Business Environmental Analysis of British Airways - Essay Example

Business Environmental Analysis of British Airways Affiliation Table of Contents Task 4 British Airways 4 Organizational Purpose 4 British Airways Different Stakeholders 5 Customers 5 Employees 5 Competitors 5 Suppliers 6 Financial Stakeholders 6 Responsibilities of British Airways 6 Economic System 7 Fiscal And Monetary Policies 7 UK Tourism Industry Growth 8 Reduction of Gas, Or Carbon Emission 8 Energy Bills 8 Competition Policy and Other Regulatory Mechanisms 9 Task 2 9 Market Structure 9 Market forces 10 Environmental analysis 11 Pestle analysis 11 Political 11 Economic 11 Social 11 Technological 12 Environmental/ethical 12 Legal 12 SWOT 12 Strength 12 Weakness 13 Opportunity 13 Threat 13 Five forces 13 Competitive Rivalry 13 Supplier’s Power 13 Buying Power 14 Threat Of New Entrant 14 Threats Of Substitution 14 Conclusion 16 List of References 17 Task 1 British Airways British Airway is the most reputed and oldest airline that operates all over the world. The British overseas airlines corporation is the merger of four airlines to make a most prestigious airline that provides facility to fly for the supersonic passenger planes. The mission of the organization is to build own image in the society and to provide better services in comparison to its competitors (Sinha, 2011). British airways mission is to ensure customer to fly confidently to one destination and responsibly create mindset to be safe on the ground as well as in air. British airways vision is to encourage achieving values that are very important for the organization (Katie, 2013). The organization values to achieve acceptable standards to govern individual behavior in the organization. Organizational Purpose The organizations are running their businesses all over the world. The main purpose of these organizations is to fulfill the basic needs of the human and to give good impact on the world. The businesses usually established in order to prevent or improve the human life. Many organizations in the world understand the management of organization and explicit verity of decisions making to provide direction to the organization (Bryson, 2011). The organizational purpose is to take verify of the decisions for the insiders and communicate with the outsiders. In the private sector, the organization is not part of the government. Whereas, the public sector organization, is owned and operated by the government. British Airways is originally a privately owned aviation organization that was nationalized in 1939. British airways merge the financial losses and industrial operations privately (Heinz & Pitfield, 2011). British Airways Different Stakeholders In an organization, the stakeholder relationship model make connections between the organization and its stakeholders. It is essential for the organization to establish a good understanding with the stakeholder in order to raise the profit and organizational profile. There are many stakeholders of British airways, including customers, employees, competitors, suppliers, media, environmental issues, local communities, financial institutions, shareholders, government etc (Balmer, Illia, & Brena, 2013). Below few stakeholders are discussed. Customers The customers are the major source of earning profits for the organization, and these customers have high impact on the management of the organization. The British airways always try to attract the existing customers and move forward to attract the young or new audience. Employees The British airways have the power to influent the customer through the abilities of the employees. However, the organization needs to manage the satisfaction of the employees. The employees need to address the demands of their cabin crew staff and manage a strong relationship with the employees to manage work. Competitors The British airways is the UK largest airline that yearly provide turnover of 8.99 billion pounds. The British airways is the market leader but it is facing high competition from other airlines including the low cost airline. Suppliers The major suppliers of British airways are the Boeing and airbus. These suppliers have the high impact on the company. The organization is dependent on the online travel agents websites that are convenient and provide cheaper deals. Financial Stakeholders On the British airways, the financial stakeholder has a great impact and interest in management operation. This financial stakeholder could grant or refuse the funds that British airways required for liquidity and gearing ratio. Responsibilities of British Airways The British airways have launched the new and ambitious camping that positioned it as the most responsible airline in the world. In the year 2007, its corporate responsibility department and board focused on cutting down the carbon emission. The company has developed the embedded corporate responsible strategy and lists many stakeholders to manage the destination strategies. British airways have become the responsible business whose key objective is to reduce the carbon emission and in the year, 2010 company reduced around 30% of carbon from its previous processes. The organization another objective is to reduce the cost of flying that directly reflects in the ticket price. The British airways today has become the largest UK airline that offer low cost flights. Moreover, the organizations are supporting the alternative development of aviation fuel and acknowledge the significant progress. The British airline is the responsible airline (Grundy, 2013). The current strategy of the British airline is to make advancement in the mobile and computer technologies. The company is also focused on the expenditure of the business operations and recuperates the global economic condition. British airways currently want to upgrade the customer experience of the business class customers during the flight hours through mobile application services. The company, currently, have the strategy to modernize the fleet while offering new services to customers. Moreover, the company is focused on increasing partners and environmental performance. Economic System The national economies of the countries are closely related with the international economic system through the practices of the international trade, capital investment and transactions. The economic fluctuations transmit from one country to another. The national governments and the international agencies usually affect the policies that affect the tariff, exchange rate, capital and describe the relationships (Hepburn, 2012). From the year 1997 to 2007, UK has increased its growth. The GDP is increasing every year with the average of 3.2%, and unemployment falls from 10.4 % to 5.3% in 2007 (Giudice, Kuenzel, & Springbett, 2011). In 2008, the UK GDP had contracted to 1.1%. In 2009, it had contracted to 4.4%. UK exposed the global financial crisis and integrated the level. In 2008, the debt of UK private sector GDP is very high at 107% GDP. UK’s aerospace industry like British Airways Economic Systems is the second largest system in the world. Fiscal And Monetary Policies UK current interest rate is 0.5%, which is beneficial to businesses. British airways have the opportunity to get a loan to expand business with low interest rate to make a better return (Cukierman, 2013). British airways are the UK largest operating airline, which has started to analyze the effects of with the UK fiscal and monetary policies. The major effecting UK policies are discussed below. UK Tourism Industry Growth The government main objective is to make more money and provide job opportunities to the biggest industries of UK. In order to make money in the underprivileged areas, government is usually funding different public and private ventures like Visit Britain and British airways. It is expected that this activity done by the government can increase the visitors to 4.6 million in the country by spending additional 2.2 billion pounds. This activity could increase the opportunity to produce new jobs. This fiscal policy of the government is encouraged by the British airways that could increase more customers. It is the most beneficial policy of the UK government as earning from many visa application can easily be done. Reduction of Gas, Or Carbon Emission In UK, the biggest source of emissions is the transportation. UK Government and many other countries are working to decrease the affects emission. The travel industry makes most of the gas emission from the transportation activities. British airways had taken a stand to work with the government, to help this cause. This activity provides the company environment friendly suppliers and cut down the emission from the flights per day. This reduction of emission from the traveling industry effectively reduced the cost of the entire traveling (Fankhauser, 2013). Energy Bills Government with the policy of reducing energy expense, which affect the traveling industry, in order to reduce the cost to save money. This practice allows organizations to use less amount of money for energy bills, from the budget. In order to make large profits, British airways is investing to expand the company. Competition Policy and Other Regulatory Mechanisms British airways aim to be active and constructive in order to accept opportunities and to regulate airports for profitable, competitive and sustainable business. The competition policy of UK has strong experimental aspect that allows improving the standards and attaining consequence of less intervention (British Airways, 2012). In other areas of regulation, the goals of British airways is to trade off to balance the interest of users for the transportation services. The license principles are reformed, and legislative are useful to develop license conditions. British airways operate in highly competitive market and understand the importance of the regulatory regime to achieve best possibilities for passengers in terms of price. Airlines need to regulate by the market to compete and make friendly atmosphere with security staff at the airport (British Airways, 2008). Task 2 Market Structure The airline competes with flights, to operate in oligopoly market structure. This market structure is considered to dominate the industry with competing limited number of the airline that is an imperfect approach. According to the British air transport association then there are nine other passenger airlines in UK. It is important to make decisions in order to set price for services the company offers. Usually, the organizations try to establish monopoly market structure in order to control prices in the competitive market. In such market structure, the firms have the power to change prices to generate different levels of output as the firms are the price takers. These firms offer same services as others are offering and change pricing strategies in order to generate profit as well as to compete in the market. Airline industry in most of the countries dominates in terms of size of population (Smith, Grimm, Gannon, & Chen, 1991). The services start from booking, in flight services, flight frequencies, and similar destinations around the world. The oligopoly is it maintains the long lasting position to substantial barriers. The fixed cost approach in the airline industry need to make itself difficult for the new entries in the market as it is required to highly invest in business to purchase aircraft. The aircrafts need sensitively analyze the short haul market and make profits I long haul (Gaggero & Piga, 2011). The aircraft manufacturers should build large and efficient aircraft to increase profitability by serving short haul market. Market forces The market forces shape the organizational responses with the basic principles of economy. The organizations through the supply and demand prediction could provide services to implement the cost strategies (Middleton & Clarke, 2012). These market forces affect the supply chain by making strategies for the company. After the accidental event of world trade center, the customers or passengers were highly concerned about the safety of life while air traveling or flying. For example, the airlines demands difference between summer and winter season has been noted which results in a huge gap. In order to meet the demands, it is essential for the airline industry to promote the tourism activities. Fuel expenses are important but not necessary if the demand is low. Environmental analysis In order to understand British airways environment in order to achieve the sustainable competitive advantages, it is important to analyze the capabilities of the company to manage business challenges. Below some tools are used to analyze the environment of the British airways and possible opportunities accordingly. Pestle analysis Political In airline industry, the security issues need to increase safety and anti-terrorism activities like 9/11 hijack in 2000 and the London bombing in 2005. The regulation of airline needs to make schedule limitations and airline operations in the United Kingdom to measure customer confidence (Carter, 2013). Economic British airways at the time of low value of pound against euro, affected by the oil prices decline during 2007. This global economic crisis had affected both individual and business by cost cutting it has been measured that the passengers are highly reduced over time. Social UK has unhealthy population and the global economic meltdown leads towards unemployment. The expenditure of British airways positively comprises the willing traveling plans for the long vacations. The unemployment at the same time has high bargaining power. Technological Online customers are focused in the price comparison by using internet services. British airline maintain technological awareness but avoiding technological based customer marketing. Large percentage of the individual has to purchase a ticket and check-ins in offline way. Environmental/ethical British airway is increasingly gaining approval for land expansion; this, in turn, create the environmental issues by increasing operational cost. Today, customers environmentally conscious to search ethical environment. Legal Legal problems in the form of fixed price arises which is the consumers preference. The merger of British airways with the American airline legally precedes costly and unnecessary distraction from business. SWOT Strength British airway is the well-known brand that carries UK air travel. The partnership of British airline with united airline made it third largest airline in the world. In the context of financial size and stability, it is the largest UK airline that improved the mobility at airports (Parton, 2012). Weakness British airway has poor relations with their employees, and it has reliability and trust issues in terms of safety and increasing terrorism activities. British airways acceptance of innovation and technology is low. Opportunity British airways has raised the quality system, and it has the opportunity to build international image in the marketing area. Due to the struggling global economy, many competitors are forced to exist from the market. British airway competitors have reliability issues. Threat In order to provide fair competition to small airlines, it is required to restrict international routes for all that generate security threat. The consumers force British airways to regulate energy policies and schedule flights in off peak season. British airways to reduce operational cost need to settle previous strategies. Five forces Competitive Rivalry British airways has high competitive strength and it caters for long and short haul flights established little difference with its competitors. In the direct competitive rivalry, virgin airlines is showing growth and for this reason is opposing British airline merger (Carter, 2013). Supplier’s Power British airways has high strength of its two major supplier Boeing and airbus and makes it high competitive. However, the bargain power of the suppliers is also high. The employees use collective approach through trade union to increase bargaining power. Buying Power The buyers of the British airways are having medium bargaining power. The increasing low cost carriers have also increased the bargaining power of the buyers. The increase of internet usage provides more awareness to customers. Threat Of New Entrant The new entrants needs high capital cost and British airway has low strength in providing significant barriers. Threats Of Substitution The substitutes for the airline companies are travelling through road and sea. Both these substitutes are time consuming and hence customers generally prefer air transport for long distances. Significance of international trade International trade in business is significant for organizations to achieve the competitive advantages. The manufacturers, distributers, agricultural industries have the great impact on the country revenue and international sales through exporting. UK economy is dependent on the foreign trade, and government support the unrestricted free trade (Trebilcock, Howse, & Eliason, 2012). However, champions of international trade like world trade organization and European Union has restricted foreign trade and investment. The UK main trade partner is EU that allows 13 percent of export and 14 percent of import. The strength of British pounds has made UK an attractive investor. Impact of governmental policies and regulation British airways in comparison of other airline industries have long policy vacuum from government that damaged or unsustainable UK economy. Government approach is to develop the policies to encourage the effective operations to meet passengers demand. Government controls immigrations and border and it is required that government’s aviation policies should bind accountability and performance regime. It is required to match the operations of airport in a standardized manner (Fu, Homsombat, & Oum, 2011). UK government policies need to integrate the transport network and plan to invest to on UK airports. Through supporting the regional airports, the economic regularization system delivers outcomes according to the government policies. The regional airports are the international hub that serves alternative capacity. Impact of EU policies The government policies for traveling or aviation in competition of European Union policies for aviation are broadly consistent. The UK government leads in order to develop the EU policies to integrate the airspace planning and management. Full range of European aviation policies will help to judge UK consistent approach to integrate liberalized forces and articulate of absent strategies for the UK aviation. British airways in comparison of the European competitors have increasing disadvantage of the air passenger duty. This distorts international market and destination attractiveness for tourism and businesses in UK (Pitfield, 2011). European countries increased aviation taxes and recover the economic damage. British airways that sell the seats to foreign customers are important to export for the UK economy that is uncompetitive for the EU. The route could not be change by the airlines that creates artificial barrier and the government should conduct economic analysis. Conclusion British airways give priority to implement the strategies that could strengthen the opportunities for the company. It is required that British airways invest on the business to gain high profits. The implementation of new market like enhancing the landing locations could be risky for the organization. It is better to have strong mergers to have strengthening resources. After identifying the PESTLE, SWOT, and Five Forces environmental analysis, it is concluded that British airways is having many environmental issues and it increasingly need to improve the stances through regularizing the policies and saving money. The strategic management improves business and financial level structure through implementing strategic management. British airway has great scope to operate the focus and report the flight schedule for passengers. British airways is holding the strong market position with strong brand image. The company needs to grow global tourism industry to have more profits in the restricted limitations of the energy consumption and limited number of flights. The company must focus on the intense competitors and make good efforts to lead or improve its position in market. List of References Balmer, J. M., Illia, L., & Brena, A. G. (2013). Corporate Marketing: Contemporary Perspectives on Corporate Branding, Marketing and Communications: Contemplating Corporate Branding, Marketing and Communications in the 21st Century. Routledge. British Airways. (2008). Business review continued The markets we operate in. British Airways. British Airways. (2012). 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