In order to profitably satisfy customers needs, the company first must understand its exterior and internal situation, including the customer, the market environment and the firm's own capabilities. Furthermore, it requires to forecast developments in the vibrant environment where it works.
In 2010 the average insert factor for BA was 78. 5% that is greater than industry average.
Company: Within an industry which is on the verge of its drop stage where no development is visible. It's very problematic for any airline to survive without stronghold and sustainable competitive benefits which can give them economies of range that they can leverage. British Airways offers some major competitive advantages over the complete airline industry: Brand Image, Partnerships & Alliances, Financial size and balance, Terminal 5. BA's strategy is highly customer target and constant service development.
With these competitive advantages they differentiated their services and different pricing strategy for each segment-first category, business, and market. As a premium airline BA's customer segmented and BA's marketing blend is somewhat different for every segments.
Competitors: The markets in which BA operate are hyper competitive. They face immediate competition from other airlines on the routes, as well as from indirect flights, charter services and from other modes of carry. Some rivals have cost set ups that are less than BA or have other competitive advantages such to be supported by government intervention.
BA's direct rivals are those who operate similar services and lie within the same tactical group. Your competition may very well be most intense through this group because they are seeking similar strategies. Lufthansa's five major competitive advantages are Strong financial performance of specific sections, Favourable cost composition, Innovative services, Regarded as the most punctual airline and their Strategic Alliances, A powerful balanced network. Similarly, KLM got two coordinated hubs at expanding airports, Sky Team alliance Air, Financial advantages.
BA encounters competition from a little variety of serious contenders in the UK with the primary contenders being Virgin Atlantic, and United Airlines in the Superstar Alliance.
Although they do not lie within the same strategic group as BA the advent of low-cost air travel has changed the face of the airline industry. Airlines such as Ryan air and Easy Jet have established themselves among the leading carriers in European countries, whilst the more established long-haul carriers such as BA have struggled to keep up using their counterparts' progress rates.
New planes, new routes, additional flights and management changes are factors that impinge an enterprise. Such changes created by a competition need regular monitoring in order for BA to look at its current position and develop future strategies.
PESTLE Analysis:
Political: Legislation of the airline industry is increasing and includes many of BA's activities, including road flying rights, airport terminal slot access, security and environmental handles. The ability to both adhere to and influence any changes in these polices is main factor to keep up BA's functional and financial performance. Restriction on mergers will have an impact on BA's proposed alliance with American Airlines.
Environmental: Government plans to significantly increase environmental taxes with the intro of a per airline flight tax, the European Union Emissions Trading Design and the potential for other environmental fees may have a detrimental impact after demand for air travel and/or reduce the profit margin per solution. These taxes may also benefit BA's rivals by minimizing the comparative cost of doing business from other hubs.
Economical: Deterioration in global market will have an impact in BA's financial position. Higher inflation rate in UK will certainly reduce holiday travels. Businesses are no longer prepared to pay high quality price because of their personnel to make short trips significantly less than three time.
Social: THE UNITED KINGDOM has an aging society. Potential opportunities for development as more aged generations have significantly more time to invest on leisure activities such as international travel.
Growing unemployment rate and federal government cuts will increase bargain power as an employer.
Understanding culture can be an important issue for every business. United kingdom people are highly individualistic, doubt avoidance and some practice of masculinity. So a diverse workforce is essential for BA. In global current market is better in a position to understand the demographics of the marketplace it serves which is thus better prepared to thrive for the reason that marketplace when compared to a company which has a more limited selection of staff demographics.
Technological: Technology is essential for competitive advantages, and is a significant drivers of globalization. A key issue would be the level to which technological advancements can offset upward pressures on prices and costs. BA is focused on increasing its customer service in line with modern technology and has opened up its first drive-through, offer Cordless LAN systems and talk through modern SMS. A substantial long-term danger is the result of video-conferencing on the demand for air travel and they may have to accept.
Legal: A significant legal factor influencing BA is the energy of trade Unions. BA has endured many strike activities in recent years and is aware of the implications that the trade unions can cause.
Porter's Five Causes:
The five forces are environmental makes that effect on a company's capability to remain competitive in a given market. The goal of five - pushes research is to identify the main competitive stresses in market and evaluate how strong and important each one is
FORCES
STRENGTH
Competitive rivalry: cost competition is very high
BA caters for both long hauls, medium and brief haul plane tickets. Within long term there's a little differentiation between BA and their opponents, in terms of value proposition.
The brief haul market is more fragmented numerous small players( Ryan air, Easy jet )
In Medium haul Competitive rivalry is fierce; Virgin is strongly opposing BA and AA suggested merger.
Consolidation of competition has increased competition.
HIGH
Power of suppliers:
Two plane manufactures-Boeing, Airbus. there is absolutely no signal they start flight service
BA constrained by sole provider of fuel to the air-port.
BA is highly unionised and the employees use collective bargaining through trade unions in order to increase their bargaining electric power.
HIGH
Power of Clients: as market is shrinking customers vitality may increase
Low focus of clients to suppliers means they may have little bargain vitality.
Increased internet consumption has amplified consciousness and connection of customers.
MEDIUM
Threat of new Entrants:
Significant barrier to entry such as competitive environment, high regulatory requirements and high capital cost requirements.
Barriers to leave are set up which deters new entrants.
If financing is cheap there is a possibility of new entrants
LOW
Threat of substitutes:
There are few direct substitutes:
1. short haul plane tickets: train providers the Euro legend or ferry
2. Long term flights: no distinctive substitutes.
LOW
Based on the PESTEL Evaluation and the Porter's five forces analysis it is visible that flight industry is hyper competitive. Customers may be powerful in this stage zero total game appears. Market share is vital providing leverage against suppliers in conditions of cost. Mergers and acquisition is typical. Though Uk Airways is a dominating player in this industry they should create significant turning cost through their central competencies and VP to stay competitive. Compromise with cabin staff is necessary to stop service disruption.
BA must have strategic fit to compete with different strategic organizations. As air travel industry is facing stiff competition BA can appeal to customer through differentiated service and staff production and morale.
