Should we retreat from the shot-haul market?
Retreat • Why? • How? Fight •Why? •Financial •Operation •Marketing •Human Resource •How?
Copyright © 2009 FreeWay Consulting, all rights resvered
Background
Question
Analysis
Solution
Implement
Forecast
Competitive Position of BA
Strength
•High-end brand image •Scale effect •Leading the Long-haul market •The most comprehensive network •One world Alliance •Good performance at Capital strength •Long history
Financial Marketing management and (Go to market) risk control TARGET
86% of employees are from UK
High salary per person
High labor cost
Potential expenses
Faced labor negotiations with unions in 2006
Culture
Structure
Copyright © 2009 FreeWay Consulting, all rights resvered
Background
Question
Analysis
Solution
Implement
Forecast
Alternative Plans
Retreat
• Give up short-haul • Focus on long-haul market which is more profitable.
Acquisition
• Merge low-cost airlines such as Esayjet • Incorporate our short-haul business with the low-cost airlines. • Rebuild a new low-cost airlines.
Indepenቤተ መጻሕፍቲ ባይዱent Business Units
• Establish two independent business units which focus on short-haul and long-haul segments respectively. • These two units can executive different competitive strategy.
Fight or Flight？FIGHT！
FreeWay Consulting
Content
Background
Question Raising
Case Analysis
Alternative Plans
Plan Implementation
Forecast
Copyright © 2009 FreeWay Consulting, all rights resvered
Copyright © 2009 FreeWay Consulting, all rights resvered
Background
Question
Analysis
Solution
Implement
Forecast
Competitive Strategy
Target market
Long-haul: Differentiation
Passenger load factor
Species
72.4%
15
Low passenger load factor refers to low income
Cause large expenses of upkeep and training
Copyright © 2009 FreeWay Consulting, all rights resvered
Copyright © 2009 FreeWay Consulting, all rights resvered
Background
Question
Analysis
Solution
Implement
Forecast
Problem Breakdown
How to respond to Low-Cost Airlines? What is our competitive strategy?
2000-2005
• • • •
Take measure to improve performance Leading little progress From loss to breakeven in short-haul market High operation cost •Some indexes like the number of passengers fall behind •The threat from low-cost carriers is stronger than ever •All options were rejected •Should we retreat from short-haul market?
More complexity in ticket ordering than the competitors Good at providing united transportation with different ranges Not intelligentized enough
Little effect with a large expenditure in advertisement Bad communication with the customers
Copyright © 2009 FreeWay Consulting, all rights resvered
÷
TURNOVER
Background
Question
Analysis
Solution
Implement
Forecast
Operation
BA Ryanair
05
Easyjet
05
Index
Average (96-05/05) 6%
74%
Analysis
Low profit margin refers to high cost ratio plex operation system 2. Immature system of problem solving
Operating margin
Background
Question
Analysis
Solution
Implement
Forecast
Marketing（4C’s)
Care about the cost performance Rapid growth potential in area market rather than high-end market Low switch cost High operation cost Lack of power in price-making Large discount in tickets has already weaken the profitability
SWOT
Opportunity
•The expansion of the European Union •The market of low-cost is developing rapidly. •The development stage in Europe is earlier than America.
Threat
•Profitable low-cost start ups •Higher oil price •e-business is decreasing the business travel
Copyright © 2009 FreeWay Consulting, all rights resvered
Background
Question
Analysis
Solution
Implement
Forecast
Financial (Do pont)
Average data rate (97-06)
PROFIT
ROA
ROS
÷ ×
RVENEUE
ROE
×
ASSET
EM
÷
EQUITY
Key information: BA experienced a fluctuate ROE, ROA and ROS, thus ROE is mainly affected by the operation.
Europe/total
UK/total Revenue
Profit
71.88% 37.00%
-31.76%
Euro especially UK have a large market share to lead high revenue and customer resource
High revenue with negative cost indicates the high cost and fierce competition