Unit 2 Marketing Management – British Airways Assignment
The main purpose of this Unit 2 Marketing Management British Airways Assignment report is to develop marketing plan for British Airways. This report demonstrates brief analysis of segmentation, targeting and positioning strategies used by British Airways, the largest airline in United Kingdom (UK). The report also explained SWOT analysis, PESTEL analysis, marketing mix and Michael Porter’s five forces with respect to British Airways. The report analyse the methods of promotion used by British Airways to attract customers and also explain company’s vision, mission and objectives. This report will also focus on current marketing strategies of British Airways. Through strategic evaluation various significant recommendations that the British Airways can upon are suggested.
British Airways is considered as UK’s flagship airline and is amongst best airlines in the world and also has one of the most extensive route networks, globally. It is also rendered to one of the largest airlines based on number of flights on roll and number of destination it covers. To manage British Overseas Airways Corporation and British European Airways and other two smaller regional airlines, the government of UK has established British Airways Board in 1972. But later on all four companies combined to form British Airways in 1974. British Airways provide scheduled air services for cargo and passengers and flies to more than 160 destinations worldwide. Airline marketing, aircraft financing and maintenance, insurance services and package holidays are provided by British Airways (Annual Report, 2015).
The company has continued to grow along with rising competition after privatization, in the airlines market over the years. British Airways has been considered as pioneering airlines in green technology adaptation and business environment friendly strategic decision. In order to reduce emission of greenhouse gases, British Airways has supported the scheme of European countries. The company had also affected due to global collapse in the year 2008 in terms of revenue. British Airways has always committed to provide quality and world class services to its customers.
As compared to other airlines companies, British Airways is in good position. The company has developed certain strategies to promote its brands at both national and international level. In order to build confidence and commitment, British Airways has developed lots of customer friendly strategies. British Airways aim is to become most responsible airlines and in terms of fleet size, international destinations and international flights, British Airways is the largest airline based in the United Kingdom. The company has utilized computing and mobile technology in order to provide effective services to customers (Grundy &Moxon, 2013). The company has developed various strategies such as:
- With the introduction of mobile application services for business class customers, the company has upgraded the customer experiences
- The company has also provided texting and mobile services for business class customers during on-flight hours.
- In order to offer new services, British Airways has modernized the current fleet of aeroplanes
- Strategies have been developed to manage cost base operation
- To make journey more comfortable, British Airways has developed strategies to modify the aircrafts
- Managing cost of tickets is the most effective strategies (Annual Report, 2015)
Segmentation Targeting And Positioning (STP)
The STP model has helped organizations to evaluate market conditions. This model contains three steps:
- Segment the market
- Target best customer
- Position of services or products (Howell, 2015).
In order to develop strategies for further development customer segmentation strategies will be effective. Hence market segmentation of British Airways can be explained as:
The process of dividing the total market into number of sub-markets on the basis of certain characteristics is known as segmentation. There are various ways to segment the target markets. British Airways market segmentation can be divided into four categories: Demographic, geographic, behavioural and psychographic.
- Demographic variable –British Airways have segmented the market on the basis of various demographic variables such as income, gender, age, education, etc. In order to compete with low cost airlines British Airways have introduced pricing strategy to appeal to a wider range of demographic segments.
- Psychographic variables–Market segmentation can also be done through customer lifestyle and attitudes. British Airways has segmented its customers based on their means of travel, whether it is for business and leisure or for both. High quality food and drink, spacious seating and friendly on board staff have provided by British Airways to make customers brand loyal.
- Geographic–On the basis of region and density of customers, British Airways have segmented the domestic flights in UK and Europe. For example, more domestic and international flights are scheduled in those regions where people useair transports (Lewis, 2013).
- Behavioural– This type of segmentation is based on how people use product or services, how loyal they are and what benefits they are looking for.
Step 2: Targeting
In order to sell products and services, organizations choose specific market segment i. e. targeting. Target market selection can be facilitated by according to several patterns such as: organization may target single market with single product (single-segment concentration) and target various market segments with different products. Single-segment concentration is followed by British Airways and offer four different service package to different customer segments. Economy, premium economy, first class and executive are four levels of services offered by British Airways to target different customer segments. British Airways target a segment of citizens involving primary market of ABC1, which preferred high class services provided by British Airways. Through expansion of its short haul market, British Airways have emphasized in attracting more diverse set of consumers (McDonald, 2013).
Step 3: Positioning
The last step of STP process is the positioning. It refers to the selection of marketing mix the most suitable for the target customer segment. The British Airway does not promote itself on the basis of having cheapest flights as other airlines do. The organization has mainly focused on metropolitan areas where the most business owner work and live. The British Airways has positioned its brand very well and customers also view its services as high quality. Attractive positioning of products and services is the major success factor for British Airways. In order to achieve long-term growth British Airways need to positioned its products and services effectively(Lewis, 2013).
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It is generally a framework used for evaluating an organization’s external macro environment by considering factors such as political, economic, socio-cultural, technological, legal and environmental. All these factors influence the growth and development of any organization. This is very effective tool used by organizations when introducing new products or services and also very effective when incorporating competitive strategy for the future. British Airways PESTEL analysis includes an analysis of the impact of these external factors on the airline.
- Political– Government rules and regulations may influence the economy or a certain industry. For example, government may introduce new tax or duty due to which overall revenue generating structures of organizations may change. British Airways has to comply with government rules to continue its operations. The government has focused on security of passengers due to terrorist threats which affects the whole airline industry. British Airways is also affected due to trade unions, in order to meet demands of employees’ trade unions threats companies by strikes (Bogdanovska, 2011).
- Economic–Inflation, exchange rates, economic growth, etc. are the factors that affect the growth of business. The global economic crisis has affected the various organizations in different sectors and airline industry very much. The weakening of pound against other currencies also affected British Airways operational activities. Over the last few years landing charges have also increased which also affected revenues structure of British Airways. Oil prices fluctuations across the world have affected exchange rates and also the airline industry. Economic and social development has influenced due to excessive taxation on international air transport. In order to reduce taxes International Air Transport Association (IATA) runs several campaigns.
- Social– The shared belief and attitudes of populations and factors such as age distribution, population growth, etc. have significantly affected the airline industry also. In UK, the ageing population is also an area of concern because older people have low spending power and they prefer to travel by other means of transport. Increasing Unemployment also affects spending behaviour of people. British Airways has taken advantage of increasingly ageing population, as older people have more time to travel (Annual Report, 2015).
- Technological–British Airways has utilized latest technology to provide quality services to customers. The company has developed platform for online booking of tickets. The online ticketing system also more competitive environment for British Airways, customers can easily compare prices of various airlines on different websites. But high technological system has benefitted both customers and Airlines. The company has provided inflight Wi-Fi services to customers which is great achievement. British Airways has used advance technology for the development of engineering and service quality of fights.
- Environmental – Government of each country has developed environmental laws for airline companies. British Airways also aware of not creating any environmental destruction and also take important steps to save environment from noise pollution. In order to minimize noise problems for residents around airport, British Airways uses the planes with noise reduction technology. British Airways reputation would be affected if the company fails to maintain environmental maintenance.
- Legal – British Airways has affected by the activities of trade Unions and involve in legal issues with employees. There are many legal problems have arisen in the airline industry, British Airways has faced legal issues when government applied restrictions on the mergers and this restriction affect the merger proposal between American Airlines and British Airways. In addition, British Airways has also affected due to cabin crew strikes that creates some legal issues. The low cost airlines has created problems for British Airways, they provide same facilities with lower price (Shaw, 2011).
The PESTEL analysis gives valuable information about British Airways regarding factors such as political, economic, social, technological, environmental and legal that affects the continue operations. In order to introduce new business strategies these factors are important and they must be involved in the planning of the strategy. British Airways and other airlines have affected due to various governmental policies and to reduce issue that affect environment, British Airways developed its strategies in comply with government rules and regulations. The company has also received several awards for its valuable services to the society; these awards include Best Airline in the Western Europe (McDonald, 2013).
Michael porter’s five forces
In order to assess the position of British Airways in the market, porter’s five forces is an effective tool. Porter’s five forces analysis is a process that helps organizations to evaluate the completion within an industry (Dobbs, 2014). The five forces are:
- Threat of new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
- Industry Rivalry
Threat of new entry
Threat of Substitution
- Barriers to new entry
- Time and cost of entry
- Cost advantages
- Technology protection
- Number of competitors
- Customer loyalty
- Quality differences
- Degree of transparency
- Number of customers
- Price sensitivity
- Total amount of trading
- Buyer information availability
- Number of suppliers
- Strength of distribution channel
- Size of suppliers
- Ability to substitute
- Cost of change
- Substitute performance
- Quality depreciation
- Buyer switching cost
In order to increase profitability, Porter’s five forces analysis will enable British Airways to make strategic decisions. British Airways market situation can be explained through five forces:
Threat of new entrants
- There are various significant barriers in airline industry such as high capital, economies of scale, product differentiation, etc.
- New airlines companies have to face tough competition from existing players. Experience staff is very important for an airline company to survive.
- Compete on limited routes
- Difficulty in finding suitable airports
Threat of substitutes
- There is no real alternative to long haul air travel in terms of cost and time
- In short haul or short distance flights British Airways have some substitutes
- So British Airways need to focus in domestic flight
- Hence British Airways do not have more threat in international operations
- British Airways have mainly focus on short and long haul flights. In terms of pricing and service offering there exits little differentiation between British Airways and its competitors
- The short haul flights are more affected because of other competitors
- Competition has increased due to variation in tickets
- Virgin Airlines opposing the strategies of American Airways and British Airways and increased completion at very high rate (Müller, 2011)
- The power of bargaining has increased due to more suppliers of aircraft
- British Airways are restricted with a sole supplier of fuel to the airport
- In airline industry the buying power of consumers is influenced because there are several airlines that offer different prices of tickets.
- Online ticket booking has increased competition, consumers can easily compare prices of different airlines through various websites
- Most of the consumers are not aware of high technology like using internet so bargaining power is medium (Annual Report, 2015).
To evaluate British Airways strengths, weakness and ways for improvements, SWOT analysis would be a good way. SWOT stands for strength, weakness, opportunities and threats.
- It is leading brand in the airline industry with large number of fleet size and international flights
- British airways has strong fleet of aircraft
- The company has operates in all continents and have number of international destinations worldwide
- Customers have shown great brand loyalty and trusted the brand
- Agreement between United States led the foundation of new subsidiary called open skies, which provide quality services to customers (Grundy &Moxon, 2013)
- The greatest strength lies in its operational staff that handles customer very well
- Increase in fuel prices is always a problem for airline industry. the increased prices resulted into increase in ticket prices which affect the revenue
- The Slowdown of UK’s economy also affected British Airways financial stability
- Opening of new terminal at Heathrow airport has created problems
- Non fuel costs like from staff and the landing charges have also affected British Airways operational activities
- Middle eastern airlines gives tough competition to British Airways (Annual Report, 2015)
- Reduction in the cost of aircrafts have reduced operating cost of all airlines and created several opportunities in the market
- British Airways have opportunities to expand in emerging markets like China, India and Middle East region
- The company has expanded its global operations by exploring new markets
- In emerging economies, the company can also start various flights on international routes
- In European markets British Airways have faced tough competition from other market players
- Airlines industry have also affected due to global recession
- Rising fuel cost is the great threat faced by British Airways and other airlines companies. Continuous increase in fuel enables companies to increase rates tickets.
- Due to tough competition from other market players British Airways have to spent large amount of money in marketing and promotions (Bertillo, et. al., 2013)
In order to promote brand or products in the market, companies uses apply the concept of marketing mix. The 7 Ps of marketing are price, product, place, physical environment, process, people and promotion (Groucutt& Hopkins, 2015). These elements of marketing mix can be explained as:
- Cost of goods and services
- Direct sales
- Online platform
- Direct marketing
- Special offers
- Free gifts
- Staff members
- Service delivery
This table describes about various element of marketing mix and also important factors required for particular elements. The marketing mix of British Airways can be further explained as:
- Product - British Airways has provided excellent services and products offered have satisfied the wants and needs of buyers. The company has provided flight tickets at reasonable price and fulfil all needs of customers. The Airways has provided the best possible in-flight services such as Wi-Fi, fresh meals, drinks, etc.
- Place – Placing refers to distribution of services and products from the manufacturer to the consumer. Without proper distribution channel services or products of an organization cannot be reached to consumers. British Airways directly sell its products via internet which reduces the cost of retailers, initially the company used retailers to sell products but technological has changed the distribution channel (Gaggero&Piga, 2011).
- Price - British Airways has planned the prices of the products according to choices and needs of customers. For example,to travel from one destination to another in economy class, customers pay £ 100; on the other hand there are customers who pay £ 400 for getting additional services in business class. On the basis of requirements of customers, British Airways has segmented its ticket price and services.
- Promotion – In order to promote its services or products British Airways has used various promotional activities. Direct marketing, public relations, advertising, sales promotion, etc. are ways through which organizations develop promotional strategies. For the purpose of promoting services, British Airways has set some prices on flights. For example, During Christmas Company sells tickets at reasonable and discounted prices as “Christmas gift vouchers”. Electronic and print media are used by British Airways for promotion of products and services. Other ways such as sponsoring events on health awareness, magazines, etc. are various promotional activities.
- People – Success of business is dependent on people because products and services are utilized by people. British Airways involved its employees relations in marketing because they are one who interacts with customers. Therefore it is important to hire and train right people to deliver effective services to clients (Shaw, 2011).
- Process – The execution of services of services is affected by the systems and process used by organizations. So to minimize costs, British Airways has developed effective distribution system and systematic procedures and steps to ensure smoothing working.
- Physical evidence – In the services industry, it is important that the services and products offered are unique and have good quality. British Airways has provided excellent quality and services to customers. The company provides effective services in both international and domestic flights
It is concluded that this marketing management British Airways Assignment evaluate marketing mix, SWOT analysis, PESTEL analysis and Porter’s five forces of British Airways. British Airways has continuously operated successfully in different destinations but at the same there are some issues which faced by airlines. Other airlines company give tough competition to British Airways by adopting various strategies such low ticket prices (Kotler, 2012).
Annual Report, 2015. British Airways [online available at http://www.iairgroup.com/phoenix.zhtml?c=240949&p=irol-reportsannual accessed on 18 November 2016
Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Howell, R., (2015). Market segmentation: the importance of age cohorts. The Neumann Business Review. pp.21-54