British Airways is one of the largest airlines companies in Europe and around the world. It was formed in 1974 and it is the flag carrier company for the United Kingdom. It experienced rapid growth especially in the last two decades and now is one of the most prestigious worldwide flying companies. In the beginning it was formed based on a public ownership scheme but later it undertook a series of transformations throughout the ’70 and the ’80. These transformations culminated in February 1987 when it was privatized by the Conservative government, indexed at the London Stock Exchange and made a constituent of the FTSE 100 Index. Since that time the airline boosted and, in a period when most big airlines struggled to gain profits, it remained on top of the preferences of worldwide customers. Since that time it had passed a turbulent era of high competition, rising oil prices (which meant cost increase) and even financial scandals, like the 2007 fine for price-fixing.
– Mission Statement.
The mission of British Airways as assessed by its “Chairman” is to serve the customer with the highest quality service possible and make all the necessary financial operations to satisfy its shareholders too (“2007/08 Annual Report”, par. 1).
– Company’s products.
Being a flying company, British Airways is part of the airline’s industry market. The airlines industry market has been under serious difficulties in the last decade. Since the September 2001 attacks it has suffered various shocks. The last was the oil price shock of the last two years which disfavored the company by raising the fuel costs for its jets. This meant a rise in total operations costs. As stated by their official website, British Airways offers two basic services to its customers in the market: passenger flight services and cargo flights service (“What we offer” par. 1). These are the main products that the company operates. These two basic services are differentiated into categories for business purposes. The cargo flights service remains intact and has no subcategory but the passenger flights service is composed of four categories and one package. The four categories offered are first class flights, business class flights, premium economic flights and economic flights (“Travel Classes”, par. 1,2,3,4). The first class and business class are part of the business flights service within the passenger flights service offered and the other two are part of the economic flight’s service for passengers. Also, the company has operative a “Holiday package”. It is composed of hotel and flights offers. The company has signed agreements with hotels and resorts around the world and offers the flights, along with return, to those places.
– Competitors and position on the market.
As valuated by the 2008 Barclaycard Business, British Airways has a leading position in the airline market (“Press Release”, par. 2). Also from the same source a couple of paragraphs below the main competitors are identified. Above all, the direct competitor is the German flag carrier company, Lufthansa. Then two other big companies come Air France and the Fly Emirates. This is on a global market scale. All of the mentioned companies, including the one we are discussing here, operate in almost all of the world’s markets: Europe, North America, Middle East and Central Asia, Far East and Australia. Of course the competitiveness is different according to the market British Airways is competing in. In the European and North American market the company we are discussing has a leader position on the market and is expanding more its market share (“Press Release”, par. 6). In the Middle East/ Central Asia and the Far East it may not be the leader but it has a relatively good market share (“Press Release”, par. 8).
– Two primary attributes.
British Airways has two noticeable attributes that make it fashionable in the eyes of its customers: relatively low costs and high quality flight service (“2007/08 Annual Report”, 5). These two attributes can be summarized as the quality of service toward its passengers (its direct customers) and low cost service offering for the market (the potential customers). The positioning of the company with its primary competitors is quite good. It is a dominant position if we are talking about the European and North American markets (“2007/08 Annual Report”, 9). British Airways has managed to be the number one company for these two major markets by combining low cost and excellent service. When they could they made price offers and keeping the level of in flight service high, and when they could not, the company tried to increase its service quality by, for example, adding something to the food or the menu during the flight. This combination has resulted in more efficiency than what the competition was doing (“Press Release”, par. 14). Regarding the Middle East/Central Asia market, the company can be ranked in the top three preferred companies of the market. The same can be said about the Far East/Australia market. Being more focused on the European and North American markets the company has less focus on these markets and the combination of high quality in-flight service and low cost is more difficult to do. We must not forget that British Airways operates from the United Kingdom so the distances covered for these markets are longer. This is especially the case for the Far East and Australia. This makes the costs of flight for the company higher and competitors, like the Fly Emirates, that operate from the United Arab Emirates have more advantages.
– Primary target markets and product categories.
Above are mentioned the markets in which British Airways operates. This is a geographical classification of the markets. From a “human” perspective the question is: what categories of people have the company as primary target? From the 2007/08 Annual Statement it is clear that the company’s best product in the business service for passengers (“2007/08 Annual Statement”, 23).
In general, the company targets all of the “mobile groups” of the markets that need long distance travel. But more specifically, British Airways focuses on business issues traveling and traveling for work-related issues. This group can comprise businessmen, freelancers, professionals, students, etc. One of the characteristics of this group is that they need to travel often. This is the main target group of the market for the company. The second target group is people in need of travel but not so often. This is mainly a market group that needs not travel often, so they are seeking primarily low cost than high quality service. And the third group is composed of people seeking alternatives for their vacancies, leisure time. Accordingly to the market target groups mentioned above the company has differentiated its products into categories. First and business class flights are mainly for the first group. Premier economic and economic are for the second and the “holiday package” is for that group seeking alternatives for their leisure time.
- Product-Market grid and strategy for market development.
+ the target group shows interest over the product.
– the target group doesn’t show interest over the product.
First, second and third groups are considered according to the description made above.
The natural question to make is why the first group purchases more the first and business class service and the second purchases economic flights? The answer is the continuation of what said above. The first group is comprised of professionals and business related people who travel often for work-related purposes. This category of people is more concerned about service quality and comfort than of price. Of course, price is important but for them cost is not primary, but comfort yes. The second group has the contrary concerns. They do not travel often and when they do it mostly is not for work-related issues. They just want to get at the place they want to go but they are very sensible to prices and then to comfort. This is why they prefer more the economic class flights. The third group is comprised of people that want to spend their vacancies. They travel only a certain period of the year, mostly during summer or the winter break at the New Year’s Eve. They are people who want the best comfort possible and with reasonable prices. This package is the main competitive advantage for the company. This is because this group is composed of people that can be part of the first and second group also. This way, the company strengthens its brand name on the market and its position. The “holiday package” can attract new customers that are not within the two other target groups but also it can make customers of these two groups consume a second product of the company. By doing this it consolidates its market share over the competition.
Does your organization have a COMPETITIVE ADVANTAGE relative to its PRODUCT MIX?
Yes, absolutely. The best form of product mix for the company is the “holiday package”. As described above it is a new kind of product for the company because it offers more than just flight. It combines at the best way possible the lowest possible cost strategy with high quality standard service. In comparison, the main competitor, Lufthansa, did not have a similar product the time British Airways launched it at the beginning of 2008. This influenced in a further consolidation of the brand name and market share position of British Airways within the European and North American markets. Regarding the Middle East/Central Asia market, Fly Emirates had a similar product but the offering of British Airways of this product increased competitiveness on the sector. Surely, the position of Fly Emirates as leader of this market was shaken.
References
- “What we offer”. 2008. The British Airways Plc. Official Website.
- “2007/08 Annual Report” 2008. The British Airways Plc. Official Website.
- “Travel Classes”. 2008. The British Airways Plc. Official Website.
- “Holiday package”. 2008. The British Airways Plc. Official Website.
- “Press Release”. 2008. Barclaycard Business.