Management Economics: British Airways Case Study

This document discusses the application of management economics in the context of British Airways. It explores the company's history, industry, products, and services. It also evaluates the factors that influence demand and market equilibrium, as well as the elements that affect the price elasticity of demand.

Management Economics

TABLE OF CONTENTS
1INTRODUCTION.........................................................................................................................4
21......................................................................................................................................................4
1About company and its services................................................................................................4
32......................................................................................................................................................5
1Evaluating demand and market equilibrium.............................................................................5
43......................................................................................................................................................7
1Elements or Factors that influence the Price Elasticity of Demand of products and services. .7
5CONCLUSION..............................................................................................................................9
6REFERENCES............................................................................................................................10
1INTRODUCTION.........................................................................................................................4
21......................................................................................................................................................4
1About company and its services................................................................................................4
32......................................................................................................................................................5
1Evaluating demand and market equilibrium.............................................................................5
43......................................................................................................................................................7
1Elements or Factors that influence the Price Elasticity of Demand of products and services. .7
5CONCLUSION..............................................................................................................................9
6REFERENCES............................................................................................................................10

INTRODUCTION
Application and use of economic study for business or organisational purpose
is recognized as management economics (Bowes and Krutilla, 2014). It is a comparative
advantage subdivision which interacts to applying microeconomics analysis to management and
business unit decision-making methods. This serves as a means of communication among theory
of economics with functional policies. This fills the key differences among "theory and practice”.
In business context economics is used to analyse the market position, brand value and
competitive state of business in global economy. This study includes British Airways’ critical
assessment of economic indicators that is assistive government guidelines. In addition to such an
implementation of various economical principles such as production and consumption, cost
benefit analysis, pricing controls on external factors that could affect the price elasticity as well
as supply inside the corporate sense.
1.
1 About company and its services
History: British Airways PLC is the largest international airline in the world. Via its own
operations and those of its alliance partners, British Airways serves 95 million passengers a year
using 441 airports in 86 countries and more than 1,000 planes. It is based at Heathrow Airport in
London, the busiest international airport in the world, and has a global flight network through
such partners as USAir in the United States, Qantas in Australia, and TAT European Airlines in
France. British Airways' earliest predecessor was Aircraft Transport & Travel, Ltd., founded in
1916. British Airways Subsidiary is the world's second largest air carrier. British Airways
provides 95 million commuters a day using 441 train stations in 86 nations and much more than
1,000 aircraft through its activities and that of its partnership spouses. This is headquartered at
London's Heathrow Airport that second busiest air base, and has a regional airline system with
affiliates including US Air throughout the U.S., Qantas in Australia, and TAT European Airways
in France. Aircraft Export & Fly, Ltd., established in 1916, has been the early ancestor to British
Airways (About British airways, 2019).
Industry, Products and Services: the organisation provides air travel services as
economy class, business class. Long haul and Mid-haul services in which first class, club world
and world travelling services are provided to customers. Recently it refined its products by tying
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up M&S and providing quality food products and services. First category is British Airways '
least comfortable way to experience travel. Club World blends luxury luxury and quality of
service of freedom and power to render every trip special and memorable. If customer should be
travelling internationally or fun, to your signature on it, there's a Club World spot. Club World
London City is the unique product class service that takes travel among London and New York's
economic centre. It's kind of like your private plane. It's the greatest way of travelling from either
the customer's entire fashionable suites to exclusive connections to spa treatments, quick-track
convenience, & excellent service (Premium Services of British Airways, 2019).
Selection of product: The reason of selecting the airline industry is because it retains
specific contribution towards economy of nation. In order to understand the management
economics aspects the given organization fits properly and able to interpret the value of
organisation (Aigner-Walder, 2015). A number of high-value at-inclusive tariffs without hidden
fees depending in your travel needs a basic tariffs * like hand luggage just – suitable for flying
light both-inclusive tariffs for checked luggage and priority boarding, modest free checked bags
for delicious dishes and nacho bar product included in cost of all entertainment ticket prices to
complementary are the few reasons that attracted the nature of business more towards clear
understanding.
2.
2 Evaluating demand and market equilibrium
There are various types of factors which should be focused by the companies while
analysing that the of its products in future will be increased or decreased. With the help of them
it can be analysed that such components may leave negative or positive impact upon sales. While
planning to set prices of an item it is very important to analyse external factors such as
substitutes, preferences, taste and expectations of customers, income level, complement goods
etc. This can help co ordinate that can help deal with their potential future negative consequences
(Ellickson, 2013).
Price of substitutes: The products and services provided throughout the sector in which
British Airways works, there are various any replacements accessible. Small profit paying
companies also deliver the few alternatives that are accessible. It ensures that throughout the
market in which British Airways works, that there's no limit on the profit that businesses can
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receive. Most of these things make the effect of products a weaker market power. Great quality
but far more expensive are the few replacements accessible. Relatively, businesses produced of
sufficient output inside the market where British Airways works compete at a cheaper price to
alternatives. This implies consumers were less likely to move to replacing brands. It ensures that
the effect of alternative services in the market is small. Price of easy Jet, American airlines,
virgin airline and Jet2 are quite competitive to British airways (Lone, Allai and Nehvi, 2013)
Price of complements: Simple-our cheapest rate, which is available on limited routes,
like hand baggage including chair allocation is perfect for flying light. Standard-With checked
luggage and seating availability in anticipation of boarding, the truly representative affordability
rate is perfect for a longer flight. The chair is infinitely adjustable which come with a backrest,
lumbar pillow with lean back that can be modified. Every World Traveller package often
provides a couple additional functionality to make the trip as painless as easy, such as a cosy
pillow with blanket, plus travel gloves, eye mask, tooth brush and tooth paste on demand.
Consumer income: This is one of the key factors that corporate entities will concentrate
on as they intend to sell their services to customers. As disposable wealth is increased, the
demand of a product decreases. A slight change in it should have adverse effects on sales. It is
presently growing worldwide due to a high stage of development. By considering the recent
increasing trends in business and world class services of British Airways it is anticipated that the
income of consumers get increased. But competition is one of the prime reasons of breakdown of
prices of air tickets of British Airways (Mills, 2017).
Consumer taste and preferences: Although providing services is very essential for
businesses to understand customer interest as tastes as it can custom tailor their expectations and
desires that can lead to increased income. On average, elderly leaflets in EU countries force
cruise lines in regards to their target audiences to create new techniques. This is necessary in
light of the fact which increased numbers of passengers and reduced-cost air carrier’s supply
demonstrate a change of attitude towards flights, causing severe image issues of providers
greater-cost passenger service. Clients of carriers consider product value as the key factor while
using carrier service. The increasing competition and behaviour therefore forced airlines to rely
on the airlines ' looks and create strong identities to make modest gains instead of lose market
share (Madar, 2015).
Consumer expectations of price: Both consumers have competitive price demands and
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it's very necessary to evaluate these for all businesses and instead fix prices for the goods that
will be offered to customers. Business is completely dedicated to assist each and every one of its
travellers creates the class services possible manner, whenever a traveller might be. The service
levels that a passenger may experience while flying through British Airways is cared for
properly, and also important information of how businesses may assist if events don't go as
expected.
Demographics: the factor mainly presents the interest of travellers and passengers for
services provided by an organisation. For buyers depending mostly on peer guidance than
traditional marketing while reaching decisions, social media sites become increasingly popular.
Growing concerns are pushing the focus lower, and customers wanting companies to also be
accountable for the climate. There is an excess supply for private plane flights that address the
needs of travellers. These facilities are discount/lavish benchmark and who are fairly flexible,
providing a quick and effective provider from tinier airlines. The consumers are increasingly
com-literate. The introduction of internet and digital technology would allow people to centrally
manage data and transform the way the buy products and services (Ustaömer, Durmaz and Lei,
2015).
It is quite vital for British airways to rely on all of the above-mentioned aspects in effort to
keep production and revenues strong as it can help reduce the risk of declining the luxury class
services of BA. It may also influence the client base and it may result in a reduction in share of
the market. If business executives neglect these factors, it can negatively affect the business's
goodwill. By bringing all of them into evaluation, corporate entities such as British Airways can
reduce the risk of declining profits and revenues of products made by them.
3.
3 Elements or Factors that influence the Price Elasticity of Demand of products and services
Demand Price Elasticity ' Price Elasticity of Demand is a statistical term that represents the
extent of response of market to price movements.' Main considerations also include amount of
customer wealth, the price of the services provided and, in particular, near alternatives for the
resources. A number of factors rely on both the market for a specific product or service To gain
accurate forecasts of the price competition of a consumer's production, it need to closely monitor
all the factors the market. As a generally speaking, a cheaper price for a good contributes in a
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lower amount requested after other factors on demand remain in place. Nonetheless, supply of
labour's price sensitivity ranges from better to great and from store to store. The curve will be as
seen in the figure following, taking into account the three different payment methods of British
Airways. The price demand is considered taut, that implies that supply is evidently evolving for
the different operating techniques. The prices are high for both the low cost product and the
demand is low for the premium value (Pirie, 2017).
Substitution Effects
Luxury vs. Necessity - Understanding that tastes and perspective of a customer is
essential as one could view a commodity as just a convenience while others might see it as a
luxury. For one, most households have a vehicle and want it every day to get to and from school.
Many citizens who are hardly able to buy food or accommodation, though, may find a vehicle a
privilege (Shaw, 2016).
Income effect
Percentage of income: It depends upon the capacity of spending power of customer that
mean if an optimum level of share is being used for demanding goods or services form customer.
As the capacity of customers travelling in first class is counted less than the travellers travel in
economy or basic class (Miyoshi, 2014).
Penetration pricing: British Airways has set some promotional prices on flights to some
special occasion: Christmas gift voucher. The promotional offer for the Christmas known as
British Airways escape ticket offers a perfect present. Domestic and European fares from return:
Low fares to 135 destinations across Europe. Club World business class offer: When flying to
club world business class you can upgrade to first class on a free one way ticket.
Economic pricing: Prices are quite favourable with attractive complementary services as
If customer wants the lowest fare, easy tariffs are best. Once they sign in, and will have an
allotted chair and it requires a attractive provision for hand baggage. For Standard tariffs, you
can use Manage My Booking to compensate to add a checked bag, pick your room, or other
options.
Competitive pricing: British airways also strengthened its brand value over the decades
and have strong brand recognition, particularly in the UK. This airline's main benefit is the
pricing model. It has an average fare and is almost 50% cheaper than other major carriers. It
provides affordable and timely hotel services with several cost-added features that include online
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reservation and transportation facilities. To ensure security, it introduces more modern aircraft.
Easyjet is considered one of the greatest Airline rivals because of its reliable and customer
friendly staff (About British airways, 2019).
Premium pricing: BA's small and medium-sized plans offer superior service at higher
prices, allowing airline to negotiate with several other competitive airlines like Virgin &
American Airlines, and starting price on consumer pricing – the price "is set higher than most to
represent better product consistency and exclusivity." Nevertheless, in past years, the
introduction of small-cost airlines or upheaval has pressured BA to be pro-active. Due to the
economy, BA significantly raised the price of its plane ticket. It was known that perhaps the
corporation had to lower the price of all its airplane tickets, to stay competitive against such
rivalry as Jet, which continued to drive down the cost, with its customer who became less likely
through hardship to pay more money. This has helped attract more people, especially smaller
companies, who can strike deals and satisfy worldwide links (Miyoshi, 2014).
Skimming pricing: The cost of production of one additional traveler is low, since most
of the expenses are primarily in variable air operating costs (cost of planes, diesel, airport duties,
etc.). It was known that perhaps the organization had to raise the price of its airplane tickets, to
stay competitive against such pressure as Virgin, which continued to drive the price down, with
its buyers, who became less prepared to pay higher costs through economic turmoil. BA's sales
rate per traveler in February 2018 was 10.9 percent of its average transaction price BA
significantly increased the price of its roundtrip ticket due to the economy, as per Chris Briers,
travel expert for Commerzbank Markets.
CONCLUSION
It was inferred in the above research study which managing economies could be
described as a method used only to contend with the implementation of various economies-
related concepts, methods and viewpoints. When going to reduce competition for both the goods,
the study of various elements is quite necessary for the businesses. These are replacements,
additions, consumer income level, taste, desires and perceptions, trends, etc. With both the aid of
all of us, it is possible to identify all the negative consequences that may lead to lower consumer
production. Pricing strategies are also defined in the above context.
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REFERENCES
Books and Journals:
Bowes, M. D. and Krutilla, J. V., 2014. Multiple-use management: the economics of public
forestlands. Routledge.
Aigner-Walder, B. (2015) Effects of the Demographic Changes on Private Consumption: An
Almost Ideal Demand System Analysis for Austria. Journal of Economic and Social
Studies, 5, 1, 33-57
Ellickson, P. (2013) Market Structure and Performance. International Encyclopedia of the Social
& Behavioral Sciences, Forthcoming; Simon School Working Paper No. 13-21
Lone, A. A., Allai, B. A. and Nehvi, F. A., 2013. Growth, yield and economics of baby corn (Zea
mays L.) as influenced by Integrated Nutrient Management (INM) practices. African
Journal of Agricultural Research. 8(36). pp.4537-4540.
Mills, A. J., 2017. The Gendering of Organizational Culture: Social and Organizational
Discourses in the Making of British Airways . In☆ Insights and Research on the Study
of Gender and Intersectionality in International Airline Cultures (pp. 37-47). Emerald
Publishing Limited.
Madar, A., 2015. Implementation of total quality management Case study: British
Airways. Bulletin of the Transilvania University of Brasov. Series V: Economic
Sciences. 8(1).
Ustaömer, T. C., Durmaz, V. and Lei, Z., 2015. The effect of joint ventures on airline
competition: The case of American airlines, British airways and Iberia joint
business. Procedia-Social and behavioral sciences. 210. pp.430-439.
Pirie, G., 2017. Air empire: British imperial civil aviation, 1919–39.
Shaw, S., 2016. Airline marketing and management. Routledge.
Miyoshi, C., 2014. Assessing the equity impact of the European Union Emission Trading
Scheme on an African airline. Transport Policy. 33. pp.56-64.
Online
About British airways, 2019. [Online]. Available through:
< https://www.britishairways.com/travel/home/public/en_in/>
Premium Services of British Airways, 2019. [Online]. Available through:
< https://www.britishairways.com/en-in/executive-club/about-the-club?
source=MNVEXC1about_the_executive_club>
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