EXECUTIVE SUMMARY Business environment means the external forces influencing business management and decisions. It contains two forces, specific and general. Investors, competitors, customers, and suppliers affect directly in their day-to-day operations are the specific forces. Social, political, legal and technological conditions affect organisations indirectly are the general forces. Strategy management and innovation are vital for an organisation’s growth and development. Upon understanding the importance of strategy management and innovation, researchers have formulated theories related to organisational management.
Theories have critically analysed with the case study of British Airways by comparing strategies with both external and internal environments.
The case study explains the dimensions of business travel and tourism and its social, economic and environmental consequences. INTRODUCTION Business Environment encloses all those factors effects an organisation’s operations including investors, customers, suppliers, distributors, competitors, regulations, government activities, economy, demographics, social and cultural factors, and technological developments.
In addition to this, physical or natural environment and global environment influences the businesses. As the rate of technological change gets faster, the organisations need to innovate or renovate of the business practices, especially changes in the product, pricing and distribution.
Organisational planning in modern times must be based on different technological developments, political developments, legal developments and cultural developments. Strategy, innovation, and change are the main key components that influence the business in growing and sustaining in the current competitive business environment.
Organisational strategic planning process: Strategy is a careful long-term action plan towards the goal. According to the today’s high competition in business environment, the large corporations not only follow the budged-oriented and forecast-based planning techniques to survive and prosperity, but also employing in strategic planning. Mission & Objectives: The organisation focus and shared values expressed as Aspirations Statement that projects the organisation representation to the consumers. Organisational leaders can define easurable financial and strategic objectives directed by the business vision. Environmental Scan: Environmental scanning means examining of the internal and external environment of an organisation, which helps the organisation in robust strategic planning. Strategy formulation: Once the clear demonstration of an organisation has been achieved, specific strategy can be developed. Strategy Implementation: For successful implementation, high level intangible terms and priority of strategy needs to be translated into more detailed policies for clear understanding at the functional level of organisation.
Evaluation & Control: After implementation, the results need to be measured and evaluated, and adjustments made as necessary in the strategic plan. (http://www. quickmba. com) SWOT Analysis: SWOT means strengths, weaknesses, opportunities and threats. SWOT analysis is a strategic planning method, and it helps the businesses in identifying and prioritising issues and then developing specific strategies to address the specific issues. Strengths: Organisational strengths are skills and capabilities which makes possible to conceive of and implement its strategies.
Some examples are tie-ups with the suppliers, resources, marketing distribution and awareness, reputed brand name, etc. Weaknesses: Organisational weakness is deemed as an opposite of strength. Examples include weak tie-ups with the suppliers and distributors, poor reputation among customers, gaps in capabilities, lack of competitive strength, weak brand name, etc. Opportunities: Opportunities are favourable circumstances of organisation towards higher performance and profits. Examples include unfulfilled customer needs, up to date with industry or lifestyle trends, technologies, business and product development, etc.
Threats: Threats are unfavourable changes in the internal and external environment. Examples include new regulations, not able to manage the new technologies; products are not able to reach the customer satisfaction level, trade barriers, etc. By utilizing the SWOT analysis in strategic planning towards the growth, organisations can develop a matrix which provides an accurate understanding of organisations’ strength, weaknesses, opportunities, and threats. SWOT Matrix StrengthsWeaknesses OpportunitiesS-O strategiesW-O strategies ThreatsS-T strategiesW-T strategies Source (http://www. uickmba. com/strategy/SWOT) In conclusion, SWOT analysis is the most important method in analysing and formulating strategy. With this, the senior managers can able to assess the internal strengths and weaknesses as well as external opportunities and threats for overall development of the organisation. (Ricky Griffin, 2007) Micro & Macro Environment: Micro environment in business is a specific area of elements which impact the organisation’s ability to serve its customers. Organisational micro environment factors consist of customers, competitors, suppliers, marketing and the general public.
Macro environment is external factors of an organisation which are uncontrollable that influence in decision making and effects on performance and strategies. These include political, economic, social, technological and natural forces. It also includes changes in interest rates, cultural tastes, and government regulations. All organisations operate in a macroeconomic environment over which they have no control. Nevertheless, it is important that firms understand the impact that macroeconomic factors may have on their operations. Inflation may caused by cost push or demand pull influences.
Businesses may benefit from mild inflation and may also suffer as a result of inflation. PESTEL Analysis: PESTEL analysis means analysing the political, economical, social, technological, environmental and legal factors, which may play a big role in an organisation processes. Political factors are political stability, taxation policies, legislation and regulation, government grants and fiscal incentives, and environmental regulations, and etc. Economic factors are interest rates, inflation rate, currency exchange rates, globalization, economic growth, and etc.
Social factors are demographic change, emphasis on safety, lifestyle development, healthy management, and etc. Technological factors are research and development activity, communication technologies, automation, operation technologies, and etc. Environmental factors are climate, weather, and etc. Legal factors are employment law, consumer law, health and safety law, and etc. (Ricky W. Griffin, 2007) In conclusion, PESTEL analysis is a method of understanding external environment and this is very important for overall development and success of an organisation.
Change Management: “Change management is an organized, systematic application of the knowledge, tools and resources of change that provides organisations with as key process to achieve their business strategy. ”(http://www. lamarsh. com/approach/managed. htm) Michael E. Porter developed a five forces tool called “porter’s five forces” to understand the industry in which a firm operates. According to the Michael E. Porter, competition is often looked at too narrowly by managers and the five forces say that competing with direct competitors.
The five forces give a holistic way of looking any industry and understanding the structural underlining drivers of profitability. The five forces are supplier power, buyer power, competitive rivalry, threat of substitution, and threat of new entry. These five competitive forces give a frame work for identifying the most important industry developments and for foreseeing their impact on industry attractiveness. (Michael E. Porter, 2008, On Competition) Source (http://www. visual-literacy. org/periodic_table/pix/porter-five-forces. ng) The job role of senior managers is to take decisions in favour of achieving the goals and make sure that the formulating strategies are implemented in the appropriate manner. The above-mentioned theories help the senior managers to approach change in a more structured way. Nevertheless, rather than sticking of organisational theories, managers have a broad range of choice and prudence. Change tends to be resisted when it affects interpersonal and job relations, but the manner of change is often important than the change itself. Change will not be effective unless the affected areas are committed to change.
By creating supportive atmosphere, close working with affected areas by the change must work out a new value system we can reach the goal of successful change. Lewin’s Model: According to the Lewin’s model, change means three stages: unfreezing, transition and refreezing. Unfreeze – supporting people to replace the old behaviour with new one, which provides psychological, social and safety needs and motivated to change. Transition – employees start looking at things in a positive way and they learn new concepts or behavioural models in this stage.
Refreeze – stabilization of change via integration of changed behaviour into the normal way of doing things. Change will fall back to prior level unless the change is internalized and institutionalized after execution. Some of the organisational resistance factors are inactive structure, inactive group, threat to expertise, poor power relations, and limited forces of change. (http://www. consultpivotal. com/lewin’s. htm) In conclusion, change models like Porter’s five forces, Lewin’s model, and choice management – change management etc help organisations to manage the change.
Identifying the competitors, consumers and suppliers bargaining power, resources and competencies assist in formulating the strategy of the organisation. Social and Demographic Influences: Social and demographic factors influence the organisation not only in terms of type of product, but also in the ways in which it produces them. Examples are male-oriented products, female-oriented products, certain food stuff, colours, etc more acceptable to some ethnic groups than others. CASE STUDY: Background Information: In 1919, Aircraft Transport and Travel Limited (AT) launched world’s first daily international air service.
In 1924, four major airline companies in Britain – Handley Page, Instone, AT and British Air Marine Navigation merged together into a single airlines entity called Imperial Airways. This airline grew in size and gained rapid reputation. The airlines not only dominated the operations in Britain, but also dominated across the different countries in the world encircling routes to Australia and Canada. In 1935, British Airways Ltd was formed with the merger of three airlines and extremely competed with the Imperial Airways.
However, in 1939, British government nationalised the two airlines and formed British Overseas Airways Corporation. The BOAC separated into two entities as British European Airways (operates within Europe) and BOAC (operates rest of the world). With the rising oil prices and industrial concerns, BOAC and British European Airways decided to merge into British Airways in 1976 and a Concord was introduced. This was referred as to as the new supersonic era. In April 1984, British Airways was made into British Airways Plc by shares offered to public.
Now, British Airways is the United Kingdom’s largest international scheduled airlines and operates more than 550 destinations across the world. British Airways has more than 280 aircrafts and has more than 40,000 employees. The corporate headquarter is located in London and its main hubs are Heathrow and Gatwick. British Airways has owned around 240,000 shareholders including 50% of shares owned by the BA’s existing employees. (http://www. britishairways. com/travel/explore-our-past/public/en_gb) Strategies of British Airways: New strategies were adopted at each level of the organisation.
British Airways top managers are certainly reviewing their strategies to identify the areas of improvement. Functional strategies aim at providing British Airways’ products with competitive advantages in terms of superior quality, innovation, efficiency and customer responsiveness. In airline industry, formal corporate strategy was that of vertical integration with lack of independent providers for specialized activities brought about the creation of in-house services with secure markets, therefore lacking up-to-date technology or cost efficiency.
With the new corporate strategy, outsourcing activities to reduce costs and elevate competitiveness, and on developing partnerships with major airlines to increase the use of each partner’s assets and better serve customers. SWOT Analysis of British Airways: Strengths: British Airways strength includes purchased fast-rate new fleet of aircrafts to praise comfortable travelling of customers. British Airways operational research declared that level of knowledge and analytical skills performed by the organisation and employees becomes it strength.
Strong focus in customer areas whilst in purchasing high-end technology for air service strengthens the business orientation. Weaknesses: Lacking marketing strategy is one of many weaknesses on organisations business and service. Even though the great infrastructure hosted, British Airways need to attract more customers with better market schemes. Furthermore limited knowledge of simulation technology, knowledge lost through internal staff moves, and difficulty to enhance specialist airline technology are the weaknesses. Opportunities: Availability of vast services and products create an opportunity to utilize them properly.
In British Airways online check-in for families with ‘Fast Bag Drop’ facility, introducing baggage policies by standardizing the size of baggage to reduce queue time in airports are some of opportunities for British Airways. Threats: Threats are seen in centralized management, bureaucratic system and poor decision making. Rapid changes on technology and customer behaviour can also be a threat if not interpreted quickly. Major threats are trade union strikes. (http://www. thinkingmanagers. com/companies/british-airways) Porter’s Five Forces analysis of British Airways
Rivalry among existing firms: Short-haul and long-haul flights are the two airline industry market competitors for British Airways in services, routes, quality and travel comfort. Ryanair and Easyjet are the short-haul market competitors. Lufthansa and Air France are the long-haul market competitors. Threat of new entrants: British Airways holds leading position in global market and makes it complex for firms to compete with it. However, Easyjet a low cost carriers in the short-haul market captured high amounts of British Airway’s market share.
Threat of substitutes: The threats of substitutes for British Airways are Eurostar and car coach specifically for short-haul destinations. Also it depends on various factors like time, price, and efficiency, etc. For example trains are cheaper than flights when fuel prices raises. Bargaining power of suppliers: Suppliers of Airbus and Boeing do not have much supplier bargaining power. British Airways has a choice with fuel supplier and the tickets costs also depends on the fuel fluctuation which is out of British Airway’s control.
Bargaining power of buyers: Competition in airline industry with low-cost travel offers makes it difficult for British Airways as it has to frequently change the strategies with the changes in the external environment. Example Thomas Cook and tour operators are selling low-cost scheduled seats. Innovation and Strategy Management By signing the joint business agreement in revenue and cost sharing and with Iberia British Airways spread the choice of air timings, better connections and short journey timings for customers travelling between London and Spain.
Technological changes and innovation have been witnessed in British Airways from the past five years. British Airways has invested large amounts in new technology and terminal facilities. British Airways has changed the uniform for more than 25000 staff and the new uniform will cost 30% less than the previous one, which continues to produce long term cost savings whilst bringing a new smart look to the staff. British Airways also expanded the operations through launching BA CityFlyer and operating from the Docklands to six UK and European destinations in 2007.
Another major technological change introduced by British Airways was implementation of management solutions from Calidris in 2007, which helped to create industry’s first Order Data Stores (ODS), which stores the customer’s information in improving the level of customer service and minimising the duplicate bookings. In 2008, introduced Online Boarding Pass (OBP) along with technology enabled PDF with e-fax and mail services to customers’ convenience and time saving. Formerly, passengers would need to have access to a printer at the time of online check-in to produce their boarding pass.
The Online Boarding Pass facility helped the customers in a great way as they did not have to wait in queue. Now they can take advantage of the freedom of online check-in. British Airways also aims on cutting down 95% of energy consumption on air handling by installing in-flight stimulator cells at its training centre in Heathrow Airport and new technology equipment also being used to reduce the noise emission. In March 2008, British Airways has moved its operations to Terminal 5 at Heathrow.
There was a technical failure and mechanical failure due to poor communication from the management side and refusal to listen to staff and technical experts. This resulted in huge flight cancellations and baggages were reported missing. This organisational blunder was due to lack of communication and there were no announcements or information on the monitors and websites. This leads to thousands of passengers had their travel plan disrupted. Hence, the move of British Airway’s operations to terminal 5 was a big flop.
This is due to the staff in mechanical and technical operations were not prepared for this change. Internal problems with employees and huge resistance when British Airways implemented the cost-cutting approach called Business Efficiency Program. It aimed at reducing labour costs by restructuring the pay scales and allowances of the cabin crew. This resulted in cabin crew worries and prompted the employees to conduct strikes. In order to reduce this, British Airways has implemented various cultural programs like Putting People First and Managing People First to maintain good employee and customer relations.
These programs will help in increase the morale of employees. British Airways staff took an opportunity in cost reduction program to apply for voluntary pay cuts to support the airline cost reduction programme. Options for employees to volunteer, unpaid leave or unpaid work between one to four weeks with the pay deduction extend over three or six months. However, the employees to volunteer also switch to part time working or longer periods of unpaid leave. This will save the airlines up to ? 10 million.
British airways utilized this fantastic response from the employees to pull the difficult period in 2008. This response clearly shows the mutual between employee and employer. (http://www. travelweekly. com) (http://www. britishairways. com) CONCLUSION In today’s dynamic and competitive business environment, organisations have to develop business strategy for their growth and development. Organisational change consists of planned (internal factors) and unplanned (external factors) change. Unplanned change is beyond the control of management.
Though there are various theories and models in literature on developing strategy, innovation, and change, successful organisations are learn to adapt to the changes in the internal and external environment. Exploring the knowledge and facilitation commencements in British Airways supported the decisions and management process. British Airways has anticipated breakthroughs in its culture, technology and politics. Improvements in technology especially launching of BA website has given a new outlook to British Airways.
The changes in strategy, technological improvements, structural changes, dealing with competition, programs designed to refine the culture of employees etc were all contributing the British Airway’s growth and development. The cultural programme at British Airways was not an appearance of mutual trust between the employees and management. There was a resistance by the employees during the launch of Terminal 5. Thus, British Airways could have maintained good industrial relations if there was a mutual trust and shared emotional responsibilities between the employees and management.
REFERENCES/BIBLIOGRAPHY: Burnes, B. (1997) Organisational Choice and Organisational Change, Management Decision, Vol. 35, No. 10, pp. 753-759. British Airways (2010) Available at http://www. britishairways. com/travel/explore-our-past/public/en_gb, Accessed 24th March, 2010. Johnson Gerry, Scholes Kevan, Whittington Richard (2008) Exploring Corporate Strategy, London, FT Prentice Hall. John Swarbrooke, Susan Horner (2002) Business Travel and Tourism, Great Britain, The Bath Press. Michael E. Porter (2008) On Competition, Boston, Harvard Business School Publishing.
Ricky w. Griffin (2007) Fundamentals of Management, USA, Houghton Mifflin Company. W. Warner Burke (2002) Organisation Change: Theory and Practice, London, Sage Publications Ltd. http://www. quickmba. com/strategy/strategic-planning http://www. quickmba. com/strategy/SWOT http://www. lamarsh. com/approach/managed. htm http://www. consultpivotal. com/lewin’s. htm http://ezinearticles. com/? The-Early-History-of-British-Airways http://www. thinkingmanagers. com/companies/british-airways http://www. travelweekly. com. au/PDF/TWSUP_BusinessTravel. pdf
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