British Airways and Porter Five forces framework.

Introduction

British Airways (BA) is one of the well known airlines in UK and it is one of the biggest airlines which operates more than 550 destinations worldwide. British Airways was established on 25th August 1919. British airways finished 91yrs in airline industry. Privatized in 1987, it has continued to increase in growth in spite of stiff competition (Connell, Williamson 2011, 115). British airways not even provide the services on domestic and international level but it also provide the service of charter for ancillary and freight (British airways 2010). There are round about 57000 employees who work in the British airline till date (Data monitor 2010).

British airways carries  approimately more than 33million passengers, and earning billions in revenue. Based in the principal business places of London, the company has significant presence at Heathrow, Gatwick and London City. The company holds a very strong customer base as it is operating across the globe. British Airways is divided in to two groups one is British Airways Plc and other one as British Airways holidays limited.

Company Overview (British Airways)

British Airways Plc (BA) is the UK’s largest international airline industry. BA is affianced in the operation of international and domestic with the service of carriage, customer traveling and the ancillary services (Data monitor, 2008). British airways fly to more than 300 destinations and  more than 33 million passengers with the earning over £8.7billion in revenue in 2007/08 (British Airways, 2008). British airways (BA) has been nominated as the world’s first airline to Participate in a scheme to reduce greenhouse gas emissions (2002) and to allow passengers to print online boarding passes (2004) (British Airways, 2008). As BA announces its aim of becoming the ‘world’s most responsible airline’ in the latest annual report which indicates that great importance lies in developing guiding principles and careful strategic and critical direction to allow the achievement of this goal.

British Airways (BA) main base is at London Heathrow Airport in west London, England. British airways also have a major presence at Gatwick Airport. It also has a base at London City Airport (LCY), with a major presence from its subsidiary BA City Flyer, which is the largest operator from LCY. BA had previously operated a well known hub at Manchester Airport. Manchester operations and international services outside of London were sold due to a lack of profitability. Passengers wish to travel internationally with BA from regional UK destinations. The common of BA services operate from Terminal 5, with the exemption of some short-haul flights at Terminal 1 and some long-haul flights at Terminal 3. British Airways serves in 150 destinations which include six domestic.

Current Strategies (British Airways)

This report is designed with the consideration of BA’s current strategies (British Airways, 2008):

1. To upgrade customer services via the introduction of text and mobile services for business class customers.
2. To bring up to date aircraft fleet and offer new services to the customers.
3. To manage the cost base issues.
4. To increase the corporate accountability through environmental performance and partnerships.

Current Position in the Market (British Airways)

British airway is on a healthy position as compare to its other competitors. It is one of the premium service providers in the market. British airways joined hands with many other leading airlines and already segmented its market. British airways are the largest international flight operators, international and domestic freight and charter service provider. British airways established as one of the greatest player in the airline industry and it has highest operational strength. 

Porter Five forces framework (British Airways)

Using the Porter Five Forces tool it analyzes the current strategic position of British Airways.

                        

Source: (Principles of Marketing, Kotler)

Threat due to new entrants in the market: All the UK airline industries are highly deregulated sector and there are least direct entry limitations for competitors. However, British Airways face low threat factor due to following reasons which are as mention below:

1) Large capital requirements for new entrants in airline industry because with low capital the competitor cannot enter 

2) Saturated the long haul market.

3) Saturation of the domestic market by other competitors such as Easy Jet and Ryan air.

4) Governance of British Airline of major routes and hubs gives the airline high power.

5) Many of competitors are failed to enter such as Zoom and XL in 2008 and they afraid by not being potential entrants.

Threat of substitute products: The threat for British airway related to long-haul market is Low. But in domestic market the threat exists in UK’s market. Customer main requirement is the cheaper fares which large number of the airlines offers to them. And for those customers brand name is not much important as compare to customer demands because it saves their money which is the positive point for them. 

Power of Buyers: Buyers have the high power at the regional level. Maximum customer attracts due to the low cost which make the buyer power high. Customers have many alternative cheap options to choose and there are approximately eight other airlines with low cost fares which are currently operating in UK. Due to the increase in technology there is option of internet through which customers can easily access the quick price comparison of fares. In UK near to 46 % of customers book their tickets online. As compare to long haul service the buyer have low power due to less product and price differentiation. 

Bargaining power of suppliers: British Airways acquire high power of suppliers. The airline faces the risks from 25 suppliers. Distraction of suppliers operations would weaken the British airways all operations because without fulfilling of the demands the airline cannot proceed further and it affects the customers. British Airways is working with lot of suppliers for example supplier of Airbus and Boeing (British Airways 2010, 31). British Airways employees acquire tough bargaining power through their unions and this make the profits for the organization.

Competitive rivalry: The main advantage to British airway is that is offer the package for both services which are long and short haul. The difference of price with its competitor is not as much for long haul flights. But the competition still lies in the form of fragmented short haul market with furious competitive tactics used by competitors and with increase consolidation between British airways competitors.