Strategic Management Assignment with British Airways (GC01685)

Executive Summary

The aim of this report is to conduct a strategic analysis for a business. The name of the business is British Airways. The key findings of this report come from several books, journals, and websites including British Airways’ website. This report does both internal and external analysis of the business environment of British Airways. For conducting external analysis two tools are used in this report, which is PESTLE and Porter Five Forces Model. The PESTLE analysis is conducted to define the trends and key drivers of British Airways’ business. Then, the Porter Five Forces model is analyzed to define the power of British Airways’ business. Next, internal analysis of British Airways’ is done using the VRIN framework, analyzing core competencies, and competitive advantages.

The internal and external analysis of British Airways shows that British Airways is facing a number of challenges. The key challenges are coming from economic factors, political factors, social and cultural factors, technological factors, legal and environmental factors. However, the internal analysis shows that although British Airways is facing a number of challenges, mainly from its external environment, it is performing better with its competitive advantages and core competencies.

Table of Contents

Executive Summary.

1.0 Introduction.

2.0 Overview of British Airways.

3.0 External Analysis.

3.1 Trends.

3.2 Key Drivers.

Increasing disposable income.

GDP growth is expected to increase.

3.3 Power

3.4 Attractiveness.

4.0 Internal Analysis.

4.1 Resources analysis of British Airways.

4.2 VRIN Analysis.

4.3 Core Competencies.

4.4 Competitive Advantage.

4.5 Distinctiveness.

5.0 Conclusion.

References.

Appendix A: PESTLE Analysis of Airline Industry.

Appendix B: Porter’s Five Forces Model

1.0 Introduction

Strategic management and developing effective strategies are essentials for a business to gain success. Thus, it is essentials for a business like British Airways to analyze its both internal and external business environment before making any major decisions (Johnson et al., 2014). As a result, this paper conducts a strategic management analysis for the business of British Airways. In the first section, the external analysis of British Airways is done using two key tools called the PESTLE tool and Porter’s Five Forces Model. These two tools provide the key trend, drivers and powers of British Airways. In the second section, the internal analysis of British Airways is done by using VRIN analytical tool, defining core competencies and competitive advantages.

2.0 Overview of British Airways

British Airways is the UK’s biggest international airline. This airline was founded in 1974 in UK. It has been growing up gradually with fleet size, destinations, revenue and profits, customer bases and market shares (ADVFN, 2016). It is now the 3^rd largest airline in terms of revenue in the world and the 2^nd largest in the EU. It has been listed in the FTSE 100 Index, and on the London Stock Exchange (British Airways, 2017).

3.0 External Analysis

The PESTLE analysis tool is applied to understand the trends within the market where British Airways operates. According to Kotler et al. (2014), PESTLE means political, economic, social, technological, legal and environmental factors. The PESTLE Analysis tool is shown in Appendix A. This analysis shows that trends within the market as follows:

3.1 Trends

Volatile global economy: according to Guardian (2016), the global is very volatile mainly because of the Brexit issue between UK and the EU, and after electing Donald Trump as prime minister in the US. A statistician at Reuters said the current year started with Wall Street’s biggest fall in the century. The UK currency dropped more than 20% within the three months because of Brexit issues. Thus, three key fears influence the global markets that are oil prices, political instability in the US, Brexit issue between the EU and UK.

Global passenger traffic

Global passenger traffic has increased by 5.8% year-over-year during the first eight months of 2014. Europe (29.7%), Asia-Pacific (29.2%), and North America (25%) comprise ~85% of the global market share by passenger traffic. In this article, we’ll discuss the growing trend in passenger traffic by region, as reported by the International Air Transport Association (IATA) (Cederholm, 2014)

Diagram: Global passenger traffic Source: Cederholm (2014)

Economic up-turn in China and India: the growing economy of China and India has been a bigger challenge for the global market including the US, EU, and the UK. However, China and India are providing lots of opportunities for multinational organizations including British Airways. This is because these two markets are huge that give lots of opportunities for British Airways to extend its business, revenue and profits (Guardian, 2016).

Online demand: in this current digital age the demand for online marketing is growing up. According to a survey conducted by McGee (2017), there has been a stronger demand for SEO and social media like Facebook and YouTube. 75% of respondents said the demand for social media is increasing, where 72% of total respondents said the demand for SEO is growing up. However, the demand for e-mail marketing and PPC are decreasing according to 12% of respondents and 10% of respondents respectively (Cederholm, 2014)

Social trends: social trends have a major impact on the aviation industry. People are seeing the industry in a new light. It is now seen as a carrier for the masses. The social perception of air travel has changed. It is being seen as safer and convenient. The number of professional travelers also increased. There are a large number of social changes that have proved positive for the airline industry. This explains the relationship between society and industry. Social factors as a result acquire a major value in the context of the aviation industry. Events like disasters and wars also have an impact on the airline industry. Whether it was the 9/11 terrorist attacks or other disasters, the impact has been severe for the airline industry. Not just this, the travel preferences of the millennial generation are also favorable for it (Dudovskiy, 2016).

Technological changes: Technological factors’ importance can be understood from the heavy use of technology in aviation. Moreover, as the people’s awareness of technology increased they were drawn towards air travel in larger numbers. Technology means speed but also convenience and safety. The World Wide Web has also brought higher profits and revenues. Best in class technology means lighter aircraft that provide both fuel economy and speed. As technological changes continue, airlines continue to gain by increased safety of air travel. Both Boeing and Airbus are focused on the use of innovative technology to make air travel safer and more economic (Dudovskiy, 2016).