Strategic Analysis of British Airways: SIM336 Report

This report provides a comprehensive strategic management analysis of British Airways, a leading airline in the United Kingdom. The analysis is grounded in Porter's five forces framework to assess the competitive dynamics of the airline industry, examining factors such as consumer power, supplier influence, threats from substitutes, new entrants, and internal rivalry. Furthermore, the report delves into the application of Porter's generic strategies, evaluating how British Airways has positioned itself within the market. The study identifies the airline's strategic choices and offers recommendations for enhancing its operations, particularly through the implementation of a differentiation strategy. The report also explores the success and failures of applying these strategic models, contributing to a deeper understanding of strategic management in the context of the airline industry.

Running head: STRATEGIC MANAGEMENT ANALYSIS
STRATEGIC MANAGEMENT ANALYSIS
Name of the Student
Name of the University
Author Note

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Executive Summary
The report has presented a thorough study of Porter’s five forces framework and the Porter’s
Generic strategy. The report is also built on the study of a company named British Airways
that has established a leadership place in the airlines industry of the United Kingdom. The
airlines industry has been examined with the support of the Porter’s five forces framework.
The generic strategy that has been applied by British Airways has also been studied in the
report in detail. The recommendations have been offered related to the enhancement of the
processes of British Airways with the help of implementation of differentiation strategy.

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Table of Contents
Introduction....................................................................................................................3
Overview of British Airways.....................................................................................3
Aims and objectives of report....................................................................................3
Aims of the report..................................................................................................3
Objectives of the report..........................................................................................3
Porter’s five forces model..............................................................................................4
Application of Porter’s five forces model on British Airways..................................6
Impact of consumer power on British Airways.....................................................6
Suppliers of British Airways..................................................................................6
Substitutes of the products and services of British Airways..................................7
Threats of new entrants faced by British Airways.................................................7
Internal Rivalry in UK airlines industry.................................................................8
Porter’s Generic strategies.............................................................................................8
Application of Porter’s Generic strategies on British Airways....................................11
Conclusion....................................................................................................................12
Recommendations........................................................................................................12
References....................................................................................................................14

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Introduction
Overview of British Airways
British Airways is a flag carrier based airline of the United Kingdom that has its
headquarters at Waterside, Harmondsworth. British Airways has been able to gain the second
largest place in the airlines industry of the UK. The position that is gained by the organization
in the industry with respect to the fleet of airlines. British Airways had merged its processes
with an organization named Iberia that had been able to develop International Airlines Group
or IAG (Britishairways.com 2019). British Airways is considered to be first passenger based
airline that had generated greater than 1 Billion Dollars of revenues in single air routes in a
single year. The organization was developed in the year 1974 after British Airways Board
had been established by British Government in order to manage two major nationalised
airline based organizations like, British European Airways and British Overseas Airways and
two other regional airlines that include, Northeast Airlines and Cambrian Airways
(Britishairways.com 2019).
Aims and objectives of report
Aims of the report
The major aim of the report is based on the reflection of the theoretical aspects of the
Porter’s Competitive strategy in order to identify the ways by which it can be implemented in
British Airways that has its operations in the United Kingdom. The report will also be able to
provide an understanding built on the success levels or failure that has been increased in the
application of the two models (ABUBAKAR and DOGOJI 2015).
Objectives of the report
 To develop an understanding based on different theoretical aspects of the
Porter’s Generic Strategy and the Porter’s five forces framework.

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 Evaluation of the applicability levels of the Porter’s generic strategies on
British Airways.
 Evaluation of the levels of success or the levels of failure based on
applicability of competitive strategy based models (Adner, Ruiz-Aliseda and
Zemsky 2016).
Porter’s five forces model
The Porter’s five forces model and different aspects that are a part of the model have
been depicted in the diagram below.
Figure 1 – Porter’s five forces model
Source - (Adner, Ruiz-Aliseda and Zemsky 2016)

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The levels of threats that are provided to the organizations from new organizations
that enter the industry have an influence on the growth of the shares in the industry or market.
The effective levels of market share are able to play a crucial part in the position that has
been developed by organizations in the industry. The profitability levels in the industry is
considered to be an important aspect that can be affected by the operations of new companies.
The large scale levels of investments that have been made by the organizations have an
impact on the expansion related activities (Bell, Dyck and Neubert 2017).
As discussed by Cavaleri and Shabana (2018), the proper development of the
effective barriers to the entry of new organizations is considered to be a significant aspect
that has an impact on companies that are already operating in the industry. The position can
be developed by an organization in the industry with the help of appropriate differentiation
with the help of different service and product based offerings that are provided to the
customers. The suppliers have the strength to influence the prices of different raw materials
that are required for the development of distribution based networks (Durand, Grant and
Madsen 2017). The large number of suppliers in the industry are able to play a main part in
increasing the levels of prices or the sales. The substitute products are able to influence the
profitability levels and sales of different organizations. The standardisation of the prices are
also based on promotional and the marketing activities that are developed by the company in
the industry (Gans and Ryall 2017).
According to Harrison (2018), the organizations that operate in the service or product
based industry influenced in a huge way by the standardised prices of different types of raw
materials. The potential challenges that are faced by the organization are also based on the
product quality and the appropriate prices of the products. The multichannel and internet
based marketing deeds that are accomplished by the firms are able to influence the methods
by which the companies are able to uphold the levels of profitability (Huang et al. 2015). The

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substitute products that are provided by different organizations are able to affect the methods
by which they are able to maintain the chances that are offered to the customers so that they
can switch between different products. The power of consumers is able to play a crucial part
in the proper growth of the revenues that have been increased by the organization in the
industry (Iammarino, McCann and Ortega-Argilés 2018). The development of loyal
customers is considered to be an important aspect that has an effect on the ways by which the
profitability levels can be retained. The competition that is faced by the organizations in the
industry has an impact on the product portfolio and the services that are provided to the
consumers as well (Johnsen 2015).
Application of Porter’s five forces model on British Airways
Impact of consumer power on British Airways
The consumers of British Airways are highly price sensitive in nature as they are
aware of the rights that they have and also have to know the levels of choices that are
provided to them as well. The different choices that are provided to the consumers for
choosing the airline from which they wish to gain the services are able to increase their power
to affect the prices of the services and products as well. The levels of switching costs for the
customers based on the services that they wish to enjoy are close to zero (Kabue and Kilika
2016). The loyal customers of British Airways are highly satisfied by the services that are
offered to them. The consumers are however attracted towards the lower price based products
that are offered to them by the other companies. The travel agents are also able to play a vital
part in the processes by which the customers can use their power in order to receive the
greatest deals that can satisfy their needs (Baumeister and Onkila 2017).

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Suppliers of British Airways
The suppliers are an important part of the processes of British Airways in the airlines
industry who are able to supply different raw materials including, fuel, labourers and
airplanes. The number of suppliers in the industry who provide airplanes to the organization
are quite low and also involve high levels of investments. Suppliers have the ability to affect
the processes of British Airways in the airlines industry. British Airways will not be able to
maintain its operations in the industry with the support that is provided by the suppliers of
airplanes (Bottasso et al. 2017). The other suppliers of British Airways are able to help the
processes of the firm with the help of effective relationships that are developed between them
and the management as well. The power of suppliers in case of the operations of British
Airways is considered to be quite high (Durand, Grant and Madsen 2017).
Substitutes of the products and services of British Airways
The proper determination of the substitutes that are provided to the customers is based
on the services that are provided by British Airways. The other modes based on transport
based activities of the customers are able to influence the services that are provided by the
organization. The customers look for the lower levels of prices that are offered to them and
the value that is provided by the services (Gans and Ryall 2017). The choice related to the
mode of transport is considered to be a significant aspect that has an influence on the target
market. The customers always look for the levels of convenience that are provided by the
services and price levels. British Airways can maintain the position within the industry with
the support of highly effective products of the company. The threats that are faced by the
company based on substitutes that are offered to the customers are moderate in nature (Kaya
2015).

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Threats of new entrants faced by British Airways
The barriers related to the entry of different companies in the airlines industry are
quite high due to the levels of investments that are required. The desired shares in the market
has been able to affect the levels of product differentiation that have been developed by the
organization (Linton and Kask 2017). The proper development of the competitive edge in the
airlines industry is an important aspect that is related to the effective procedures of the
organization. The unavailability of different types of distribution channels is an important
factor that reduces the chances of entry of the new organizations. The threats that are faced
by the company based in entry of the new firms in the airlines industry is thereby considered
to be quite low (O’Connell 2016).
Internal Rivalry in UK airlines industry
British Airways faces high levels of competition on various levels including the local
organizations and the international organizations as well. The intensity of the competition
levels in the industry is however quite high on an international level. The various terms that
have to be considered in order to face the stages of competition in the airlines industry
include, convenience levels, prices and the services that are offered to them as well (Pels,
Njegovan and Behrens 2017). The market value of the organization can be maintained in an
active manner with the help of services that are offered to the customers. The quality of
services that are offered by the organization to the consumers is a significant aspect that has
an impact on the development of market value in an effective manner. The maintenance of
similar term is mainly based on the stages of competition and the intensity of the rivalry as
well (Porter and Kramer 2019).
The analysis of the competitive environment of British Airways has been able to
depict that the organizations have faced major levels of competition based on services that are
provided to the customers and the prices of the services as well. The services and price of the

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organizations are considered to be significant aspects that have an influence on the long term
operations that British Airways has been able to develop (Robinson et al. 2016).
Porter’s Generic strategies
As discussed by Sheehan and Bruni-Bossio (2015), Porter’s Generic strategies can be
divided into four types that include, cost leadership based strategy, differentiation strategy,
focussed strategy, segmented differentiation strategy. The different generic strategies can be
illustrated with the help of the following diagram.
Figure 2 – Porter’s generic strategies

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Source – (Iammarino, McCann and Ortega-Argilés 2018)
As discussed by Sölvell (2015), cost leadership based strategy has been considered to
be the most effective for the ways by which the companies are able to gain an entry into the
new market. The effective levels of market penetration are considered to be significant
aspects that can have an influence on the position that is developed in the existing market.
The organization mainly focusses on the ways by which competitive advantages can be
gained in the industry in order to uphold the place (Terpend and Krause 2015). The products
and services that are developed by the organizations with the implementation of cost
leadership strategy are considered to be of low quality that are only able to fulfil the needs
and demands of the consumers (Zehir, Can and Karaboga 2015). The major focus of the cost
leadership strategy is based on the ways by which the organizations can reduce the costs of
production in order to increase the levels of profitability. The selection of promotional
strategies and distribution based channels will be able to play a major role in proper growth
of the services of organizations in the highly competitive business environment. The
differentiation strategy is applied by the companies in order to uphold the uniqueness of the
services and products by proper improvement of the quality levels (Robinson et al. 2016).
The needs of customers in this case ate fulfilled in a different manner in comparison to the
cost leadership strategy. The unique products or services that are developed by the
organizations that implement differentiation strategy are provided to the customers at lower
prices. The differentiation is achieved by the organizations with the help of different
attributes that include, brand logo, technological features and the design of the products as
well (Durand, Grant and Madsen 2017). The differentiation is mainly associated with the
customer services based aspect rather than the costs of production and marketing of the
products. Differentiation can also be identified as an effective approach that can help in the
growth of competitive advantage in the industry. The levels of returns of the organizations

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will be increased with the help of unique services and products that are provided to the
consumers (Linton and Kask 2017).
As discussed by Adner, Ruiz-Aliseda and Zemsky (2016), the companies that target a
small or niche group of customers implement the focussed strategy. The companies in this
case can select from a differentiation or a cost leadership based approach in order to uphold
their position and revenues in the industries. The organizations need to analyse the demands
and needs of the consumers in order to make the choice between the focussed cost leadership
and focussed differentiation strategies (Sheehan and Bruni-Bossio 2015). The investments
that are made by the company in different organizational operations are able to affect the type
of focussed strategy that can be implemented. The types of customers who are targeted by the
organization have an impact on the focussed strategy that is implemented. The strategy will
be mainly based on the approaches by which the levels of investments that can be made in
different organizational activities (Gans and Ryall 2017). The development and
implementation of focus strategies are able to play a major part in the processes by which
high levels of revenues can be gained by the organizations. Proper analysis of the needs and
demands of the customers is considered to be a significant part of the processes by which
focus strategies can be developed by the modern organizations (Sheehan and Bruni-Bossio
2015).
Application of Porter’s Generic strategies on British Airways
The cost leadership approach has been applied by British Airways in order to target a
large group of customers. The alliances that have been made by the organization have been
able to play a key part in the growth of low cost based services and products. The company
has been able to target the customers with the help of its services in order to uphold its place
in the competitive airlines industry. The price sensitive consumers of the organization have