British Airways: A PESTLE Analysis of Macro and Micro Environments

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Desklib provides past papers and solved assignments for students. This report analyzes British Airways' macro and micro environments.
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BRITISH AIRWAYS
MICRO AND MACRO ENVIRONMENT OF BRITISH AIRWAYS
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Executive summary
The negative and positive impacts of the macro environment on the business operations of
British Airways have been one of the most influencing factors for the performance of British
Airways in the market of airlines. These factors have different impacts on different sectors of the
business. These have been briefly studied in the report. After this, in the following section, the
strength and weaknesses of the external environment of the company have been analyzed and at
last, all these are interrelated with each other.
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Table of Contents
Introduction......................................................................................................................................4
LO3. Exhibit the negative and positive effects of macro environment on business operations, by
using recent examples......................................................................................................................4
P4. Ascertain macro environment’s positive and negative effects of business operations
through particular examples........................................................................................................4
LO4. Ascertain specific businesses’ internal weak and strong areas and illustrate their connection
with external macro-factors.............................................................................................................8
P5. Conduct analysis on the organisation for finding out its internal weak and strong areas.....8
P6. Illustrate the ways in which the weaknesses and strengths of the organisation are related to
the external macro-factors of the organization..........................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
In the following description, there will be discussions regarding the effects of macro
environment and the strengths and weaknesses of an organization. The organisation selected here
is the British Airways of United Kingdom. The macro environment of British Airways comprises
of those factors, which are external, and company or organisation does not have its complete
control on these external factors (Shaw, 2016). These will be briefly analyzed in the description
along with the answering several learning outcomes. At last, the description will be terminated
with a short conclusion based on the data described in the whole report.
LO3. Exhibit the negative and positive effects of macro environment on business
operations, by using recent examples.
P4. Ascertain macro environment’s positive and negative effects of business operations
through particular examples.
All the external factors encompassed by macro environment of the British Airways have a great
influence over the business operations of the British Airways (Mhlanga and Steyn, 2017). Due to
this reason, it is required that these factors and their influence on the business operations of the
British Airways should be analyzed. This can be done through the help of PESTLE analysis
method.
Through PESTLE analysis, various macro factors regarding the British Airways like political
factors, economical factors, social factors, technological factors and environmental factors can be
analyzed easily. This will not only analyze the past and present impacts on the business
operations of British airways, but it will also help in forecasting the future long term impacts of
the macro environment on the business operation of the British airways. This will be helpful in
future operations also. These macro environmental factors and their negative and positive
impacts on the business operations of British Airways are as follows:
Factors Explanation
Political Government interference
Foreign influence
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Changes made in government
Political conflicts
Economical Rate of inflation
Economic trend
Changing fuel prices
Competitors prices
Social Demographic
Social influences
Demographic
Customer’s brand appeal
Technological Research & development
Changing technological trend
Technological expenses
Consumers priorities
Legal Trade unions
Consumer protection
Law of employment
Environmental Environmental problems
Energy consumption
Sustainability policy
Waste management
Carbon dioxide emission
Table 1: Pestel Analysis
(Source: Learner)
All the factors depicted in the table above are illustrated in detail in the further description:
Political factors- From the table above, all the political factors related to the macro environment
of British airlines can be overviewed. In the past few years, British airlines have faced much
political and governmental interference in its business. The company has faced and is facing
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many negative consequences due to imbalance in political factors of the macro environment of
the company. The terrorist attacks of the years 2001 and 2005 have affected the confidence level
of the customers of British airlines. All the terrorist activities, which occurred in the past have
influenced the political environments and has resulted in occurrence of crisis and imbalance in
the political field of the country. This has resulted in declines of passengers of international
flights and thus has negatively affected the business operations of the British airways.
Along with these, the interference from government and the strict rules and regulations formed
for the airlines has also affected negatively on the business operations of the British airways.
Economic factors: Due to the decline in economy on global scale, the demand for air travelling
has been declined and thus it has negatively influenced the business operations of British
airlines. The rivals of British Airways have lowered their charges, which has resulted in sudden
decrease of British airways’ customers. Thus, the rate of profitability of British Airways has
declined majorly and thus has negatively affected the business operations of the company.
Social and cultural factors: The change in taste of the customers and their varying preference
and demand from the airlines has brought major transformation in the various airlines companies
of Europe. Due to this, the British Airways must also focus on these areas. The trend of air
travelling has been observed to increase in the recent time due to the lowering prices of air
tickets or flight tickets (Beatriz and Marc, 2011). This has created a dilemma for the companies,
which charge higher amount from their customers. This has created a negative impact on the
British Airways business operations. Along with the pricing demand, there is significant change
of trend observed in the taste of customers regarding the looks of the airlines (Kuhn, 2012). This
has forced the British airlines to enhance its looks of the airlines for creation of strong brand
image in front of the customers.
Technological factors: Due to the changing technological trend all over the globe, there is a great
requirement of advanced and developed technology in each sector. Even the customers of
various airlines prefer most advanced technologies in the airline services. Therefore, this has
resulted in pressurizing the airlines to invest and focus in their technological sectors. The British
Airways has been benefited due to this external factor its macro environment. As the British
airways, uses advanced and developed technology. The company is able to provide better
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technological services in its flight and thus it has gained competitive advantage due to this
external factor (Grundy and Moxon, 2013). Therefore, it is clear that the technological factor of
the macro environment of British Airways has positively affected the business operation of the
British airways.
Legal factors: The legal factors of the macro environment listed in the table above have mainly
created negative impacts on the business operation of the British airways. The most influencing
legal factor was the strength of trade unions. There have been many strike occurred in the British
Airways by the trade unions and on other major strikes took place between the period of 2004
and 2005. One of the most recent union strikes occurred in the year 2010, which lasted for three
consecutive days. This resulted in cancellation of hundreds and thousands of flights by the
British airways. The loss can be predicted without any help of accurate data. Due to such event,
the company has become aware of the powers of unions. The consumers of the British Airways
also lost faith in the company. The situation was so worse that the British Airways had to rent
flight and planes from its rivals, which is one of the most possible competitive disadvantages for
the company. The company suffered a huge loss in the business. All these factors clearly depicts
that the business operation of British Airways was very negatively affected by the legal factor of
its macro environment.
Environmental factors: Ecological factors have become one of the most significant concerns for
every kind of organizations in the business sectors. The practice of sustainability has gained
drastic recognition in the recent years. Due to which, the airlines have started to implement
sustainability practices in their business operation. However, the British Airways had started
practicing sustainability in their business operations more than 20 years ago (Talamini et al.
2013). The company has developed an excellent sustainability policy and it has been including
most advanced technology for lowering the negative effect on the environment due to the
activities and business operations of British airways.
The company has emphasized on the areas like lowering of carbon dioxide emission from the
flight, reducing noise from the engines by replacing them with the most advanced engines and
thus lowering the noise pollution and along with these, the British Airways have also been using
alternative and more eco-friendly fuels. Apart from these practices, the British Airways company
has also formed an objective of waste reduction and the waste disposal in landfills for betterment
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of the environment. In these ways, British Airways has focused on lowering the negative impact
on the environment through practicing sustainable operations in its business (Ho, 2014).
These were the negative and positive impacts of the elements of macro environment of the
British Airways along with the example of several incidents.
LO4. Ascertain specific businesses’ internal weak and strong areas and illustrate their
connection with external macro-factors.
P5. Conduct analysis on the organisation for finding out its internal weak and strong areas.
It is very crucial for any organisation or company to analyze and identify its weak and string
spots. The strong areas of the business should be strengthened regularly, as they are one of the
competitive advantages for the company whereas the weak areas can become a great competitive
disadvantage for the company (Ameer and Othman, 2012). Therefore, for better functioning in
the future, identification of strength and weakness of British Airways is very important for the
company. The strength and weaknesses of the British Airways can be understood effectively by
the overview provide in the table below:
Strengths of British Airways Weaknesses of British Airways
Strong image of brand name in the market High dependency on the market of united
kingdom
Skilled and huge workforce Lower ROI on capital
Strong network of distribution Lower margin of profit
Practice of sustainability in business operations Presence of several rivals in the market
Dominance in the market of UK Less expansion of business over the borders of
United kingdom
Table 1: Strengths and Weaknesses of BA
(Source: Learner)
All the points above can be better understood by following description:
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Strengths of British airways:
1. The British airway has strong brand portfolio and reputed name in the market and in front of
its customers. This is a competitive advantage for the company.
2. The British Airways have numerous and skilled employees in its workforce. This provides
another advantage to the company among its rivals present in the market.
3. The British Airways have strong network and channels of distribution. The reliability of the
company has increased due to its advance and strong channels of distribution (Airways,
2017).
4. As discussed above in the previous section, the company practices many environmental
friendly activities in its internal and external surroundings (Babatunde and Adebisi, 2012).
The company has focused on lowering negative impacts on the environment and has included
many environmental friendly practices in its business operations. This is one of the biggest
competitive advantages for the British Airways (Camilleri, 2018).
5. As the company is known to collect its highest revenues in the market of United Kingdom
and it has a strong influence on the customers of United Kingdom, the British airway has a
special and dominant position in the market of United Kingdom.
Weaknesses of airways:
1. As the British Airways is one of the major companies of the United Kingdom. The revenue
collected by the company from UK’s market is more than double to the amount of revenue
collected from the rest of its markets spread all over other countries on the globe (Kaynak
and Kucukemiroglu, 2015). This makes the company highly dependent on the market of
United Kingdom which makes it business vulnerable in other markets.
2. The profit rate of the company is lower when compared the capital invested by it in the
business.
3. The profit margin (PM) of the company is 10.9%, which is less than the average PM i.e.
12.72%. This is one of the most concerning weaknesses of BA.
4. The company has several strong positioned rivals in the market giving cutthroat competition
to BA.
5. The business chains of the BA are not widespread among various nations, which confine its
business market.
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P6. Illustrate the ways in which the weaknesses and strengths of the organisation are
related to the external macro-factors of the organization.
The macro environment of BA discussed and analyzed through PESTLE analysis have been
observed to create negative and positive impacts on the macro environment of British airways. It
is observed that the political factor has lowered down the rate of customer engagement of the
British Airways with the service provided by the company (Mowforth and Munt, 2015). This has
resulted in lower profit margin, which is one of the weaknesses of the British airways. Another
factor of the macro environment i.e. the sustainability policy and practices of the British Airways
has resulted in creating positive effect on the environment and this factor has empowered the
sustainability policy of BA. This is one of the strengths of the company. The technological factor
of macro environment of the company has provided competitive advantage to the company. This
is one of the reasons for its dominance in the market of United Kingdom (Holloway, 2017). Due
to some of the legal and economic factors of the company, the expansions of business chain of
British Airways have been confined to several boundaries, which is one of the weaknesses of the
company. In these ways, the negative and positive influence created by the factors of macro
environment of the company has resulted in emergence of strengths and weaknesses of British
airways. Therefore, it is clearly noticeable that the weaknesses and strengths of company are
related to the macro environment of British airways.
Conclusion
The report comprises of explanations of macro environmental factors of British Airways along
with its strengths of internal and external environment. The relations shared by these two factors
i.e. macro environmental factors and strengths and weaknesses of British Airways have been
analyzed and studies properly. Therefore, it can be said that all the requirements of this report
have been fulfilled appropriately.
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References
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britishairways. com/travel/where-we-fly/public/en_gb/map [Accessed 13 November 2017].
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http://www.academia.edu/download/40717568/unclasified.pdf
Babatunde, B.O. and Adebisi, A.O., 2012. Strategic Environmental Scanning and Organisation
Performance in a Competitive Business Environment. Economic Insights-Trends &
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Kaynak, E. and Kucukemiroglu, O., 2015. Marketing Airlines Internationally: US Travellers’
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