Marketing Audit/Plan

British Airways
1/7/2011

Strategic Marketing Management

Submitted to: John Heather Umar Hanif Mughal

Word Count 4,250

Contents
1.0 Introduction.. 3 2.0 Situation Analysis 3 3.0 Macro Environment.. 4 4.0 Micro Environment... 5 5.0 Micro Internal Analysis6 5.1 Customer Segmentation6 5.2 Competitor Analysis..7 5.3 Brand.8 5.3.1 Brand Image.8 5.3.2 Product..9 5.4 Distribution Channel10 6.0 Internal Analysis10 7.0 Resource Analysis..11 8.0 Marketing Plan...12 8.1 Generic Strategy.12 8.2 GAP Analysis..............................................13 8.3 Growth Strategy..14 8.4 Competitor Strategy15

8.4.1 Defense Strategy15 8.4.2 Attack Strategy...15 8.5 Positioning Strategy16 9.0 Implementation Plan.17 10.0 Budget & Control.20 11.0 References & Appendices..21

1.0 Introduction British Airways Plc (BA) is the UKs largest international scheduled airline. Alongside scheduled services, BA is engaged in the operation of international and domestic carriage of freight and mail, and the ancillary services. As BA announces its aim of becoming the worlds most responsible airline in the latest annual report (British Airways, 2010), great importance lies in developing guiding principles and careful strategic direction to allow the achievement of this goal. In order to grow BA needs to look at its macro and micro external and internal environment. 2.0 Situation Analysis British Airways is in business with more than three decades and the current strategies they are following is 1. Enhance business class customers experience by introducing text and mobile services. 2. They also want to upgrade their aircraft fleet and provide new services. 3. Cut costs. 4. By making partnerships and through environmental performance, BA also wants to increase corporate social responsibility. (britishairways, 09/10). BA also operates in cargo and other services, but in this marketing plan the focus is on BAs passenger services due to the size of the market and the opportunities BA has in the market (Blackwell publishing, 2011). BA is currently following a differentiation marketing strategy which is proving to be

successful because their profits are increased in 2010 as compared to 2009 (britishairways, 09/10).

3.0 Macro Environment

PESTEL Factor Political

Effect on Industry
1) Deregulation

Implications for BA.

Need to follow rules & regulations if British airways want to carry on its operations. Sufficient security measures should be taken.

2) High security need due to terrorism

threats.

1) Global economic Crisis: 2) Oil Prices

Economi c

Reduce the amount of business travel by methods such as teleconferencing. Increase in oil prices and changes in exchange rates will have an impact on BAs costs.

Social

1) In UK statistics reveal that there are more no of old people in the country compared to adults and children. (see appendix 1) (National statistics online, 2009). 2) Unemployment rate rises to 8 per cent. (see appendix 2) (National Statistics online, 2009).

This is a potential opportunity for British Airways to grow. The reason is old people prefer traveling because they have time as compared to other age groups.

Technological

1) Online reservation systems and other technologies are used by aviation industry such as online booking system.

In order to compete in modern era BA need to adapt with these changes quickly in order to implement these changes and advancements in their company. New Charter (climate change bill) may increase BAs operational costs. These problems can damage the image of BA if not solved.

Environmenta l

1) Government is forcing the airline carriers to control the noise pollution and energy consumption (DFT,2008) 2) Canceled flights and loss or miscarriage of baggage (channel 4, 2008). 1) Price Freezing

Legal

Limitations on mergers will have an effect on BAs alliance with American Airlines.

Conclusions: The analysis concludes that all the factors which are explained above may affect BAs performance. All these factors are taken into consideration when writing a marketing plan.

4.0 Micro External Environment

Competitive Rivalry Factors Long haul Flights Level of Threat Low Implications for BA Little difference in terms of price between BA and its competitors. Short haul market is more competitive than long haul because it has many small low cost airline carriers such as EasyJet. Alliances of competitors with each other have increased competition.

Short Haul Flights

High

Combined Competitors

Medium

Conclusions: In short haul flights competitive rivalry is intense because some low cost airline carriers provide cheap offers but in long haul flights the level of threat is low because the difference in terms of pricing is not so much. Power of Suppliers Factors Two aircraft providers Restriction on fuel supplier Level of Threat Low High Implications for BA High bargaining power BA has been restricted by only one supplier of fuel to the airport.

Conclusions: The situation in this case in difficult for BA. They only have one sole supplier of fuel and BAs prices rely upon the changes in oil prices which is beyond BAs control. However they do have high bargaining power

in terms of aircraft providers. Boeing 787 Dreamliner and airbus A380 are willing to save long term orders. Power of Buyers
Factors High degree of consumer power Internet usage Level of threat Medium Medium Implications for BA Buyers have high buying power Internet use has build up knowledge and synergy among customers

Conclusions: Buyers have high bargaining power because they can complain to any services BA has to offer if they are not satisfied with it. Buyer power is also strong in low cost airline market because consumers want to fly in cheapest prices. As there is more competition in low cost airline market, customer loyalty is very important.

Threat of New Entrants

Factors High capital cost investment Distribution medium Level of threat Low Low Implications for BA There are many barriers to entry for new entrants. Suppliers prefer to supply to well known companies rather than new entrants. New entrants are coming in short haul business such as easy Jet etc.

Short haul flights

High

Conclusions: The threat of new entrant in long haul flights is low because there are many barriers to entry including high capital cost, landing and takeoff slots availability. However threat in short haul flights are medium because in short haul flights there are many new airlines which recently entered the low cost airline market and did well. BA needs to maintain competitive pricing policy for its short haul flights as well.

Threat of Substitutes Factors Short haul flights Level of threat Medium Implications for BA. There are few substitutes in short haul

flights like Eurostar or ferry Long haul flights Low No noticeable substitutes.

Conclusions: The level of threat in substitutes is low in long haul and medium in short haul. In long haul there are no noticeable substitutes but in short haul there are few like Eurostar or Ferry. 5.0 Micro Internal Analysis 5.1 Customer Segmentation and Targeting British Airways is using a differentiated marketing strategy for its customers. It aims at capturing differentiated market by offering them high quality service. It has targeted its customers that are well educated and are willing to pay more for quality service. But BA is facing some extreme competition in short haul flights where its target customers are same as target customers of low cost airline operators such as Ryan Air or Easy Jet. The problem here is that these low cost airline carriers have damaged the dominance of BA in the European market. Furthermore, they also offer cheap ticket pricing and some other innovative processes to capture consumers from BA. But one side effect of these offerings are that in order to get a cheap ticket, customer had to book before three months, but if customers purchases ticket before a week the prices of these low cost airline carriers go to extreme high. Whereas BA offers same price even if you book before a week. However BA follows different targeting strategies according to different classes of the aircraft. Economy Premium Economy Business Class First Class
Gende r Age Marital Status Social economic grade Type of house Regionality

Target Audience Name

Quality Conscious (BC) Quality Conscious (BC) Economy Economy

M F M F

35-40 35-40 25-60 25-60

75% are married 80% are married 60% are married 70% are married

A,B A,B C1,C2,D,E C1,C2,D,E

93% own property 90% own property 55% own housing 40% own housing

All over UK All over UK All over UK All over UK

According to travel classes BA has targeted its customers. British airways know the importance of understanding these target markets and it entertains its customers differently and according to their profile by addressing their expectations and needs. 5.2 Competitor Analysis Due to emergence of low cost airline operators, airline industry is becoming more and more competitive in nature than any other time in the history. Low cost airline carriers such as Easy Jet and Ryan air provide customers with cheap tickets, offering more options to consumers than they ever had imagined. British Airways do business in two strategic groups and competition is different in both these strategic groups. Short-Haul Flights Long-Haul Flights British airways is competing in both strategic groups in which one group provides low cost tickets to customers and compete on cost basis whereas other group provides high quality service and flights to many parts of the world. BA competes on regional, national and on Global basis. In UK, BA is the largest carrier in the market with 15.8% of market share leaving behind the second largest long haul carrier Virgin Atlantic having 9.2% of market share. If long haul licenses will be issued to low cost airline carriers then the situation for BA will worsen.
PRICE

Fig 1. Strategic Groups in Airline Industry (Drummond &Ensor 2004) Region

Scope

Easy Jet Ryan AIR BMI

British Airways Virgin Lufthansa United Airlines Air France

Global

5.3 Brand A brand identity is very important for all organizations. It spreads a powerful message to consumers by its name, form, logo and advertising. British airways core brand value is that they provide Quality flights for all people. 5.3.1 Brand Image: Unlike easy jet and virgin, British Airways is operating only in airline industry and it has not widened its business to other areas of market. Virgin is in other businesses as well such as insurance and financial products .Easy jet has also introduced its cafs, rental cars etc (Guardian, 2009). BAs brand cores are narrow concentrate because they are competing only in airline industry. The branding as a sign of written communication delivers six levels of meaning:

1. 2. 3. 4. 5. 6.

Attributes Comfort, convenience, Satisfaction Benefits Comfortable seat, nice meal, beverages and reliability Values - prestige, safety, sophisticated style Personality Personality of businessman or executive traveler Culture English culture, systemized, trustworthy Consumer More business people, less students

However people from all backgrounds can use the service and BA is a big carrier which flies to all destinations of the world from one of the busiest airports in the world. 5.3.2 Product

British airways is service oriented organization providing flights across destinations in the travel industry. British airways product includes flight services, quality in the flight, and large scale of flights, reliability, safety and business class. It supplies a chief product and differing alternatives to fulfill all consumer needs (Provenmodels, 2009). The company has divided its service into segments of economy, premium economy, business class and first class. According to Kotlers five product levels theory:
1. Core Benefit: Customers buy tickets to fulfill their basic need to fly 2.

3.

4.

5.

from one place to another. Basic Product: BA flies to 58 destinations worldwide and 98 destinations worldwide. Customers book their flight on a scheduled flight to particular destination. Expected Product: In BA customers expect to have assigned seats, good meals and beverages, quality service and on board entertainment. Augmented Product: BA also provides value added services and it has three different executive classes for different people: BLUE, SILVER and GOLD. Silver and Gold members have the facilities like executive lounges at the airport. Potential Product: BA has positioned itself as high standard, high quality airline and its the leader in its category. It not only focuses on core product but on augmented product as well and tries to fulfill different customer needs according to different classes of people. BA is thinking to introduce potential new first class for the future which is different from the present first class in attributes.

5.4 Distribution Channel British airways have extended its contract with Amadeus for three years. The agreement guarantees full content to all Amadeus users worldwide which will assure that travel agents will have access to same range of fares as they would have through BAs website (transnatioanltravel, 2007). The full range of BAs fare will be same as those offered by direct, indirect channel, distribution provider or website. According to John Mornement, who is the head of selling and distribution at BA

By having this agreement in hand, companys distribution costs will lower 6.0 Internal Analysis

S W O T

Internal Strengths: Distinctive label image Partnerships & friendly associations Terminal 5 at Heathrow Immobility

Internal Weakness: Bad relations between employees Dependability & assurance Innovation & change

External Opportunities: New technology like SkyTrax quality system Opponents choke out Opponents failing to provide authenticity. Appearance of recent markets.

External Threats: Environmental sensibility Recession

7.0 Resource Analysis The resources and competencies of an organization is very important to understand because they are helpful in making strategies for an organization (Liono Noto, 2005).They should give company a competitive edge over its

competitors. In order to identify external environment of BA it is important to look at the companys assets and competencies.

Resources
Assets
Tangible Physical BA has control and occupancy of some of the best airports in the world. Intangible BA has potential to extend their ownership. E.g. terminal 5 at Heathrow.

Financial

They are still earning Good recognition of BA good profits but they in UK. Government will are in some loan. BA put give them bail easily. a lot of money into marketing every year. Very experienced workforce from top to down. They have good fleet of aircrafts, machines and technology. Management information system, Eticketing etc Ability to perform efficiently. Processes and setups

Human

Operational

Setup

Good framework that favors decisions.

Competencies
Strategic Working Good character of Willie Walsh in Aer Lingus. BA hired him as a CEO. In BA every department is excellent in their work. Marketing department is working effectively for companys product development, alterations in product and CRM. The workforce is experienced and

Operational

they are efficient in performing activities that need to be happen daily. BA also keeps good ties with agencies.

Capabilities Money Good revenues and profits. Good allocated budget for R&D, Marketing and promotion. Highly experienced and skilled workforce Good airport hubs, priority slots at Heathrow. Leaders in airline industry in UK, good brand image, deep understanding of consumer needs and wants. Good headquarters, more focus on design of the shop, website and attractive advertisements to attract customers.

Men Machines Market

Materials

8.0 Marketing Plan

Objectives A complete analysis of the company has been done and objectives have been created to adjust BAs strengths and opportunities within the market.
To increase market share from current 15.8% to 18% by May 2012. To increase business class market share by 5% by July 2012. To improve employment relations internally and externally by July

2012. 8.1 Generic Strategy Used by British Airways

Porters generic strategy explains some of the basic alternatives companies have when they are going to compete in their target markets. British Airways is currently focusing on differentiating strategy which is appealing to broad scope

British Airways

BA has positioned itself as a differentiated focused and broad scope business and trying to improve business class passengers. As it is following a differentiated strategy, it is very necessary to increase market share of the business class which appeals to a differentiated segment. 8.2 Gap Analysis The main objective of this marketing plan is to increase British Airways market share by 2.2% by July 2012. If no efforts would be done for the marketing mix of BA the company will lose 2% of its market share in between these years. The current market share of BA now is 15.8% which will reduce to 13.8% if no efforts have been done. Therefore, a market share gap has been created between July 2011 to July 2012 which is shown in the following fig.

Market Share

18% 15.8% 13.8% 4.2% GAP

July 11 Time

July 2012

8.3 Growth Strategy Ansoff Matrix is well commonly known as a useful marketing tool that helps the organization to identify its market growth and product strategy (Paul, J. James, H. 2006). The Ansoff matrix conveys that an organization can grow only by marketing its new and present products in new or present markets (tutor2u, 2007). Ansoff Matrix for British Airways
Existing Products New Products

Market Penetration
Existing Markets Strategy Adopted

Product Development
Strategy Adopted

Market Development Diversification

New Markets

The reason why the Market penetration and product development strategies have been chosen is because they are perfectly aligned with the objectives of the marketing plan.

Market Penetration Strategy Progression in employee relations Clarification BA needs to decrease present tension from negative employee and consumer relationship. Upgrade and remodel brand image in order to increase market share. Target business class passengers as the most profitable target segment of BA.

Upgrade brand image Segment target

Product Development Strategy Technological advancements Clarification Provide passengers with in-flight internet service to enhance the overall quality of the service. Offer value added services to passengers such as rental cars and hotel rooms.

Addition of value added services

By following Ansoff matrix all three objectives of this marketing plan can be achieved. The chosen strategy for increasing market share of BA is the Market penetration in which existing services will be sold more to existing customers. This can be done by increasing the usage of existing customers by introducing loyalty programs. For the second objective of the plan, business class segment have been targeted in order to increase business class passengers for long haul flights. Same strategy has been used for this objective as well. Product development strategy is used offer new services to existing customers of the market. To improve technology in order to enhance

passengers experience with BA and also need to provide some value added services in return for some extra cash. Both these strategies that are adopted will ultimately help in increasing the market share for BA. 8.4 Competitor Strategy
8.4.1 Defense Strategy There are six defensive strategies for competitive advantage but the most appropriate strategy for BA is the Mobile defensive strategy and Pre-emptive defense. Mobile defensive strategy is used for BA because high degree of flexibility will not allow competitors to attack easily. Hence BA will need to invest in product development in order to update its technology. Pre-emptive defense strategy is used to attack competitors before they attack BA (smallbusiness, 2009). This is because American Airlines and other differentiated focused airline carriers will target segment of business class people. BA is also focusing on Business class people to increase profits in that segment (smallbusiness, 2009). Therefore attacking competition will help the company to defend its segment. 8.4.2 Attack Strategy There are basically five attack strategies a company can adapt in order to make a conclusive battle. The strategy that is most appropriate for BA is encirclement strategy which aims to encircle its competition from all sides. Market encirclement strategy is used to extend its products to all segments and supply chain. BA not only needs to segment on business class but it also needs to increase its distribution channels where people have more access of the services BA has to offer. Contract with Amadeus for distribution of its services to agents will help the company to save distribution expenses. 8.5 Positioning Strategy BA has positioned itself as differentiated focused airline carriers. In order to attract customers for its business class BA needs to improve the service quality of the flight by enhancing customers experiences. In order to be profitable BA also needs to sustain its quality service and improve relations with the business class passengers. Most importantly BA has positioned itself as a direct competitor to virgin Atlantic on all the routes. It also needs to reposition itself as superior airline and harvest the luxurious travel market. BA needs to reposition its business class in minds of customers as a fun, innovative and professional. BA needs to attract its business class passengers by giving them great quality service, modern in-flight entertainment system, internet access and spacious seating adjustments. Communication and customer feedback is very important and through communication BA can achieve the desired objectives. For example Virgin Atlantic offers in flight ice cream for its customers thus exceeding its

customers expectations. BA also needs to find out through communication that which is important to its customers. Positioning Map High price

British Airways
Business Class

Low quality

High quality

Low price

9.0 Implementation Plan

Marketing Mix Product

Strategy Reposition itself as a premium airline to harvest the luxurious travel market.

Tactics Business class cabins are enhanced in a recent past and BA can co-brand itself with London luxury hotels such as Savoy or Ritz.

Extend long haul flights from London city Airport.

BA needs to extend its premium only services to long haul destinations such as Delhi, Chicago,

Toronto etc.

Price

Protect positioning as the most distant airline carrier for overseas business travel.

Design suitable pricing strategy that includes giving obligatory service to first and economy class while targeting business class as most profitable target segment.

New product offering and a competitive price if offered from London to New York will give BA opportunity to get high profit margins as no competition is established yet. Promotion Give early incentives to business class passengers in the loyalty programs Air-France-KLM offers its customers a frequent travel status after just 15 flights in any class whereas BA gives it in 50 flights. Offering early incentives to customers will make them more loyal to the firm and they will be impressionable for what their competitors have to offer.

Introduce new club name as astudent flying club to capture future premium passengers.

Implement this by offering students attractive flying packages. Banking industry has successfully implemented this strategy and they are opening accounts for students. When students get on with their professional life they are less likely to shift from their current bank to another.

Social media Interaction

BA needs to invest on social media websites such as face book, twitter etc to access new and existing customers. It is a very effective way to promote a product without damaging the overall brand image. This method will also help BAs customers to communicate directly with the company. Furthermore it will also help the company to spread its message to vast audience

Place

Provide access of products and services to customers in broad scope and adequately

Increase distribution system scale by making alliances with Amadeus and one world. Online

enhance supply chain system

system should be made user-friendly as most business class passengers buys from internet. Enhance relationships among employees and improve communication flow inside the organization.

People

Enhance efficiency of the delivery.

Improve baggage mismanagement and delays.

Stimulate, appoint, back and promote employees. Make them interested to their job by making job rotation etc Allocate employees according to their skills and experiences in the organization. Upgrade website to a new and attractive look. Update website regularly and make it more graphically attractive.

Evaluate skills and experiences of employees. Physical Evidence British airways need to upgrade its online distribution channel. They need to provide customers with up to date information and more importantly easy access to information customers are looking for.

Message service give to its target audience should be revised.

Provide customers with online chatting service by allocating a sales representative on the website in order to help individual customer.

Introduce students flying club program to capture future travelers.

Create a club for students and offer them attractive prices as they are prospective future customers. Communicate directly and indirectly from top to bottom of the organization.

Processes

Involve each and every one in the customer satisfaction process

10.0 Budget and control Budget breakdown of the total marketing plan is shown in the pie chart below. The total allocated budget for this plan is 18,000,000 and it is divided according to each element of the marketing mix.

The stage gating methodology has been used in this controlling process of the budget. Each activity has been identified with start and end dates. With every milestone achieved, it became easier to operate and evaluate the project.

References
1. British Airways, 2011. Travel Classes. [Online]

http://www.britishairways.com/travel/classes/public/en_gb Accessed Date: [26-06-2011]

2. Blackwell Publishing, 2010. Analyzing Resources and Capabilities.

[Online] http://www.blackwellpublishing.com/grant/files/CSAC05.pdf Accessed Date: [26-06-2011]

3. The Guardian News, 2009. The Business. [Online]

http://www.guardian.co.uk/business/2009/nov/13/implications-iberiaba-merger Accessed Date: [26-06-2011]

4. British Airways, 2011. Annual Report [Online]

http://www.britishairways.com/cms/global/microsites/ba_reports0910/o ur_business/markets3.html Accessed Date: [27-06-2011]

5. Mindtools, 2008. Generic Strategies [Online]

http://www.mindtools.com/pages/article/newSTR_82.htm Accessed Date: [25-06-2011]

6. Scribd, 2009. British airways Marketing Mix reviewing opportunities.

[Online] http://www.scribd.com/doc/49038109/An-Upgrade-for-BritishAirways-Marketing-Mix-reviewing-opportunities-in-an-ever-changingindustry Accessed Date: [25-06-2011]

7. Channel4 News, 2009. Business Articles. [Online]

http://www.channel4.com/news/articles/business_money/ba %2B8216losing%2Bmarket%2Bshare8217%2Bclaim%2Btravel %2Bagents/3591962.html Accessed Date: [25-06-2011] 8. Proven Models, 2009. Five Product Levels. [Online] http://www.provenmodels.com/16/five-product-levels/philip-kotler/ Accessed Date: [24-06-2011]

9. Transnational News, 2007. British Airways Distribution Channels.

[Online] http://www.thetransnational.travel/news.php?cid=britishairways-distribution.Feb-07.22 Accessed Date: [24-06-2011]

10. Tutor2u, 2006. Competitive Advantage. [Online]

http://tutor2u.net/business/strategy/competitive_advantage.htm Accessed Date: [23-06-2011]

11. Paul, J and James, H. (2006 p.6-8). Marketing Management. 6th edition.

McGraw Hill Press Publishers.

Appendices

Source: Mindtools.com
http://www.google.co.uk/imgres? imgurl=http://www.mindtools.com/media/Diagrams/GenericStrategies.jpg&imgrefurl