Management Economics Analysis of British Airways

This report provides an analysis of British Airways from a management economics perspective, including the company's history, market segmentation, and different market structures. The report suggests that the best market structure for British Airways could be a monopoly due to the low degree of rivalry in the market. The report also discusses government interventions and their impact on the aviation industry.

MANAGEMENT
ECONOMICS- 2

Table of Contents
INTRODUCTION...........................................................................................................................1
Describe the company.................................................................................................................1
Analyse the market......................................................................................................................2
Different market structure in the company history.....................................................................5
Suggestions for the company operate in a different market structure and the government
interventions. ..............................................................................................................................6
CONCLUSION ..............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Economics is the study of knowing all the various factors which are concerned with the
resolving of the the problems that can arise in the business and then make some of the decisions
with keeping in mind all the necessary actions of the company and the micro and macro factors
in the business environment. Demand and supply do have the major play role in the this
conception as it assists in making the preferred choice between the cost and the demand for the
product in the market. Also economics study also helps in understanding the market situation and
make some necessary steps that can be beneficial in future. In this respective report the chosen
organisation is British Airways is a British airline. The work comprises information about the
company's offerings as well as information about the company's history. It comprises the
industry and market segmentation with which the company is involved, as well as the company's
profile since its inception(Zhang, Hassan and Iqbal, 2020).
Describe the company
British Airways was founded in 1919 and was regarded as one of the best and most
important airline companies in the United Kingdom at the time. On an annual basis, the firm
serves almost 39 million people and is considered one of the largest and most modern fleets in
the world, travelling to over 200 locations in 70 countries. The airline and the flag carriers
British Airways was founded in the United Kingdom and is based in London. British Airways,
United Airlines, Virgin Atlantic Airlines, and Delta Airlines are some of the company's primary
competitors.
The corporation British Airways is primarily a full-service airline that operates
internationally. It may also provide a variety of round and extensive fares for global flights, as
well as a large network. British Airways can give services to customers by flying from specific
airports and locations. The business is a private limited company with limited liabilities and is
mostly owned by its shareholders(Vertakova, Kazantseva and Plotnikov, 2020).
The Brand was chosen because it is well-known throughout the world for providing high-
quality service, making it simple to understand demand and supply in the current market,
allowing the company to take corrective action to meet the changing needs and wants of their
potential customers and thus remain competitive in the long run(Alam And et. al., 2020).
1

Analyse the market
The market is defined as the regular meeting place where buyers and sellers congregate to
sell and buy services by the company in order to accomplish the common goal of increasing
profits in a vast activity field. There are many market structures that businesses employ in order
to meet the requirements and desires of potential clients and to establish a positive brand image
in the marketplace. The oligopolistic market is the market segmentation in which the corporation
British airline operates. The oligopolistic market is defined as one in which the trading
enterprises are interconnected, and where some of the firms have the authority to decide on
activities relating to products and services, as well as to dominate the market(Augustynczik And
et. al., 2020).
The aviation sector is referred to as an oligopoly market because of the imperfect
competition that exists, with a limited number of companies that are present and can also
dominate other businesses in the industry. The oligopolistic market is also defined as a market
with a small number of sellers and the ability to differentiate without going too far. In this market
structure, the sellers have a huge and high number of market ads and are unable to ignore the
actions of their competitors(Subedi and et. al., 2020).
They are identifying the single authorities in charge of specific commodities in order to
create the finest brand image in the market while also benefiting the social group. They have a
strong brand image in the market, allowing them to achieve greater profit and growth with ease.
Various type of market structure
It is characterised as a market segmentation based on the nature of the market, the
number of sellers, competition, and the customer behaviour that affects the majority of
purchasers. This also aids in satisfying the demand of potential customers because they are
serving a certain segment, therefore they give it their all by employing the appropriate strategy to
remain competitive. The following are examples of different market structures:
 Perfect competition market: It is a market structure in which a large number of
passengers and aviation departments travel at the same time and there is no single seller
with a significant influence in the agency, so all of the other agencies act as price takers,
offering homogeneous prices for the tickets and services provided to them. Their primary
goal is to increase profitability, and agencies are free to enter and quit at any time.
Because there are no consumer preferences in the market, they are operating on their own
2

principles. As a result, there are no obstacles for the aviation department or the passenger.
They can choose a product depending on their requirements and wishes, which is entirely
dependent on their spending power and consumer mindset.
 Monopoly market:It is a market in which there is a single seller that sets their
discriminating price policy according to their wishes because they have all the power and
are the market's price maker. Consumers have no choice but to pay the seller's
predetermined price because they have no other option. They provide a one-of-a-kind
service and have no competitors in the industry, thus they have an excellent strategy for
surviving in the vast travel department(Shaktawat and Vadhera, 2021).
3

 Monopolistic market: This is a more realistic scenario that occurs in the actual world, as
there are many passengers and sellers, but they do not all provide the same things.
Although the products are similar, they are slightly different. The consumer has several
options for acquiring tickets, and the seller can charge a somewhat higher price since they
have market power, so the seller becomes the price maker in such situations(Barrese,
Phillips and Shoaf, 2020).
 Oligopoly market: Some companies in an oligopolistic market can assist in determining
the source of a company's low or high performance, as well as the law of the competitor,
which can explicitly state the agreement among the restricted competitors. Where the
behaviour has not been corrected, some of the dominant competitors can lead to an
enforcement gasp as well as a reduction in the company's welfare. If all of these elements
are present in the market, there may be certain gaps in terms of enforcement and market
welfare due to the concentration ratio. The marketers and the companies in the oligopoly
4

Markets are extremely responsive by nature, and their services may be lowered to that of
another company operating in the same market, which may be sufficient to keep its
market position(Sanasi and et. al., 2020).
Different market structure in the company history
Because there were fewer companies in the industry in the beginning, British Airways
operated in a monopoly market. The aviation sector has been changing in recent years, and this
has had an impact on customers. The airlines have also implemented various changes in order to
satisfy both consumer expectations and market restrictions The aeronautical companies work
under an oligopoly market framework. Monopoly, economic and non-economic events, as well
as the introduction of a low fare and improvements in technology features, can all help to foster
competition. This could result in a change in market structure as well as a better travel
experience for consumers. Customers can also plan ahead of time with direct flights, and
businesses can boost transparency, which can increase the cost and techniques for securities.
Commercial airlines have carried about 450 million people in their luxury and also for business
journeys, which is claimed to be cost-effective and can help increase deregulations. The
economic and organisational elements can be linked with the force in this scenario. The airline
can also provide virtual protection against bankruptcy, which can occur when the airline and its
business are on the verge of failure(Dzyuba and Solovyeva, 2020).
There are certain characteristics of perfect competition market which is explained as follows:
 Exclusive product: In a monopoly market, the items and services are offered by a single
seller who sets the price, although there are multiple substitute products accessible in the
industry and marketplace.
5

 Obstructions to the entry: In the market, there is a single seller who can maximise the
profits of others by playing the dominant seller position. They can also establish prices
that are higher and more competitive owing to the lack of competition, and their process
can also meet the monopoly the market price that is current.
 Price perception: The perception of the processes that operate in a monopoly market
might cause certain variations in the prices and quality of goods and services over time,
as well as among enterprises that deal in the same items and services. It is also possible to
argue that the monopoly market is competitive, and that it may deliver services to
customers with lower quality and lower pricing(Karatepe, Aboramadan and Dahleez,
2020).
 Profit maximization: The company that deals in a monopoly market structure can also
maximise its profit margin as one of the best and also deals in a less competitive market,
which is also attributable to the increased competition in the marketplace.
 Single dealer: In a monopoly market, the market is managed by a single supplier, who
can also raise demand and supply, thereby improving services. In addition, the single
seller in a monopoly market can also produce and create goods and services according to
the consumer's preferences.
Suggestions for the company operate in a different market structure and the government
interventions.
Because there are few enterprises present and no rivalry in the industry, the best and most
effective market structure for British Airways could be monopoly. Because of the low degree of
rivalry in the market, there are fewer price wars, and pricing of products and services in the
industry can be set by a single seller, allowing earnings to remain more steady(Kells, 2020).
When dealing in a monopolistic market, the biggest gain that British Airways can obtain is a
reduction in the amount of money that it must spend on the research and development process.
Specific government interference is also present, and it is for the benefit of society, as well as for
the advantage of some social groupings. There are many changes occurrences in the aviation
business that are also covered by the industry in the most efficient manner, such as flying rights
and access to slots by societal control These days, the aviation business adheres to a slew of rules
and works in accordance with government directives, which aligns with the compliance of a
6

highly regulated marketplace. The industry is also adapting to the changes by maintaining a
balance between operational activities and organisational performance.
7

CONCLUSION
The above analysis concludes that macroeconomics has a significant impact on the
economy, as demand and supply have a significant impact on the company's overall profitability.
The corporation uses various market structures, such as perfect competition, monopoly,
monopolistic, and oligopolistic markets, to efficiently sustain itself in the target market. Because
there are so many customers and sellers, the corporation operates in a monopolistic market, but
they provide unique products.
8

REFERENCES
Books and Journals
Zhang, J., Hassan, S.T. and Iqbal, K., 2020. Toward achieving environmental sustainability
target in Organization for Economic Cooperation and Development countries: The role
of real income, research and development, and transport infrastructure. Sustainable
Development, 28(1), pp.83-90.
Vertakova, Y., Kazantseva, A. and Plotnikov, V., 2020. Green supply chain management as a
tool for transforming the economy in the transition to the sustainable development
concept. Agricultural and Resource Economics: International Scientific E-
Journal, 6(2), pp.37-56.
Subedi, S. and et. al., 2020. Socio-economics of wheat production in Kailali and Sunsari districts
of Nepal. Journal of Agriculture and Natural Resources, 3(1), pp.29-37.
Shaktawat, A. and Vadhera, S., 2021. Risk management of hydropower projects for sustainable
development: a review. Environment, Development and Sustainability, 23(1), pp.45-76.
Sanasi, S. and et. al., 2020. Making sense of the sharing economy: a business model innovation
perspective. Technology Analysis & Strategic Management, 32(8), pp.895-909.
Lund, P.D., 2020. Improving the Economics of Battery Storage. Joule, 4(12), pp.2543-2545.
Kells, S., 2020. Impacts of COVID-19 on corporate governance and assurance, international
finance and economics, and non-fiction book publishing: some personal
reflections. Journal of Accounting & Organizational Change.
Karatepe, O.M., Aboramadan, M. and Dahleez, K.A., 2020. Does climate for creativity mediate
the impact of servant leadership on management innovation and innovative behavior in
the hotel industry?. International Journal of Contemporary Hospitality Management.
Dzyuba, A.P. and Solovyeva, I.A., 2020. Demand-side management mechanisms in
industry. Journal of New Economy, 21(3), pp.175-195.
Barrese, J., Phillips, C. and Shoaf, V., 2020. Why do US public companies continue to join the
UN global compact: Ethics or economics?. International Studies of Management &
Organization, 50(3), pp.209-231.
Augustynczik, A.L.D. And et. al., 2020. Socially optimal forest management and biodiversity
conservation in temperate forests under climate change. Ecological Economics, 169,
p.106504.
Alam, M.K. And et. al., 2020. The influences of board of directors and management in Shariah
governance guidelines of the Islamic banks in Bangladesh. Journal of Islamic
Accounting and Business Research.
9