Strategic Analysis of British Airways: A Comprehensive PESTEL, Porter's Five Forces, and SWOT Analysis

This comprehensive analysis delves into the strategic landscape of British Airways, examining its external environment through a PESTEL analysis and Porter's Five Forces model. The internal environment is explored through a value chain analysis, while a SWOT analysis identifies the organization's strengths, weaknesses, opportunities, and threats. The paper concludes with a discussion of the main issues faced by British Airways and recommends strategies for future success.

Strategic Analysis
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Table of Contents
1.0 Introduction..........................................................................................................................2
2.0 UK External Business Environment....................................................................................3
3.0 Internal Environment Analysis............................................................................................7
4.0 Analysis of the SWOT Position...........................................................................................9
5.0 Main Issues Faced by organisation....................................................................................12
6.0 Analysis the business unit of the organisation with any name of the strategy which the
organisation can adopt..............................................................................................................13
7.0 Conclusion..........................................................................................................................15
8.0 Recommendation................................................................................................................16
Reference List..........................................................................................................................17
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1.0 Introduction
The following assignment is based on the strategic analysis of British airways. British
Airways is considered as the biggest airline company incorporated in the United Kingdom.
The organization was founded on 31st march 1974. The UK based organisation provides a
wide range of standard quality travel services to its customers. The task introduces about the
different tools that are used for the external as well as internal market analysis such as
Political situation, economic situation, social factors, technological factors, legal factors, and
environmental situation. There has been introduction of the strength, weaknesses,
opportunity, and threats analysis of the organization. The task introduces about the Porters 5
force model and the internal environment analysis. There are several issues faced by the
British airways evaluated in the assignment.
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2.0 UK External Business Environment
2.1 PESTEL Analysis
British Airways is regarded as the biggest foreign airline company in the UK. It provides
excellent facilities to its customers. The PESTLE analysis of the British Airways comprises
of the evaluation of the external situation affecting the business of airline.
2.1.1 Political situation
Every business is required to be controlled by the political structure of UK. Likewise, the
airline business is also required to comply with several regulations. The airline industry is to
follow the regulations while making use of airport slots, while selecting the directions by
airline, fixing the price of the airfare, working with the business partners as well as payment
of the cost of infrastructure. The government in many nations levy several security measures
in order to fight gains the threat of violence and resolution of the issues related to the
immigration.
2.1.2 Economic situation
An economic crisis is considered as very usual in the business related to airline. Business
travel and tourism has diminished significantly because of such crisis. The introduction of
Brexit has created a severe impact on the economic structure of the United Kingdom leading
to severe inflation in the country. This has also declined the business of British airways and
other airline companies. The global depression in the year 2008 has created an adverse
influence on the business operations of the British Airways. The downturn in 2008 has
enhanced the charges of services and oil, United Kingdom has encountered with serious
economic crisis, the reduction of the value of sterling. Other economic issues such as the
capital market risks, increase in unemployment, attrition of budgets of household activities,
decreasing property rates, etc has declined the confidence of consumers and the airline
business.
2.1.3 Social situation
Every kind of traveller, either the business or general travellers, prefers trustworthy airlines.
They tend to make sure that their journey by flight goes calmly and smoothly. Because of the
downturn in 2008, they are very concerned regarding the flight price. They desire to get
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standard quality services at a reasonable cost. The traveller look for latest airlines that is able
to provide them with the quality services at an affordable rate. The customers search for
different sites that compared price of different airline companies and for trip booking at an
appropriate price.
British company can provide the quality services to its customers at a reasonable rate in order
to gain large customer base. Demographics are a very important factor considered as a social
variable as it accounts for the ages of different travellers. As the average age of flyers
reduces, it is likely that the business prospect of British Airways suffers further with demand
for lower cost travel options.
2.1.4 Technological situation
Nowadays, business or casual travellers make use of the internet services and cell phones for
availing the airline. Hence, airline companies should set up their official websites in order to
provide services to the customers and attending the queries of customers and resolving their
confusions (Dhar, 2015). Nowadays, the ecological improvement technologies and
technologies increasing the capacity are being publicized such as departure management
system, arrival management system several other system attending to the wake vortex
impacts.
British airways can adopt several ecological improvement technologies in order improve the
technology for carrying out its business and attract customers towards its services.
2.1.5 Legislation situation
There has been a progressive control of legal structure of United Kingdom over the airline
business. Concerning the contemporary security as well as the environmental requirements,
British airways is to follow the strict rules and regulation in order to address the issues related
to the infrastructure, slot capacity and the direction where the flights are going to take off and
land (Najam et al., 2016).
2.1.6 Ecological situation
The airline industry is required to face all the environmental factors such as the waste
management, air, water pollution, land take, noise, and many more factors. Likewise, British
Airways is required to manage the different environmental concern such as frequent changes
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in the climate (Ravetz, 2016). In order to manage these issues, the government of United
King has set up several rules and regulation to limit the airline companies towards the
development of emissions and radiations. Thus, British Airways as well as other airlines
companies are ought to comply with the broad range of international, environmental, local,
and national regulations as well.
2.2 Porter’s Five-Force Model Application
It refers to the methodical structure established by the Michael Porter. The analysis of British
Airways is as follows:
(Source: Lohmann, 2018)
2.2.1 Higher level of Threats posed by new entrants
The threats related to the entrants of new companies in the airline industry stands at a low
level. This is because the airline industry requires a considerable amount of capital
investment in order to carry out airline business. It is not possible for everyone to carry out
airline business since it involves high capital investments.
2.2.2 High level of Suppliers strength
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The bargaining power of suppliers stands at a high level. British Airways acquires aviation
turbine fuel, aeroplanes, and several airline companies for operating its business (Côté et al.,
2016). They demand an accurate level of cooperative power in industry, this exercise a
significant influence on the productivity of the business operations of the aviation companies.
2.2.3 Moderate level of Buyer strength
The bargaining power of the consumers of the services provided by the British Airways is at
a moderate level. The seriousness of competition in industry as well as the lack of switching
costs for the customers increases their power of bargaining. Along with that, the consumers
do not have any other alternative to travel thousands of miles in a short period, reduces their
bargaining power. This helps the British Airways to have a sound bargaining power.
2.2.4 Low level of Threat posed by substitute products
Risks from alternative products are low for the British Airways’ business. However, there are
several substitutes of air travel such as sea transport, road transport; still air transport
continues to be the quickest mode of travel. There are no other alternative of the air transport,
which has the capacity of travelling thousands of miles in a short period. The rapid
development of internet technologies and communication systems correspond to the air travel
in direct substitution. For example, current developments in the communication technologies
such as video conferencing are creating facilities of convenience for the people who travel to
different places for business meetings and the conferences. They do not require travelling too
far places for business purpose and conduct meetings.
2.2.5 Competitors’ rivalry
With respect to long distance travel services, the competitors’ rivalry is low. British airways
provide both short as well as long distance travel services by flight. For long distance travel
services, British Airways and other airline companies are similar with respect to prices and
services. However, with respect to the short distance travel services the competitor’s rivalry
is high since there are different companies providing those services existing that is why the
short haul sector is divided. Several rival organizations are switching over to acquisition and
mergers in order to improve their profitability and increasing the competition.
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3.0 Internal Environment Analysis
3.1 Value Chain Analysis
Value Chain analysis, referred as the methodical system, is one of the most important tool
used for internal environment analysis in order to gain a competitive advantage of in the
industry.
3.1.1 Primary activities
Primary activities refer to the activities in the value chain analysis that exercise great impact
and it is simple to scrutinize the impact. The different primary activities of the value chain
analysis are as follows:
Out bound logistics
The outbound includes delivery of finished commodities to the customers for the final
consumption. The British Airways achieves competitive advantage by offering quality
services or facilities to its customers by the help of a broad assortment of airports existing in
world.
Inbound logistics
Inbound logistics is defined as the products collected by the company from its suppliers.
British airways gains competitive advantage in this business’ stage by the help of effective
establishment of continuous relationship with the proper inventory control system and
suppliers.
Operations
This stage involves preparations of the products and services in order to sell it to the
consumers. British Airways can gain a competitive advantage by providing its consumers
with improved services related to the luggage safety, fast check in services, online booking
facilities and many more airline services.
After sale service
These services include product erection activities, addressing to the queries and grievances of
the consumers. In order to gain competitive advantage in the airline industry, British airways
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has established loyalty club cards as well as established effective interaction with the
consumers via different communication channels.
Marketing and sales
In order to gain competitive advantage in the airline industry, British Airways not only
performs marketing activities to its consumers but also to the internal as well as external
stakeholders of its organization. The superior level management of British Airways maintains
a significant budget for the initiative of sales and marketing for the services provided by the
organization.
3.1.2 Support offering activities
The support offering activities refer to the activities that are performed in the value chain
analysis in order to provide support to the prime activities of the business. These activities do
not directly affect the business of the company. However, they can be considered as
extremely essential for the achievement of competitive edge. The different support offering
activities of the value chain analysis are as follows:
Development of technology
Technological development is very essential for the achievement of the competitive edge
since it enhances efficiency in business activities and saves time as well. British Airways has
adopted several technologies in its business operations and intermittently makes investments
in technological innovations in order to provide improved satisfaction to its customers
(Hakansson, 2015). Erection of LED display in its flights for providing service to customers
is an instance of the activity.
Procurement
It refers to the acquisition of the products and services in order to carry out the business
activities effectively. Competitive edge is achieved by the British Airways in this business
stage by the help of its size as well as advantages gained by the help of economies of scale.
Infrastructure of the firm
Firm infrastructure is considered as one of the most important support offering activity that is
for the business activities that includes financial planning, strategic planning, and the
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management information system as well (Dunning, 2015). In this business stage, British
Airways has gained the competitive edge by the help of effective intellectual property,
improved knowledge, and skill as well as ample of relevant information.
Development of Human resource
The employees are the biggest asset of every company and essentially contribute to the
company towards the achievement of the competitive edge in the industry (Erickson, 2017).
British Airways considers it workforce as an effective and essential medium of achieving
competitive edge (Erickson, 2017). In order to improve the effectiveness of employees and
enhance satisfaction towards their job, British Airways periodically develop several
initiatives as well as programs. This increases job loyalty among the employees and enables
British Airways to gain competitive edge.
4.0 Analysis of the SWOT Position
4.1 Strength
There are several strengths of the British airways:
 British Airways enjoys 90 years of successful business experience by providing
quality services to its consumers at reasonable rate. This is the reason why it gains
extreme trust of its customers (Press, 2017).
 It is holding company of “IAGC international airlines”. Being owned by the
company, IAGC, British Airways is considered as the largest airline organization
based on improved financial strength and public image.
 It possesses its own engineering division for maintenance of the aeroplanes its
 British airways is a very tech savvy organization
4.2 Weaknesses
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The weaknesses of British Airways are as follows:
 British Airways possesses large employee union. The breakdown in the bargaining
procedure disturbs the business operations
 Though the organization possesses a widespread existence by owning several
companies as subsidiaries, British Airways is required to expand its business activities
in several developing countries such as India, China, etc
 More than half of the total proceeds of British Airways are generated from the market
of United Kingdom. Such over dependence of the company is considered as a
significant weakness of British Airways
4.3 Opportunities
The opportunities of British Airways are as follows:
 Because of excessive government involvement in business operations of airline
companies, several aviation companies are leaving the industry. This creates big
opportunity for British airways to enhance its market share and expand its business
operations (Pearson, 2014)
 British Airways possesses a significant opportunity of developing the business
activities in different nations, due to the increase in demand for interconnectivity,
growth in foreign tourism, increase in middle class society and emergence of fresh
group of consumers
4.4 Threats
The threats of British Airways are as follows:
 British Airways faces cut throat competition for other aviation companies, that
hinders the development of its business (Mills et al., 2017)
 The UK government severely regulates the airlines business. This creates hindrances
for British Airways towards expansion its business operations in different nations
such as India, China, etc.
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5.0 Main Issues Faced by organisation
There are several issues faced by the organization, creating hindrances in the path of
development of the business operations of British Airways. More than half of the aggregate
financial proceeds of British Airways are created from the market of United Kingdom
(Papatheodorou, 2016). Such over dependence of the British Airways is considered as a
significant weakness of British Airways. Despite the fact, the organization possesses a
widespread existence by owning several companies as subsidiaries; British Airways is unable
to develop its business in other nations such as China, India, etc (King, 2015). There is an
intense competition exiting in the airline business, creating disruptions in the improvement
and diversification of its business activities. There are several rules and regulations are
related to the airline business that is very important for the British Airways to comply with.
Failure in compliance of some rules and regulation by the British Airways increases the level
of government interference disrupts the profitability and business development of the
organisation.
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6.0 Analysis the business unit of the organisation with any name of the strategy which
the organisation can adopt
Bowman clock is defined as a model or strategy that is applied by an organization for the
evaluation of the competitive situation of a company as compared to that of its business
rivals. It is a representation of eight strategies, by the help of which the analysis is made.
Position 1
This position defines the situation where companies provide low quality goods at cheaper
price. This is because their products do not possess any distinctive quality. They are also not
differentiated from other products. No company wants to stand in this position.
Position 2
The position defines the situation where standard quality goods to the customers. This
happens when the companies are launching new products. This causes an urge to attract
customers towards it.
Position 3
This is a hybrid position that involves business situation when the goods having distinctive
quality are differentiated and are available at a standard price.
Position 4
In this situation, the company sell the goods differentiated from the other at an increased
price.
Position 5
This position involves sale of designer or snob goods, whose producers focus on a short
group of customers those who purchase goods for status symbol
Position 6
The position involves excellent quality products and services at an increased price.
Position 7
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This position involves trade of low value, high price goods.
Position 8
This position involves trade of products and services that possess standard price but goods
possessing low quality.
British Airways exists in the Position 6 of the Bowman Clock Strategy since it provides
excellent quality services to its customers by charging a comparatively higher price from the
service receivers.
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7.0 Conclusion
The following assignment concludes that British Airways is considered as the biggest airline
company incorporated in the United Kingdom. The UK based organisation provides a wide
range of standard quality travel services to its customers. In order to gain competitive
advantage in the airline industry, British airways has established loyalty club cards as well as
established effective interaction with the consumers via different communication channels.
The introduction of Brexit has created a severe impact on the economic structure of the
United Kingdom leading to severe inflation in the country. The value chain analysis of
British Airways is critically explained. British Airways is a very tech savvy enterprise.
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8.0 Recommendation
Strategic analysis involves internal and external environment evaluation for business in order
to establish a strategy for the development of business operations. There are several
challenges the British Airways face during operating its business activities. There are several
issues related with the business operations of the British Airways that is that creates
hindrances for British Airways to development business in different countries. It is
recommended to the British airways to fulfil the interests of its employee so that the
employee union could not hinder development of its business. Though the organization
possesses a widespread existence by owning several companies as subsidiaries, British
Airways is required to expand its business activities in several developing countries such as
India, China, etc through different online as well as offline sources. It should not be over
dependent on the market of United Kingdom for operating its business. It should globally
develop its business for enhancing its profitability. British Airways educate it employees to
comply all the rules and regulation related to the business properly in order to reduce heavy
government involvement in its business that hinder its business development. The following
airline organization should satisfy the demands of its and fulfil the interests of its internal as
well as external stakeholders in order gain competitive edge in the industry.
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