Operations Management for Market Leadership

Operations Management for Market Leadership Chapter 1: Introduction 1.1: Overview Operations management is deemed to be an integral part of the day-to-day business process and services delivery of organizations irrespective of the industry in which they are operating as argued by Slack et al (2005)[1]. This makes it clear that the effective use of the resources and technology in order to ensure prompt delivery of the promised services to the customers is not only elemental for the sustainability of the business but also the core deliverable that can be achieved only through effective operations management (Slack et al, 2006[2]). Tourism in the global market has seen tremendous growth with the increase in the affordability and the demand for new destinations in the market from all levels of the market (Yu, 1997[3]). The increase in the level of package tours and the number of holidaymakers visiting places abroad since the dawn of the twenty-first century justifies the aforementioned (Dempsey and Gesell, 2007[4]). It is further evident from the arguments of Dempsey and Gesell (2007) that the increase in the tourism industry is mainly influenced by the level of affordability and convenience provided through flight services across the globe mainly in the form of economy flights. This makes it clear that effective operations management in the tourism industry especially in the airways business segment of the industry is a key element that has a direct impact on the tourism industry in a given geographical location (Barnes, 2007[5]). The growth of economy and low fare flight services to a variety of destinations across the European Union and across the Atlantic further makes it clear that a airline operator cannot achieve market leadership through pricing strategies but only through distinguishing itself from others through quality of service offered. In this report a critical analysis on the use of effective operations management practises to achieve competitive advantage through improving business operations at British Airways Plc is presented t o the reader. 1.2 Aim and Objectives Aim – The aim of this report is to present a critical analysis on the use of operations management concepts to achieve sustainable market leadership and growth at British Airways in the Tourism Industry. Objectives The above aim is accomplished through focusing the report on the following research objectives To present a literature review on the key concepts associated with the operations management in the tourism industry focusing on the airlines business. To present a company profile on British Airways and the company’s operations management. To present a discussion on the areas of development for British Airways and the implementation of the Operations Management concepts presented in the literature review. 1.3: Research Scope and Methodology The scope of the research is restricted to the airlines business segment of the tourism industry as opposed to the airways operations as a industry in itself. This is due to the fact that the case of former involves the operations management from a quality of service perspective whilst the latter also involves the industry standards and regulatory aspects of the business. The research methodology is qualitative in nature as the application of the operations management concepts at British Airways to actually test its viability and the results of the implementation requires higher level of commitment from the company which is unavailable for this academic research. The research hence uses secondary research resources to deliver the research on the chosen topic. 1.4 Chapter Overview Chapter 1 – Introduction This is the current chapter that presents the research aim and objectives alongside a brief introduction on the nature of the research being conducted. Chapter 2 – Literature Review This chapter presents the key concepts of Operations management and their role in the tourism industry focusing on the airlines business segment. The purpose of this chapter is to present an insight on the Operations Management concepts at a theoretical level prior to conducting the company profile of British Airways in chapter 3. Chapter 3 – Case Study This chapter commences with a company profile on British Airways (BA) Plc followed by a detailed analysis of its business operations and the current operations management strategies deployed. The aim of this chapter to present a critical analysis on the issues faced by the operator in the UK and the global market in terms of effective operations management to deliver quality service to its customers. Chapter 4 – Discussion This chapter presents a discussion on the theories and the research presented in the chapters 2 and 3. The discussion presented aims to justify whether the theory discussed in the literature review can be accomplished in case of BA. This chapter also aims to present a discussion on the benefits that can be realised through the implementation of the operations management concepts as part of the BA business operations’ management. Chapter 5 – Conclusion and Recommendation This chapter presents a review of the objectives initially to assess the relevance of the research conducted in relation to the set objectives. This is followed by the conclusions drawn on the research and recommendations for both the intended audience and for further research. Chapter 2 – Literature Review 2.1: Introduction Operations management in the tourism industry is a major aspect that is not only integral to the business of the organizations in the industry but also the core element that dictates the mere existence of the competing organization (Barnes, 2007). This is naturally because of the fact that the operations management forms majority of the service management strategies of any organizations (Barnes, 2007). The prompt and effective delivery of the services promised to the customers is deemed to be the key for achieving competitive advantage in the tourism industry as well as t he hospitality industry as a whole (Fenn, 2008[6]). This makes it clear that the operations management in the strategies of the organizations in the tourism industry where travel by both the holiday makers and professionals are fused together, is critical for successful delivery of the products and services. Unlike retail/wholesale manufacturing industries, operations management in the tourism industry does not have a physical product for delivery through the use of logistics mechanisms but actually depends on the logistics and transportation strategies for customising the products and services to the intended customer (Fenn, 2008). This is naturally because of the fact that the tourism industry is integral to the transportation and logistics management for both the travellers/tourists and baggage handling as argued by Baxter (2007)[7]. This makes it clear that the operations management in the tourism industry mainly in the air-travel business segment is dependant on the application of the logistics and transportation management concepts from a services delivery perspective as opposed to merely delivering the products using a Just-in-Time or similar delivery strategy (Fenn, 2008). Core concepts of Operations management Clark and Johnston (2005)[8] argue that the overall operations management in a given organization predominantly revolve around the following core concepts Product and Service Management Quality Management Inventory Management Logistics and Transportation Management Facilities Management Configuration Management These are discussed in the subsequent sections of this chapter in the light of operations management in the airlines industry. 2.2: Product and Service Management The product and service management in the world of operations management is mainly concerned with the configuration and delivery of the services post purchase by the customer (Wild et al, 2005). This makes it clear that the product management in the case of operations management is the actual process of defining the timelines associated, costs and the service level agreements associated for the delivery of the product as an operations’ service to the customers by a given business organization. For instance, in a online retail scenario where the delivery of the goods purchased by the customers over the Internet is delivered using a logistics service provider by the retailer, the service level agreement of the retailer with the supplier must ensure that the guarantee to the customer is achievable under typical operational conditions of the business (Baxter, 2007). In case of the airline industry the major aspect associated with the delivery of the aforementioned products/services is that the product sold is in itself is realised as a service rendered to the buyer/customer. This makes it clear that the effective management of the operations by the airline operator is critical to ensure that the services purchased by the customers are delivered effectively. For example, a ticket or package tour purchased by a customer as a product is also the service experienced by the customer during the course of the journey. This further makes it evident that the operations management is not merely prompt delivery of the product but actually its appropriate planning and implementation in case of the airline operations in the tourism industry. The product and services management in the operations management of any organization involves three major aspects as discussed below: Definition – The definition of the product or service intended to sell to the customer is the first and most critical element associated with the product and service management as argued by Slack et al (2006)[9]. The product definition in the tourism industry involves the definition of the scope of the product and its intended value addition for the customer or the buyer as argued by Fenn (2008). The product definition also involves the process of ensuring that the requirements of the customers are met with by the service provider in case of the tourism industry. This is because of the fact that the services offered are measured by the customer who directly experiences them as part of the delivery of the product or service as argued by Fenn (2008). This first-hand response element of the customer feedback and their perception associated with the tourism industry is the major element that attributes to the need for a stable product definition. The airline operations in particular is one of the business segments where the first-hand response of the customer is not only part of the services offered but also in terms of the delivery of the service and associated tasks like the baggage handling, check-in and in-flight services including food and beverages offered as argued by Baxter (2006)[10]. Yet another element associated with the operations management in the airline industry as part of the product definition is the extent to which the service provider is prompt in the delivery of the services defined as part of the product. In case of the airline industry this is a critical aspect owing to the fact that the tourists and other travellers using the airline service depend entirely on the effectiveness of the operator in handling the safety and security of the passengers as well as their belongings in terms of checked-in baggage, hand baggage etc. As the traveller on holiday using the airline service to reach the destination will require his/her checked-in baggage in order to continue with their vacation without hindrance, the aforementioned justifies the need for a stable product definition. Another critical aspect associated with the product definition in the tourism industry is the need to ensure that the customer requirements are not only catered for but also to ensure that the services delivered as part of the business process is managed effectively at the operational level as argued by Baxter (2007). As mentioned before the case of tourism industry in general mainly involves the customer experiencing the services delivered first-hand. In other words the operations management in the tourism industry is not a behind-the-screen process but performed in front of the customer itself (Baxter, 2007). Design – The design phase of the product or service involved in the airline industry of the tourism business is a key aspect that involves a variety of long-term, short-term and day-to-day operational decisions as argued by Clark and Johnston (2005). The design phase of the product or the service is deemed as the actual planning involved with the scoping and delivery of the product or service defined at the product definition. In the case of airline operations business, the key elements that influence the design include from long-terms aspects like infrastructure, location, facilities up to day-to-day operational activities like the provision of food and facilities in-flight as well as the handling of baggage at the airport terminals both at departure and arrival ends of the journey as argued by Baxter (2007). The long-term decisions in the operations management of the airline operations involve Location – The location of the airport and the associated infrastructure to ensure the flight handling on a day-to-day basis without affecting the domestic life of the general public is the critical element associated with the product design for the airline operators on a long-term basis. This is evident from the case of many airlines managing the infrastructure and operations of the international airports of key destinations. Lufthansa’s role in managing the Frankfurt Airport in Germany, the management of Dubai International Airport by Emirates and responsibility of managing key international airports in the UK by British Airways including London Heathrow airport are classical examples for the aforementioned. Infrastructure – The infrastructure associated with the setting-up and the continuous maintenance of the airport is the second long-term element that influences the effectiveness of the tourism operations management by any airline operator in a given location. The infrastructure maintenance includes the installation of the security, baggage handling, staffing and mainly the handling of flight take-off and landing at airport terminals to ensure the smooth transfer of passengers from or into the aircraft as applicable (Dempsey and Gesell, 2007). Apart from the aforementioned, the key long-term element associated with the product design is the ability to improve and accommodate to changes in the external business environment in order to cater for the demands from the customers (or travellers) in the target market. The increase in the prominence of cheap flight services for the trans-Atlantic and European Union destinations for tourism is an example that justifies the aforementioned. With the increase in cheap flight services, the density of air-travellers in the western nations to various foreign destinations for vacation has increased tremendously (Baxter, 2007). This increase in the passenger density through airports which is also due to the growth in the affordability and the rising economic growth across the globe as a result of out-sourcing is one of the key long-term elements that influenced the construction of Terminal 5 at the London Heathrow airport. The opening of the Terminal 5 at the Heathrow airport has provided the British Airways flight operator the opportunity to utilise the infrastructure to consolidate the operations of all BA flights (long and short-haul) from a single Terminal at the Heathrow airport thus establishing the company’s brand identity effectively in the UK and global commercial aviation market. Delivery – The delivery of the services in the airline operations industry is the final and the most critical element in the case of the product and service management as argued by Slack et al (2006). Apart from the fact that the customer experiences the operations management strategy first-hand as part of the journey travelled, the delivery element also accompanies the services and facilities offered to the customers as part of the operations and their ability to meet the customer requirements (Slack et al, 2005). Footnotes [1] Slack, N.; Chambers, C.; and Johnston, A.B.R (2005), Operations Process Management: Principles and Practice for Strategic Impact, Prentice Hall [2] Slack et al (2006), Operations Management, Prentice Hall Ltd [3] Yu, G (1997), Operations Research in the Airline Industry (International Series in Operations Research Management Science), Kluwer Academic Publishers [4] Dempsey and Gesell (2007), Airline Management: Strategies for the 21st Century – 2nd Edition, Coast Aire Pubns [5] Barnes (2007), Operations Management, Cengage Learning [6] Fenn, D (2008), Travel Tourism Market – Market Review 2008, Key Note Ltd [7] Baxter, J. (2007), Travel Tourism Market – Market Review 2007, Key Note Ltd [8] Clark, G; and Johnston, R (2005), Service Operations Management: Improving Service Delivery, Prentice Hall [9] Slack, N.; Chambers, C.; and Johnston, R.; (2006), Operations Management, Prentice Hall [10] Baxter, J. (2006), Travel and Tourism Market – Market Review 2006, Key Note Ltd

D1 Business Environment

British Airways stakeholders. Those indivivals who have interest to BA operations are BA’s stakeholders, or any individuals whose action can affect BA’s operation can be stakeholders of British Airways. Stake holder can be either internal or external. Internal stakeholders: are those who are involved with business internally for example owners, shareholders, managers and employees. External Stakeholders: are those who are involved in business externally for example customers, suppliers, local community and government. Owner: Since BA is public Limited Company so it belongs to its share holders. More control goes to that individual who has big share in the company so share holder have a major influence in directing and managing the company as well selecting the board of directors who run the company and set the goals and strategic planes. Every share is marketed in stock exchange market so BA’s share ranges from small to big values. Therefore Shareholder wants their share to be valued higher and higher so, they can sell their shares in better prices if the company is in better economical condition. Shareholders and owners can facilitate and bring more high quality services by putting more money in the company; buying fuel efficient Air planes, investing in high tech technology, employing experienced and qualified managers can bring development in overall functionality of BA. In addition to this, ordering planes like dream liner Boeing 787 by owners of BA would attract and bring glory and reputation to BA. Furthermore investing on fuel efficient planes, on one hand has profit to environment and on the other hand it reduces the expenses of fuel and consequently fares will go down by 20 % as result there will be more customers and more profit to the company and its shareholders. Moreover every measure in which there is intention either to upgrade the company or to down grade the company has its massive impact on the overall function of business by owners. BA owners can select a hard working, honest and reliable directors on the annual general meeting so having an experienced and full of energy board of director can bring a prosperity and achievement to the company as chief executive of BA, Willie Walsh, told the Tories they would make a big mistake if blocking the third runway, we can see that a chief executive is arguing and want to win the argument in will of BA. Employees: are those who are internally and in some extent externally associated with BA. Because we say externally, that local community some time supply the employees of a company. Employees like managers, pilots, flight attendants, IT workers, engineers and etc need a better working condition, secure jobs, suitable salaries, friendly environment from BA. In addition to this employees should be valued by the BA in order to get best result from them. But in return the employees should be hard working, enthusiastic, and polite with the customers, dedicated, committed and looking after BA’s prosperity and well being. If the BA is prosperous and rich they will receive good rewards and salaries. If the BA is not doing well in the term of service which being offered to its customers as a result the company going to lose its fame and credibility and will not be able to support itself and its employees. AS we saw last year, that as result of industrial action by cabin crew which was supported by trade union made a loss of ? 510 million to the BA to which BA . n the other hand employees should be committed , dedicated and they must try their best to follow those rules in which BA’s objectives are set . additionally employees play a major role in progression of the day to day operation of the company by being committed and enthusiastic in what they are employed to . Having hard working and dedicated employees will take the BA toward the success and prosperity in contrast lazy and time killing employee will make losses not only for company but also for himself. So having dedicated employees can going to change the company’s reputation and the way how it develops toward a better condition for example the cabin crew industrial action was taken and made a big loss to BA , if they had not taken that action the BA would not have made that much loss as result of action . Customers: are external stakeholders of the BA, they play a big role by paying to receive services from BA. They want quality services, high standard and effective performance and they wants to be valued by the BA employees during the services being provided by BA. Furthermore customer needs reasonable prices along with quality and effective services, because the British people are so critic and fault finder of services which is being provide by companies. The customer feedback is very important to BA , it should be considered critically regarding the quality of food, quality of services during a flight . The way stewards are behaving with passengers all hese affaires going to be feed backed by the customers as result of all this if the company give a quality and effective services according to customers wish and will so the customers will be again and again with BA ,if the services are poor and short of quality and effectiveness so they will never return to BA any more . as we can see and assess that all BA’s revenues come from its customers through services ranging from cargo to i ndividuals which is being transferred therefore the customers are integral and base part of BA’s stakeholders . I am a regular and multi traveller with Qatar Airways as I have seen high quality hospitality and services during the flights beside cheap prices that every time they give me offers . consequently I am a regular and potential customer of Qatar Airways so in the same way every single customer needs and wants same like me, cheap price and good services. Every action and feedback of the customers going to change the way and performance of the company. The more customers are happy the more money and prosperity going to come to BA, so every action of the customers have its considerable effect on the business. Happy customers mean good business and more profit distressed and unsatisfied customers mean that the company is not doing well it should reconsider about its operation and performance. Suppliers: Can be external stakeholders who provide what the company needs for its routine operation. Suppliers play an impressive role in overall performance of BA operation by providing Planes on which passengers being carried to tissues which are being used to clean and wipe onboard. All of these materials are being supplied and procured by suppliers along with coordination and procurement of BA. As BA has saying that every year a total of ? 5. 2 billion is purchased goods and services from its suppliers. BA is determined to make a stronger relationship with its supplier as well as compromise with them on the payment and trade credit. The more time for trade credit is prolonged the more BA is convenient and determined to pay its supplier enough cash. As BA ‘s CEO said in the chartered institute of purchasing and supply in London â€Å" Close co-operation between British Airways and its key suppliers will be vital in helping the airline to weather the economic storm. He emphasized on finding the new opportunity to seek cost reduction and cost efficiency ways with suppliers. As, BA has introduced some tough measures to its strategic suppliers in recent economic downturn. Now BA and its suppliers are supporting each other by introducing cost efficiency and price reduction scheme , but there would be no change in services ,which BA provide for the people . BA and its suppl ier have come to a term on how to eliminate wastes, improve efficiency and ways to find how to run business smoothly by coordinating within suppliers and BA. The major suppliers who supply the fuel, engines have pledged to reconsider about tier prices in the tough economic recession and its good news for BA. Now a day BA is looking for other alternative fuel like bio fuels with engine suppliers but predicted slow progress. Suppliers need prompt payment as long as there logistical package is delivered or services provided and they want extended contracts and new offer. In addition giving value for supplier might bring more coherence relation between BT and its suppliers. Trade Union: is an organization which supports the employees in terms of better working condition, hiring, firing, payments through bargaining by its leadership on behalf of employees by employers. In UK trade unions supply the workforce, skilled and qualified individuals to companies. For example the pilots, stewards ,engineers and other staff who are necessary for operation of BA is being provided and introduced by Trade Unions , so whatever comes to BA employees in term of salaries , working hours ,firing ,redundancies, job cuts and pensions Trade unions will take decision against BA’s action regarding the employees. Trade unions made an election on which to find that who is going to vote for industrial action and who going to vote for strike, in long and puzzling negotiation between cabin crew, Trade Unions and BA officials finally they voted for a strike . As Consequence the BA revealed a steep loss for the April to June quarter after being hit by cabin crew strikes. Additionally the greatest losses come to BA as result of industrial action which was taken by staff. Finally the figures put the amount of money which BA has incurred as result of strikes and industrial actions cost it ? 44-191 million. For all this reasons Trade Unions has its own influence over the function and operation of the BA business as stakeholder. The above issues which happened on the verge of Ester brought some bad reputation for BA as well as lost some of its credibility among the people who would book for holidays, so BA would have suffered having lost its customers to rival carriers beside being hardly hit by loss of millions as result of strikes and actions by Unions. Government: is an important external stakeholder of BA whose actions and decisions will bring some changes, which will be very useful but some time it can be very destructive for the BA and other companies as well. For instance putting flight bans on UK’s territory as result of ash cloud in which BA incurred an amount of ? 50 million each day. As result even The British Pilot Association called on the government to give a banking system bail out for the BA Company which is in verge of recovery from recession. 50 million loss a day had destructive impact on the economy of BA as result of government decision putting ban on domestic as well as international flights as due to ash clouds from Icelandic volcano on 2010. On July of 2007 BA had struggle with government over single-bag rule which put in place to prevent passengers especially those who wanted to land in Heathrow as transit passenger from carrying more than one bag which was very unfavourable and disliked by many passeng er and made unattractive Heathrow airport for many visitors . As a result the head of BA and its shareholder in AGM criticised the government policy which was a hinder over the way of BA and reduced the number of the passenger and visitor as result. UK government wants a blooming and blooming BA so that to be able to survive, develop and employ more people, pay taxes and carry the flag of the UK to all over the world. Having a successful and flourish BA going to contribute economically to government and gentle governments economical policy will be in favour of BA. Local communities: are the external stakeholders as well as internal because the employees can be local community . ocal community play a major role in the function and operation of a business. Local community supply the business with labour force and some time local community support the businesses in tough times but some time there have been rows and disputes between local community and businesses, as it has been running since a long time between BA and those who are opposing agains t building of third runway in Heathrow. The groups who are against the third runway are Local community, naked bike riders, and NO TRAGE and green energy supporters. The Labour government wanted the third runway to be constructed to boost the economy by accommodating more flights and attracting more transit flights which are crossing Atlantic for American countries. All anti runway campaigners has been supported by local residents who were under flight path and more vulnerable to the consequences from flights. There is more flights in the London sky people doing want their sky criss-crossed by aircrafts and they say there was nearly a plane collision over the Londoners and human disaster and mid-air collision would have caused carnage in the capital. Even Willie Walsh BA’s CEO attacked on the Tories blaming them that they would make their biggest ever mistake by not allowing the third runway to be build but Tories opposed against the third runway as well and saying that the third runway is a horrendous price for the environment. Even though Walsh explained that major businesses like to be connected more efficiently but his opinion was reused by the Tories. As we can see that Local Community has more influence on the business For Example Extraction of third runway by BA and labour government was opposed by Local residents as well as other groups in order to have a good climate and environment. So if the local community had allowed the BA or BBA to build another runway there would have been more flights, more jobs for jobs for the people , more planes would have been ordered for suppliers , more planes would have landed and more and more profit would have gone to BA so in this case BA would have paid more taxes . But Local community along other groups opposed the scheme and no one made the runway there is no job, no flights and no money ,but in return people have nice environment they enjoy living in the vicinity of airport and no longer have fear of bad environment and plane crashes. BY supporting no to third runway campaigners Tories won the attracted more supporter from people who were against the theory.

The Effects Of Hydraulic Fracturing. Are Natural Gas And

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