Globalisation and Innovation
Assessment weighted at 40% assessing all module learning outcomes.
Prepare a management report of 3,500 to 4,000 words on an organisation of your choice, based in UK. This report should assesses the impact of external and internal factors on the organisation and evaluate the organisation responses.
Describe and analyse the primary internal and external influences to which the organisation is subject. This first task should take about one third to one half of your overall report.
Having particular regard to either
(a) Change in Technology,
(i) analyse how your chosen theme influences policies and decision making in your chosen organisation
(ii) critically evaluate the effectiveness of the organisation’s response.
(iii) demonstrate some areas for improvement in the response of the organisation
Both Internal as well as External factors create a strong impact on the planning and innovation of any organization anywhere in the world. By analysing the impact of internal and external factors on the organization we can easily find out the threats and opportunities present in the market for the organization. Here we will find out what all internal and external influences an organization like British Airways is subjected to and how does it affect the product innovation novelty, and how it is different in the U.K. markets from the rest of the world.
A British airway was the worst rated airlines in 1981 and was called Very Troubled airlines with severe losses, bad quality, overstaffed and very near to bankruptcy. It was voted as an airline to be avoided at any cost for air travel and famous for its unpunctuality. But with the Survival Plan Initiated by John King, the chairman in 1981 changed the image and turned failure into success. The things which he did was simple following the SWOT analysis by analysing the internal and external factors leading to failure and dissatisfaction and then he identified the major threats and opportunities that can be sued and made British airways a profitable organization back again.
The best way to find the internal and external resources causing the great impact on the organization is short and simple SWOT Analysis. This Analysis can be incorporated in to the strategic planning of the organization to get desired results. John King initiated by taking a radical step of cutting down the expenses by reducing the staff and the staff was cut down from 52,000 to 43,000 and the best part was that most of the workers took voluntary retirement. By 1990 British Airways was converted into a profitable entity. This could be done through SWOT analysis.
Steps Taken for Revival of British Airways
John King transformed the airline image by making it transportation business and erased the customer orientation effect from the base of the airlines. They totally changed the culture of the organization by making it focused on customer service. The internal environment of the Airlines was revamped by introducing many steps like:
• Training Programs
• Follow the rule of “Putting People First”
• All staff trained about customer handling techniques.
• Mangers handling front line employees received intensive management training.
• All the employees were given training on “Putting People First” Technique.
• All the managers were trained for” managing people first “Technique.
• The Human Resource department was completely over hauled and was focussed on policies like hiring, compensating, appraisals, and promoting etc.
BY the year 2000 the British Airlines was completely overhauled and its bad image was wiped off now the target was:
• To sustain British Airways as world’s favourite airline.
• Improve customer service as per new demands.
• Extending its reach locally as well as globally by doing marketing agreements and alliances.
• Improving the management to become the best management rated company.
Definition of SWOT
A SWOT Analysis is a helpful tool which helps in analysing the strength, weakness, Opportunity, and threats of nay business venture. It helps in giving a direction to planning and assists in taking informed decisions too
Strength: These are the internal factors which assist an organization to achieve desired objectives.
Weaknesses: These are again the internal factors which hamper and are harmful for an organization to achieve its objectives.
Opportunities: These are the External factors which help an organization to achieve its objectives or goals.
Threats: These are the external factors which are harmful and hamper the path of achieving organizational objectives.
After analysing the SWOT’s finding the factors and the inter4dependence of these factors helps in finding the whole path to achieve the end objective.
Internal Factors and External factors
The main aim of any SWOT analysis is to identify the vital internal and external factors which are responsible for achieving the desired goals by any organization.
The strengths and the weaknesses of any organization existing within the organization are the internal factors. They carry strong impact on the objectives of the organization. The internal factors are mainly the Four P’s (Price, product, promotion and packaging) along with personnel, manufacturing, finance etc.
On the other hand the Threats and the opportunities which are posed by the external environment to any organization are the external factors. These include the technological changes, legislation, socio cultural change, macroeconomic matters, competitive position and changes in the markets.
SWOT analysis of British Airways
Strengths: It has international Operations and the employee productivity is very high. It has got strong presence on the busiest airport of Europe that is the London Heathrow International Airport.
Strengths of British Airways
• Very strong Brand Image
• It ahs OpenSky Agreement along with international operations
• Skilled staff
• Expansion of Aircraft fleet
• Economies of scale have been designed by using spare space in passenger aircraft for carrying cargo and give cargo services too.
Weaknesses: Over the time it has witnessed a decline in the profitability. The employees are dissatisfied as they do not receive any post retirement benefits. The major geographic regions have not shown any growth for quite some time.
Weaknesses of British Airways
• High cost of management with declining profits
• Labour strikes quite often due to strong and powerful Employee Union
• Strike in Christmas which is the peak season for air travel.
Opportunities: British airways hold the reputation of globally known airline with its markets spanning all over the world. It has shown good increase in its trans-pacific cargo airlines. The Asian –Pacific Markets have also shown great increase as Asian and Pacific tourism is getting a boost and international flights to Asia and Pacific countries have increased over the time. Emergence of new markets in Asia Pacific which can be tapped
Threats: Due to steep rise in aviation fuels price, the cost of airline travelling has increased and the recession is also affecting the tourism industry. The other market players which have introduced low cost airlines tickets like Virgin airlines are posing excessive competition for British Airways. It has shown a weak economic outlook for the U.S. and the European zone. Due to down sliding economic conditions and recession since 2008 has caused downslide in the markets in the U.S. as well as European regions. (British Airways PLC).
• Rising prices of fuel for aircraft
• High ;level competition from competing airlines which are offering lower cost
• Changing consumer behaviour
• Unstable political situations and Global economic crisis.
Identifying the areas for change after analysing the internal and external factors
Satisfying not just the customers but the employee satisfaction was also necessary so British Airways gave the Highest Bonus Payouts to its employees when it earned great profit margins.
They identified the opportunities of tapping the busiest airline route which is between US and U.K., so they did a strategic alliance or collaboration with American Airlines, this way they were able to share profits with them by gaining a wide control over the 60% flights of this route between U.S. and U.K.
Overstaffing was another weakness which was hampering the growth of British Airways, so it planned to give voluntary resignation within 18 months to around 5000 employees. Thus reducing the extra baggage of workforce which was damaging the profit margins of the airlines. At the same time the higher management was asked to device and design policies and implement them regarding payouts, pay freezes, payments were restructured, early retirement policies were brought into effect. The management was asked to introduce practices which would promote greater efficiency amongst employees.
Changes in Technology and its effect on organization
During this phase it was found that changing the technology also helped in various ways by influencing the policies and decision making process. With the changing technology British Airways also planned to phase out half of its Boeing 747’s which were bigger in size and were not fuel efficient and planned to replace them by smaller 777’s which were more fuel efficient. They planned to cut down the routes which were unprofitable to them. The number of flights was reduced on these routes.
The policy of “Lounges in the Sky” was introduced to attract leisure driven customers towards best and luxurious airlines. The online sales were lifted with the help of e-commerce (Suneja, 2011).
Changes in Technology
Technological competencies can be measured using eth R&D intensity of any organization (Bhattacharya & Bloch, 2004). It has been found that the external resources of knowledge need to be combined with the internal factors of in-house R&D to get the desired results (Veugelers 1997).Cohen and Levinthal (1989, 1990), said that new knowledge can be generated by using the in-house R&D activities and infrastructure and it also helps in utilising and enhancing the firms capability to use external knowledge which is generated outside the firm. This clearly indicates that the firms which work in high level of technological opportunities get more leverage as they get more incentives to invest in in-house R&D.
Utilizing the technological changes gives the organization an edge over the competitors and helps in developing new innovations which are real technological advances for the firm. The changes in technology also help in contributing towards the external sources of knowledge of the organization. Thus if a firm accepts the changes in technology by changing its decision making it will help in achieving technological competency against its competitors(Vega-Jurado et al 2008).
The direction and rate of technological change is not defined by demand but rather it is defined by appropriateness of technology in the special usage in the industry (Cohen 1995). A strong scientific base of any company leads to new innovations like in case of British Airways.
Acceptance of Change in Technology by British Airways
It has accepted the changes in technology in the best possible manner by involving them in policy changes like earlier the customer had to check-in physically on the airport which consumed time and they had to hire extra staff for checking –in but they made it technologically advanced by adding a internet technology . So now the customers can do online check-in also. They do not have to face the trouble of standing in queue waiting for their turn long before the flight on airport. This clearly indicates that implementing technological changes brings innovativeness and helps an organization to perform better.
The acceptance does not stop here with global warming becoming a serious issue and reduction in carbon footprints a necessity the airline industry has to contribute towards saving environment by being environment friendly. Here British Airways played a major role by being getting accredited for carbon offsetting scheme. This carbon offsetting scheme helps in offsetting carbon emission using various technological measures. Thus reducing the carbon footprints and damaging the environment as less as it can. British Airways thus became the first airline to win the government approval from the Department of energy & climate change for new carbon offsetting Quality assurance scheme.
British Airways has become a pioneer in carbon emission reduction and is setting an example for the whole aviation industry by taking a strong stand on climate change. It has put a cap on carbon emissions to reduce them drastically by 2020 and cut the carbon emissions by 50% by the year 2050. This vision of going green and supporting the climate change of British Airways (BA) makes it a true example amongst all the airlines in the aviation sector. The aviation sector is getting a nice example set by BA to work towards climate change and add some contribution in positive manner. BA has guaranteed that while taking the challenge of reducing the carbon emissions it will also work towards reducing the passenger fares also. Setting the goals of reducing the carbon emission through technological advancement will incur some cost on BA, but it will not divert the cost on passengers, rather find a way so that even the passengers can travel at minimum cost with BA and in eco friendly manner.
Internal Factors affected by change in Technology
The fleet of aircrafts which are technologically sounder and fuel efficient have been added to its fleet, thus strengthening its travelling destinations. Moreover it has access to world class Heathrow International Airport which in itself has all the eco-friendly buildings and runways to reduce carbon footprints using latest technology.
The staffs is also well trained and the cabin crews are given training by using the latest technology and making their staff as well as crew members technologically sound The pilots and cabin crews have flight simulators which is another example of acceptance of latest technology by British Airways. For training its employees the Human resource uses computer based learning, library facilities and audio and video based learning tools for the management staff. Thus internally the Airlines take all the measures to make it technologically competent and use technology innovatively. Like the customers get premium services at every touch and the firm listens to their feedbacks which the customers give online. BA takes the corporate social responsibility also with great significance by reducing the carbon wastes by 50% and following the climate change programme.
External factors affected by change in technology
The external factors that are the customers of BA are being listened too very keenly through taking feedbacks and attending all the customer complaints very promptly. In order to extend their services they do strategic corporate alliances with other firms which are technologically advanced or could be of any help to them and the customers. Like they have strategic alliance with One World, American Airlines, and City Fliers etc. They too have OpenSKy Alliance and partnered with UNICEF to promote “change for good” which will help them in managing corporate social responsibility externally towards the society. They have opened a community Learning Centre at the Heathrow Airport where their customers and other airline passengers learn about many social responsibilities. Externally they have worked towards donating money to Nongovernmental organizations by doing collections from staff and managers. They did the fund raising too from their customers towards good social causes.
Effect of Internal and External Factors on Functions of management
The four main functions of management that is planning, organizing, leading and controlling are also affected by internal and external factors. Thus when the planning committees should make major plans for the company they should very carefully consider the impact of all the factors on these four functions of management to implement all the changes successfully in the organization. Here in case of British Airways they should manage their internal Factors like perfect customer service to manage their customer queries and attend the phone calls by hiring extra staff to give excellent customer service to their loyal customers and information to the new customers. A comprehensive website could be of great help in providing all the desired information to the customers calling in. This will reduce the load on the Human resource and the customer will get all the information anytime about all the flights, delays and schedules, schemes etc. form the website on their fingertips.
This means they just have to plan and create a website with the help of their marketing and Information technology department, they need to keep it updated time to time to give the latest information to their customers. This will help the customer feel satisfied and they will appreciate the services and prompt information delivery, which is usually a hassle to call the airport about flight information and delays. Same way the website should be interactive and take the feedback from the customers which should be monitored so that British Airways gets to know the needs and wants of their customers directly.
Same way the various strategic alliances and travel deals with various hotels in various destinations helps the customer save many hassles. This external factor which is globalization helps British airways gives an edge over its competitors. Like Virgin Airlines have a fantastic combination of packages holiday tours which offer flights along with destination accommodation through alliances with best world class leisure hotels and resorts. This way the customer gets everything at one place and does not have to hunt or look for accommodation when they reach their destination.
If we analyse the Market Position of British Airways by using Porter’s Five Forces Force Strength Competitive rivalry it has been found that BA takes care of both long and short haul flights and there is very less price difference between its price and other competitors. The domestic market is full of many small players, which pose a threat to BA in the short haul flights section.
Recommendations for BA
In order to make the airline the best choice for long haul customers they are trying to improve their premium customers, to increase the profitability. BA needs to provide an outstanding service to its each and every customer at every touch point. This will bring a revolution in the outstanding services to all the customers on all routes and classes get to experience premium services. BA needs to increase its global presence in the major global cities in order to give the best global connectivity to its customers abroad. This way they will be able to create a mark in the top tier global cities. This can be done directly or through alliances and partnerships. Through continuous support of the government and working in close partnership with airport owners in London they can influence the government policy decisions. This way they can build topmost position in London itself.
It has gained competitive advantage through the modern technology of Self Service Check-in (SSCI). The use of IBM kiosks has helped in lowering the cost by about $3.50 per passenger and enhanced the freight processing facilities too. BA has used the largest computer after the defence industry, which has helped in extracting data within two seconds form anywhere. It should search for various technological advantages to reduce the carbon footprints too to create a global impact on all its customers. They can try and use Bio fuels too which will reduce the carbon emission and is cheaper too. They should try to reduce the noise emissions from the aircrafts along with efficient waste management facilities too.
• Suneja, A 2011,Flying into a storm: British Airways, SLideshare.com, viewed on 13 october,2011 , http://www.slideshare.net/cooledu/british-airways-260809
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• Bhattacharya, M., Bloch, H., 2004, Determinants of innovation. Small
• Business Economics 22, p 155–162.
• Cohen,W.M. & Levinthal, D.A., 1989, Innovation and learning: the two
Faces of R&D. The Economic Journal 99, p 569–596.
• Cohen, W.M. & Levinthal, D.A., 1990, Absorptive capacity: a new perspective on learning and innovation. Administrative Science Quarterly 35, p 128–152.
• Veugelers, R., 1997. Internal R&D expenditures and external technology sourcing. Research Policy 26, 303–315.
• Vega–Jurado, J et al 2008, Research Policy, Science Direct.com, Spain, p 617-620.
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