This essay cover Unit 1 Exploring Business - Assignment 2. It evaluates the extent to which the business environment affects British Airways, using a variety of situational analysis techniques. Further it explores how changes in the market have impacted British Airways and how the company can react...
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C: Examine the environment in which businesses operate
Introduction and PESTEL analyses on British Airways…………………….…………………….………….….…………..2
Competitors analyses Porter's Five Forces on British Airways……………….….…..………………..4
SWOT analyses of British Airways ………..……………………………………………………….…….…………..5
Internal environment of the company…………………..…………………………………………..……………..7
Risk assessment, health and safety
References………….……………………..……………………………………………………………………………………….10
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Introduction and PESTEL analyses on British Airways
External and internal are the two main types of business environments. The internal
environmental factors are within the business and have an impact on the business success and
approach. The company has control over its internal environment while on the other hand the
external environment is made up of a wide range of factors which are outside of the business
control. To have successful business you have to successfully manage the internal operations but
also to see and recognize potential threats and opportunities in the external environment. That’s
exactly what British Airways have done for years and continues to do, and that is the reason why the
company is one of the most successful in the field. First let’s look at the external environmental
factors and what impact they have on British Airways. In order to do that I will do PESTEL analysis on
the company.
Political factors are a big part of any airline company because they have to follow tight
regulations. This regulation can differ depending on the routes the company flies on, the airport slots
the company uses, who the company is partnered with and how much they pay for the
infrastructure. There are also strict roles which cover security and safety as well as the impact on the
environment the company has. Under security falls the problem with terrorism which effects airlines
on a big scale. One recent example is when on the 17 th of September 2017 a British Airways plane
was evacuated at the Charles De Gaulle airport (Paris) because of a report of a direct threat 1. The
plane was surrounded by fire vehicles and armed police because of the security threat. The threat
turned out to be false but this incident effected the reputation of the company as it was all over the
news and social media. It resulted in many frightened and angry customers because the delay of
their flight and the reputation of the company was hurt. As this is an external environmental factor
the company doesn’t have a direct control over what could happen but what they focus on is better
security measures which can prevent incidents like the above to happen again.
Economic factors like recessions can have huge impact on businesses. A good example of that
is the global recession in 2008 when the stock market when through crisis resulting in banks not
willing to lend to each other due to the high risk and potential losses. This recession caused the
value of the pound to drop which made things even worse for the UK business world. This global
recession hit both the air travel industry and the passengers. People couldn’t effort to travel as much
because they had financial problems which resulted in smaller amount of passengers. Business travel
was reduced as well because the companies all over the world were cutting costs meaning they were
looking into alternative ways of communication such as teleconferences. In 2008 the UK consumer
spending sharply decreased because of the recession, reaching its lowest point in 13 years. That
reduces the profit of the airline company, in order to survive British Airlines had to cut flights
because sometimes the plains were almost empty to the point where the flight was actually costing
more then it was making from tickets.
Social – Based on the office of national statistics the UK has an aging population 2. That can be
good news for British Airways and the whole tourists/leisure industry because the older people have
more time to spend on traveling and relaxing. Another important social factor is the employment
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rates in the UK. According to the statistics the unemployment rate has increased 3 in the past few
months which is a big advantage to British Airways as this increases their bargaining power as an
employer. Furthermore, the demand of the customer is increasing over time and this results in the
need of more employees and new facilities which is connected with new costs.
Technology has a huge influence on airline companies. Most people now days buy their plane
tickets online. A recent survey discovered that 80% of online shoppers compare prices on different
websites before making final purchase4. Consumer awareness is high as the customer can find the
best price online. This means that British Airways have to keep their prices relevant to the
competition at all times but at the same time to keep the high quality of their services. The company
has realised that most people buy their tickets online so they have developed customer friendly
website where you can browse all of their offers as well as make e-ticket reservations and check-in.
On the other side they have to be careful not to become entirely online as this will limit their
customer base, especially the older people who are not used to shopping online.
The environmental/ethical factor plays a big role in British Airways mainly because of the
carbon emissions. The company has decided to reduce their carbon emissions by engaging in
corporate social responsibility (CSR). They aim to identify the health and safety risks as well as the
risks associated with the environment. The biggest issue in terms of the environment is the carbon
emitted by the planes. British Airways developed a programme to reduce the negative impact
aviation as on the earth5. This plan includes working on developing new low carbon fuels and
emission saving campaigns as well as working on new airplanes which are more fuel efficient. The
company also runs environmental projects which are supported by the customers. Their aim so to
reduce the net carbon emissions by 50% by the end of 2050. Their environmental strategies help to
attract new investors and customers because people see that the company cares about the
environment. Another problem is the high noise levels around airports. For the people who live near
airports the noise produced by aircrafts is the most significant environmental problem. British
airways have achieved their goal to reduce the average noise created by their planes by 15% by the
end of 2014 and now they have set a new goal which is to reduce it by another 10% by 2020.
Legal factors include all of the legislations and strict regulation control the government
enforces over the airline companies. One of this legislation is the scarce capacity air service
agreements which puts a limit on the number of flights that can be performed on a given route. The
problem with this legislation is that in case of need for more flights because of customer demand
British Airways are not legally allowed to have more flights then the arranged number by CAA (Civil
Aviation Authority). Also it is up to CAA to allocate the rights to operate flights meaning that if CAA is
not in favour of the company, you will get less flights allocated to your company. Another important
set of laws is the employment relations laws as well as the trade unions which make sure that those
laws are followed by the employee – British Airlines. Also, there are mergers limitations laws which
can have impact on the future alliance of British Airlines and American Airlines.
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