I. Company’s 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. ...view middle of the document...
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.