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01/30/2012

British Airways' Business Environment


            British Airways is the United Kingdom’s largest international scheduled airline flying to 148 destinations around the world. The airline is considered as one of the world’s leading scheduled premium international airlines. The airline’s principal place of business is Heathrow. Aside from scheduled passenger services, British Airways also operates a worldwide cargo business (British Airways 2009).

 

SWOT Analysis

            SWOT analysis is a management tool that aids in the identification of organizational strengths, weaknesses, environmental opportunities, and threats (Jones and George, 2003). Through the SWOT analysis, the organization will be able to produce an organized inventory of factors that are potentially relevant to the firm’s strategic situation (Saloner, et al 2008).

 

Strengths

            One of the strengths of British Airways is its acquisition of modern, top of the line fleet of aircrafts. These aircrafts are aimed to improve the airline’s product and service offerings thereby increasing the number of passengers. The acquisition of modern aircrafts also allows British Airways to go head to head with their major competitors and to service wider markets. The company’s human resources is also considered as one of the company’s strengths. As a progressive, high performing organization, British Airways recognizes that engaged employees are more committed to organizational values and more willing to embrace change and improve customer service.

Weaknesses

            One of the weaknesses of the company is its weak marketing campaign and strategy to encourage repeat purchase and customer loyalty. There is a need for British Airways to come up with marketing strategies that will attract more passengers.

Opportunities

            The completion of Terminal 5 is expected to strengthen and improve customer experience, continue to make the business more cost effective, grow British Airways’ operations and make corporate responsibility a prominent part of the business. The company is also in the process f improving its products and services which is expected to attract more passengers.

Threats

            One threat for British Airways is intense competition. The airline operates in highly competitive markets. British Airways face direct competition from other airlines on its routes, as well as from indirect flights, charter services and from other modes of transport. Some competitors have cost structures that are lower than British Airways’ or have competitive advantages such as government support. Another threat is that the airline’s suppliers, in which the airline is highly dependent, are in a high risk of business failure because of the present economic condition. The failure of a key supplier may cause significant disruption to the airline’s operation. Safety and security is also a threat for British Airways. Failure to prevent or respond to a major safety or security incident could adversely impact the airline’s operations and financial performance. Another significant threat is further deterioration in the global economy. If the global economy continues to decline, the financial position of British Airways will be affected.

 

 

PESTLE Analysis

            The airline industry is highly competitive and regulations are heavily implemented. Aside from these, the airline industry also faces different challenges brought about by drastic changes in customer behavior affected by different external factors such as economic condition.

            The PESTLE analysis is used to identify forces in the macro-environment that are affecting the business at present and are likely to continue to affect the business in the future (Haberberg and Rieple 2008). The PESTLE analysis is used as tool for analyzing a company’s macro-environment. Macro-environmental analysis is interested in factors in the wider environment that influence the demand for the product or service offered by a company; demand for the product or service; the manner in which the product or service is distributed; the price that is charged for the product or service; as well as the manner in which organizations compete with each other (Haberberg and Rieple 2008).

 

Political Analysis

            The airline industry is highly regulated. The airline business in influenced and governed by tight regulatory controls. Almost every airline business operation and decision is influenced by regulations and policies. Regulations are applied in the routes that an airline chooses to fly, the business partners the airline works with, the airport slots it uses as well as the fare it sets and the infrastructure costs it pays. Another area which is heavily regulated in safety and security. In recent years, the environmental impacts of an airline is also subject for regulations and policies. Governments around the world introduced a range pf security measures in order to fight the threat of terrorism and illegal immigration. Airlines continue to engage with different governing bodies such as the European Union and national governments to ensure safety and security while causing minimal inconvenience to customers (British Airways 2008).

            Safety Standards are strictly implemented in Europe by the European Union. The International Aviation Organization (ICAO) is one of the governing bodies concerned with safety standards. The European Union, being a regulatory body in Europe published a list of airlines that failed to meet the safety standards set by ICAO. These airlines are banned in Europe (Department of Transport 2009).

Economic Analysis

            The airline business is highly sensitive to any economic downturn. Economic downturn causes business travel, which is considered as the bread-and-butter of the airline industry, to drop significantly. The global recession in 2008, has tremendous impacts on the airline industry. There are a number of factors that affected the business of British Airways – prices increases in oil and commodities, collapse of sterling, unprecedented financial crisis experienced by the United Kingdom. Consumer and business confidence on airlines declined because of rising unemployment, uncertainty in the capital markets, a continuing squeeze on credit, the erosion of household budgets and falling house prices.

Social Analysis

            Significant decline in consumer demands and changes in consumer behavior are being experienced by airlines around the world. This is due to the global recession. Because of the decline of global economy, consumers from premium, business and individual categories are choosing to cut back on air travel expenses. Consumer confidence is also declining. Though many customers continue to see a first holiday as an essential rather than a luxury, most are cutting back on second and third holidays and short breaks.

            Business travelers and individual passengers are choosing trusted airline brands. Customers seek assurance that their journeys will go smoothly. The downturn in the economy is also pushing the consumers to be more price-sensitive. Consumers are looking for value for money, demanding excellent levels of service and high quality standards at lower costs. Consumers also tend to be less loyal than before. They are more willing to try out other or new airlines, which offer real value. Technological advances such as the internet and mobile phones are helping the consumers to make informed choices. Consumers are using price comparison sites and seeking out personal recommendations on service and quality before booking their trips (British Airways 2008).

Technological Analysis

            Internet, mobile phones and PDAs are tools that passengers use in checking-in. Maintaining a corporate website which also handles customer queries and reservations is also becoming a new requirement for airlines. Technological advances that aim to reduce environmental damage caused by airline operations are also increasing as well as innovations that aim to improve service and passenger experience.

            At present technological advancements especially capacity enhancing technologies and environmental mitigation technologies are continuously introduced. Some of the technologies that are being developed now in the aviation industry are Arrivals Management System, Departure Manager System and technologies that address wake vortex effects.

            An arrivals management system (AMS) is an air traffic management automation tool designed to optimize traffic flow in and around the Terminal Maneuvering Area (TMA). There have been developments in the United Kingdom and across Europe regarding arrival managers and associated tools. Departure Manager Systems (DMS) have also been a focus of research and development.    Boeing in the year 2000, has announced the development of aerodynamic techniques which cause the wing tip wake vortices from an aircraft to collide with each other a short distance behind the aircraft, resulting in them dissipating more quickly (Little 2000).

Legal Analysis

            The airline industry is becoming increasingly regulated. The scope of such regulation ranges from infrastructure issues relating to slot capacity and route flights, through new environmental and security requirements.

Environmental Analysis

            Some of the environmental issues that the aviation industry faces are noise, air pollution, land take, water pollution and waste management. Aircraft noise has the potential to affect the quality of life of at least half a million people living close to UK airports. Aircraft, airport vehicles and rod traffic to access airports emit air pollutants, such as nitrogen oxides, fine particles, carbon monoxide and hydrocarbons. Building an airport inevitably takes land away from its previous uses. In particular, it can affect wildlife habitats, landscape and heritage (Parliamentary Office of Science and Technology 2003; Friends of Earth 2006).

            Like many organizations today, British Airways face several environmental issues such as climate change. Governments and policy makers are now creating regulations and policies that will require airlines to curb emissions growth. All airlines have to meet a comprehensive range of local, national and international environmental regulations (British Airways 2007).

 

References

 

Airlines banned from operating to the UK 2009, Department for Transport, viewed 13 July, 2009,

<http://www.dft.gov.uk/pgr/aviation/safety/foreignairlinepermits>.

 

Annual Report 2007, British Airways, viewed 13 July, 2009,

<http://www.britishairways.com/cms/global/microsites/ba_reports/pdfs/BA_Report_2007_08.pdf>.

 

Annual Report 2008, British Airways, viewed 13 July, 2009,

<http://www.britishairways.com/cms/global/microsites/ba_reports0809/pdfs/BA_AR_2008_09.pdf>.

 

Aviation and the environment 2003, Parliamentary Office of Science and Technology, viewed 13 July, 2009

<http://www.parliament.uk/post/pn195.pdf#search=%27uk%20aviation%20industry%20growth%27>.

 

About British Airways 2009, British Airways, viewed 13 July, 2009

<http://www.britishairways.com/travel/about-british-airways/public/en_gb>.

 

Herberberg, A & Rieple, A 2008, Strategic management: theory and application, Oxford University Press.

 

Jones, GR & George, JM 2003, Essentials of contemporary management, McGraw-Hill Professional.

 

Little, AD 2000, Study into the Potential Impact of Changes in Technology on the Development of Air Transport in the UK, viewed 13 July, 2009,

<http://www.dft.gov.uk/pgr/aviation/airports/ctat/changesintechnologyandairtra.pdf>.

 

Pie in the sky 2006, Friends of Earth, viewed 13 July, 2009,

<http://www.foe.co.uk/resource/briefings/econ_aviation.pdf>.

 

Saloner, G et al. 2008, Strategic management, Wiley.

 

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