BUSN 09044 - British Airways Strategic Management and Action Report

This report provides a strategic analysis of British Airways, a public organization that has experienced performance challenges in recent years. It includes a strategic audit of the company's financial and business performance from 2017-2020, analyzing profit and loss accounts to identify key trends in fuel costs, revenue, and employee expenses. The report further examines various strategic actions, such as Porter's generic strategies (cost leadership, differentiation, and focus) and the Ansoff Matrix (market penetration, product development, market development, and diversification), recommending differentiation as the most suitable strategy for British Airways to achieve a competitive advantage. The analysis justifies strategic decisions to enhance the company's plans, goals, and improvements in products and services, emphasizing the importance of customer satisfaction and innovation to attract and retain customers. A critical reflection is included, summarizing lessons learned from completing the report, highlighting the importance of strategic planning and adaptation in a dynamic business environment.

Strategic Management

Table of Contents
Executive Summary.........................................................................................................................1
MAIN BODY...................................................................................................................................2
Strategic Audit.................................................................................................................................2
Analysis of different strategic actions ...................................................................................5
Critical Reflection..................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

Executive Summary
The file highlights the information about British Airways a public organisation. British Airways
is UK airline based airways with the headquarters in London, England. It was created in 1974
and it hasn't performed well in the last 3 years. It includes a strategic audit which helps in
assessment of internal procedure related to strategic goals. It justifies the different strategic
decision taken by the company to enhance the company's plan, goals and improvement in their
products and services. At present the strategies of British Airways is to manage the expenditure,
raise the customer's satisfaction level and develop the aircraft services in order attract as well as
retain several customers towards the airways.
British Airways had lost its momentum prior to pandemic. British Airways was once, a
reputed company but presently the performance of the organisation has declined as well in
comparison to the one it had since last three years. In spite the fact that the organisation has been
witnessing decline since three years, the organisation has continued to carry innovative ideas to
fulfil the needs and requirements of the customers. This project further explains the
diversification and complete analysis which will help the British Airways to perform better in
their airlines industry and strategic action which aims to accomplish the goals and objectives.
Further it focuses on the strategies of the company to make sure the efforts of employees and
bring together in order to help them grow.
It helps to make better judgements, prioritize goals, enhance effectiveness as well as
efficiency as well as to keep the resources mobilized to take suitable actions for the betterment of
the company. It gives focus and attention to their customer services too. The main issue that
arises during strategic action is due to the external environment of the business. The strategic
methods are useful for the organisation during the allocation of the resources that is further
helpful in analysing the position of the organisation in the market which further helps in
enhancing the business operations. These actions allow the organisation to maintain its present
state and generate good amount of money.
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MAIN BODY
Strategic Audit
Profit and loss account of 2017-18
 Fuel cost was increases by 390 million pound, or 15.4 percent to 2537 million pound in
the prior year (Cornwell, 2022). This increase was mainly due to a higher average fuel
price, which increased from an average of 519 dollar per metric ton in 2017 to 687 dollar
per metric ton in 2018, partially offset by fuel price hedging and weaker US dollar.
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British Airways continues to benefit from the performance of next generation aircraft
which are more fuel efficient.
 There has been an increase in the impairment, depreciation as well as normal wear and
tear by nearly 5 % in terms of new aircraft deliverables. There has been high charges of
depreciation in terms of 747 Boeing 747 flight which has further resulted in the change in
terms of residual values. The cost of aircraft lease has increased by 4.5% as a result of the
commercial wet lease cost that was incurred in order to operate the additional wet lease
aircraft in order to compensate for the A321 New delays.
 Several costs including handling costs, catering costs as well as several other operating
cost have rises by over 5%. This year on year comparison is affected by a 56 million
pound charges in regard to the compensation, accommodation and baggage claims in
context to the operational disruption following the power outage.
Profit and loss account of 2018-19
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 Total revenue for the year was 13,290 million pound, up 325 million pound which is
25% compared to previous year, despite ongoing competitive pressure and resuced
capacity due Trend engine issues. Passenger revenue increases by 335 million pound
or 29%. Available capacity increased by 0.9 percent mainly a result of densification
programme. In addition the number of passenger carried increased 1.7% to 47.7
million (Göv, 2022).
 Fuel cost increased by 321 million pound or 10.6% to 3237 million pound compared
to 2927 million in the prior year. Average commodity fuel price of the twelve months
were lower than in the same period last year, an average of 687 dollar per metric ton
in 2018 to 628 dollar per metric ton in 2019.
 Depreciation cost increased by 320 million pound or 40.7 percent and this was
partially offset by a decrease in aircraft operating lease cost of 233 million pound as a
result of adoption of IFRS from 1 January 2019.
 Engineering and other aircraft costs decreased 0.6% despite adverse foreign exchange
effects. This declination has also happened due to the lower contractual price rises
following contract negotiations during 2019.
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Profit and loss account of 2019-20.
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There has been a decline in the Fuel, oil costs and emission charges excluding the exceptional
charges of over hedging 2077 million pound or 64.2% to 1160 million pound in comparison to
the 3237 million pound in the previous year which has reflected the capacity reduction. It has
further been observed that there has been a decline in the average commodity fuel prices since
the last year.
Employee cost before exceptional items decreased by 834 million pound or 33 percent to 1695
million pound in prior year. The restructuring and redundancy programme resulted in further pre-
exceptional employee cost savings, along with savings driven by decreased flying schedule
(Kahlawi, 2022).
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Analysis of different strategic actions
Strategic Actions helps in managing to take action which are required to fulfil the long term
goals with help of given time and resources. A proper strategic action plan will be a clear guide
to success and also it will prioritize the goals to make better decisions that will boost the internal
morale. Employees will be cleared about their daily operating task that will enhance the
creditability and transparency. It will help in dealing with long term beneficial products and
innovations. Strategies are also made to study the behaviour of customers, competitors and
market and get a final roadmap of the organisation to maximise the overall profit and strength of
the business (Marabaeva And et.al, 2022).
Details of different analysis of strategic actions are as follows-
Porter's generic strategies - Porter's Generic elaborates how a company can pursue its
competitive advantage across its chosen market scope and explains how firms achieve
competitive advantage. Strategies were explained by Michael Porter in 1980 which can be
applied to any size or form of business. It was formed by three strategies that is cost leadership,
differentiation and focus which provides direction to the company. Porter's Generic strategies of
British Airlines is done by following manner-
 Cost Leadership strategy- It is one of the easiest technique regarding the minimisation
of the company cost. The cost leadership strategy mainly comprises of the strategy to
acquire the market share with the help of low costs in order to attract the customers who
are cost conscious as well as cost restricted. Hence under this approach, the focus of the
organisation is to become the organisation with the lowest cost of production. British
Airways does not follow this strategy so, it can provide services and sell products that
have unique features for which customers are willing to attract and pay more. This
aspect is very important for the British Airways to go through the competitive strategy of
the airline industry (Memarzadeh Kiani, Imani and Karami, 2022).
 Differentiation strategy - Under differentiation strategy, company focuses on the broad
market that involves the creation of a product or services that is perceived throughout its
industry as unique. It takes place when there is a focus is required to the unique product
or service in the market. It is mainly related to the external business environment to meet
and satisfy the needs of customers. The business unit may then charge a premium for its
products. This can be linked with brand, image, design, service and technology. This
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strategy requires good research and ability, development, innovation to deliver high
quality of services. It is important to be flexible and to be able to adapt changes quickly
in a changing market. British Airway uses this because it helps the company to grow
through new business creation which leads to the expansion and removes the loop holes
of the company (Nantavisit and Wongsa, 2022).
 Focus Strategy– Under this third generic strategy, it is based on following a narrow
segment which makes the strategy different from the others within that segment attempts
to achieve either a cost advantage or differentiation. It is a combination of cost
leadership and differentiation. This focuses on concentrating on small segment on
various bases like geographical territory and customer segment. It can be performed
either by differentiation or low cost approach. It also develops a specialized product to
fill the need and requirement of customers. The negative aspect of focus strategy is that
the target segments can disappear or shrink over a time for some reason.
By analysing the above strategies Differentiation is best strategy for British Airways because it
will attract more customers for competitive advantage. By applying the differentiation
strategy,the company can give more value to the uniqueness of its services. For example, one of
the company's strategic objectives is to increase investment in research and development(R&D)
to enhance its services that satisfy customer's requirement and demand (Oyewo, 2022).
Ansoff Matrix
The Ansoff Matrix has been developed by renowned mathematician Ignor Ansoff. It is a
strategic tool which has four quadrants namely market penetration, market development, product
development and diversification that will be used to analyse the risk connected with each
strategy. It is a way used by British Airways and many other companies to plan their schemes
for growth and helps to analyse the risks associated with each one. It is also called as Corporate
Ansoff Matrix. The four quadrants of Ansoff Matrix while considering the products and services
of British Airways have been explained below in details (Roberts and et.al., 2022)-
 Market Penetration- Market penetration can be referred to the act wherein the
organisation uses its existing products in the existing market while focussing upon the
sales of the product. The British Airways can excel through the strategy of market
penetration by acquisition of competitor firm in the market in order to conquer the market
share as well as the customers of the organisation within the market. At present, stiff
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competition is being faced by British Airways and hence the organisation is focussing
upon the attraction of customers and further retaining them by offering several discounts
and offers during the ticket booking as well as offering tickets at reasonable prices.
 Product Development- Product development is referred to the act wherein an
organisation introduces a new product in the already existing market. The new product is
introduced in order to cater the needs of the existing market. The product development
can take place with the help of strategy formulation and further investing in the research
and development sector so that the new products can be developed. British Airways can
adopt product development by adding several new features in the existing market.
 Diversification- Diversification is when the firm tends to enter in a new market along
with a new product. It is considered as the strategy which involves high level of risk.
There are basically two types of diversification strategies like related diversification and
unrelated diversification. This strategy can be used by the organisation when it deals with
the new products in the new market as well.
In case of British Airways, Market development is suitable because company is already well
established in the airline market. The company only needs to bring innovative ways to attract
their existing customers through changing features of its services. British Airways should focus
on Asian countries for its development. It can also take the help of the existing customer's
feedback for improving their services as well as by reducing the prices with efficient services can
create a positive image of the British Airways. Mainly company is not focusing on the
advancement aspect. It should also adopt new changes in the technology with lesser restrictions
(Tan and Yin, 2022).
Critical Reflection
I have analysed the report which suggests several strategic decisions that are to be taken by the
organisation in order to enhance the products and services. In context to my research, British
airways has been the largest international airline in the United Kingdom. As per my findings, the
present strategies of British airways is to focus upon the management of the cost, modernisation
of the aircraft's as well as enhancement in the level of the satisfaction of the customers. I have
analysed the market strategies of British Airways with the help of Ansoff matrix which focuses
upon the four strategies. I recommand the organisation to use market development so that it can
reach to more customers globally.
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Market development is suitable because company is doing well in the airline market. The
company is required to take innovative ways to attract their existing customers through changing
its services pattern. British Airways should focus on different countries for its development. It
can also take the help of the existing customer's feedback for improving their services as well as
by reducing the prices with efficient services can create a positive image of the British Airways.
Mainly company is not focusing on the advancement aspect. It should also adopt new changes in
the technology with lesser restrictions. I analysed from the above information that it is necessary
to focus on the external factors of the British Airways with the proper strategic which helps in
assessment of internal procedure related to strategic goals. It justifies the different strategic
decision taken by the company to enhance the company's plan, goals and improvement in their
products and services (Sohrabi and et.al., 2022). With the help of Ansoff Matrix, British Airways
can plan their schemes for growth and analyse the risks associated with each factor. I concluded
that differentiation is best strategy for British Airways because it will attract and bring more
people for competitive advantage which will create more opportunities. By applying the
differentiation strategy,the company can make the services more uniqueness . For example, one
of the company's strategic objectives is to enhance its services that can be done by taking
feedback from the existing customers to enhance its services and to know the loop holes that
satisfy customer's need and demand.
CONCLUSION
It can be concluded from the report that strategic audit is a important aspect of the business
concern. As strategic audit helps to determine whether the company is meeting its objectives in a
proper manner which will assist the company to find out the directions to move forward towards
achieving its goals. This report has examined the micro and macro environmental analysis using
Porter's generic and Ansoff matrix to analyse the risk which is involved in the particular
direction and grant an access to capital which is required to get the things done. Moreover, it
identifies the external factors which will help in designing the strategies for British Airways for
better performance.
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