BA Current Strategy

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Quresh Moochhala. I.D. 2337113

HuzaiIa S. I.D. - 2193759

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E V AL UA T I ON OF B RI T I S H AI RWA Y S `
C U RR E N T S T R AT E GY

Market Strategv
In numerous ways contemporary marketing activity oI the airline is Iollowing
conventional and well-tried methods, which reIlect decisions concerning the
product/service stipulation oI routes, seat allocation and types, in-Ilight and ground-based
services. BA has chosen those international multi-market segments, which it Ielt most
comIortable and in which the company is able to avoid conIronting companies that serve
similar markets. BA reIuses to be content with its current status quo, having such a strong
commitment it Ioresees its own obsolescence by developing new routes, improving
service quality and increasing expenditures Ior sales Iorce, advertising and sales
promotion relative to the markets growth rate. The airline has a proper breakdown oI
markets, and has Iound that Iew kev-markets account Ior a very large share oI its
revenues. It Iollows a tailored strategy to meet environmental diIIerences, reputation Ior
high quality Irom medium to low relative prices complementing high quality that endows
with economic leverage.

!74/:.9$97,90
Airlines, such as BA, are an excellent example oI the use oI a company/corporation name
as a brand Iollowing a single brand positioning strategv. Analysing the current position
oI BA and its marketing mix and seeking a new position Ior it that seems more
appropriate. Product repositioningbasically has two obiectives, which are increasing the
product liIe cycle oI BA, and the other is to amend any positioning mistakes. In Iact the
product should not be seen as a physical item but a constellation oI multiple services
matching, to greater or lesser extent, the consumers' requirements. In addition, the
company's corporate palette oI red, white and blue is being brightened and lightened,
more closely drawn Irom the British Union Flag than the current scheme, to reIlect the
airline's British heritage. It has a standard service with modification in relation to its
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product/service design. In relation to its new-product strategy, it is a leader in creating
new products to serve its customers better (in relation to value marketing strategv) and
Ior diIIerentiating Irom its competitors; BA came up with the Ilat-bed`. It was
advantageous Ior BA as it drove customer curiosity.

The use oI IT to support the horizontal diversification strategv played a key part in
British Airways` transIormation Irom an ineIIicient state-owned airline providing poor
service to one oI the world`s leading air carriers. British Airway established Speedwing
in the IT marketplace selling soItware and services to other airlines, in areas such as
passenger reservations and check-in, Ilight operations and planning, revenue accounting,
cargo and engineering-maintenance services, as well as systems development and
integration, and mobile communications installation and support. BA took a 51 per cent
maiority stake giving them what they believed was a sustainable competitive advantage.

Pricing Strategv
For its established service, BA tries to maintain the price since getting into price wars
could lead to a great loss and, in turn, increasing price would make the airline lose out on
its competitive advantage. A discriminatorv pricing strategv is adopted where the
services are sold to diIIerent passengers at a diIIerent price under diIIerent class (First
Class, Business/Executive Class, World Traveller Plus and World Traveller), this is also
known as dual pricing. It also implements an expected pricing strategv where the price
range that will be accepted by customers is Iound out, the response is then analysed and a
price is Iixed. In addition, BA has adopted a flexible pricing strategv in relation to its
geographic market segmentation. Furthermore, the tickets have an odd pricing in which
the price ends in an odd number or iust under a round number Ior example $49.99. Many
customers iudge the quality oI a product by its price. BA applies this in its pricing
strategy by having a price normally in excess oI those asked by near-perIect substitutes.
This is done through prestige pricing which is available only on certain proIitable
destinations.

Distribution Strategv
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Following an intensive distribution-scope strategv, BA makes its tickets booking and
purchase available at all travel agencies (which basically acts a selling agents on
commission) apart Irom their regional oIIices, and now even the Internet. BA uses a
combination oI both direct and indirect channel structure. To minimize the number oI
intermediaries in the value chain, BA has resorted to selling tickets online where the
customer does not need to pay commission to any agent or middleman. BAs strategy oI
vertical integration was one way oI enhancing is distributions network by owning single
or multiple terminals at certain international airports. However, this strategy oI vertical
integration was not much a strategic decision at New York`s JFK Airport.

Promotion Strategv
BA Iacilitates its promotional strategy by advertising and public relations. BA spends an
adequate amount oI it annual turnover on advertising and sales
promotion based on the use oI percentage sales approach
(breakdown method). BA chooses its media channel strategv by
advertising in newspapers, magazines, television, Internet, transit
advertising and occasionally radio. BAs media selection strategy is
good in terms oI quality oI audience reached. When British Airways
places online advertisements, it isn't going Ior a direct response.
British Airways is an excellent test case Ior the eIIectiveness oI
brand advertising online. While the company did use standard
animated banners and buttons, they thought to make them special in
a couple oI ways. Two oI the banner ads -- one Ieaturing coIIee
being poured, and another showing wine being poured -- were so-
called synergy ads, which reIerred to the oIIline components oI the
campaign. The liquids were shown Irom the perspective oI the
person lying in the Ilat bed seat -- an unusual eye-catching
perspective. The words "click to see the bed" appeared on these
banners, allowing someone who had seen a television or print ad to
take advantage oI the Web to get more inIormation about the seats. In other words, BA
made eIIicient and eIIective use oI the advertising-copv strategv.
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Competitive Strategv
BA competes on the basis of its high qualitv attained through its break-through
technological innovations. BA emphasised on the value chain innovation, regarding
eIIorts to re-invent` the industry value chain can have a Iour-hold payoII: lower costs,
better product/service quality, greater capability to turn out multiple or customized
product versions, and shorter design-to-market cycles. A stronger Iocus, however, was on
cost reduction, which included stiIIening price competition that gave BA extra incentive
to drive down unit costs. BA increased sales to customers in a mature market, by growing
and taking existing customers away Irom rivals by providing complementary items,
ancillary services and Iinding more ways Ior customer to use the product. As the
domestic market matures, BA entered Ioreign markets where attractive growth potential
still existed and competitive pressures were not so strong. BA expanded into such
emerging-country markets as South America etc pursuing a Iocused strategy aimed at the
Iastest-growth segments within the industry. Strategic initiatives to leverage existing
resources and capabilities oI BA by entering new businesses with promising growth
potential in gaining rapid market penetration.

Customer Service Strategv
BA has to enhance its customer relations in terms oI service, speed and most importantly
quality oI delivery. The Operational Research group is the largest private sector
operational research group in the UK. The group acts as a Iee charging internal
consultancy Ior the various divisions oI BA (this highlights the Delphi Technique). BA is
divided into seven separate customer Iocused teams (key proiect areas are shown in
brackets):
4 Airports (baggage handling, passenger services and terminal control)
4 ProIit Development (engineering and cargo operations)
4 Revenue Management (inventory management and pricing)
4 Corporate (Iinance revenue, runway capacity, network development, corporate
strategy and other central departments)
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4 Operations (Ilights and services, operations planning and delivery, and crew
resources)
4 Sales (world-wide sales and sales Iorecasting)
4 Marketing (relationship marketing and product development)

Although these teams are all located at London Heathrow, they work in almost complete
isolation to one another, highlighted by their disparate locations within the Heathrow site.
However, staIIs are regularly Iront-line training and rotated between the teams and ioint
meetings are held on a Irequent basis, ensuring that some level oI cohesion is maintained.

In conclusion, British Airways is a complex organization and the traditions and practices
oI product/service orientation, which was Iostered by the monopolistic practices oI a
regulated industry, are not easily overcome. But good marketing, in its many Iorms, is
increasingly seen as the key to the airlines' competitive success. The current strategies
adopted by BA do have certain inaccuracies; however, they were Iundamental in
Iormulating the obiectives and goals oI the airline.
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OB1ECTIVES OF BRITISH AIRWAYS

Every company has long-range purposes that are not quantiIied or limited to a time
period; these can be deIined as obiectives oI a company. However, these obiectives do
have uncertainties and they have to be avoided. A Iew examples are lack oI credibility or
motivation, poor inIormation inputs, obiectives without considering diIIerent options, no
corporate values, and lack oI uniqueness or competitive advantage.

Financial Objectives
They signal commitment to such outcomes as earnings growth, an acceptable return on
investment, divided growth, stock price appreciation, good cash Ilow, and
creditworthiness. However the current Iinancial Iigures were not available as the Iinancial
team oI BA is reviewing their past year. AIter an unproIitable 2000, BA is trending
downward in total leverage and, and though a bit top heavy with debt ($1.3 billion
coming due over the next Iive years). Apart Irom that, BA is recovering Irom the net
income losses by their extremely low EBT (only 5 million pounds) percentage being used
to cover interest expenses. As they continue their recovery BA is in a Iragile position and
can easily be upset in a market downturn.

Their main Iinancial obiectives should indicate:
4 They should improve they current position in the Iinancial market.
4 They should have a strong ROI rooted in a high percentage oI company-owned
assets with a strong cash base as well.
4 They must try to eliminate their low debt risk as well.
4 In order Ior BA to return to maximum proIitability they should strive towards
achieving lower operational costs either by decreasing overheads or attaining
purchasing eIIiciency maximizing long run proIits.
4 In order to avoid a liquidity position BA has to strengthen through additional
secured Iinancing, which would result in a positive cash Ilow.
(Refer to appendix for more financial data)
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Product/Market Objectives
4 In strategic terms, product/market obiectives are proactive to competition.
4 By coordinating new services and routes to attain greater market share.
4 Smoother travel to a wider range oI destinations.
4 Reductions oI the need Ior connecting Ilights and the consolidation oI ground
services, an improved service are some oI BA`s obiectives.
4 BA should position itselI by getting stronger in the market or be able to maintain
its present position brand awareness by aggressive advertising.
4 To attain growth in sales and SCA.

Management Objectives
4 BA has to place high emphasis on training, which is seen as a key to competitive
advantage and central to the company's goal oI continuous improvement.
Training, which consists oI both Iunctional training and general management
training, should also be a key Iocus in BA's human resources and service delivery
strategy. The company should place particularly high importance on training its
Iront-line staII, Ior equipping them with skills to deal with the stress and demands
that arise Irom customers' high expectations.
4 Reward and recognize staII Ior contributions to service excellence.

Marketing Objectives
4 British Airways should continually benchmark itselI against the best in all
relevant industries, strives to exceed expectations and institutionalize customer
Ieedback systems.
4 BA has to push the limits oI the trade-oII between satisIaction and proIitability.
4 For BA becoming a service leader requires having a plus point in being a highly
productive, cost eIIective and proIitable airline.

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A variety oI dimensions and concepts provide the basis Ior the organization`s vision, or
what it should work toward, in the light oI long-range opportunity. Furthermore, the
general intent or company position designed to guide, regulate certain actions and
decisions, especially those oI maior signiIicance or oI a recurring nature. Mentioned are
the obiectives as a long-range purpose that is not quantiIied or limited to a time period.
This results in a goal that is a measurable obiective oI the business, iudged by the
management to be attainable at some speciIic Iuture date through planned actions.

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ALTERNATIVE STRATEGIES

" Enhancing travel insurance

Due to the increasing crisis dealing with terrorism, hiiacks and Ilight malIunctions; many
travellers including businessmen and now even Iamilies now adopt travel insurance. BA
should initiate a ioint venture with an online travel insurance company
(insurancetogo.com
1
) providing these services over a global perspective to share its risks
and to accomplish mutual enterprise thereIore accomplishing its Iinancial obiectives. The
reason an online travel insurance company is to be chosen is Ior the Iact that the web
presence is increasingly seen as a way oI communicating brand personality, which should
be consistent with other Iorms oI corporate communication. From a consumer perspective
the Internet is more or less relevant and useIul, with easy navigation Ieatures so that the
time spent on a visit is IruitIul. Most importantly it should reIlect the investment in brand
development and provide reinIorcement oI all other marketing activity.

BA`s current travel insurance scheme seems to be unsuccessIul as there is no brand
awareness, moreover, their pricing policies are moderately high than compared to a
competitor that is oIIering the same service Ior example Iamily rates are 3 times the
normal adult rate. In addition, the number oI Iamily members covered in the Iamily plan
Ior the insurance are limited Ior example taken account oI the Iamilies that have more
than 7 members (which is common in the Arab Iamilies) cannot take beneIit oI this
insurance schemes. ThereIore, we have decided to review this strategy Irom the scratch.

Considering there are not many airlines oIIering this service, BA is expected to be an
earlv-entrant in this market. This strategy would cover a total market on an international
scale, in order Ior this strategy to be successIul the company has to show a strong

1
InsuranceToGo is one oI the only General Agencies in the world dedicated to international travel and
ancillary insurance products. They provide marketing and sales tools to get started, product support,
experienced advice and marketing strategies. They also install online sales tools onto existing web site so
the product can be sold 24 hours a day.
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commitment towards convincing its customers on purchasing insurance plan/policies. The
policies and plan should be designed as a customized service with the help oI database
marketing. which would help it compete against standardized insurance companies. In
order to meet total consumer satisIaction on basis oI quality time commitment and
customer service, the policies and programs should examine customer value perspectives
the ioint venture should Iurthermore train its employees, travel agents and provide an
incentive to its worldwide distributors to increase sales keeping in mind customer
satisIaction.

Price penetration can be adopted in the initial stages to gain large market share,
discourage competition and gain a cost advantage through realizing economies oI scale.
Apart Irom this, it should serve markets at minimal costs while maintaining desired
product image through an intensive distribution-scope strategv; this can be achieved with
the help oI the Internet and various worldwide selling agents. Their advertising-copv
strategv should be having high Irequencies in its initial stages and then gradually making
it medium so that customers can spend more time on the verbal/visual content oI the
service.

Strategic Analvsis on the 3 C's

Company: The airline will achieve more market share through brand awareness and
recognition oI this service. Since most oI this service is based on the Internet, there is not
much oI a Iinancial investment required. In turn, this results in low costs and achieves its
increased distribution and marketing obiectives.

Competitors: Since there is limited competition among airlines oIIering this service on a
global scale with similar prices, this gives BA a head start in exploiting this opportunity
with relation to when to compete, and where to compete. With regards to it competitors
among insurance companies,

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Customers: BA can act as a one shop stop with help oI its Internet allied partner
InsuranceToGo oIIering its customers easy access to the insurance package
conveniently by sitting at home on the Internet or Iace-to-Iace with the travel agent. Its
unique low pricing package would also attract passengers who are Irequent Ilyers as well
as people who are very cautious about traveling.

" Diversifving into Biz 1ets

In diversiIication, BA should go Ior concentric diversification (products are introduced
share a common thread to the Iirms existing product, whether through marketing or
production. Usually the new product is directed to a new group oI customers as it Iocuses
on a market niche). This achieves BA`s obiectives, which is to grow even when their
current market/product has reached maturity, as there was expected 80 increase over
the previous ten years in executive iets. Secondly, it`s brings out stability in the
Iluctuations in earnings attaining cost leadership. The promotional strategy used by BA
should be a high promotion expenditure strategy and it should choose the media vehicles
such as newspapers, television, transit advertising, Internet and direct mail to its Irequent
Ilyers. And Iinally, to establish security when the company may Iear backward
integration Irom its maior customers.

Three Iactors help this sector in the current environment:
1. Airlines are looking to slim down their costs by renting` business iets through
Iractional ownership as opposed to buying.
2. In the immediate Iuture, with airport security causing increased delays, many
executives are Iinding that they`re spending more time on the ground than in the
air. With those same ground delays, travel oI less than 500 miles in almost the
same by car as it is by commercial airlines. With a biz iet on a Iractional program
time is signiIicantly reduced and at a manageable cost.
3. Right or wrong, people have security concerns about Ilying on large commercial
aircraIts. Any increase in terrorism could spur tremendous growth in this sector.
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Company: This strategy will help BA to create its image as an initiator. BA will also have
to spend a lot oI money on advertising and promotion to create brand awareness and to
gain loyal customers, which will require a high capital investment. II our predictions are
correct then BA would be able to IulIil its obiective oI having a strong ROI in the long-
term helping it to enhance its corporate image.

Competitors: Market Iorecast are predicting that thousands oI these new aircraIts will be
snapped up by companies and individuals wanting a iet but unable to aIIord owning or
renting` an executive aircraIt. II BA can provide a measure oI cost-eIIiciency, that
advantage will translate into less discount, more margin and competitive pricing Ior the
manuIacturers. (Refer Appendix 7 for pictures)

Customers: This alternative will help BA`s customers to avoid the constant delays in
Ilights, plus the security concerns about Ilying on large commercial aircraIts due to
terrorism and security threats. The customer/customer group has Ilexibility in choosing
their own customized timings, cuisine etc.

" Crowth & Market expansion through code sharing

Code sharing, in one Iorm, is the use oI a single code Ior diIIerent operators on an inter-
line iourney. The inter-line connections are necessary when airlines are not oI suIIicient
size to provide online connections oI suIIicient Irequency and extent. BA has entered into
code share agreements in the past only with 10 national airline carriers. But these routes
were not appropriate Ior increasing sales and hence they should Iind new markets.
It could achieve sales growth and market expansion by having code share agreements
with more appropriately chosen airlines associates. With this alternative strategy, even
where BA does not Ily its own aircraIt, Ilights will carry a dual Ilight code number and
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BA can sell seats on these Ilights, along with the actual Ilight operator. The process also
works in reverse, where BA will serve a particular destination and will undertake an
agreement with the national carrier oI that country which will allow the latter to sell seats
on BA Ilights.

This agreement provides Ior a wider choice oI destination, which was previously not
served by BA, and allows BA to expand into territory without using its own aircraIt,
thereby gaining greater customer volume. The possible national carriers it could code
share with are: (below mentioned are the airlines with the destination they could code
share with and vice-versa)
4 Japan Airlines: Tokyo, Fukuoka, Osaka and Sapporo. For Example, in addition to
BA`s non-stop Ilight to Tokyo BA and Japan airlines could sign a code share
agreement introducing code share services between Osaka, and Tokyo, Fukuoka
and Sapporo.
4 South AIrican Airways: Johannesburg.
4 Philippines Airways: Manila.
4 Sri Lankan Airlines (Air Lanka): Colombo.
4 Spanair: Madrid, Barcelona and Cordoba.
4 DragonAir: Hong Kong, Beiiing


Company: This strategy will lead the company to a new growth route. Adoption oI this
strategy will help BA to retain its best destinations and divest those destinations or
markets, which aIIect BA Iinancially to a loss. It is also beneIicial because BA does not
have to buy new aircraIt Ior serving those routes thereby minimizing the risk involved.

Despite this Iact, this strategy may to be Ieasible Ior a Iew market segments like
Philippines because it is a very small market and does not have much oI sales potential.

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Customers: Code sharing can beneIit the customers with a wider choice oI destinations
and routes. It also helps BA minimize the connecting Ilight conIlict against delay time.

Competition: By adding new territories through code sharing in their destination range
BA can prevent competitors like KLM, Virgin, Air France, LuIthansa etc Irom building a
strong hold in the market. In this way BA would be reactive against the challenges put
Iorward by the competitors. Thus, BA in the long term would have lower cost than that oI
the competitors enabling it to put pressure on them by competing in their markets.

" Increasing fleet bv acquiring small airline companies

The Iuture development oI the success oI Great Britain as a tourist destination oI Europe
remains Iirmly routed in the ability oI BA to provide the Ilight services and operational
logistics to Ily people Irom around the world into Great Britain. Hence BA should plan
more than double its existing Ilight volume oI 45 million customers annually to over 50
million by the end oI 2010.

BA should analyze the various untapped geographic markets, and keep an eye out Ior
small but potential airline companies that can be bought over or acquired which would
help BA to increase its Ileet and it could use the same staII, hence saving on hiring new
employees, creating iob positions and purchasing new aircraIts. A possible example
probably is acquiring Air Aruba which serves only the Caribbean market, iI the takeover
is successIul will beneIit in the Iollowing ways: getting hold oI a new potential market,
increase in Ileet, experienced staII and overall enhancement oI BA corporate image.


Company: Acquiring related business gives an advantage oI abundant operating Iunds to
BA. The culture at BA is receptive to such business, as it has taken over many small
businesses in the past. It would help cut down costs since lay-oIIs can occur at the
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managerial as well as the sales staII (since customers are more oIten the same) level. This
helps BA to achieve the obiective lowering the operating costs by decreasing overheads
and oI increased sales growth Ior BA.

However, one maior cost Ior BA would be training those employees to come up with
BA`s standards. Another drawback oI this alternative would be too large to handle but
then again in order Ior it to increase sales it has to expand in any sort oI way.

Customer: It could beneIit the customers Ior providing them international Ilight quality at
a lower cost without changing the customer perception oI the company image. This
image Ior BA can be attained through advertising and promotions in the consumer`s
minds.

Competitors: By adding a new market (destination) to their current range, BA can prevent
competitive advantage by Iixing a relatively lower price (price penetration). At the same
time this strategy will not provide BA with a competitive edge to BA since it is easy Ior
its maior competitors to Iollow the same pattern.

" Improving in-flight service

In order Ior BA to remain a service leader in the airline industry, BA has to aim at
creating an eIIect to regularly surprise customers with its new ideas. This can be
accomplished by paying intense attention to its customers and constantly identiIying new
opportunities, such as lighter and more nutritious Iood and better in-Ilight entertainment
and communication service. Such new-Iangled ideas are also generated by Ieedback Irom
staII, inIormation about other airlines, analysis oI complaints and compliments, and
maior traveller surveys.

The in-Ilight service will be Iocusing on:
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4 State-oI-the-art Entertainment: Providing a bigger and better variety oI movies
and other programs to choose Irom especially in the long haul Ilights. Apart Irom
that, study showed that most Ilyers preIer to have a better game play during
Ilights; this can be achieved by installing GameBoy consoles. Further research
showed that most Ilyer like to have a quiet ride` this can be achieved by
installing headphones that dampen external noise. Noise cancelling headphones
are specially designed Ior airplanes which include a chip that synthesises the
'anti-sound, cancelling a lot oI the hiss associated with airplane iets and
ventilation systems. Using laptops or personal digital assistants (PDAs),
passengers can enioy a secure broadband access to the Internet, and business
email accounts and company intranets. They will also be able to send and receive
attachments and view entertainment all at DSL-like speeds. This service serves
two important market segments: commercial aircraIt operators and their
passengers as well as executive aircraIt.
4 Delicious Food Cuisine: Nevertheless, Iood and beverage provision in airlines is
oI special signiIicance on long haul Ilights, where it may even be the only
signiIicant break Irom monotony. Levels oI cuisine are important discriminators
between classes and airlines explicitly compete on indicators oI quality. Much oI
this is driven by customer research showing concern Ior appropriate Iood
conIorming to national, regional and cultural standards, whilst presentation,
hygiene, environmental consciousness and responsible packaging as well as
choice and novelty are important.
4 Security, ComIort & SaIety: Camera systems installed on every Ilight deck that
monitors passengers Ior suspicious activities. At the same time it can be very
helpIul Ior Ilight attendants to be there Ior those Ilyers who require their presence.
When discussing increase oI comIort level, improving their seats in the economy
class and having a number oI amenities in their toilets such as shower Iacilities,
pay-and-press clothes in a minute, also by having medical personnel on board
every Ilight, etc. should be Iocused on.

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Customers: With this strategy BA is Iocusing on total customer satisIaction Irom every
perspective oI a traveller. This strategy can help BA to improve its goodwill position in
the market regarding saIety, comIort and improved service quality.

Company: the above strategy requires heavy investment in R&D, product modiIication
and advertising expenditure. This would help the company in attaining product leadership
and however, result in a downturn in the short run but will eventually be proIitable in the
long run with increasing ROI as more and more customer would take the beneIit oI these
services and could increase the potential market share.

Competitors: Very Iew companies will be able to match the R&D structure oI this
adopted strategy. BA will have to ensure patents Ior these innovations to their services
making it harder Ior competitors to imitate similar services

" Organizational Restructure

In order to remove ineIIiciencies persisting at the corporate, managerial, sales and entire
workIorce staII level, BA needs to revitalize its organization structure to ensure
eIIiciency and smooth running oI operations.

A competent and strong commitment staII will strive to IulIil promises made to customers
regarding services, quality, and time commitments by providing greater customer value.
BA can use organizational restructuring to develop an upturn in long-term relationship
with its channel members through their workIorces` expertise and appeal to reduce
conIlicts between all levels oI management, customers and various publics internally and
externally. In order to do so BA needs to improve their staIIs low morale oI the company
by increasing reward incentives oIIered and also by having repeated appraisal and
cultural mix, by giving the employees a sense oI pride that will make them eager to Iace
challenges. In order Ior BA to attract and retain the most competent workIorce, BA has to
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have a maior Iocus on training and compensation packages in order Ior it to meet its
management obiectives.

This alternative would also help BA Iocus on customer service by producing a high
degree oI teamwork. BA employees could probably switch iobs in order to be Ilexible to
keep planes Ilying and baggage moving. This would involve a high degree oI training in
various Iields Ior all employees` ion order to execute such a .70,9;09,.9..


Company: BA has to retain the most competent managerial and sales/customer service
teams and the overall workIorce (pilots, stewardess etc) that will contribute towards
improved perIormance oI the company through maximizing customer satisIaction. It will
make BA more capable oI achieving its growth in profits and financial. management
obiectives.

Customer: Customers such as Irequent Ilyers or passengers who travel once in a year are
always concerned with the value they receive Ior the amount they spent. A well-
organized, well-motivated and competent workIorce will go a long way in learning,
understanding and satisIying customer needs and building long lasting relationships with
them.

Competitor: Research shows that Singapore Airlines is very well known Ior maintain
strong customer relationships that have beneIited them over the years. With an
organizational restructuring, BA can retain the competent staII which will build strong
customer relationships and increasing customer service levels which would be at par with
those provided by Singapore Airlines.
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EVAULATION OF ALTERNATIVE STRATEGIES

Analysing the diIIerent strategic alternatives to be considered by BA and the obiectives
they meet can help to determine the strategy or a combination oI strategies that should be
proposed.

The Iollowing alternatives that were proposed by us have been evaluated:

1) Enhancing travel insurance.
a) Due to increasing global terrorism, hiiacks or iust out the blue Ilight malIunctions
air travel insurance has become more oI a necessity to cautious travellers.
b) Using the Internet based insurance company; BA oIIers to provide air travel
insurance on a global scale hence increasing brand awareness oI BA in relation to
its improved and modiIied insurance service.
c) There is convenience and access to inIormation and packages to customer
d) This alternative strategy is set to cover both the product/market as well as
marketing obiectives by BA positioning itselI as a strong contender in the market
and be able to maintain its present position brand awareness by aggressive
advertising. The airline also has to push the limits oI the trade-oII between
satisIaction and proIitability.

Hence, aIter reviewing these points it seems that this strategy would deIinitely help BA
meets its obiectives and it will provide complementary beneIit to BA and the company it
would Iorm a ioint venture with. Although this strategy would increase operational costs
in the short-run with regards in commission that will be taken by agents, however
considering, the current Iinancial position, it is not advisable to undertake this strategy.
With Iurther consideration given to this alternative, we believe that the advantages
outweigh the disadvantages, and hence it should be adopted.

2) Diversifying into Biz 1ets`.
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a) By diversiIying it is spreading its risk into a related business.
b) It is an emerging and attractive market, making the entry timing perIect Ior BA to
exploit.
c) According to predicted Iorecast will reap huge proIits in the long term.
d) As we all know, diversiIication cannot come cheap. Investments are very high and
so are the risks since this cater to the high end users who would be willing to pay
more Ior a chartered Ilight.
e) Only the product/market obiective is Iavourable in this strategy as coordinating
new services will help BA to attain greater market share. Financial obiectives may
or may not be met.

This strategy could be adopted Irom a market expansion point oI view. On the other
hand, BA`s current Iinancial position is not Iavourable Ior investments on such scale. In
short, BA might end up in a very risky position, as a saying goes winner takes it all and
losers take a Iall. Seeing their potentially in the last decade or so, we believe that BA
would be successIul iI the strategy is adopted now.

3) Growth & Market expansion through code sharing.
a) Creating wider choice oI destination without using its own aircraIts.
b) BA in the long term would have lower cost than that oI the competitors enabling
it to put pressure on them.
c) The obiectives met in this alternative are smoother travel to a wider range oI
destinations, to attain growth in sales and SCA and Iinally, in order Ior BA to
return to proIitability this strategy helps BA achieve lower operational costs. In
addition this strategy reduces the need Ior connecting Ilights.

AIter analyzing and evaluating this strategy, we Iind it to be operationally Ieasible, attract
more customers and enhance the corporate branding oI BA as a whole. Thus, this strategy
is in the green.

4) Increasing fleet by acquiring small airline companies.
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a) It increases market share, wider range oI destination, no need to buy new aircraIts,
to meet cultural needs oI the particular market are some oI the advantages oI this
alternative.

We would not advice BA to adopt this strategy as in this alternative the drawback
outweighs the beneIits. The drawbacks are that BA has to intensively train more people,
modiIy and maintain existing aircraIts thereIore increasing operational expenses and
maintenance costs. They would have to determine the corporate culture in that particular
market and adopting it, making it very diIIicult.

5) Improving in-flight service.
a) Better entertainment, notorious Iood and increased security services.
b) Total customer satisIaction, break through innovations making it market leaders
are some oI the obiectives that have been met.

When considering this strategy, BA is only going to increase their investment Iigure
which is not encouraging by its current Iinancial position. It will also be serving markets
which will not give expected resulted are there is only certain segments within the target
market who will appreciate these services.

6) Organizational restructure.
a) To possess a competent managerial and other workIorce to increase motivation
and give employees a sense oI direction as to what they have to achieve.
b) To maximize customer satisIaction by having long term relationship and training
the workIorce to make sure the Ilights are running and baggage`s moving`.
c) This alternative Iocuses on the management obiectives.

Although this strategy Iocuses on possessing a competent managerial staII which can
only be achieved through organizational restructuring, it is a strategy that needs to be
adopted. Although this strategy will increase the operational cost moderately it is
predicted to be very proIitable in the short and long run.
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Conclusion for evaluation of the alternative strategies:

Accordingly the Iinal strategy recommended Ior British Airways should be a combination
oI the strategies oI diversiIication, enhancing travel insurance, growth & market
expansion by code sharing and restructuring oI the organization. This combination oI
strategies is recommended Ior BA bearing in mind its current position in the airline
industry and its long-term obiectives and goals. This strategy could be implemented until
the company has a high proIitability margin and is conIident to adopt even more offensive
strategies and seize its competitors markets.

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Possible Improvements to the recommended strategies for BA

There is always risk in change - strategic risk, executive risk, circumstantial risk, as we
see Irom the September 11
th
tragedy and its resulting impact on the airline industry.
Though presently, BA seems to be doing everything right, there is still scope Ior
improvement in certain strategies.

1) Slow down on the costs in the expansion plans. Though proIitability Iigure show
that BA has been doing moderately well because oI its bold strategies. Too much
expansion too Iast may actually lead to its untimely loss. At present thereIore, it
would be advisable not to expend too much oI its cash and other resources into
additional Ileets and destinations too Iast beIore those investments at least show halI
the return. A conservative strategy as this would saIe guard itselI Irom Iuture
environmental risks also. Additional costs that are encountered because oI its high
aircraIt utilization also need to be reduced. Just by issuing more bonds (which it has
done in the past) may not be appropriate, as these have to be paid back with high
interests at a later date.

2) $07;.0 The service in certain sectors is very poor and needs to be rectiIied
immediately. This is important taking into consideration the Iact that the airlines Iaces
maior competition in this sector with airlines such as Singapore Air, Emirates and
KLM, which not only serve the same routes, but some also do it Ior a slightly lowered
price. Thus is the service is not improved upon, BA may lose its customers is they
don`t provide the value Ior money.

3) ;0781.,943. DiversiIication into Biz Jets` service, which could target the high
cost travel market sector, thus increasing their customer base, with increasing their
costs by much. Since every proIit gained by BA has had huge investments in the past,
this strategy would also be successIul. The predicted demand would result in proIit
worth billions oI U.S. dollars iI only the strategy would be adopted now.
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Bi z 1et Fore cast
2

3

4) Passenger Friendlv Airports.
L o w F a r e C a r r i e r s B r i t i s h A i r w a y s
% 0 7 2 3 ,
Small ticketing area (concentration on low
cost sales over the Internet)
High proIile ticketing desk reIlecting
corporate image and presence
Fast check in preIerred but quality oI
location is secondary issue. Control oI
speed is essential.
Check-In convenience and proIile is oI
great importance
Terminal services (Iood etc.) are oI
secondary importance.
It is important that passengers Ieel
purchasing needs are met
Terminal Iacilities are not important.
Image oI maior international hub with good
Iacilities preIerable.
, 9 0
Low-tech gate Iacilities (comIort oI
secondary importance.)
Hi-tech gate Iacilities (creating proIessional
and polished image.)
Power in and out oI gate (eliminating
wasting pushback time.)
Air-bridge essential to product image
wherever possible.
Economy lounge Iacilities only
Business and Iirst class lounge required in
addition to economy space (separation oI
diIIerent classes essential to product.)

2
Biz Jet Iorecast taken Irom The Areospace Insudtry Forcast oI 2001.

Biz Jet Market
0
2
4
6
8
10
12
14
2001 2002 2003 2004 2005
B
i
I
I
i
o
n

$
2001 $8b
2002 $7b
2003 $8b
2004 $10b
2005 $12b
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Ability to separately route incoming and
passenger preIerably to save time.
Long turnaround times provide outgoing
passenger ample time to route passenger in
appropriate manner.
Miscellaneous
Minimum catering Iacilities required.
Facilities oI preparation on in-Ilight Iood
and entertainment are essential as it Iorms
part oI the package.
Cleaning staII required less Irequently.
Minimum Iacilities required.
AircraIt cleanliness essential part oI the
package.
No standby aircraIt parking during
daytime.
Standby aircraIt required parking.
EIIicient removal and loading oI aircraIt
baggage and cargo.
EIIicient delivery oI arriving baggage to
customer/passenger a priority.

5) 47547,90 :9:70 During our research we have noticed at many occasions that
departments are not Iully aware oI the Iunctions oI other departments. In addition to
the vast number oI nationalities employed by BA and the resulting cultural
diIIerences, we Ieel there is a lack oI corporate culture. As company oI this proIile
cannot aIIord to operate without implementing its visions, philosophy and corporate
culture.

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EVALUATION OF RECOMMENDED STRATEGY

The adequacy oI the recommended strategy can be evaluated using the Iollowing criteria:

' Suitability.
The recommended strategy should lead to a Iuture advantage or an adaptation to Iorces
eroding current competitive advantage. The diversiIication into Biz Jets` as well as
enhancing air travel insurance would be the most suitable strategies, which oIIer
competitive advantage.

' Validity.
The strategy should be consistent with the market environment. Considering the
recommended strategies such as the travel insurance because oI its current environment
which basically has global terrorism, SARS crisis, and technical malIunctions customers
want to be ensured that they have a smooth Ilight. DiversiIication would also be valid
because the marketing environment in regard to Biz Jets` is emerging and it is the right
time to enter this market.

' Feasibility.
It is basically the appropriateness oI strategy in light oI available resources. The growth
oI market share through code sharing would be Ieasible as BA would not have to
purchase new aircraIts to serve new routes and destinations. Training the current
workIorce to serve the customers better in various Iields so that relationship between the
airline and customers last longer.

' Internal Consistency.
The recommended strategies should be in tune with the diIIerent policies oI the
corporation and the product/market arena. Since BA needs to undertake maior
investments, it will be unrealistic to hope Ior increase in short run proIits. Thus, the
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44
strategies recommended will ensure consistency since the obiectives oI BA is to
maximize long run proIits.
' Vulnerability.
The degree oI risk may be determined on the basis the perspectives oI the strategy and
available resources. In diversiIication strategy Ior BA the degree oI risk is very high. For
insurance the degree oI risk is satisIactory, Ior training the only risk would be that aIter
an employee has been trained completely in all Iields, he/she might quit BA and ioin
another airline. SatisIactory level oI risk is also there Ior code sharing.

' Workability.
The workability oI a strategy should be realistically evaluated with quantitative data. The
diversiIication strategy is workable due to the predictions oI the Iorecast illustrated
above, showing that it will bring in proIits due to the Iorecasted demand.

' Appropriate Time Horizon.
A viable strategy has a time Irame Ior its realization. The time horizon oI a strategy
should allow implementation without creating havoc in the organization or missing
market availability. Again, here the diversiIication strategy predicts that by 2005, the
proIits would be in billions oI dollars iI BA adopts the strategy now and executes
appropriate strategies Iollowing it to maintain market share in this particular market
segment. The time Irame is also helpIul in removing ineIIicient management and staII.
Every strategy basically has to be executed within a certain time Irame in order to attain
its short-term or long-term proIits.

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IMPLEMENTATION OF THE RECOMMENDED STRTATEGY

Implementation Process:
Since British Airways needs to undertake maior improvements to improve its
organizational eIIiciency, it should not aim towards attaining short-term proIits. The
company must be willing to retain its returns to earn log-term proIits.
The tactics that can be used to implement the recommended strategy (combination oI
strategies) are:

For Enhancing Travel Insurance

For Diversification into Biz 1ets`

For Growth and Market Expansion by Code Sharing

For Restructuring of the Organization
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46
&$

As British Airways has had to become more competitive, they have striven to reduce
costs, primarily through the reduction oI staII and the outsourcing oI non-core activities.
Their prime competitive advantage is the network and scheduled Ilights, and
consideration oI these is the key criterion oI Iocusing on consumer needs and wants. All
Ieatures oI the travel experience with British Airways need to be synchronized and oIIer
eIIiciency and value Ior money to the customer. Any negativity in the travellers'
experience will prompt more active consideration oI alternatives Ior BA. There is
increasing evidence that the development oI interactive Web sites can Iill this gap and
electronic systems oI ticketing, billing, emplaning, are all tied to this development.

We notice that many airlines, including BA have lost track oI the true needs oI the
passengers and are trapped in outdated view oI what airlines services are all about.
Hence, BA should Iocus more on the needs oI their customers and bring out better ways
to serve their markets, invest moderately in new innovations that could moreover be a
boon or a curse, and Iinally, play saIe with their competitors.

Whatever the Iuture may bring, the volatility oI the airline industry can never be
underestimated. II the plan is to succeed the next Iew years will need to see very positive
advertising elasticity, asset marketing oI the most successIul variety and some spectacular
returns on management decisions. The corporate culture oI BA will be tested by all the
bad news days it is bound to pass through. It is Ior a Iact that the new BA corporate
strategy is explicitly aimed at delivering a quality product with Iull customer service.
However, such high demands and expectations result in a need to constantly change and
review everything the airline does.

The review will have to Iocus on the outlook Ior air travel demand, management`s
strategy to reshape business size and mix, to Iurther reduce costs without endangering
service quality and labour relations and to improve the liquidity situation through
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alternative sources. It`s going to be tough to turn around this once mighty organization.
StaII will need some morale boosting news soon, other wise motivation will Iall even
Iurther and labour turnover rates will soar.

As a Iinal point, we can conclude that British Airways does not lack potential in any way,
and iI it plays all the right moves - it has a great chance to outrun its competitors in the
airline industry.

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Conclusion for evaluation of the alternative strategies:

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