Friday, 24 February 2012

Problems encountered by British Airways after the merger

Question 1

What are the Problems encountered by British Airways after the merger in the year 1974-1981?


            After the merging of British Overseas Airways Corporation and British European Airways which formed British Airways, the company had faced many issues and problems.  One of the problems encountered by the company is in terms of cultural context. The consequences of culture become particularly apparent in cross national operations, mergers, and acquisitions, where not only different organizational cultures but also organizational cultures rooted in different national cultures meet (Very, Lubatkin & Calori, 1996; Schneider and DeMeyer, 1991).  When organizational members from diverse cultures interact and, especially, when one culture is required to adopt the methods and practices of the other culture, disruptive tensions emerge.

And this happened between the employees of the two merging industries (BOAC and BEA).  This problem can be described as acculturative stress or culture clash (Very et al, 1996). The costly resulted from the differences of the personnel. For example, the employees of BOAC were described by BEA staff as aloof, and certainly ill-equipped with the knowledge of the intensively competitive airline industries.  On the other hand, BOAC were snobbish with the staff of BEA thinking that flights to the European mainland were for tradesmen while long haul air travel was for the province of the gentleman.  The opposing ideas and beliefs of each of the employee was the cause of the problems encountered by British Airways after the merging.

Another problem or issue faced by British Airways is in terms of its imposed management system.  The British Airways implement a very hierarchical, inflexible and preoccupied with status differences which can be seen in their staff uniforms. The company is also having a problem because of its being rules-oriented.  In addition, another problem that arises is the inability of the management of the new company to see and satisfy the needs of their customers.  The company has given emphasis on its inward-looking management approach and concentrates on retaining its various routes which resulted on unsatisfied customers.

 Question 2

What are the effects of these conflicts?


These problems and conflicts had a negative effect on the new company.  British Airways has been considered as the most notorious company because of its poor service.  Furthermore, the company’s operation has been affected and in 1980 the company had been regarded to have the worst punctuality record all over European carriers flying from UK and voted as the airline to avoid. This also results in substantial loss of the company.

 Question 3

            What is the management changes made within British Airways?


            In order to change its reputation of being an industry with poor services, British Airways had considered major management changes. Known as change management, companies, businesses and working organisations are integrating change into their work system so as to be competitive and be more efficient in satisfying clients or customer needs.  According to Carlopio (1998) change may be referred as the implementation of an innovation, in which the vital role is to improve output through an adaptation of practices. Realizing the value of changing the management system of British Airways to become competitive, the Conservative Prime Minister Margaret Thatcher appointed John King in 1981 to be the Chairman of British Airways. Under the management of John King, he imposed changes including the closure of several routes as well as selling off the cargo service and planes. The company also lay off 20,000 staff as part of the change.

In 1982, Colin Marshall became the Chief Executive Officer of British Airways. During this period, BA was generating its first surplus which is the effect of the cost-cutting activities imposed by John King. This was the time when Marshall had also realized that the organization needs to pay attention on it customer service so as to ensure that the industry will continue to earn profit. In order to initiate such change, Marshall hired Consultants to gather data about staff and customer attitudes. The result of such evaluation shows that there is a significant gap between what the staff is providing and what the customer actually needed. Hence, another management initiative was the change of the system from staff- oriented to customer oriented industry through the creation of “customer is king” culture within the organization.

Marshall also founds out that the staff has an internal problem in terms of having a good and harmonious working relation; hence, he decided to create a more cohesion among the BA staff by implementing the Staff Development Initiative which aimed at deep-seated and lasting cultural change. This also aims on having more effective employees which will provide quality and excellent service among its customers.

This cultural training continued until the late 1990s and in order for the employees to do their job efficiently and to ensure customer satisfaction Marshall also created Awards for Excellence in 1987.  The aim of this initiative is to reward high performers and motivate the employees to always do their best in providing services.  During that year, Brainwaves, a suggestion scheme was also introduced.

Part of the changes imposed by Marshall is its integration with Lancaster University to provide MBA course for its employees. This is a part of the cultural training imposed by the company to make its employees more effective is providing services to its target market.

In addition, the organizational structure of British Airways also changes to a much flatter and slimmer structure. Five sections of the industry are directly reporting to the CEO and eleven profit centres were created. This structural alternation aims to enhance the staff integration and communication, within BA. The performance-related pay was also introduced by the management based on an appraisal system which values the significance of customer service and organizational cohesion. This change also includes major investments in planes, ground facilities and IT in order to adhere to the needs of its customers.

It can be said that the major management change happened within BA is when the industry has been privatized in 1987 and took over British Caledonian Airway in 1988.

 Question 4

How these changes helped the company?


            The main objective of the changes imposed by British Airways is to make the company survive in the marketplace and become competitive in the airline industry.  The changes imposed by the company had helped the industry to become more customer-oriented by providing quality and excellent services. Through these changes, the company has also been able to improve the relationship of the employees as well as the employee-customer relations.  The time-consuming and expensive investments as part of the changes also paid off when BA won the prestigious Business Traveller “World’s Best Airline award in 1989.  The management changes imposed within BA had made the company become more competitive in the UK market. The strategies imposed as well as the human resources management technique has been the key factors why the company had achieved so much and became a strong competitor in the airline industry.

 Question 5

What are the problems encountered by the British Airways during and after the management change?


Although the management change had been able to enhance the competitiveness of the British Airways, this does not mean that the company is free from any other problems and issues. As mentioned above, the management imposed a more comprehensive human resources management through its Staff Development Initiative, however, not all employees had been able to meet the objective of such initiative.  Hence, the problem encountered by BA during and after the management change is with regards to some of the employees.

The problems were attributed to the behavior of some of the employees which causes internal problems to the operation of the industry. Another problem is the libel case of King and Marshall by Richard Branson in 1993. This issue gain negative effect for the company. In edition, the initiative in terms of customer relations also faced problems by 1997 as far as employee relations is concerned. The problem lies on the inability of the management to foresee and predict some problems upon the change management.

Internal problems in accordance with employee relation also arise when the company had included cost-cutting approach within the industry which Ayling called Business Efficiency Programme (BEP). This programme had resulted in cabin crew worries in terms of financial losses and triggered the employees to conduct strikes and rallies. In this event, 300 staff has joined in spite of the intimidation of the management including threats to block promotion or even of dismissal and/or being sued for damages. Another 1500 personnel participated in a mass sick-out which has an overall cost of BA £125 million. This problem was a result of the inability of the management to utilise strategic management system in terms of employee relations.

Another problem arise during the change process, this time because of the initiative of the management of the company to change the brand of British Airways from the familiar red and blue BA logo into a 50 new designs from artists across the globe. The goal of this image change is to make the BA more recognizable into the world market.  However, these cause problems because some of the shareholders did not agree to this idea and find such change as extravagant and unpatriotic.

Another problem that arises is in terms of the increasing customer dissatisfaction of the services offered by British Airways. In addition, because of the inability of the management to handle employees effectively and to show commitment and honest communication, more internal human resources problems arise.  This in return affects the overall operation of the business making the business loss profits and reputation among its target market.

Although, Ayling had resigned, the man who replaced him also faced a lot of challenges and problem and above the difficulties linked with continuing to cut costs at the carriers by downsizing while improving morale. In July 2003, the company has faced problem relating to the introduction of electronic swipe cards for employees to clock on and resultant alterations to rosters.  Because of this unofficial stoppages to 500 flights were being cancelled. This caused a lot of issues and problems within the airline industry and the image of the British Airways had been sacrificed because of these undying problems and conflicts.

 Question 6

            What are the responses of the management of BA to solve these problems?


            In order to solve such problems in terms of having good employee relationship and customer relationship the management brings back its strategy of Putting People First as Putting People First Again. In addition, the management also provides the updated course to all BA personnel. The year 1999 has been a remarkable year for BA because of the problems and conflict faced by the management and all the approaches used to solve such conflicts.

             The company also initiated an e-commerce strategy to increase online sales and provide new innovations like flat beds and in-seat laptop, e-mail, phone and fax connections in business class which increases customer satisfaction.

Question 7

            What lies in the future of British Airways?


            The company is still facing a bigger problem in spite of its initiatives and changes imposed.  In this case, the Gate Gourmet adds up to the cause of the problems in terms of the BA’s brand image. Such dispute has created a notion that the business practices imposed by British Airways is not relevant to what it shows in its corporate images.  With this, the management is now trying to seek some strategies and approaches so as to solve these problems and one of which is thru a marketing communication initiatives.

            In addition, the current management also realizes that the lack of leadership and entrepreneurial competence had been the root of all the problems encountered by the company.

 Question 8

Recommendations for British Airways Management


            It seems that the major cause of the problems encountered by British Airways is due to the unplanned management changes imposed. In addition, the problems also arise because of the inadequate knowledge of its management about the use of strategic management and other management systems. Strategic management is the process of specifying an organisation’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. It provides overall direction to the whole enterprise (Abell, 1999). It can be "viewed as a set of theories, frameworks designed to explain the factors underlying the performance of organisations and to assist managers in thinking, planning and acting strategically" (Campbell, Evans & Stonehouse, 2002).

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