Assessment of Operational, Environmental and competitive positions in the Perspective of British Airways Plc.

MBA - Strategic Management

Submitted to: Dr.Teddy

Date: April 26, 2011

Foster

By
Md. Faruk Hossain Student of MBA Term-2 (BFM Group-2) College of Technology London CTL student ID: 094075-86 UWL student ID: 2010020021

TABLE OF CONTENTS
1. Executive summary..3 2. Introduction..4 3. Company back ground..5 4. Literature review......6 5. Macro Environment..7 6. Pestle analysis...7 7. Opportunity and Merger analysis........10 8. Porter Five Forces...11 9. Micro Environ.....11 10. Resources based View Point...12 11. Generic Option .......12 12. Ansof Matrix ......12 13. Michael E porter generic strategies.13 14. Recommendation.15 15. Conclusion...15 17. References....16 18. Appendixes...17

EXECUTIVE SUMMARY

Todays Business world is much more competitive and challenging that was existed before. With the advancement of rapid development of technology, recent economic recessions and the very complicate world political situation has affecting the world business environment. Strategic management in the organization becomes very important and sensitive issue which deals with the change or the factor which may affect the business environment. Main goal of an organization or a business is maximization of shareholder wealth. For achieving this goal company or an organization need to get the competitive advantage. Implementation of proper strategy by an organization help them to stay on the right track of business and also help them to protect the upcoming threat in the mean while to grab the right opportunity in a right time. This report has been conducted on Google Inc. and it will assess the organizational, operational, and industrial condition by using some strategic tools such as Bowmens clock, Michael porter Generic strategy, PESTEL and SWOT, Porter five forces, Meckengy 7s,viro and ansoff matrix subsequently
competitive position within it. This report mainly conducted to find out what types of strategy should require for BA in order to fit in the market as successful organization. In this report it has analysis about the BAs operational, industrial and business environment and the outcome result will explain the strategic decision that has been taken by BA and the market position of among the other competitors. A different type of strategic tools SWOT, PESTEL, TWOS, ACTIVITY MAP, Porter Five forces has been used to assign its industry and environment and operational condition.

Introduction
There are so many Airline industry exists in the world, British Airways (BA) is one of them. British Air ways is one of the Biggest International scheduled Airline industry of the world based on United Kingdom. British Airways reflect the excellence air service, pride and glory for the airline industry. The past history of British Airways is dramatic and eventual. After

founded of British Airways this airline industry faced lots of crisis and undulant situation. Most of the time this Airline manage their business by taking successful strategy and some cases those decision they had taken by them was not successful. In this report we will mainly focus on the operational function and the Industry environment of British Airways within extreme competition. It means how British airways will define their strategy for getting the competitive advantages while consider its operational business functions and industry environment.

British Air ways operating national and world wide scheduled air service for the carriage of passenger and baggage, freight, mail service. There is huge carriage service across the world which make them leader in the industry. No doubt profitability of a company or industry relies on customer satisfaction and their demands. So an organization definitely realizes its peripheral and internal circumstances, markets, and its own capabilities. It also need to be understand those very changing factors which are uncontrollable and try to adapt this uncontrollable factors within it business environment. This report will give a demonstration how British Airways were dealing those issue and still they are dealing by taking strategic management decision. Various types of strategic management tools and model will be used in this report for assessing the operational function and business environment which will also lead us to take the proper management decision in the case of British Airways PLC.

Company Background
Company background of BA is historic. After formation of BA it got numeric historic events those events are left a vital impact on British Airways. In 1924 four airlines merged together and formed as Imperial Airline. 1939: 24th November Imperial airways and British airways Ltd combined under provisions of British Overseas Airways Corporation. 1974: 31st March 4

BOAC and BEA disappear and formed as BRITISH AIR WAYS. In 1976 the British Airways they introduced they one of successful project in the history the supersonic plane named Concord Under the supervision of Lord King BA started to transform as private company1996: Robert Ayling appointed as a Chief Executives. In the Robert Ayling revolutionary changed has occurred. He build strong Brand image and which make the company profitable and BA become number one airline industry during his era. 1997: 10th June British Airways introduced its new corporate identity, a newly stylish logo and ethnic tailfins. 2000: Due to poor company performance of Robert Ayling (CEO), 25th April he was replaced by Rod Eddington joined as new CEO of British Airways. 2001: November British Government gave the permission to BA for the construction of terminal 5 at London Heathrow Airport. In May 2004 British Airways completely banned their high supersonic aircraft called Concord. In September BA sells its 18.5% stake in the national airline of Australia Qantas. In the early of millennium airline industry was profitable and Heathrow Airport becomes World most crowded airport in the world In September 2005 Willie Walas joined as a CEO after retired of Rod Eddington.1st February 2006, BA renamed fully owned subsidiary British airways city express to BA connect. BA becomes one of the most over crowded airport in the world due to this reason providing mass service 27th march 2008 BA opened Heathrow Terminal 5. In 8th April BA merges with Iberia to form International Air line group, the third largest airline in the world by revenue (see Appendix 1 for the timeline figure)

Literature review:
Success of an organization or a company depends how well the organization performing in the business world. Similar types of business and in the same business environment one company is doing better and other its not! Business world is very dynamics and flexible it has changing overnight. So it is very important to assess the situation of the hole business for the particular industry and must define the strategy how the will take the opportunity or how the will overcome the adverse situation and thats the way organization will get the success. 5

Strategic management is consisting of two parts one is formulation the idea or strategy and another is implementation of the idea or the strategy. So many scholars have defined the strategy management from their research and observation. In terms of future directions, the basic problem of any company (or, for that matter, of any living thing) is survival. And to survive over the long term, as Lowell Steele of General Electric succinctly summarized, a company must have two strategic capabilities: the ability to prosper and the ability to change (Steele 1989, pp. 22-23). There is a keen interest among serious observers of business to understand the reason for profitability and market success. However, observers of business often uncritically leap to the conclusion that the keys to success can be identified by watching and imitating the behaviours of successful firms. (And this is often called benchmarking or best practices.) However, uncritically using currently successful firms as a standard for action assumes that the successful outcomes are associated with identifiable key success factors, and by imitating these factors, other firms can achieve similar successful results Besanko et al., 2000, p. 4. Strategy, planning, budgeting, and knowledge are the four forward-looking activities of management, and it is important that they be clearly distinguished. Budgeting is the allocation of resources for the future operations of an organization. Budgeting is neither planning nor strategy. All organizations budget, but they do not necessarily plan nor strategize. Organizations annually budget in order to allocate the resources for continuing operations. Thus the managers of all organizations do formulate budgets; but not all managers plan or formulate strategy fredrick Betz, 2003, p. 9.

Macro Environment: In the general senses macro environment of the company refers
its external economic factor that plays an important role for the organizations. In the business environment three are some factor which are responsible to affects the business. Slide change of these factors which mat leads a massive change in the business. Once there is any change in the external factor, then manger should define right strategy to cope up the change of this external factor. So organization always keep examine the external environment so that they can take the opportunity

External Analysis:

There are various types tools for analysing the external

environment of a company such as PEST analysis. PEST analysis is very effective, simple and widely used technique that will give the clear view of some external forces which are directly or in directly affect the business and subsequently making the strategic decision. How British Airways surrounded by those external forces which are push the company taking strategic decision and making their vision for the future.

Political Factors
Change of government has a great influence on the organization. Similarly a British airway has getting same problem. During Labor government era they have given the permission to British Airways for making third runway in the Heathrow airport. Heathrow airport is one of the busiest international passengers airport of the world and BA wanted to have this 3rd runway cause it will bring for them more profit. After the election new coalition government has came and they banned the previous government plan. Dismissal of the third runway plan at Heathrow it will make an impact their aircraft hanger capacity because of after merge with Liberia ultimately they need new runway because of their capacity already packed. BA spoke man said, Government has already conscious about the making of third runway at Heathrow air port that they could get the more economic benefits but they cancel the plan and he also include that As Britains only international carrier, BA are promise to giving the supreme international air links to help the countrys economy After merging with Iberia airline they are concerting at Madrid airport, which has excess capacity. (More Information Available in the appendix: 1.2)

Economic Factors
Economic factors also affect the airline industry. When recession has started after that British airway has gradually loosing their revenue. Still this recession is going on and its got the shape W

According to BA financial reports comparatively this year BA is going to losing their revenue more. This recession has a great impact for all kinds of industry. BA is the best frill airline service with premium class seat and expensive and its greatly affected by the recession. And

the other had no frill airline industry getting the benefit of recession. After recession hit on BA the policy they had taken to cut down their cost. They are trying to reduce their staff and also administrative function. (See Appendix 1.3)

Social Factors
Social or cultural factors has a great impact of any kind of business because corporate industry or business covered by the culture. The social and cultural image defer from country to country. On the other way British Airways is a multinational company they were operating worldwide flight service around the world so they have to consider this issue very care fully. If we follow United Kingdom demography we will observe that United Kingdom is becoming an aging people dominating country. These old people expanding the Grey Market who are past their leisure time by traveling. So this is considerably a great opportunity for the airline industry to expand their business if they focus about the particular aged group of customers. (see Appendix 1.4)

Technological Factors
Technology is one of vital issue of any organization and the modern world is truly dependent on technology. Now in days technology is one of the vital weapons proper use of this issue company can get the best performance and they can also reduce their cost as well. And the perfect example reflected on BA Chief Information officer Paul said Airline industry using the technology to drive the streamlining business processes which are also help to minimize cost and removing complexity he also added

We successfully reduce our 40% cost by running our IT operation over past four years. And we are doing it more efficiently and effectively very simple and keeping its standard IT operation playing a key role for British Airways they made 20% profit to 620 million in the face of gradually increasing of fuel price and rapidly growing competition with no-frill airlines. Bill Goodwin. May 2006. BA developed their online ticket selling which also cut down their cost and also minimized their huge direct customer service over phone or direct meting. BA focusing on how they can give the latest technology to their customer it will also create their high value service. Another problem is gradually increasing of oil price so BA trying to Innovate new technology like renewable energy they made a partnership with Solena group and Installing a sustainable jet-fuel plant. BA has vision they will start to use biofuel instead of oil from 2014.

Environmental issue
Environment is one of the Potential factors for British Airways it has great impact on business. Like emission carbon dioxide which is cause of burning fuel these types of problem create public awareness and also part of corporate social responsibility. BA is trying to reduce their emission of carbon-dioxide by using the bio-fuel and renewable energy. These types of research also increase the production cost.

Legal factors
On March 2008 BA agree with the open sky policy. Open sky policy explains EU airline can fly to US from any airport from EU and also they can use the any particular air route under open sky policy. This policy crated more completion in the airline industry. Considerably Heathrow and us airport route is most profitable route in the air line business. (Guardian 31/03/08), it was projected due to this policy BA is going to loss their profit by 2.3 million. BA has taken some policy to reduce their losses like they recruit lower cost of crew and they

will arrange this staff outside of UK. And they have reduce 25% cost by recruiting lower cost staff and also make one root flight like Paris to New York. At issue is the fact that BA wont allow the two pilot groups to be as one. This leads us to believe that the BA management has a different objective. That objective is to divide the pilot workforce and push further new jobs generated by deregulation through this cheaper cost base www.baplane-bapilot.org, See appendix 1.6

Opportunity Analysis and Merger with Liberia: Merging with the Spanish Airline
Industry considerably it is the best opportunity for BA. Two large companies will be able to create the great value composition. In the modern world technology will be one of the best opportunities for them. Now in days E-business becomes more popular and reliable and cost driven policy. This is also a great media of getting the customer need. Through the technology BA is going to make the renewable energy like bio-fuel that will keep the environment safe as well as it will decrease the oil price. Value adding and innovating flight service will be great opportunity for BA. Like making new sophisticating air craft new seat, network and produces new attractive service will be great opportunity for British air ways. ( more information are available in appendix 1.7)

Porter five forces:

Today world is very much competitive in every sphere. No doubt analyzing of competitive character of airline industry is very crucial and tactical for generating strategic decision for the BA. Potential competitive forces define the profitability of an industry and simultaneously its plying great role in order to define the strategy of a company Michael E Porter March-April 1998, p.21-25. See appendix 1.8 Threat of new entrants: Three is no vital chance of new entrants. Competitive rivalry: Yes there is competitive rivalry

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Bargaining power of supplier: Supplier is stronger. Bargaining power of customer: There is not any potential threat from customer. Because BA maintaining premium customer serving with offering great safety. Threat of substitutions: Yes for the short haul distance there is big threat for substitutions.

Micro Environment
British Airways Plc is one of the largest international regular airline and carriage service in the United Kingdom and in the world. After formation of British airways and still now so many historic events and strategic management decisions has taken place in order to make this company as a profitable business. It is also notable that British air ways has change its Chief Executive officers for several time due getting the perfect person who are able to take better strategic management decisions. So it is very important subject to understand the business environment of British Airways for getting perfect result in the terms of taking proper management strategy.(More Information in the appendix 1.9)

RESOURCED-BASED VIEWPOINT: Collis and Montgomery says that Corporate strategy is such a way company created value by assessment their recourses and coordination of its dynamics activities its based on their recourses, business and structure system of the company. Collis and Montgomery so it is very much potential to understand about resources of and its multi using approaches how a service has produced by using its external and inter recourses David J. Collis and C.A Montgomey, 1998, p. 117 (See Appendix 1.10)

Strength
Merger with Spanish Iberia it could be strength for BA. British Airways is a well-established brand name that has gained loyalty and trust from customers. Innovative culture enables BA to take full advantage of technological developments for example, online sales, and drive thru check in. BA has a global geographic coverage with excellent communication with strong

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international alliances. BA has strong Brand image. BA is the Premium service airline which is the great strength of British airways.

Weakness
BA has some weakness after Iraq war and manuscript of 9/11 they are recovered little bit but thy have suffering for liquidation problem negative in net income and high cost of debt is the main weakness for the BA. Recent cabin crew strike for several reasons it means employee relationship is not good in the BA.

Generic Option: When business reach to its maturity stage after that end of the maturity stage or keep the maturity or growth rate the market has to define their strategy in order to get the profit from the business. Now in a days Airline industry is much and more competitive then it was before. Selection of a strategy is complicated. In order to find the suitable strategy we have to focus on four key points which will help us to find out the best option which will fit with BA. As they are 1.How much cost will required. 2. Assesment of the risk associated with the options. 3. What types of commitment (investment and resources) they have for the particular busies. 4. Retaliation from the business after implantation of the strategies.

Ansoff Matrix: Ansoff matrix is one kind of tools in order generating strategic option. Brief description of Ansoff Matrix is described below in the perspective of British Airways. Market Penetration: According to the Ansoff matrix market penetration is the option for the B.A. Market penetration means penetrate the product to the all types of customer. Yes BA can follow the idea but it is not easy to establish this idea. They can offer new service it may increase their production cost.

Market Development: Alternate way they can consider about the market development especially in the overseas. Again they can penetrate their service in the overseas which may obstructed by the other

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domestic airline and their government. more money as I motioned in the BA suffering serious debt funding so it may not viable for BA to select this option. Product development: Ba can consider about the product development idea. And they have already considered this step. Does BA have the skill and knowledge is necessary to do it, How BA will face the to entry barrier. All the product existing in the market they will compete with the new product? In addition we have to consider the investment and resources. For an example Virgin Airways they developed their service like giving extra service like home to airport and airport to hotel by their personal transportation system. BA has to find out a solution how they can developed their product through innovation and research, then their product will begin to take care it self and also the can able differentiate from the other products that are existing in the market. They modified their service more automation and quicker because service of the BA has slower than other operator.

Diversification of product: Diversification approaches will help BA to sustain their business. They can do through innovation, merger. But diversification approaches come when a company or firm fully maturated it in business life cycle. They can go for related diversification like they are maintaining now Cargo service. This processes can be accelerate through foreign direct investment, alliance, merger and acquisitions.

Michael Porter Generics strategies: Michael porter generic strategy mainly focuses few main option for the company if they wish to select that open its possible to get the sustainable competitive advantage. This generic strategy based on overall cost leadership and differentiation of product. Cost Leadership: Its associated with the low cost strategy. It means company defines their strategy they provide the lowest cost in the market in order to getting the competitive advantages. If they wish to get lower cost strategy they must have gain the economy of scale for their particular product. It means it will add the low value of the product. This strategy 13

mainly associated with technology and frequent uses of their resources or maximum they can use their resources. This strategy also reduces the resources as much as possible. Low cost focuses gives the less profit and try to capture the mass market. In the case of BA they are following low cost option. This strategy fit with low cost Ryanair. So in the case of BA cost leadership approaches is absent. Differentiation: Differentiation strategy associated with higher risk. This option differ the product from the market existing product. More value addition is required for the differentiation. BA follows the differentiation option. That is why their service got more special, and costly, the use their large number of recourses. They have good customer service, highly skilled employee, BA supreme air service which very much famous in the world that BA service is more luxurious, safer than other which help then to get strong Brand image in the airline industry. (See Appendix 1.12 )

Recommendation
British Airways setup their goal to become a global premium air in the world and they will compete 2012. BA focusing their all concentrations on customer they will use their all types of resource in order to getting the customer satisfaction. They will deliver the out standing customer care, differentiating of product or all classes of customer service. They will full feel their objective so customer can get taste of global premium airline where customer can travel anywhere in world according to their demand. Customers: BA will assign the customer demand. What types of service they expect from the industry they will full fill this demand especially in long haul service? And they will provide different service for their customer. So it will improve their revenue stream. 14

Deliver the differentiated service for the all customer key touch point Colleagues: BA will reassess their staff through training, reward motivation and proper human resources management which will give best customer services. Performance: The will increase their infrastructure and modified their technology in order extensive service for the customer. They will be keeping counting to grow and make shire their self-become one of the dominated airline in the London. Partner: Through merger and acquisition will build mutual trust and it will help BA to become a global premium Airline. Excellence: Service that will provide by it will get appeal from the customer globally. BA wants fly with their customer anywhere in the world. BA will confirm the supreme and unique service for all types of customers according to their needs. They will do the proper marketing then customer will come to know if they have to pay little bit extra but that service thy will get it will be excellence. See apindix.

Conclusion: British air ways is one of the prestigious airlines in the world. But after the economic recession this industries has struggling to stay in the market. So strategy formulation is the very important for this industry that will help this organization to regains its past pride. Economic world is moving very first so rapid change in business environment also another reason which always motivate the organization define right strategy which business really need for the particular time being.

References:
Besanko, David and David Dranove and Mark Shanley, 2000. Economics of Strategy (2nd ed.), New York: John Wiley & Sons. British-airways-history., [online], available from URL: http://www.ehow.com/facts_5526082_british-airways-history.html#ixzz18VFL2MyG , [retrieved 1 December 2010] David J. Collis and C.A. Montgomery , Corporate Strategy: A Resourced-based Approach McGraw Hill, 1998

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Fredrick Betz, 2003, Executive Strategy, Strategic Management and Information Technology, JOHN WILEY & SONS, INC. USA, p. 9. (Guardian 31/03/08), www.guardian.co.uk, online version. Hausmann, Ricardo, Emilio Lozoya Austin, Irene Mia (2009), The Mexico Competitiveness Report, British Airways, p 494 Johnson. Gerry, Kevan Scholes, Richard Whittington, et al (2008), Exploring Corporate Strategy PESTEL p56. Michael E Porter March-April 1998, ed 10th , On Competition, Library of Congress Cataloging in publication data, USA, p.21-25. Stegmann. Juan Pablo (2009) Strategic Value Management: Stock Value Creation and the Management of the Firm "internal analysis", p109. Steele, Lowell W., 1989. Managing Technology, New York: McGraw-Hill. www.baplane-bapilot.org,

Appendix:
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Appendix 1.1(Time Line)

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Appendix 1.2 Political Factor: At the beginning of the year 2001 Airline industry they started to face difficulties due to terrorist attacked and this incident also recognized as 9/11 strategy this had a direct relation for the British airways revenue. BA earning their most of the profit from London to New York business class passenger. After the 9/11 most of the passenger canceled their travel during this time its cost them heavy financial losses. When customer were losing their faith due insufficient security for bringing their trust BA implement high measure of security. Government also announced for all the airline industry they have must keep details of all the customers 72 hours before the journey when they journey starts. In July 2005 United stated started war with Iraq this war hit in the oil prices and no doubt this leads to unstable political issue. When British airways supersonic jet concord air plane introduced in the airline industry at that time it was revolutionary steps. This Concord air plane had great triumph, time consuming premium air service and so on. But the problem was that this plane used to produce huge sound pollution and this service was very much familiar to the business class specially those passenger they were traveling from London to New York. America deals this types situation politically. The tried to not to give any chance to British airways so that they cant enter their market. Then BA authority deals this matter politically and negotiated with the America that, they were not going to operate their flight any time. BA were allowed to operate their flight in a particular period of time and fixed airport. And BA was agreed with their agreement ultimately they made profit through concord air service.

Economical Factor: Appendix 1.3 Taxis ion issue also another concerning for BA each year tax has rising which affects its pricing model. This year tax has increasing 3.5% which will effect on the ticket price. Government has also adding per flight tax and environmental tax which will decrease the profit margin from per ticket. Now BA keep trying to reduce price at best as possible which will help them to grab more customer. During the war between USA and Iraq Fuel price has raised at highest rate and it cost them 100 extra. Again during the recession this oil priced has decline that also affected the exchange rate as well and dollar got the more strength than pound rate. Which also causing low price of ticket. And this time low cost airline took the complete advantages. Main activity of BA is transporting passenger all over the world when price decrease or increase or the international economy slow down passenger always looking for the better option based on the particular economic condition. So BA took some step to reassessment their product to reduce their cost or modified their ticket price.

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Social factor: Appendix 1.4 BA is a multinational organization and they have to consider about different group of people bases on culture, social and religious issues. BA operating their long haul flight in Middle East and Asia. Most of the customer from that region they demand Halal Food which is issue of social factors. Because of Muslim people they eat HALA food. On of the catering service supplier of BA is Gate Gourmet they said The company some of the major airlines has decided that majority of their food will be Halal meals for all types of long haul British Airways from Heathrow which will create the standard production and cost will be go down or getting the boost profit CHRIS BROOKE 14th September 2010. Appendix: 1.4

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Environmental factor Appendix 1.5 BA trying to modernize their all fleet keeping the standard operating to make sure air quality will be good. They will reduce the noise pollution 15% by 2050.BA focusing on the recycling of waste through improvement of their infrastructures. BA has some bad image about the losing of baggage and canceling of flight which is a esthetical issue. This issue has a very bad impact of their brand and reputation.

Appendix: 1.5

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Legal factors: Appendix 1.6 Another legal factor BA is suffering that is trade unions. BA suffered many strikes when they approached for any changed. A significant legal factor affecting BA is the power of trade Unions. BA has suffered many strike actions (August 2004 and August 2005) and is aware of the implications that the trade unions can cause. Legal regulations on employee rights, customer rights and an upsurge in environmental and ecological issues are more factors that BA must consider (BBC News online 09/02/06).

Appendix: 1.7
BA has revolutionary supervision to managing their employee and providing them excellent training, salary and reward for buildup highest quality work force truly it will very good opportunity for them. Skytrax group is an airlines quality certifier they usually do the research on airline passenger, airline alliance, and airport, weakness and transport related issue and they published an annual report consist of best airport, best airline. So it would be a best opportunity for British Airways for build up their strong brand image by make up their weakness. Threat Analysis When recession has started after that world economy has collapsed and the same it has a very strong impact on airline industry. BA is still suffering with the economic recession and trying to come out from this circle. It means this recession is still a great threat for BA. On May 2008 BA has joined with open sky alliance after this company has facing economic loses each year. Though company has taken some step to mitigate this issue. Recently BA has facing serious debt funding problem which is a threat for the industry. If revenue increases at an alarming rate then it is very hard to manage the working capital and recently exactly same thing happened for BA. Each year BA losing their profit and now they are in huge losses. It may lead the acquisition issues. Gradually rising of oil price is one of the threat which are already been discussed. Low cost airline they are already taking full advantage still in strong growth rate, awareness about the environmental issue, international politics, terrorist considerably threat for British Airways. Change of government and change of policy also creating threat for BA. BA desperately needs another air terminal in BA but government refuses the plan. Competitor Analysis Competitor analysis is a potential segment for the generating strategic decision. Some experts think that it is the best way to taking any decision for the business by keeping the idea about competitors. That will give an idea about competitive advantage and disadvantage; it will give better understanding about market, better forecasting about the future market and help to find out the best strategy for the business. In the perspective of British airways what type of organizations we may consider as a competitor? We may define that similar types of company they are giving the same service in a same time for the particular market. It may be noted that all types of similar companies are not following the same strategies for their business. One world In the case of BA main competitors is American Airlines, Delta Airline, and Virgin airline, Qantas Airline, Lufthansa Airline and Air France KLM etc. World airline business we may define in the 5 categories as they are 1.Specialist Airlines. 2. Non schedule Airlines. 3. Low Cost or No frill Airlines. 4. Local Airlines. 5. Mass service provider Airlines. See image. BA facing the competition from the Maas service providers for the long haul service on the other hand they are facing competition from the low- cost air service in the local market. BA doing their business based on transatlantic route and Europe to USA. Their main customer is business class people When low cost airline enter the airline industry total scenario of the Airline industry has change a lot such as Ryanair, Easy Jet, Air Berlin, Air Asia etc. Dramatically in the recession period this airline industry playing the leading role and they are plying a vital role on Mass air service provider like BA.. Economic recession has great impact in airline business and gradually down of oil price creates the extreme competition like with Virgin Airline, Emirates airline and due to this competition fare has decreased almost 30%. Low cost airlines have taken the cost cut down strategy and mass air service they ignored that strategy may they failed to reach the target due to this reason rise of low cost airline improve dramatically and the capitalized the market as well. In the perspective of superior cost management Ryanair, Easy jet, Air Berlinn business paradigm is perfect they were giving very low prices in the different air schedule. In the future there is a great chance this low cost airline will be the new entrance for the mass service provider (Telegraph, 2002). If we see financial state of that particular company it will reflect the same statement that I mentioned before.If the mass airline service providers change their strategy then it will affect the

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Merger and Acquisitions (Appendix 1.7)

British Airways Plc and Spanish airline Iberia recently merged in the early of 2010. Company statement saying due to this merger both company will be benefited from share holders, employee, and customer perspectives. Iberia is one of the Spanish giant airline there main hub located in Madrid in the consequence of this merger no doubt British Airways will get the large market of Europe which will help the company to compete with other company Air France, Appendix 1.8 Lufthansa. BA understand they the save 350m per year. This two new It is very much potential to forecasting about will business paradigm of British Airways. company will Porter forces analysis Appendix 1.8 What typesrecognized 5as International Airlines groups.business paradigm looks like. And services they usually provide or how their Headquarter of the new International Airline group Threat the others companies. will be in of new entrants: Three is no of BA thy will retain 55% how its differing fromLondon and stake holder vital chance of new entrants. of the total share. Now BA has The golden era of airline industry was 1985 to 2005. After that air line taken the policy consolidation. International airline groupfor theindustry becomeAnd airline business isthehigh of got 419 entrants. Hence flying to morea time aircraft. more competitive and economic downturn, terrorism and war makes its more difficult new than capital cost time consuming, is many with Rayn required or this business and high risk associated with this 200 destinations and Compare infrastructure Air Ltd. British Airways Business Paradigm: it too expecting they will carry 62 million of passenger in a year. BA business so chiefitexecutive is verythe new entrant to open an airline industry very quickly. said This merger will give airlines is very difficult for hopeful and pessimistic about the merger he British Airways is one of the largest if a Quality hugein the world for it hasair passenger that isnew company form they could rarely compete with the BA. But there is a network and the strong brand image,Low very positive for the customer they can enjoy the Quality chance like short haul airline we calledChiefjet, Ryan air, theyBA). This year and following new entrants for the Easy Executive of are still in profit and they might be two years premium air service (Willie Walsh Simple Luxury service airline industry. So British Airways has Service in the perspective of new entrants. Very long haul less threat will beService very competitive and uncertain for Service Long Haul Short Haul the airline industry this merger will help us cutting Best down our cost and we will be successful to get the competitive advantages. Hence this Frills Competitive rivalry: YesNo Frills Airline there is competitive rivalry advantages BA about the competitiverate of reliability an idea what types of competition is going on Analyzing and Iberia waiting for rivalry it will give merger help the company to compete Reliability Low heavy losses This with among the particular like Air Newzland, Emirates, France. types market for BA they are as their rivalry Airlines, and similar industries. There are two Flexibility Flexibility follows long haul and short haul flight. So they two types of competition from both directions if High Facilities Low facilities consider about the long haul market then BA has to compete with Air France, Qantas, Lufthansa etc. High techThey will compete on flight route, service network, new innovation, aircrafts, and the quality of service. On the other hand High tech short Better Safety haul airlines industry they are competing with BA in order giving best lower prices. (Feldman, 2002) Lower Safety Higher Cost Lower Cost Bargaining power of supplier: Supplier is stronger. Alliance: In the the trade union in order extend their bargaining power it help to survive down the action Premium BA worker using economics downturn all the global airline is trying them to bring and that price, contract Service Economy Service. terms or delivery duration from the supplier. Every year BA spends 5.2 billion for the supplier so supplier issues are very they are talking for come out from the recession economic analyst has a positive thinking vital for the BA. They are trying to make better relation with the supplier. it will help them to get more efficiency in their about these types of approaches. The merger creates the massive idea for the customer business (BA annual report 2009/10). BA has numerous buyers but their main buyer is oil supplier then followed by air fleet andairlines. It will They are strongly dependent on oil supplierbusiness to spreadoil price or supply of oil has and aircraft supplier. give them space for take part in the cause fluctuation of their cost based, changed their business a lot. More or less fuel price dynamic but other supplier cost is fixed. According BA annual report and the have to do some thing for come out from got recession and suppliers they may statement We are monitoring our supplier and our record tells as wethe 25 most importantits the positive creates difficulties becauseAshley Steel,faults thenchair for transport impact in our business.at KMPG. This movement. of operational global it may causes the fatal and infrastructure We are trying to mitigate this problem by updating all the information and maintaining supply risk measure (BA annual report 2009/10). merger was lying as steeping stone towards transatlantic airlines and American airlines. Business paradigm also creates the value proposition of the company.customer. There isBritish of customer bargaining power Economic recession has a great impact on bargaining power of In the case of high rate air ways their business paradigmAirways. Three is extreme competition It means over the time in the case of British has also changing over time. exists in the market and customer focusing on the low price British Air waysissue again they can vote against the BA if any cases they are not happy. Recent strikes at the BA and focused by media got strategic drift because of wrong management decision. If we look in peoples are sources that we will they are their for the alternative airlines. There the British air was incomegetting more awareness. Sosee thatlookingbusiness follows the Pareto is lots of airline industry in the world which makes rule. According to this formula when British air ways Principle. Also known as 80/20 the customer more stronger n the case of British airways industry. In the year 2005 there was a problem about the cheek in and baggage handlers strikes at Heathrow in the support of Gategourmet employees that has occupied it 80% seriousby the economy classCustomer power is more effectives break event point. seats impact on their revenue. passengers then they get the in term of short haul distance this market is dominated And rest of 20% by low for the business class. price is cheap from BA through online sale from 20% less procedure to get in the seats cost airlines there offering It means 80% of the affects comes and they have of it causes. So airplane. This low cost swapping for that customer loyalty is important. Civil aviation act also says about customer right it is very much important sys British air ways they must occupied their which also makes them stronger. See their profit they must have occupied the economy class and for the maximization for appendix. Threat its strongly remarkable British air ways always focusing group of business class seat. So of substitutions: BA mainly operating their flight the customer those people who are financiallyforCoach, Railway etc. This alternate communicationof Short time distance there isless very long haulflexible or business In the term is more haul consuming and much and short haul distance. class people substitutions like customer can use rather than normal passenger.fare. So there isofthreat for short haul distance. But for themade some cheaper from air In the era a Rod Eddington,(CEO) he has long haul distance there are not any potential strategic decision which made the companydistance much unsuccessful.the country to country and factors of proper substitutions because of long haul very mainly associated with It also noted that communication, time, class people across the world wide and most of the British airways deal with businessand the service customer want to use that may not same in the all the country. Like rail communication is United Kingdom to USA. At that time truth for the other to customers were traveling from very faster in the United kingdoms but it may nothe had decided countries so there are not any real substitutions. reduce the economy class 75% and increase the business class 25% for maximization of their profit. But after incident of 9/11 this strategic decision completely failed because of 22 their business class passengers were not traveling at that moment as a result they never been got break-even point which give them a huge losses in their airline business history.
Bargaining power of customer:

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