British Airways: Strategic Management

Free «British Airways: Strategic Management» Essay Sample

1.0 Introduction

As the leading airline in the United Kingdom, the British Airways still has clear chances for internal improvements as well as growth opportunities (Gregory, 2010). However, these opportunities can only be tapped through the formulation of clear and achievable strategic management goals. Strategic management entails providing the overall direction for the organization by setting goals which are aligned with the main objectives (Eden & Ackermann, 2013). The process of strategic management is the responsibility of the top management team who act in accordance with the needs of the stakeholders. The main objective of the stakeholders is profit maximization. Strategic management process must involve the scanning of the environment, both internal and external. For instance, this goal can be achieved either with the help of the SWOT or PESTEL analysis. The SWOT analysis of the British Airways reveals that the company is facing some serious threats and weaknesses, which need to be dealt with so as to realize the goals of the organization. Similarly, there are some opportunities for the company’s further expansion.

2.0 Growth Strategies

Growth can be assessed regarding either the number of clients, the number of employees, or operations. The British Airways has some open chances for growth. The company can initiate growth strategies through three main directions: investment and growth, growth through Blue Ocean strategy, and internationalization strategy (Eden & Ackermann, 2013). The choice of direction in addressing the growth strategies in the company will greatly impact the results. It will also depend on the resources available to the company. While some of the strategic directions require large investments, other directions will not put a lot of pressure on the resources of the British Airways.

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2.1 Investment and Growth

British Airways can undertake growth strategies which focus on investment and growth. In doing so, the company will invest substantially in operations, which are geared towards increasing both the operational and resource utilization capacity. British Airways as a company is comprised of four main strategic business units (SBU): finance and accounting, operations, marketing, and human resources. 

According to the Boston Consulting Group (BCG) model, the strategic position of an organization can be classified as a star, a question mark, a dog, or a cash cow (Evans, Stonehouse, & Campbell, 2012). The classification is based on the amount of cash required by different strategic business units in the investment process. In the case of British Airways, human resources can be regarded as a star, because the organization does not require much investments in this direction (Evans et al., 2012). British Airways currently possess adequate personnel according to the operations of the business. All that the organization needs is to align the human resources department to its strategic goals. The finance and accounting department of the organization can be classified as a dog. It does not require huge investments either. The marketing department of the organization can be classified as a cash cow owing to the fact that the marketing operations can generate extra income for the company. These extra revenues enable the organization to undertake major expansionary projects. On the other hand, the operations department can be classified as a question mark, because its operations require much investments. For instance, in its expansionary strategies, the organization needs to install major technological devices aimed at improving the capacity of the British Airways.


Human Resources


           Question Mark


   Cash cow



    Finance and Accounting

The revenues arising from the extensive marketing campaigns conducted by the British Airways will be used to support the human resources department as well as develop operations. It is worth noting that the operations of the organization require a lot of investments. The realization of these huge investments requires marketing campaigns that will increase sales and revenues significantly. In this process, the finance and accounting operations require support (Evans et al., 2012). However, weak and uncertain operations of the organization should be divested so as to reduce the demand for cash. For instance, the operations which have continuously produced losses should be managed properly to reduce the cash needed for expansion. Only those operations which guarantee the prosperity of the organization should be allocated the necessary resources. Similarly, the financial resources available to the British Airways, which represents the Dog, should be harvested wisely for maximum returns. However, in the case of any unbalances in the portfolio, acquisition, as well as divestments, additional measures need to be taken.

The GE McKinsey model advocates prioritization of strategic business units. With a lot of opportunities and few resources, the British Airways has to choose how to best use their cash to produce the best returns. Ideally, more profitable business units should be allocated the largest amount of resources (Jarvis, 2014). At the same time, the operations, which prove to have little financial strength, should not be allocated a lot of resources.

According to the Ashridge model, the ‘fit’ between the British Airways and the strategic business units (SBU) should be established. Ideally, the portfolio can be classified into the main categories, which include ballast, alien territory, value trap business and the heartland. The business operations of the British Airways can be regarded as the heartland, because they require substantial amounts of investments while at the same time guaranteeing a good return on investment. Focusing on these operations will allow to achieve the growth strategy set by the company.

2.2 Growth through the Blue Ocean Strategy

The British Airways can foster growth through the use of Blue Ocean strategy. Essentially, the main principle behind this strategy is that an organization can create uncontested markets hence making competition irrelevant. British Airways can create these uncontested markets by horizontal or vertical integration (Eden & Ackermann, 2013). Horizontal integration will entail acquiring or merging with another company in the same industry. In this case, British Airways can acquire Air NZ by purchasing 51% of its shares. Thus, the company will substantially reduce the competition in the market.


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2.3 Internationalization Strategy

The British Airways can also undertake expansionary and growth strategies through internationalization. Internationalization involves three main steps: the selection of the foreign markets, foreign market entry, and foreign market developments. The selection of the foreign markets to be utilized by the British Airways will depend on the following factors: geographical proximity, technological superiority, the capacity of the markets, and the technological intensity of the industry. Specifically, British Airways can undertake the internationalization strategy through the opening of new offices in new locations, such as Africa, America, and the Asian continent. In these continents, there are crucial emerging markets, which can be suitable for the services offered by the airlines (Sui, & Baum, 2014). Additionally, all these market niches are favoured by the factors needed in the market selection process. Ideally, the American market has technological advancements needed for the airline’s operations and can match and support future technological endeavours of the organization.

Asian and African continents are favoured by the fact that they are very close to Europe. Geographical proximity will, therefore, be of essential importance in the internalization strategy adopted by the airline. The attractiveness of the markets can be analysed through the use of PESTEL analysis. The political, economic, social, technological, legal and environmental structures in most of these areas can support the operations of the British airline. Most of these continents, especially the USA, have continued to enjoy periods of stability in political, legal and economic spheres (Sui, & Baum, 2014). The British Airways can utilize different entry strategies into these markets. For instance, it can make use of a strategic alliance with other airlines in Africa and Asia. For instance, the airline can form a strategic alliance with Qatar Airways in its bid to expand into the Asian market.

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3.0 Strategies for Internal Improvement

3.1 Areas which Need Improvement

Currently, the British Airways need to improve their operations significantly. This progress can be initiated by either internal or external advancement. To achieve internal improvement, the company needs to put in place all measures geared towards improving the overall wellbeing of the company (Mellahi & Frynas, 2015). From the SWOT analysis conducted, it is evident that the internal processes of the company still have some weaknesses, which need to be addressed. Strategic management will be essential in offering a solution to the problem. The main areas which need to be improved in the British Airways include human resource management, relations with employees, and physical environment. The need for the enhancement of human resource relations emanates from the fact that the company has experienced several cabin crew strikes, which is an indication of poor human resource policies. At the same time, the Heathrow airport, which is the home to the British Airways, is very congested. To ease this congestion, there is a need to improve the physical conditions there.

3.2 Strategic Performance Management

Strategic performance management entails aligning the goals of the performance management in an organization with the overall strategic goals as well as fostering quality-oriented results. In strategic performance management, the goals of the organization are divided among the respective teams and individuals in a way that creates harmony and allows efforts to be streamed towards achieving the most important goals. In the process of strategic management, the creation of individual targets and goals receives special attention (Mellahi & Frynas, 2015). Both individual and team goals should be aligned with the overall objectives of the organization. Additionally, the British Airways need to evaluate their employees so as to ascertain the level of conformity of their efforts to the set goals (Rothaermel, 2015). Importantly, the organization should ensure that all workers are involved in the goal-setting process. In such a way, cabin crew strikes can be eliminated effectively. Additionally, so as to foster quality, the rewards should be linked to performance in such a way that the employees who perform well are appreciated.

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3.3 Hoshin Kanri

Hoshin Kanri is a phrase that is used to illustrate the management and the control of the overall direction of the organization. According to the basic principles of Hoshin Kanri, the measurement of the whole system will give the executives a clear understanding of the situation. In this connection, therefore, the British Airways can install a system where the performance of the whole organization is measured (Sui, & Baum, 2014). Additionally, Hoshin Kanri can be achieved by setting clear objectives and then communicating them to all stakeholders promptly. Importantly, the resources of the British Airways need to be prioritized for effective and efficient performance. The five steps of Hoshin Kanri can be essential in helping the British Airways achieve its long-term objectives. 

3.3.1 Strategic planning

Determining the vision as well as the mission of the organization is essential. Afterwards, the major threats, which emanate from the external environment, should be identified. Additionally, the basic and strategic operations must be differentiated.

3.3.2 Development of Hoshin Kanri

The British Airways should ensure that all stakeholders are involved in this step. Top management of the company should ensure that the vision is achievable. The objectives should be transferred from the top management to the grassroots of the organization (Hill et al., 2014). On the other hand, decisions regarding how the goals will be achieved should be made from down to the top. The process should be reiterated until the consensus is achieved.

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3.3.3 Realistic planning

While setting the targets and goals for the British Airways, the available resources as well as the competencies of all workers should be considered. Ideally, all the minor activities of the airline should be aligned with the major goals of the organization.

3.3.4 Control and action

This step will involve writing down as well as evaluating the overall Hoshin Kanri plan. Changes needed in the British Airways have to be discussed. Additionally, it is necessary to address potential challenges which the organization may face in future.

3.3.5 Diagnosis of the CEO

The Chief Executive Officer (CEO) of the British Airways will review the results of Hoshin Kanri and adjust the process for future use.

3.4 The Balanced Score Card (BSC)

The balanced scorecard is a strategic management tool that incorporates both financial and nonfinancial measures. The balanced scorecard is comprised of four main perspectives, which are used to measure the performance of employees. These perspectives include the following approaches: financial, customer, internal processes, and learning and growth (Sui, & Baum, 2014). It is worth noting that the balanced scorecard has been proven effective in aligning the employee goals with those of the organization. Financial goals will entail setting individual profitability targets for the employees. Customer satisfaction will be measured on a scale of 1 to 5. The individual and team targets will, therefore, be based on this measure. The internal process perspective will involve setting goals which capture the innovativeness of the employees and the organization in general. On the other hand, the learning and growth perspective entails establishing specific employee needs regarding skills and expertise and then offering relevant training.

3.5 The Business Process Reengineering (BPR)

This is a gradual process through which the activities of the British Airways are gradually changed to increase capacity while simultaneously assuring the achievement of the organizations goals (Rothaermel, 2015). Specifically, internal process that need improvement include customer service and operations.

3.6 Benchmarking

The British Airways can benchmark its operations based on other airlines in the industry which have smooth operations. This technique can be realized on the basis of competitors or other airline companies (Sweeney, 1994). Qatar and the Emirate Airways can serve as examples for benchmarking.

3.7 Outsourcing

Outsourcing will enable the British Airways to concentrate on core activities. For instance, the airlines can outsource such services as air ticketing and employee recruitment. Thus, the airline will be in a position to focus on the operations which promise growth and increase profitability (Rothaermel, 2015).

4.0 Conclusion and Recommendations

Strategic management provides the general direction for the organization. The process entails the formulation of goals their implementation. In the British Airways, strategic management will be key in fostering growth and expansion. The extent to which the British Airways can maximize strengths and minimize weaknesses will determine the success of its objectives and ensure that the long-term goals are achieved. The main strategies which the airline can put in place concerning growth include internationalization, investment and growth, and growth through the Blue Ocean framework. The latter approach allows the firm to create an uncontested market and eliminate fierce competition.

The British Airways should be broken down into some strategic business units (SBU) according to the Boston Consulting Group (BCG) model. The operations department should be the main source of investments in order to foster growth and expansion. Additionally, the creation of an uncontested market should make use of horizontal integration. It will be key to eliminating competition while at the same time providing a chance for growth. Thus, to improve its internal process, the British airline should integrate strategic performance management and human resources management policies. Therefore, Balanced Scorecard (BSC), business process reengineering (BPR) and outsourcing will be used effectively.

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