Business Strategies in British Airways - Essay Example

E-commerce and Business Strategies British Airways Yvonne L. Academia Research As the internet develops into the most accessible channel for commerce, it’s efficiently is assessed in the airline industry to quell the massive economic downturns and fluctuating prices of oil. How the airline industry survived by the use of e-commerce is the subject of this study which addresses the questions of how British Airways framed its business and utilize the opportunity to reach out to its clientele and eventually treated e-commerce as more efficient than conventional market schemes with respect to costing and gaining online customer trust and awareness. Introduction The E-commerce revolution has surged forward with applications appearing in the airline industry as equitable with fast and easy modern technology service in the new age. This scientific protocol allows the industry to communicate internally with suppliers and partners and with their customers. Plagued with a series of economic downturns and fierce competition and global critical issues, the airline industry had no other recourse but to adjust and adapt itself to the current business scenario than remain covered in dust as other competitors fly by. Although most airlines were reluctant to engage strategically in electronic commerce giving justification to their highly exceptional personalized service, the Paris Crash in 2000 and the September 11, 2001 downfall made every international flag carrier cringed at the thought of closing its doors forever and were instead forced to lunge for drastic measures to regain its earning equilibrium. Bigger airline industries brainstormed their marketing specialists while directors hold close door meetings in the effort to address the problems besieging the entire future of everyone associated with the business. Small players beyond 2003 were still struggling to keep up with the prevailing market scene but bigger players had adjusted faster but then again faced with the critical issue of mass employee lay-off for most of its workers affected by the online economic measures. However the e-business held promises to lower the operating costs of these sectors as well as connections to the wider world in a matter of seconds. Flag carriers like British Airways, KLM, Cathay Pacific, Qantas, American Airlines and Singapore Airlines responded by installing e-commerce platforms as the robust channel for business. The role of E-commerce in BA survival The Paris Crash in 2000 and the 9/11 terrorist attacks the following year, coupled by fluctuating maintenance costs, and the future of Concorde was limited despite the expensive modifications after the crash. BBC1 related that experts used passenger figures and other published data to forecast the airline’s 2002 full-year result and put up with the likely pre-tax loss in between £300m and £400m. Projecting profits and sales compared to losses was neither an exact science as recognised by Corts2 but given the strong evidence of bankruptcies in Europe and the US, plunging passenger numbers, and a steady switch away from traditional carriers to low-cost airlines that ceased the scheduled services with Concorde that BA had took investments on has featured the climactic down side3. Realizing that aviation was still by far a revenue problem despite a century after its start, the management team developed ways to maintain its balance rather than forever closing its doors as the flag carrier by cutting jobs, overtime reductions, management revamps, leave extension schemes just to save off on the numbers4. Long term options of taking the business around proved more feasible in 2002 when the firm finally announce the ‘Future Size and Shape’ plan, which aimed to cut annual costs by £650m and removed an additional 5,800 jobs on top of the 7,200 the firm had already announced5. Calculated business risks allowed BA to switch to online calendar-led selling to reduce the cost of sales and expenditures given to travel agents that allowed them to compete with other airlines IT system. Soon these E-commerce and Business to Business moves were a favorable and practical cost structuring that ultimately led to lower equilibrium price levels in a long-run equilibrium by decreasing the underlying costs on which any price premiums are based according to Milgrom and Roberts (1982)6. E-commerce and the future for an airline like BA? By the turn of the century, E-commerce has become a vast media that demanded a deeper understanding for corporations to capitalize on this free technology. BA upon its corporate restructuring put up their BA.com web site at the centre of nearly every customer-facing business process7. Now, it is seen that four out of every five passengers buy their airline tickets online with the advent of electronic payment systems making it possible for most transactions to see completion in a matter of minutes with the least effort and expense according to Kollock(1999)8. Japanese Air Line (JAL) has the opportunity to launch an e-commerce service via the Web to position itself at the leading edge of e-commerce and gain first-mover advantage9. In the year since its inception, JAL Online has reported a fairly rapid, with more than 1,000 companies using the system while new services are added to its core capabilities that recently released discounts on various services, as well as the ability to pay for JAL services with a corporate or individual credit card10. Framing the business and marketing opportunities Though fairly new in the e-commerce gaming, BA may still be in the customer relationship management but relationships with the corporate traveler, the business customer from British Airways is already talking about B2B. The corporate strategy identified in British Airways is focused on the company most profitable sectors, is not just on it’s first and club class passengers, leisure travelers and business travelers that form a large part of the market. Flying is capitalized as much on the above profitable sectors and BA has definitely realized that by capturing the business travel market one should think about the corporate customer who flies more often than not. Marketing schemes that feature ticket-less domestic reservations with credit-card payment capability similar with a reservation system that allows customers to make, confirm and cancel reservations, as well as to view information on flight schedules, space availability, and arrival and departure information are among its perks. Business models adapted initiatives that targeted to domestic businesses whose services extend beyond flight reservations to include hotel services and linkage with Eurostar as a reach-out to the entire European community. Safety measures in the e-commerce industry allowed a Mastercard Securecode system that BA was lauded as the first global airline to offer across multiple regions, with a roll-out to 23 country sites including the key markets of United Kingdom and United States11. Customer interface To offer customer cliques, BA has offered online interface that adjust account balances to reflect frequent flyer miles as they accrue and made an overseas outsourced staff available 24/7 for live phone-in services12. Customer interaction over the telephone and through three customer profiles: Business Flyer; Leisure Flyer; Internet Fare Shopper. Business to customer introduction of technologies such as electronic data interchange has recognized the value chain that is becoming digital and easy to integrate so that consumers become an important player in all steps of value creation (Bailey, 1998)13. With matters such as online functionality and service expertise the corporate customer is delegated with full travel experience for all the travelers within the corporate. BA has realized that the amount of money a client is spending on travel and the second is the well being of all of his travelers is paramount to its operations. Looking after those travelers because they’re a member of that clients is making sure that BA capture the market. Branding BA has realized that equating cheap products entails a cheap service, while “free” is in that has lately curbed competition that is so fierce that the lowest pricing is no longer effective, as there is always some other supplier to offer a product for far lesser or even for free. BA has found that saving costs in their own part of the chain is incredibly difficult and so a scenario needs to be established that attract the flying customer to utilize its full services at a minimal cost. British Airways cut European air fares by up to 80% on at least 42 routes and slashed from £59 return on domestic routes and £69 return to Europe. More than 50,000 air tickets at the lowest fare would be available every month on the 71 domestic and European routes, which also would have lower flexible fares and fewer booking restrictions14. World Traveler promotion were launched on US destinations for passengers to travel for an extra £150 for a one-way upgrade in the airlines premier economy cabin. Huge discounts were offered on ticket purchases made online that allowed simplification yet strengthening it regional operations. Implementation Corporations are in need of a quick tutorial on flashy websites that attract only the non-paying in their false notion that corporate stability is seen in too visible attractions. Business to Commerce or B2C introduction of technologies should increase is easy to access to the whole value chain so that consumers become an important player in all steps of value creation. E-commerce has become vast, and it demands a deeper understanding of how to capitalize on this freely available trillion-dollar public infrastructure in Lee (1997)15. Strengthening an e-commerce image is becoming a major challenge for many corporate communications departments and BA has achieved its purpose by developing a web-based ticketing system that is simple enough for a third-grader to operate and understand. Corporate mile schemes have been very successful and the loyalty program has seen huge revenue growth called On Business and one scheme in the US called Venture Club. Strengthening an e-commerce image is becoming a major challenge for many corporate communications departments and BA has achieved its purpose by developing a web-based ticketing system that is simple enough for a third-grader to operate and understand. Selling propositions and image positioning strategies were implemented online along with recognizing URL related difficulties associated with a client not remembering the site. Measurement BA has audited the above implementation liabilities and has employed proper standards in search of a perfect solution that really works within the proper timeline. Ticketing reservations has slowly minimized from people picking up their phone to their implanted travel agent who makes 75% of their bookings. Out of 5 clients, at least 4 are booked online which reflects the hybrid technology the customers can equally enjoy along with good service whether they choose to make it on their desktop or whether they choose to pick up the phone and Cisco was deployed to develop VoIP to more than 14,000 British Airways staff, which will use 8,500 Cisco IP phones at its UK offices and airports16. oneworld carriers - who account for more than 50 per cent of Heathrows traffic with 35 million passengers a year travelling on around 700 departures and arrivals a day - are split across all four of Heathrows terminals. British Airways carriers at Heathrow have audited their operations and consolidated in the GBP4.2 billion (US$7.6 billion) Terminal 5 in an up-graded Terminal 3, which is the closest of the existing terminals to the new facility. By March 2006, British Airways reflected a 40.4% increase in its profit margin that saw a complex logistical challenge and recognised the charismatic importance of Concorde to British Airways17. BA used Concorde to win business customers, guaranteeing a certain number of Concorde upgrades in return for corporate accounts with the airline as a key factor in winning business from transatlantic competitors18. As an exact measure of e-commerce worth, British Airways report of a leap in fourth-quarter profit after higher ticket prices and demand for flights outweighed a sharply higher fuel bill has raised its revenue forecast for the current financial year with an actual rise on $151 million, up from £1 million the previous year. With the company’s shares closing at 29.25 pence, or 9.1 percent, at 349.25 pence on the London Stock Exchange,19 all the company needs is an assessment of it values and to adjust to the current oil price hikes. Media’s convergence Corporations that are still stuck in print-advertising mentality may see their selling propositions in the middle of a glossy brochure but not on their income. The traditional promotional model with the typical graphics is already replaced with e-commerce front and animation overload20. This approach shall replace all the intelligence from the actual proposition with giving a sharp deal motivation to act or to come back for another visit. B2B and B2C in a way, has been in the tip of the iceberg for sometime that the airline industry was fearful to tread on. We see them advertised on TV yet 80% of the United States e-commerce was accounted for by B2B transactions21. Conclusion E-commerce applied to the airline models has provided high profile hope for profitability in most airlines which has seen their future in long haul flights where it is clear that it could maximize profit by doing the majority of its flying internationally. British Airways technical advancement can suggest that other players should stop complaining and get to work connecting all segments of the industry rather than loosing a site into oblivion without cashing in on the advantage it brings thereby foretelling a losing game in the e-commerce world. Companies must therefore study its marketability in the internet and devise ways to capture the buying market with the millions of sites being added thereby loosing much to the practice of using simple, unique, one-of-a-kind, globally protected identities. This requirement demands the application of a Five Star Standard. If companies are serious about their plans to augment their business and competent to try out responsibly the e-commerce innovations, one needs to formulate a management task force to review your approach as a critical boardroom-level issue that looks upon the merits e-commerce brought to the British flag carrier. Bibliography BBC News. 2002. Q and A British Airways, http://news.bbc.co.uk/1/hi/business/1998415.stm Cincinnati Post. 2003. Concorde Flies into History, http://www.cincypost.com/2003/04/11/editb041103.html Watson, James.2006. Turbulent Times for BA, http://www.computingbusiness.co.uk/computing-business/comment/2148682/turbulent-times The Economic Times. 2005. British Airways resumes most of its flights. http://economictimes.indiatimes.com/articleshow/1200068.cms International Herald Tribune. 2006. 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