British Airways (BA) is the flag carrier airline of the United Kingdom and its largest airline

based on fleet size, international flights and international destinations. When measured by
passengers carried it is second-largest, behind easy Jet. The airline is based in Waterside near its
main hub at London Heathrow Airport.
A British Airways Board was established by the United Kingdom government in 1972 to manage
the two nationalized airline corporations, British Overseas Airways Corporation and British
European Airways, and two smaller, regional airlines, Cambrian Airways, from Cardiff, and
Northeast Airlines, from Newcastle upon Tyne. On 31 March 1974, all four companies were
merged to form British Airways. After almost 13 years as a state company, British Airways was
privatized in February 1987 as part of a wider privatisation plan by the Conservative
government. The carrier soon expanded with the acquisition of British Caledonian in 1987,
followed by Dan-Air in 1992 and British Midland International in 2012.
British Airways is a founding member of the One world airline alliance, along with American
Airlines, Cathay Pacific, Qantas, and the now defunct Canadian Airlines. The alliance has since
grown to become the third-largest, after Sky Team and Star Alliance. British Airways merged
with Iberia on 21 January 2011, formally creating the International Airlines Group (IAG), the
world's third-largest airline group in terms of annual revenue and the second-largest in Europe.
IAG is listed on the London Stock Exchange and in the FTSE 100 Index.
A long-time Boeing customer, British Airways ordered 59 Airbus A320 family aircraft in August
1998. In 2007, it purchased 12 Airbus A380s and 24 Boeing 787 Dreamliners, marking the start
of its long-haul fleet replacement. The centerpiece of the airline's long-haul fleet is the Boeing
747-400; with 47 examples in the fleet, British Airways is the largest operator of this type in the
world.

SWOT Analysis
Conducting a SWOT analysis of your business is actually kind of fun. It wont take much time,
and doing it forces you to think about your business in a whole new way.
The point of a SWOT analysis is to help you develop a strong business strategy by making sure
youve considered all of your businesss strengths and weaknesses, as well as the opportunities
and threats it faces in the marketplace.
As you might have guessed from that last sentence, S.W.O.T. is an acronym that stands for
Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organized list of
your businesss greatest strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal to the company (think: reputation, patents, location). You
can change them over time but not without some work. Opportunities and threats are external

(think: suppliers, competitors, prices)they are out there in the market, happening whether you
like it or not. You cant change them.
SWOT analysis of BA

British Airways

Parent Company

International Airlines Group

Category

International

Sector

Airlines

Tagline/ Slogan

To fly. To serve. The world's favourite airline; Upgrade to British

Airways

USP

Premium Airline, Upper Middle Class, Middle Class

STP

Segment

Passengers Preferring Comfort / reliability

Target Group

Corporates / Upper Middle Class / Middle Class

Positioning

Premium

SWOT

1. Strong Backing of UK Govt

2. Strong Hub in UK
3. Strong brand presence and excellent global presence
4. It has a fleet size of over 260 aircrafts
Strength

5. It has nearly 150 international destinations across 6 continents

1. Severe Competition from Cash Rich Middle Eastern Airlines

Weakness

2. Intense competition means limited market share

1. The Heathrow Terminal is a major hub across the world and it

has a major presence here
Opportunity

2.Expanding its global operations

Threats

1. Rising Fuel Costs

2. Rising Labour Costs
3. Increasing Competition in European Market

Competition

Competitors

1.Virgin Airlines
2.British Midland
3.Lufthansa
4.Emirates
5.Jet Airways

PESTLE Analysis
PESTLE analysis, which is sometimes referred as PEST analysis, is a concept in marketing
principles. Moreover, this concept is used as a tool by companies to track the environment
theyre operating in or are planning to launch a new project/product/service etc.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S
for Social, T for Technological, L for Legal and E for Environmental. It gives a birds eye view
of the whole environment from many different angles that one wants to check and keep a track of
while contemplating on a certain idea/plan.
The framework has undergone certain alterations, as gurus of Marketing have added certain
things like an E for Ethics to instill the element of demographics while utilizing the framework
while researching the market.
It may be so, that the importance of each of the factors may be different to different kinds of
industries, but it is imperative to any strategy a company wants to develop that they conduct the
PESTLE analysis as it forms a much more comprehensive version of the SWOT analysis.
It is very critical for one to understand the complete depth of each of the letters of the PESTLE.
It is as below in perspective of British Airways:
POLITICAL
The government has control where airlines can fly, and aspects of their product, planning and
pricing policies. Even though the regulations are heavy, compliance is essential if British Airlines
wants to continue operations
Increased security due to past terrorist threats, airline companies have to pay more for security
check and insurance, which lead to the costs of airline companies increase. Sufficient security
measures should be in place to ensure consumer confidence and competitive advantage is
maintained.
National and international government affect airline industry by regulation and policies. British
Airways flying both nationally and internationally airplanes have to abide by certain regulations.
British Airlines has to follow legislations and regulations, which include protection of the
environment, pollution, H & S regulations, and security legislation.The increase of VAT at 20%
in January 2011 will affect British Airlines and its shareholders.
ECONOMIC
British Airlines has reacted to the actual economic situation by introducing low cost flying to fill
empty seats.
British Airlines is affected by the recession as the number of travellers is in trend of decreasing.

The cost of fuel is a risk for British Airlines because when the cost of oil raises this will be
replicated to tickets and if the price raises less people use planes.
Terrorist threat during the past few years makes people reconsider travelling by plane.
Global economic crisis: World growth is projected to just over 2 percent in 2009. Pound weakens
especially against the Euro. Possible reduction in the amount of business travel as companies are
cutting costs and using alternative means of communication such as teleconferencing. British
Airlines is vulnerable as a UK operating airline to a poor exchange rate.
Oil prices declined by more than 50 % since their peak retreating to 2007 levels. Decline in fuel
price also means strengthening of the dollar. Fluctuations in oil prices and exchange rates will
directly affect British Airlines cost base. UK consumer spending saw its sharpest decline for 13
years between July and September 2008.
SOCIAL
The UK has an aging population. Potential opportunities for growth as older generations have
more time to spend on leisure activities such as international travel.
Increasing unemployment in UK thus also increases bargaining power as an employer.
The social and cultural influences on business vary from country to country. British Airlines
serves a wide range of global destinations, carrying passengers from many nationality, religion,
language, etc. If it has no clear idea of cultural issues of destination countries, this could affect
badly the business. Example, no meal that has pork can be served in fight to Muslim countries.
Increase in airline crashes might result in people being reluctant to casually travel by place due to
fear of death.
LEGAL
Restriction on mergers will have an impact on British Airliness proposed alliance with American
Airlines.
Open Skies Agreement provides opportunity for British Airlines and its competitors to freely
transport aircraft between the EU and US.
The major legal factor affecting British Airlines is the power of unions. British Airlines has
severely suffered many industrial actions especially in the past years and is aware of the
implications that the trade unions can cause. Take for example Cabin Crew strikes. Good
employee relations are essential if British Airlines wants to avoid industrial action and
interrupted operations.
The events of terrorist attacks have caused the introduction of new security regulations from the
Europe and US that came into effect in summer 2006 and fall in customer travelling confidence.

Legal regulations on employee rights and customer rights have also to be followed. British
Airlines has to follow new regulations from the Europe and US to provide details on passenger
such as the location they are going to stay on the first night of their visit. British Airlines has
reacted to it by collecting required information on the manage my booking section of its
website.
ENVIRONMENTAL
In response to environmental issues, British Airlines current strategy is to minimise the
environmental impacts of their operation. This includes consideration of climate change, air
quality, noise level, waste and recycling. The company has set challenging goals for further
reductions in their carbon emissions, reducing and recycling waste, improve local air quality and
noise pollution. Tighter environmental regulation may increase operational costs each year. 191
aircraft engines were modified on our Boeing 747 and Boeing 777 aircraft to reduce NOx and
improve fuel efficiency. British Airlines has reduced 10.9% in CO2 emission across UK.
British Airlines new aircrafts such as 12 Airbus A380 and 24 Boeing 787 aircraft are
considerably quieter than the aircraft they replaced to reduce noise pollution.
In response to climate change which is the key issue facing British Airlines, the company is
determine in playing a full part reducing global greenhouse gas emission through the adoption of
new technologies and low-carbon fuels. British Airlines has also recycled 35% of waste across
Heathrow and Gatwick.
Limited land and for growing airports which makes expansion difficult at Heathrow as it would
result in a loss in the Londons Green belt area.
Consumers are becoming increasingly green and more aware of the environmental impact of
their actions. Failure to adopt an integrated environmental strategy could lead to a detrimental
effect on the British Airlines reputation and income.
Cancellations of flights and reported loss of baggage by customers would bring up ethical issues
that could have an unfavourable effect on reputation if left unresolved.

TECHNOLOGY
A recent survey revealed that 34% of online consumers plan to use price comparison sites more
in 2009 thus increases consumer awareness and therefore bargaining power.
Online booking services and check-in is becoming increasingly used by the airline industry.
British Airlines must ensure that they remain up to date with these technological advances whilst

avoiding becoming overly reliant, as this may isolate certain consumer markets such as the
elderly who dont feel comfortable using such technology
Technology is vital for competitive advantage and the key issue will be the extent to which
technological advancements can offset upward pressures on price and costs. British Airlines has
invested a huge amount of money in improving it technology. With the in-flight internet service,
British Airlines has put in place internet ticket booking system in order to reduce costs and
become more competitive. Online sales are regarded highly important by British Airlines. It has
placed considerable faith in its website presence to boost online-sales which have reduced
customer traffic vial British Airlines call centers.
E-Tickets have become the standard ticket format used by British Airlines, making flight more
straightforward, flexible and secure.
There are also security check technologies. British Airlines is focused on improving its customer
service in line with modern technology and offer wireless LAN systems and communicates
through modern SMS texting but a significant long-term threat is the effect of videoconferencing on the demand for air transport and they may have to accept telecommunications
companies as big competitors for their business.
Terminal 5 has transformed their operational performance and customer service. In their
2008/2009 report, it is starts that British Airlines has exceeded punctuality and baggage targets
across the network which has achieve customer satisfaction scores.

FIVE FORCES Analysis

Porter identified five factors that act together to determine the nature of competition within an
industry. These are the:

Threat of new entrants to a market

Bargaining power of suppliers

Bargaining power of customers (buyers)

Threat of substitute products

Degree of competitive rivalry

Threat of New Entrants

Low entry due to least profitability
Customer or supply loyalty
Access to supply or distribution channels
Expected retaliation
Experience
British Airlines constitutes barriers to entry to new entrants in a sense that: British Airlines has a
dominant position which means that it will be difficult for a new entrant to compete with them on
a global level from the start since British Airways has got more terminals than other airlines due
to the priority given to historic rights of existing users. However as barriers of entry are
becoming non-existent, new entrants are appearing in the short-haul and these low-cost airlines,
such as Easy Jet have steadily chipped away at British Airlines European dominance. However,
a lack of take-off and landing slots makes it difficult for new carriers to find suitable airports.

Threat of substitutes
The threat is very high due to the economic situation as customers are very price sensitive.
Customers are switching to alternatives such as train, cars and shipping. For example, there is
Iceland train from London to Germany via the Netherlands, Eurostar to Paris and Brussels,
coaches, ferry and other low-cost carriers for short-haul.
The company faces stiff competition from the low-cost carriers (LCC), which offer strong
discounting. In particular, cash-rich rival Ryanair, for example, and its growing market share
may force British Airlines out of the short-haul leisure market.
Open Skies, is the new airline started and flies from Paris and Amsterdam to New York is the
subsidiary of British airways British Airways World Cargo, is also subsidiary of the British
Airlines ant it is the world's twelfth-largest cargo airline based on total freight ton-kilometers
flown. British Airlines City Flyer is a subsidiary with Avro RJ aircraft in Edinburgh, but they
operating mainly from London City Airport.
As a result of the high levels of competition, the existence of many substitutes, forces airlines
traditionally being perceived as, world class-high price, to charge low prices for their services. It
follows that profit margins are lowered, within the industry.
This can be derived from the average of the last 5 years average of net profit margin just -0.722,
apparently implying that the profits are heavy lowered because of the substitution effect in
Europe.
Bargaining power of suppliers
British Airlines has two suppliers of aircrafts and suppliers in fuel and in-flight services.
British Airlines is in the business for long and has created good relationship with suppliers.
British Airlines is currently examining a supplier diversity strategy to meet the future needs of
the business. With diversity of suppliers, British Airlines will stop suppliers power in controlling
the prices. Fuel companies have high supplier power. As started in PESTEL analysis British
Airliness price depend on fluctuations in oil prices. Without aviation fuel, British Airlines will
not make profit
Before the Heathrow airport British Airways buy accessories and equipment slots from other
airlines companies including United Airlines, Brussels Airlines, GB Airways and Swiss
International Air Lines, and now they have their owns about 40% of slots at Heathrow.

Bargaining power of buyers

British Airways offers perfect services for passengers travelling in the premium cabins and
passengers with status. Alliance industry has a lot of competition in the airline sector, so the price
of the tickets changes day by day to attract the more customers. The customers of the airlines are
mostly business or tourists. British Airlines aim is countered by foreign carriers such as Emirates,
who fly direct from UK provincial airports to Dubai, Abu Dhabi is being successful.
Intensity of Rivalry
In the airline industry the oversupply of flights, makes it hard to compete with the rivals.
Therefore, because of the oversupply, companies go for massive price cuts in order to cover their
costs by the big volume of sales. But the trade-off for airline is the overcapacities that always
have to deal with by avoiding occurring. Since, if over capacity occurs companies may suffer to
break even, and is usually the case for the airline industry.
British Airways is constantly adjusting its price range of flights, in an attempt to overcome
overcapacity issues that have already been proven a barrier for breaking even for the company.
As the study of the industry competition arising from the rivalries among existing firms in the
first force. In the global alliance industry British airways provide Boeing and cargo services and
they have competitors like Lufthansa airlines, Swiss airways, Virgin Atlanta, Delta, FedEx, and
DHL. At same cost British Airlines is providing the more quality services than the other airlines.
British Airlines operates in two different markets and therefore faces competition in both short
and long haul. The competition between airline companies is intense as in recent years, airline
companies have been suffering from losing customers. The emergence of low cost airlines such
Easy jet and Ryan air makes the competition higher in the short-haul travel as their business
model is based upon offering low fares through outstanding cost management. They use smaller
airports, not allocating seats, making passengers pay for refreshments and not issuing tickets. In
long-haul the competition is even higher as it comes from larges airlines that offer if not the
same, but similar service or more.

Value-Chain Analysis
Value chain analysis is undertaken when a systematic approach is sustained in the development
of competitive advantage (Johnson et al. 2008)

Primary Activities.
Primary activities within value-chain analysis are the ones that directly affect the business within
short period of time and their affect is easy to monitor. They are inbound logistics, operations,
operations, outbound logistics, marketing and sales, and post-sales services.
Inbound logistics. Goods received from company suppliers are referred to as inbound logistics.
Competitive advantage is achieved in inbound logistics stage of the business by BA through
establishing on-going relationships with suppliers, sophisticated system for stock control and
professional training that has been accredited by UK City and Guilds (BA Press Office, 2008)

Operations. Generally, operations stage of the business involves preparing goods and services to
be sold to customers. BA has a range of competitive advantages in operations part of the business
through offering its customers increased security for their luggage, offering quick check-in
services and also offering some services such as ticket bookings and booking of other services
online.
Outbound logistics involves sending ready products to customers for consumption. Also,
outbound logistics mainly relate to manufacturing companies, services companies can also gain
competitive advantage in delivering their services to their customers that can be considered as an
element of outbound logistics.BA gain their competitive advantage in that aspect through
excellent customer service and offering their services through wide range of airports around the
world.
Marketing and sales are considered to be one of the main grounds for gaining competitive
advantage and usually is utilized by many companies fully. Competitive edge gained in
marketing and sales by BA involve marketing activities not only to customers, but also to all
stakeholders of the company. Also, BA senior management large amount of budget for marketing
and sales initiatives for the company.
Post-sale services involve installation of the product, handling complaints regarding the
products and services etc. BA recognize post-sale services as an important ground for achieving
competitive advantage in the marketplace, therefore have initiated their loyalty club cards, and
also maintain communication with their customers through a range of channels.

Support activities
Activities that are needed to support the main business activities within value chain-analysis are
referred to as support activities. Their impact on the business may not be direct, nevertheless
businesses cannot afford to dismiss support activities as unimportant regardless the type of the
business. The elements of support activities within value-chain analysis are procurement,
technology development, human resources management, and firm infrastructure.
Procurement. The procurement function of the business relates to the purchases of all goods and
services that is required for business operations. BA gains competitive advantage in its
procurement function through its size and benefits greatly through economies of scale.
Technology development. Technology is another factor that has been widely acknowledged as
an important source of competitive advantage for companies, because it allows companies to
reduce their costs and improve the efficiency of operations. BA has also recognized the

importance of technological innovations and periodically invests in technological innovations for

greater customer satisfaction. The installation of individual LCD screens on the planes can be
used as an example for this argument.
Human Resources Management. The importance of employees for gaining competitive
advantage is immense, especially in services companies. BA view their employees as an efficient
source for gaining competitive advantage and therefore regularly devise programs and initiatives
to increase employee job satisfaction levels and increase their efficiency. For instance, Speak
Up! initiative has been devised in order to obtain employee perspective on the efficiency of
business operations and increasing employee job satisfaction levels. (2007/08 Annual Report and
Accounts)
Firm infrastructure is another important support activity for the business and includes strategic
planning, management information system and financial planning. Competitive advantage in
terms of firm infrastructure is gained by BA through its efficient hierarchy structure and vast
amount of information, knowledge and expertise that the company possess.

BCG Matrix
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray
firms brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis)
and speed of market growth (vertical axis) axis.
Growth-share matrix is a business tool, which uses relative market share and industry growth
rate factors to evaluate the potential of business brand portfolio and suggest further investment
strategies.
Understanding the tool
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and its potential. It classifies business portfolio into four
categories based on industry attractiveness (growth rate of that industry) and competitive
position (relative market share). These two dimensions reveal likely profitability of the business
portfolio in terms of cash needed to support that unit and cash generated by it. The general
purpose of the analysis is to help understand, which brands the firm should invest in and which
ones should be divested.

Relative market share. One of the dimensions used to evaluate business portfolio is relative
market share. Higher corporates market share results in higher cash returns. This is because a
firm that produces more, benefits from higher economies of scale and experience curve, which
results in higher profits. Nonetheless, it is worth to note that some firms may experience the
same benefits with lower production outputs and lower market share.
Market growth rate. High market growth rate means higher earnings and sometimes profits but
it also consumes lots of cash, which is used as investment to stimulate further growth. Therefore,
business units that operate in rapid growth industries are cash users and are worth investing in
only when they are expected to grow or maintain market share in the future.
There are four quadrants into which firms brands are classified:
Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing
market. In general, they are not worth investing in because they generate low or negative cash
returns. But this is not always the truth. Some dogs may be profitable for long period of time,
they may provide synergies for other brands or SBUs or simple act as a defense to counter
competitors moves. Therefore, it is always important to perform deeper analysis of each brand or
SBU to make sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation
Cash cows. Cash cows are the most profitable brands and should be milked to provide as
much cash as possible. The cash gained from cows should be invested into stars to support

their further growth. According to growth-share matrix, corporates should not invest into cash
cows to induce growth but only to support them so they can maintain their current market share.
Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are
capable of innovating new products or processes, which may become new stars. If there would
be no support for cash cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment
Stars. Stars operate in high growth industries and maintain high market share. Stars are both
cash generators and cash users. They are the primary units in which the company should invest
its money, because stars are expected to become cash cows and generate positive cash flows. Yet,
not all stars become cash flows. This is especially true in rapidly changing industries, where new
innovative products can soon be outcompeted by new technological advancements, so a star
instead of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market
development, product development
Question marks. Question marks are the brands that require much closer consideration. They
hold low market share in fast growing markets consuming large amount of cash and incurring
losses. It has potential to gain market share and become a star, which would later become cash
cow. Question marks do not always succeed and even after large amount of investments they
struggle to gain market share and eventually become dogs. Therefore, they require very close
consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product development, divestiture
British Airways has had a great market share and low growth rate over the past few years. They
did not make any major investments like increasing their fleet size or expanding their
destinations which made them a cash cow. But recently, BA placed more focus on their growth
strategies by placing orders for new aircrafts, expanding geographical market. Another major
decision was the merger with Iberia which will be finalized by the end of 2010. This will make
the companys revenue one of the highest in the Aviation Industry. By doing so, BA will not only
generate large amounts of cash because of their strong relative market share, but also consume
large amounts of cash because of their high growth rate; therefore the cash in each direction
approximately nets out. It shows that the company is slowly in the process of becoming a star.
REFERENCES
http://www.wikipidia.com
http://www.mbaskool.com
http://articles.bplans.com/business/how-to-perform-swot-analysis/116#ixzz3A3PMzm00

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