Industry Analysis and Adaptation for British Airways Report

This report provides a comprehensive analysis of the airline industry, with a specific focus on British Airways. It begins with an introduction outlining the importance of understanding customer requirements and adapting to market changes, setting the stage for an in-depth examination of both th...Read More

Industry Analysis and
Possible Adaptations

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Use of PESTLE model and Porter’s 5 model..............................................................................1
Analysing internal business environment using Value chain model..........................................3
Reflective writing........................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Around the world there are many companies that deliver their customers with similar
type of products and services. Focus of these organizations is to gain maximum profit. This is
only possible when they are able to understand requirement of customers. Taste and preferences
of customers changes frequently and it is important for the business to understand them are
appropriate steps are taken (Nataraja and Al-Aali, 2011). To carry out the report in appropriate
manner, British Airways is taken into consideration. Cite firm focus on understanding their
customers and delivering them services with high quality. This report covers influence micro and
macro environment on airlines sub sector in UK economy. Further, it covers analysing internal
business environment of British Airways. Lastly, it also includes reflection on usefulness of 5
forces model.
MAIN BODY
Use of PESTLE model and Porter’s 5 model
There are different types of models that are helpful enough to make analysis of the macro
and micro environment. In this context, there are two models implemented and this will help to
make proper analysis of the airlines sub sector in UK economy. More specifically, PESTLE and
Porter 5 forces model is used:
PESTLE analysis: First thing that comes in mind for airlines industry is comfort and
luxury. However, many other aspects also considered in this industry. Many airlines companies
are facing high operation cost and reduced margins and profits. Below given are the 6 factors of
this model:
Political: The type of environment in which airlines industry operates is political in
which customers are favoured. Main reason for this is that safety of people is paramount and
there are strict regulation followed so that (Asrar, Ali Omar and Syed, 2017). Apart from this
passengers can push themselves towards other airlines as the type of services delivered will be
similar but the cost will different. As per the type of perception that is carried out by individuals,
they prefer to get services that are delivered to them at low cost but high quality.
Economic: Due to the terrorist attack increases has high negative impact over the
business of airlines. Apart from this, the prolonged recession, changes in prices of oil and
imminent global slowdown and considered to be the economic factors that are negatively
affecting the business operations of airlines. It is important for airlines industry to cope up with
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high fuel prices, high competition, labour demand, etc. When these type of condition arise, then
there are conditions in which the price of services increases so that these costs can be met
(Ancell, 2016).
Social: There are major social changes that are identified due to change from millennial
generation’s emergences into customer’s class. The demand of customers has raised
tremendously. In this context, there are frequent changes that have to be made so that they are
able to satisfy the requirements of service users. In order to meet up the requirements, it is
important for the airlines to stabilize the cost.
Technology: With time, there are many changes has taken place in relation with
technology. It is important for the airlines industry to make sure that new or updated technology
should be used so that high quality services are delivered (Abdi and Sharma, 2010). When these
are not done, then it becomes difficult for the business to satisfy customers. By using advanced
technology, the use of fuel can be used effectively and thus the cost of services can be reduced.
Legal: In recent years, there are many lawsuits that have raised on the side of both
customers and employees. Further, the regulators are very conscious and strict towards the
airlines industry. Apart from this, legislations are helpful enough to make sure that customers
and employees get proper services and all their needs and requirements can be satisified in
appropriate manner.
Environment: Environment of the countries play vital role in airlines industry. In this
context, when the climates of the countries are not favourable, then it becomes difficult for the
business to deliver their services. Apart from this, the airlines need to make sure that all the
services that are delivered by them are effective enough in which customers are satisfied.
Porter five forces: Unique services are delivered by airlines industry. With huge level of
convenience, passengers are transported and this cannot be delivered by any other industry.
Below given are the five aspects that are covered in this model:
Bargaining power of buyers: There are two group of buyers, first are the individual flyers
and other one is the buyers. Individual flyers are the people who buy plan tickets for number of
reason like personal or business reasons (Pringle and Huisman, 2011). On the other hand, buyers
are the online portals and travel agencies. Second group work with many companies in order to
deliver customers with best flights possible. Both these groups focus on making purchases based
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on the place they are willing to travel and its cost. Buyers are required to deliver all type of
information so that they are able to satisfy customers.
Bargaining power of suppliers: Major suppliers of airlines industry arte the airplane
manufacturers. Airbus and Boeing are the top two manufacturers. It is important for the airlines
companies to select the most appropriate and suitable suppliers so that they are able to get the
materials in low price (Magretta, 2011). This way, it becomes favourable enough to make sure
that low price for the services can be delivered. For a firm to make a plan is around 200 million
dollars and so it requires making sure that proper planning of budget is done so that purchases
can be done.
Threat of New Entrants: There are two aspects in this factor. One is the condition when
there are extremely low switching costs. Second one is when there are no proprietary services or
products involved. In airlines industry the threat of new entrants is low (Porter and Heppelmann,
2014). There are high costs involved in order to establish a new business. Further, there are low
switching cost in customer tend and brand. In this context, customers do not prefer to trust over
the firm which they are not sure of and so that the rate of new entrance is low.
Threat of Substitutes: The rate of threats for substitutes is medium. There are many other
sources of transportation and these are used by customers depending upon their preferences.
However, it is can be stated that the fastest way for reaching any destination is through airlines
industry (Porter and Heppelmann, 2014). More specifically, there are substitutes like car, bus,
train, etc. of airlines industry. However, the cost is dependent on the total distance that has to be
travelled by a person.
Rivalry among existing players: Rivalry in airlines industry is intense due to many
reasons. It includes reasons like the industry is very stagnant, it seems to be in mature stage of
business cycle, competitors stay for long run. Further, the costs for the fixed cost are high in this
industry. Further, the rate of profit that is developed by this industry is high as for most of the
people flying is important.
Analysing internal business environment using Value chain model.
British airways is the most renowned company which is operating all over world with
domestic and international flights as its main product and service. This is coming into airlines
industry of UK that is also known as market leader of airlines industry of UK. It is having main
share of market within UK and which means there is very tough competition in market. Both
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internal and external environment of industry is changing and helping in attaining of competitive
advantage to company. However, company is focusing majorly on delivery of most effective
service to customers which will thus be helping in competitive advantage to company.
The internal environment of British airways include employees, owners, shareholder and
management. While external include like suppliers, customers, government, etc., it becomes very
much important company is analysing correctly that who would be including within company.
Culture of British airways will also included within the part of internal environment which will
be like that of organisational structure of company (British Airways Value Chain Analysis,
2018). Basically this culture of company is based upon apathetic one this means that company is
adaptation of new policy which will be changing to include customer in their process of policy
formulation.
Illustration 1: British Airways Value Chain Analysis
This will be based on value chain model of internal business environment analysis will be
used so that environment could be analysed in order to see for competitive advantage. There are
tow distinctive part of this model which are primary and support activities as shown in above
diagram.
Primary analysis:
Inbound logistic-
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All service which are primary part of British airways like that of timely delivery of fleet,
wide range of other products and that of catering products in planes are part of inbound logistic.
It is the duty of company that they are ensuring the cleanliness and freshness of food which is
been served to its passengers while they are boarding (Wild, Wild and Han, 2014). All the
suppliers of company and relationship with them must be taken good care of on the side of
British Airways by this they could ensure that all equipments and tools which they are requiring
is been available.
Operations-
British airways is working in about 400 destinations of world which means that there is
very extensive level of work which is going on within company. So operational work of firm
would be very much involving customer service because of large base of customer. Operational
work which company is been involved is very much tedious involving customer security, quick
service ot them, online booking of tickets.
Outbound logistic-
This will be including the ready made products which are been given as per the parts of
customer consumption mainly this part is related to manufacturing or production companies as
they are been involved in making or production of products. So in British airways the service
which they are giving is the only part which will be known to as outbound and inbound logistic.
Firm is having its operational work in almost 80 country of world so the service like customer
and luggage handling would be included within the service part of company.
Marketing and sales-
The main aim of company is to have their focus on which quality of service they are been
given to customer i.e., it must be of the best one (Cavusgil, Knight and Rose, 2014). So company
is following that kind of marketing and sales strategies which would be easily targeting potential
customer and keeping their brand value above any other company. Marketing mix and marketing
plan must be employed by British airways which will be focusing on making company more and
more close to customers.
Service-
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This will be including both after and before sale service to customers this will be aiming
at good value of service and quality as well. After sale service of British Airways include
product installation and complaint handling of customers. This service will be very important
that company has recognised firm will be gaining competitive advantages within industry under
this they have started following the scheme of loyalty club cards (Pinto, 2015). Within this
process they are engaged in regular communication with all important customers via variety of
channels that are been used.
Support activities:
Firm Infrastructure-
Company is having its headquarters at UK which was founded in the year 1974 and
currently having about 183+ destination to fly. Infrastructure of British airways is very much
pleasant company is been operating in about whole world which means that company is having
wide range of products and service which they are offering ot huge amount of customers each
day.
Human Resource-
Recruitment and training of employees who are working within organisation this is the
part and power of human resource management (Cavusgil and Knight, 2015). There are almost
40000 employees are been employed including 15000 cabin crews, 5500 engineers and 3600
pilots. So managing them and their training is the work of HR management only.
Technology development-
There are about 5500+ engineers who are working within company this means that
technology development of company is very much focused and been developing each year. This
will be most important part of British airways this will be telling that employees and customers
need to be very much influencing on the part of technology advancement.
Procurements-
The suppliers who are important part of company need to be very well regulated which
means that equipments or tools which are needed by firm should be used and supplied at correct
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time (Zander, McDougall-Covin and Rose, 2015). This will be lowering down the cost and time
of wastage of company.
Reflective writing
Porter's five forces can be used in the context of determining the external business
environment of British Airways (Buckley, 2016). External factors are those factors which
operates outside the organisation and affects the operational activities of the venture. I have
analysed the below mentioned five forces for British Airways in order to determine its affects on
the venture related functions of cited airlines. Bargaining power of customers: With a detailed analysis conducted, I have concluded
that the bargaining power or force of customers over the BA is comparatively high. This
is because, the services that are being provided by the mentioned venture are directed
towards customers only. Their preferences as well as demands affect the business and its
revenue in a wider way. I have analysed that, if the venture increases its rates, the
customers may start preferring other airlines over the concerned BA. Bargaining power of suppliers: I can conclude with the analysis undertaken, that, the
bargaining power of suppliers in the context of British Airways is considerably moderate.
This is because, there are fewer substitutes available in then market for mentioned firm
for its requirements relating to fuels, food and beverages, etc. which are considered to be
as the core components for the organisation to undertake its operational functions. With
my analysis, I came to know the fact that BA has always tried to maintain a collective
bargaining system with its suppliers, but, it has failed many a time in the same. New entrants threat: Entry of new firms in the airlines industry, leads to an increase in
the number of competitors for British Airways. With a detailed evaluation of various I
have analysed that, with reference to airlines industry the force of new entrants is
significantly high if a new firm enters, because a new venture who has entered would
undertake differentiation in its offerings on a large scale to attract more customers. This
may lead to a turnover on the part BA's of customers. According to my point of view it
should also be taken into consideration that, new entry of a venture in the present sector
requires numerous differentiations as well as a huge amount of capital to be invested.
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 Rivalry: The rivals refers to the competitors of the venture that operates simultaneously
with the mentioned firm in the airlines industry. As per my opinion, the merger activities
on the part of BA would lead to generation of beneficial results for that company. This is
because, competitors try to steal over the customers of the concerned brands in the name
of competition. An adoption of merger strategy would result in removing this competition
and thus generate more customers for the venture.
 Substitutes: As I have analysed, there are a number of substitutes available in the airlines
industries, which the customers of cited entity may switch over to. This availability of
substitutes, may result in customer turnover as result of a slight changes in the prices or
rates charged. Thus, the force or power of substitutes in the context of BA is
comparatively high.
CONCLUSION
From the above chapters it was concluded that British Airways if they are implying
important factors like that of Porters five force or Value chain model for the analysis of both
external and internal environment of company then this would be very much useful. For this
purpose we could also be employed PESTLE analysis which is one of the best model of external
environment analysis.
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REFERENCES
Books and Journals
Abdi, M. R. and Sharma, S., 2010. An Empirical Study Of Information System For Disruption
Management. In Creating And Managing A Technology Economy (pp. 285-312).
Ancell, D., 2016. Clipped wings: corporate social and environmental responsibility in the
airline industry. Taylor & Francis.
Asrar, W., Ali Omar, A. and Syed, J., 2017. Hybrid Buoyant Aircraft: Future STOL Aircraft for
Interconnectivity of the Malaysian Islands. Journal of Aviation Technology and
Engineering. 6(2). p.5.
Buckley, P.J., 2016. The contribution of internalisation theory to international business: New
realities and unanswered questions. Journal of World Business. 51(1). pp.74-82.
Cavusgil, S.T. and Knight, G., 2015. The born global firm: An entrepreneurial and capabilities
perspective on early and rapid internationalization. Journal of International Business
Studies. 46(1). pp.3-16.
Cavusgil, S.T., Knight, G. and Rose, E.L., 2014. International business. Pearson Australia.
Magretta, J., 2011. Understanding Michael Porter: The essential guide to competition and
strategy. Harvard business press.
Nataraja, S. and Al-Aali, A., 2011. The exceptional performance strategies of Emirate
Airlines. Competitiveness Review: An International Business Journal. 21(5). pp.471-486.
Pinto, J.K., 2015. Project management: achieving competitive advantage. Prentice Hall.
Porter, M. E. and Heppelmann, J. E., 2014. How smart, connected products are transforming
competition. Harvard Business Review. 92(11). pp.64-88.
Pringle, J. and Huisman, J., 2011. Understanding universities in Ontario, Canada: An industry
analysis using porter's five forces framework. The Canadian Journal of Higher
Education. 41(3). p.36.
Wild, J.J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education Limited.
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Zander, I., McDougall-Covin, P. and Rose, E.L., 2015. Born globals and international business:
Evolution of a field of research. Journal of International Business Studies. 46(1). pp.27-35.
Online:
British Airways Value Chain Analysis. 2018. [Online]. Accessed through: <https://research-
methodology.net/british-airways-value-chain-analysis/>.
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