that assist airline companies to improve the overall business process. British Airways get huge advantages while operating their business in UK as this country represent one of the strongest technological infrastructures. On the other hand, high number of internet users and string as well as powerful network access (5G), assist British Airways to use highly modern machines, application system, operating process and software that can easily be accepted by society. On the other hand, high technological development in UK, assist British Airways to make all the services provided by this airline automated and eliminated the use of manual process to fasten the overall outcomes

1.2.2 Porter’s Five Forces

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From the external analysis of the critical factors in the airline industry, it is evaluated that BA is mainly affected by macro factors in terms of political, economic, social, and technological due to which their profitability has been disrupted. Although the impact of five forces is quite evident on the BA, however, as compared to the factors discussed in the PEST analysis these factors are not that evident. Gupta et al. (2019) has analysed the impact of political factors in terms of terrorism suggesting that it has disturbed the profitability of the airline industry due to the restriction in travel. Moreover, Lachmann (2016) has complemented this fact evaluating that BA has suspended its operations in Cairo due to the security concerns. This has affected the principal benefits of the BA in these states. Apart from that, Kim et al. (2015) have also suggested that economic factors inflation, interest, and economic environment have affected the operations of the airline industry largely. According to a report by Gupta et al., (2019) BA has reported the highest ever loss of 401 million euros due to the effects of coronavirus. On the contrary, social factors have contributed significantly to the growth of the company due to the changing lifestyle of the people for which travelling has become necessary. According to a report by Alshubaily (2017), due to the impact of social factors, the airline industry has been able to achieve a major growth by 49.3%. Similarly, Lachmann (2016) has evaluated that the impact of technological factors has been quite evident since it has contributed to the safety and comfort during the travel of the passengers.

Section 02

management

The previous section focused on the external environment those British airways functions in. This environment brings varied opportunity and threats to the organization. Looking at the opportunities, firstly, new markets and their opening through political influence and government agreement can lead to British airways accessing new emerging markets (Gupta, Gupta, and Gupta 2019). Williams (2017) has further commented on the political factors suggesting that it has discouraged the participation of the airline industry to various section. Therefore, the airline industry needs to make treaties with different other countries to diversify its targeted market and ensure its profitability. Thus, the political factor could be considered as a vital driver, which could help BA in overcoming reduced profitability that has been lost due to its restricted options. Secondly, the development of the market, especially through technological growth, can dilute competitor’s advantage and enable British airways to rise above their competitors. Another great opportunity offered to British Airways is through a better-digitized booking channel (Gupta, Gupta, and Gupta 2019). However, technological factors have been integrated into the core of the business in the airline industry, which is contributing to its success. Wang et al. (2017) has demonstrated that the greatest contribution of technology in the airline industry is maximising the efficiency of the airline by making travel safer and lucrative. Furthermore, Belobaba et al. (2015) have also stated that due to the impact of these technologies airline industry has been able to meet the compliance of international regulations for protecting the environment and ensuring sustainability in the environment. Therefore, it could be evaluated that political and technological factors are two drivers that would help the company in formulating its new strategy for the development of the company.

Section 03

3.1 Ansoff’s Matrix

The company could utilise the Ansoff matrix for formulating its strategies based on the two drivers’ namely political and technological factors. The rationale for selecting the Ansoff matrix is that it utilises two approaches for the development of a new growth strategy. Johnson et al. (2018) has identified these two approaches, which include market development and Diversification strategy. Diversifiable strategy will assist British Airways to diversify the entire market to get better market opportunities. Here marketers of British Airways can use Ansoff Matrix to make market diversification.

Market penetration:

In this stage, marketers of British Airways will focus on improving the quality of the existing products or services in the existing market. For example, marketers will improve the ranges of customer case services such as providing them online updates about slight status, prices and time.

Market development:

Here the marketers of British Airways will launch their existing services or product in new market. This process will assist marketers of this company to extend their market footprint in international market.

Diversification:

Here the marketers of British Airways will go for launching their new products into new market that will assist the company to makes its business growth in international market.

Production development:

Marketers of British Airways will launch new product into existing market to grab string competitive advantage.

3.2 Evaluation of the Strategy

To improve internal functions with the adoption of new technologies in the BA. From the perspective of shareholders in the BSC, diversifying the market will help the company to reduce the political barriers and restrictions. In a similar manner, from the perspective of innovation and customer satisfaction, integrating the technology in the BA will help the industry to improve its flight procedures and operations, which will ultimately pull the customers towards the business. Finally, by integrating the technology in the internal business functions, BA would leverage the customer and employee satisfaction, which would then helped them to enhance their effectiveness (Nørreklit et al. 2018). Thus, from the evaluation of strategy using BSC, it could be recommended that the strategy should go ahead since it covers all the major aspects, which hinder the growth of industry and its profit in the airline industry.

Conclusion H

Overall, this report is extremely essential for the organization and its growth. The world is growing at a fast pace and requires new strategies and ideas every now and again. While strategy is important and geared towards success, the fact is strategy often does fail. Sometimes it may be the right people were not included in the effort, or perhaps the goals set forth in the strategy were unrealistic to begin with. Therefore, the leadership of BA has to bear the responsibility for ensuring successful execution of the company’s strategy. Simultaneously, the effective leader will also be building a culture of trust. Outstanding leaders not only are able to accomplish these things, but also create a culture with a positive view of change and accountability. Above all, communication is crucial to organisational transitional change, this will impact largely on performance. To be competitive with other airlines and provide the best customer experience British airways has to consider the impact of the external environment, understand the growing trends, and need for better experiences.

Reference list:

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