Order from us for quality, customized work in due time of your choice.
Executive summary
British Airways is one of the largest airlines companies in Europe and around the world. Along with Lufthansa they dominate the market within Europe, but also from Europe to Middle East and North America (Golden 2007). Despite worldwide financial problems, the British Airways position is that of a cash cow in business travel service for passengers. The market growth is slow and in fact is halting, but they got a very suitable position. Even thought the business service flights are going well, the other two types have some difficulties. This is true especially for the cargo flights. Of course they are not in the position of dogs from a BCG perspective but nearer to question marks surely. British Airways launched in March 2008 the holiday package . The brand name of the company is well known in the business service flights sector of the market and it is easier for this package to be incorporated into this sector. The first reason for placing this new package in this area is that business service clients are those types of clients that can afford to pay for their flight service higher fees than the economic class clients. These clients are mostly in travel for business purposes. The launching of this new service, the Holiday Package , aims to furthermore the market dominance of the company in the business flights area. This package is an effort to strengthen even more the good brand name British Airways already has. It aims to make the company became in the mind of customers not just an airline that transports people and cargo from point A to point B but also a company that offers you an excellent way of spending your leisure time also.
Introduction
British Airways is one of the largest airlines companies in Europe and around the world. Formed in 1974, it has experienced a rapid growth in the decade after and now is one of the most prestigious flying companies. It undertook a series of transformations through the 70 and the 80. These transformations culminated in February 1987 when it was privatized by the Conservative government and indexed at the London Stock Exchange and made it 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.
In this report I will analyze one of the current products of the British Airlines portfolio, its holiday package . I will do an analysis of the current situation of the product portfolio of the company, a BCG, or Boston matrix, analysis. After seeing the situation I will direct my focus on the holiday package of the British Airways. What is, are, the target audiences for this product. How is the product positioned in the market and what are its weaknesses and strengths. What marketing strategy is being used for the promotion of this product and what can be done to make the product more successful and profitable? And finally, after talking about the implementation of the above mentioned strategy, the last part will be for the evaluation of the strategy; how to know that it was successful or not.
Companys BCG analysis
BCG Matrix also known as Growth-Share Matrix is strategic tool for portfolio planning and analysis. BCG Matrix is used for current portfolio analysis, portfolio planning and development, and new strategy development ( BCG Matrix 2007).
As we can see there are four quadrants: dog, problem child, star and cash cow.
In which of the positions of the above picture does British Airways fit? Currently, British Airways is one of the leading airlines in the market. Along with Lufthansa they dominate the market within Europe, but also from Europe to Middle East and North America (Golden 2007). Their overall market share has increased by 4% in last year only (Press Release 2008). British Airways has relied much upon the brand name build during the past decades of the last century. It offers two major services: passenger flights and cargo flights. Within the passenger flights, it is well known for its business service but it also has an economic service ( Business Review 2008). According to the 2008 Press Release statement of Barclaycard Business mentioned above, British Airways has a good position in an industry that is facing ever rising difficulties because of the oil prices and the financial crisis.
But despite worldwide financial problems, the British Airways position is that of a cash cow in business travel service for passengers. The market growth is slow and in fact is halting, but they got a very suitable position. Their revenue from passenger flights in total were 7,541£ million in the 2007/08 fiscal year compared to 7,263£ million the year before, and from those more than two thirds were from business service flights ( Income Statement 2008). From the same source it can be noted that British Airways generated 694£ million of after tax profit for the 2007/08 fiscal year, a more than 10% increase than the previous one. And most of this profit came from the type of service described here ( Income Statement 2008). Now let see the situation on the other type of services they offer, economic passenger service and cargo flights.
Even thought the business service flights are going well, the other two types have some difficulties. This is true especially for the cargo flights. Of course they are not in the position of dogs from a BCG perspective but nearer to question marks surely. In comparison to their biggest European competitor, Lufthansa, they have a much lower market share in these types of products (Golden 2007). As can be noted from their financial Income statement (2008) the revenue from cargo is 616£ million in the last fiscal year compared to 600£ million the fiscal year before. And, as stated above, their economic service for passengers brings less than one third of the total passenger service flights revenue ( Income Statement 2008). Golden (2007) notices that the increase in revenue for this type of products is no more than 2% a year. So, these services British Airways offers surely do not generate much cash flow and revenue and are struggling to be there, but certainly they do not only consume cash from the company portfolio. But these products are not the focus of the company and the new service they launched in March 2008 is the probing of this statement.
The Holiday Package
As described above, the business flight service for passengers is the best that British Airways has. It generates the most income. By using a focus strategy on the market they launched in March 2008 the holiday package . This is done because the brand name of the company is well known in this sector of the market. As British Airways is well known for its business services its easier for this package to be incorporated into this sector. The holiday package presumably needs less effort and cost to develop than in the cargo or economic passenger flight sectors of the market. The cash flow generated from the passenger business flights can be used to promote this new type of service. According to Porters Generic Strategy a segmentation criteria can be use to even more successful in a narrow market area. This focus strategy permits you to have low costs for the development of your product/service ( Porters Generic Strategies 2007). Actually British Airways want to be even more dominant in the business service flights sector of the market in order to consolidate their position in the future. They can use some cash already generated from this sector and launch this new service.
If we refer to their website, this new service is segmented into several sub-service areas:
-
Beach holidays;
-
Family holidays;
-
Luxury holidays;
-
Romantic breaks;
The four of them have as their main target business class customers, being those existing customers of the company or new ones. But even within this area there is a narrower segmentation. The first segmentation is focused on customers that intend to take relatively long vacancies, mostly one to two weeks or even more. British Airways does not offer you only the flights but also the company is in contact with different hotels and resorts around the globe. You can choose your preferred destination and the flight (with return), hotel accommodation and place tour are included in the package. British Airways has made deals with well-known hotels and resorts for this new service they are launching, being those in places like Barcelona, Bermuda, Barbados or Dubai ( Beach Holidays 2008). This is true even for family holidays part of the package. The difference is that the company offers you places of resort more suitable to family accommodation around the globe. This shows a classification of the clients in order to address them properly. It would be a marketing mistake to address clients that are unmarried for family service offers, for example (Taylor 2006). For the luxury holidays the company offers accommodation to the most luxurious hotels existing around the globe. And finally, for the romantic break option the company offers flights and hotels (clients can chose between a luxurious, high class and a middle class hotel) in the so called romantic cities of the world ( Romantic Breaks 2008).
Strategy implementation
From the segmentation of the package it is clear that the product is a kind of service addressed to a certain area of the market. More specifically it is placed in the business service area which is also the most profitable for the company. The first reason for placing this new package in this area is that business service clients are those types of clients that can afford to pay for their flight service higher fees than the economic class clients. These clients are mostly in travel for business purposes. But of course even within them there are different categories. The beach and family holiday part of the package is addressed to that part of the business service clients that are not willing to spend much on vacation. The luxury holiday is designated for those clients in possibility and willing to spend much for their leisure. Romantic holiday is also addressed to a relatively small customer potential, the newly married or in-love couples. The last two are small group within the business clients area for this reason the focus of the company is for the first two mentioned sub services of the holiday package ( What the Future Holds 2008). Being an economy of scale the price for luxury and romantic holiday will be much different than the family and beach holiday option. Having less possible customers the first two will have higher prices (especially this is true for the luxury holiday option) but the competition will also be taken in consideration.
It is a mistake to keep prices higher than the competition. The family and beach options will have a lower and more affordable price since they have much more potential customers. The money for the promotion of this new product/service will be available from the revenue of the business flights sector of the company. But the budget needs not be very big, just big enough. This is due to the fact that the company has a strong brand name within the market and the hotels and resorts it has agreement with also are widely known ones. The combination of both secures that the promotion of the product will be easier. Since it is a business service type the slogan to be used, the promotions message should be in relation to the companys business service slogan: Upgrade to British Airways . It should be able to grab attention, excite interest, create desire and prompt action. A possible one can be: Holidays to fabulous places with affordable prices? Than upgrade to British Airways . For the implementation of the strategy signs and displays at the companys terminals can be displayed. Also, informative brochures can be distributed along with the boarding ticket to each of the clients. As mentioned before the focus would be on business class clients but brochures regarding family and beach holidays can be distributed to all the clients throughout the year. This is the strategy regarding existing customers. for new ones a part of the budget available should be used to create a TV promotion to be aired at the beginning of the spring season, March. This TV advertising will focus on the vacation planning that the company offers for individuals or families and that everything is going to be taken care of if they fly with British Airways. Also, just a little after some funds can be used for newspaper advertising, especially in business type newspapers. The combination of what said above should provide a successful promotion strategy of the product.
In conclusion, the question to be answered is how to evaluate the strategy about the promotion of the product? One probing element would be to conduct field surveys and from their result to judge for the performance of this new service. Another would be to see the revenues of the company from that type of service and compare/contrast them with the cost of implementing the strategy for the promotion of that service. But the combination of both techniques would bring a better result. By comparing and contrasting the revenue data the financial performance of the companys product can be evaluated in the direction of market profit. Does this new service bring more profit for the company or not? The second, field surveys are used to evaluate the customers market share for the company. There are different results to be considered here. If the survey shows that a considerable percentage of the existing clients have used the new service then it is very good. If to this is added a considerable percentage increase in new customers attracted from this new service, this type of service is in an excellent position. Even in the case that the profit increase for the company from this new service is relatively not satisfactory enough in comparison to the cost the service has, the company still has an advantage: it has strengthened its brand and its position in the market share.
Conclusions
British Airways is one of the leading companies in the market. The launching of this new service, the Holiday Package , aims to furthermore the market dominance of the company in the business flights area. This package is an effort to strengthen even more the good brand name British Airways already has. It aims to make the company became in the mind of customers not just an airline that transports people and cargo from point A to point B but also a company that offers you an excellent way of spending your leisure time also.
References
2007, BCG Matrix. Mr. Dashboard. Web.
Golden, L 2007. British Airways market share take-off with summer seat deal. AME Infro Limited.
2008, Press Release. Barclaycard Business.
2008, Income Statement. The 2007/08 Annual Report. Web.
2008, Business Review. The 2007/08 Annual Report. Web.
2007, Porter Generic Strategies for Business. The Quick MBA Course.Â
2008, Beach Holidyas. The British Airways Plc. Official Website. Web.
Taylor, W. 2006. Introduction to Management. Ninth Edition. Prentice Hall: New Jersey.
2008, Romantic Breaks. The British Airways Plc. Official Website.
2008, what the Future Holds. The 2007/08 Annual Report. Web.
Order from us for quality, customized work in due time of your choice.