Report on Business Environment Analysis for Virgin Atlantic Airlines

This report examines the business environment of Virgin Atlantic, a UK-based airline company. It begins with an introduction to the concept of business environments, encompassing internal and external factors that influence a company's operations. The report employs PESTEL and Porter's Five Forces models to analyze the macro and micro environments affecting the airline industry. The PESTEL analysis explores political, economic, social, and technological factors. Porter's Five Forces evaluates the threat of new entrants, substitute products, bargaining power of customers and suppliers, and industry rivalry. The report then assesses Virgin Atlantic's internal business environment using the value chain model, examining primary and support activities. The analysis emphasizes how these factors influence the company's strategies and competitive positioning. The report concludes by highlighting the usefulness of Porter's Five Forces in understanding the external environment and making strategic decisions. The analysis covers aspects such as political stability, economic conditions, social trends, and technological advancements, all of which are crucial for the airline's success.

BUSINESS ENVIRONMENT

Contents
INTRODUCTION.......................................................................................................................................3
TASK..........................................................................................................................................................3
A) PEST and Poter’s Five Force model to know the influence affecting Airlines...................................3
B) Analysing internal business environment using value chain model....................................................6
C) Usefulness of Five Force Model.........................................................................................................7
CONCLUSION...........................................................................................................................................8
REFERENCES............................................................................................................................................9

INTRODUCTION
According to this current market scenario there are many companies that are establishing
themselves in the market area and they are perfectly working very well. Thus, business environment is
considered as a combination of both internal and external factor that can have an impact on the activities
performed by a company (Niemann-Struweg, 2014). This can be both positive and negative what matters
is how a company takes this for increasing their sales and profitability. Organization that will be taken in
this assignment is Virgin Atlantic Company; it is an Airline company in United Kingdom. They provide
services nationally and internationally as well. This report will throw light on PESTEL analysis and
Porter’s 5 Force model in order to know the influence of micro and macro environment that is affecting
the business operations. By using the value chain model the researcher will evaluate the factors that is
creating problem in internal business environment. Lastly, the use of 5 force model and its usefulness so
as to understand external business environment is included in this assignment.
TASK
A) PEST and Poter’s Five Force model to know the influence affecting Airlines
Political factor:
Virgin is one of the leading companies that is based in United Kingdom, political factor
will help the researcher in examine the influence of regulatory bodies in the sector of airlines. In
context with the company laws and policies that are implemented by the government is having a
great impact on the business operations. Therefore, firm has faced many challenges while
establishing themselves in different countries as they had to follow various rules and regulations
imposed in a particular nation (Pinto, 2015). This includes some of the factors like licensing, taxes
introduced due to political instability, increased of customs and tariffs implemented by them and
many more. Along with this, a fear of terrorist attack was always there, thus, regulatory bodies
took much attention in focusing on safety and security. Therefore, political factor plays an
important role in development and growth of the organization.
Economic factor:
This includes the entire process of economy through which they can run their whole
business as the organization had to face a lot of stiff competition and to sustain in the market
they were forced to cut down their prices in order to give a tough fight to their rival companies.
Along with this, a sudden change in political and economic decisions can hamper the business
and this includes certain factors like inflation rates, increase in the price of goods and services,
interest rates and many more that can affect in some or the other manner. Apart from this,
economic crises that are conducted on a regular basis is having a negative impact on a regular
basis. Thus, it is important that before launching of any new policies Virgin Atlantic Company
must go through the factors that can act as a barrier in entire business operation. This will enable

them in expanding their business in different areas (Moroni, Arruda and Araujo, 2015). Although
the organization is having a strong image in front of its customers and to maintain this company
is formulating strategies and plan of action in order to increase the sales and profitability on a go.
Therefore, company must go through all the polices that are being adopted so that they can
remain in the market for a longer period of time.
Social Factor: Earlier people use to travel only for business process or because of some
serious work but after coming of globalization now everybody in different parts of the world are
enchasing their existing knowledge. As compare to previous scenario now people are more
aware of the current trends and situations as a result they are becoming more demanding.
Therefore, in context with Virgin Atlantic companies they are facing issues in fulfilling the needs
and wants of customers. Thus, consumers have ample amount of knowledge about availing the
rights so they are selecting right package according to their choices (Menychtas and et. al., 2014).
Technological factor: With the change in course of time, technology has provided
maximum benefits and in terms of Virgin Atlantic Company, these have improved their
automation of manufacturing, using advanced machineries and equipments, research and
development activities etc., thus, technology has provided competitive advancement to most of
the organization. Now company can easily communicate with their Air Traffic control in
different parts of the world. Apart from this, it is helping Virgin Atlantic Company in improving
their business process and outsourcing and electronic commerce. They are utilizing technology
in getting into the reach of maximum people so that can promote their companies and tell its
customers about the offers that they are providing. This will enable them in increasing their sales
and profitability. Other than this they have incorporated advanced machineries in providing high
quality services so as to sustain in the market area for a longer period of time.
Therefore, the entire factors that are mentioned above is playing some or the other role in
increasing the economy of the nation. As with the increase in sales of their flight tickets a little
part will be contributed and this will generate more revenues (Huang-Horowitz, 2015). Thus, by
providing interesting offers company can attract more and more customers towards their country
and an increase in the demand of travel and tourism can be seen. Along with this Poter’s 5 Force
will help the researcher in understanding the impact that can help the nation in increasing their
revenues and funds.
This is an effective model that is used for analyzing the current market situations so that
organization can identify the trends that are happening in the present scenario. Therefore,
through this model companies are making strategies that they can implement for gaining
competitive advancement. This model was profound and was first published in the year 1979 by
Michael E. Porter of Harvard University, and has guided many organizations in formulating
strategies. Therefore, in context with Virgin Atlantic Company, they have made optimum
utilization of this model and as a result the have gained maximum benefits. Some of the points
are explained below in order to understand it in an effective manner.

Threat of new entrants: To operate the business of Airline industry is not an easy task as
it requires a lot of capital. Thus, economy and market of United Kingdom is very strong and in
context with Virgin Atlantic Company, as they are holding a better position so they are not
facing any difficulties in operating their business in an effective manner. Instead the problem that
is creating problem is of take-off and landing slot because of which they had find put suitable
airports for the same. Side along the policies that are made by the regulatory body also plays an
important role as rapid (Klapper, Love and Randall, 2015) alterations in laws can affect the entire
process of business. Therefore, in context with Virgin Atlantic Company they are having ample
amount of money which they are using for implementing new tools and technologies which can
be used by them in having effective communication.
Threats of substitutes: For this sector there are minimal threats of substitution if any than
it will be like bus, train, cars, subways that run on domestic routes but there is no threat on
international routes. Therefore, in context with Virgin Atlantic Company, but there are airlines
too who provides the same service and if they give offers less than the company taken in this
assignment than people may have choices of adopting services provided by the rival
organization.
Bargaining power of customers: Buyer’s power is relatively higher as compared with
different airline industry as have better choice of selecting plans according to the choices and
preferences of the clients. In terms of Virgin Atlantic Company, if people are not happy with the
services and price they are offering than customers can look around to various organization
working on the same field in order to get better price and facilities (Huang-Horowitz, 2015).
Therefore, price differentiation can be easily found so; it is essential for Virgin Atlantic to
monitor the services provided by the other rival companies on a regular basis. This will assist
them in knowing the strategies adopted by competitors (Cai and Yang, 2014).
Therefore, bargaining process is determine as an important market output because it
sometimes create pressure on customer’s mind to choose the effective offers so that they can get
maximum benefits. Thus, an increase in price will minimize the power of buyers. Furthermore, if
consumers have many options than power will increase. It includes certain elements like degree
of dependency, switching of cost by buyers and many more.
Bargaining power of supply: There is a direct connection between the cost of aviation
fuel and price of oil, thus, Virgin Atlantic cannot change the status by their own. Regulatory
bodies are there who are responsible for the same. By expanding the business at wider level they
will be able to improve the power of possessing over their suppliers. Henceforth, it includes
factors like raw materials, labors, components and many more. They all are required for running
a business in an effective manner. Therefore, neglecting a single person can affect the entire
process as a result decrease in sales and profitability can be seen (Baesens and et. al., 2014). For
example: if the prices are higher than the usual one than suppliers may not prefer to work with

the firm any more. Capacity of allotment channels, substitute inputs are some of the factors that
are to be considered for having effective growth (Botha, Kourie and Snyman, 2014).
Industry rivalry: With the change in course of time there are many rival companies that
are increasing and dealing in the same field. Thus, it is important that company implement latest
tools and technologies for getting an effective results. This will help them in giving better
services as compared to other rival organization.
B) Analysing internal business environment using value chain model
Internal environment is related organisation and its factors affect on business from
internally. An internal environment is composed of different components of company involving
staff members, corporate culture and management which shows behavior of employees. The
internal factors impact business firm as whole and others impact to manager of an organisation.
In addition to Virgin Atlantic Company, it determines it’s all internal factors and try to manage
or control them for conducting business in an effective or better manner. This company analyze
its internal environment with the help of value chain model. In addition to this it is a framework
of the Michael porter which aids to measure particular activities by which organisations can
develop effective value along with the competitive advantage. In order to conduct value chain
analysis, this firm is split its activities in to the primary activities as well as support. The value
chain model of Virgin Atlantic firm is given below as above:
Primary activities
Inbound logistics- An inbound logistic operation of Virgin Atlantic are difficult and
include delivery of catering goods, planes fleet and many on- board on proper time (Cai and Yang,
2014).
. Under this stage, competitive benefit is to be accomplish through Virgin Atlantic organisation
by developing an on- going relationship with sophisticated system and suppliers for the purpose
of stock control.
Operations- Under this consists preparing of services and products to sold to consumers.
In United Kingdom, this airline company conducts its business at large scale. The scope of these
business operations is very extensive.
Outbound logistics- It includes sending the finished goods to consumers for the
consumption purpose. It is concerned to the logistic organisation and applicable towards the
services of business like airlines.
Marketing and sales- The marketing strategy f this organisation is directed at
communication of marketing message in order to target consumer segment. In addition to this
marketing message attempts to correlate brand of Virgin Atlantic with reliability, convenience,
effectiveness etc.

Services- The post- sales services include installation of handling complaints and goods related
to services and goods. Virgin Atlantic Company recognize its post sales services as necessary
part in order to achieving the competitive advantage at market place (Botha, Kourie and Snyman,
2014).
Support activities
Firm infrastructure- It consists control systems as well as planning like accounting,
finance and corporate strategy. Virgin Atlantic Company spends more on its technological
solutions as well as infrastructure.
Human resource management- This organisation hire people through means of
advertisement through newspapers along with the website. Current employees can earn as well as
recommend incentive by same. It provides better training and development to its staff members
and increases their skills so that they can perform in better manner.
Procurement- Virgin Atlantic Company has effective procurement department which
obtains the effective quality of services and products at minimum cost in order to provide world-
class facilities in an effective manner. It takes advantages of large operations and accomplishes
economies of scale.
Technology department- Virgin Atlantic organisation not only includes technological
developments for increasing productivity but spend money on it. This firm wins an award in the
entertainment system of in- flight, designing of beds and travel seats to provide an additional
comfort to consumers.
C) Usefulness of Five Force Model
Various entry and exit barriers for airline industry and this indicates that large number of
financial resources are require to enter in this sector. I analysed that airline industry is
characterized by large number of regulations and this indicate that regulators remain responsible
to satisfy the safety aspect. Due to all this Virgin Atlantic also deal with various elements exist in
business environment and in this sector, it is very difficult for new players to maintain their
market share. One of the main benefits of Porter’s five force model is that it help me identify and
various factors exist in market and that impact on business operations. With help of this model I
learned that airline sector is saturated as more and more firms are entering into the sector with
the aim of generate profits. From this I learned that industry rivalry is little high in this sector and
this is the factor that affects the Virgin Atlantic very much. Further this model helped me in
examine the suppliers for carrier like Virgin Atlantic is the maker of aircraft. Suppliers include
those who make spare parts to airlines. Mainly airline sector has a presence of few players and
various suppliers and due to this the power of the suppliers in this sector is low. In addition to
this, power of buyer is the factor that has a huge impact on (Bah and Fang, 2015).

Virgin Atlantic and it is very significant for firm to study this element in an effective manner. I
analysed that Virgin Atlantic has require collecting of information about the factors that
influence an individual to buy company’s product and attract him towards product of entity.
Porter’s five force model helped me in identify the fact that individual in the West often travel by
air and due to this threat of substitutes is not very high Virgin Atlantic. Overall all five forces
impacted on business actions and decisions of Virgin Atlantic the only difference is that some
affect the same in positive manner while other affect in negative way. It is clear that Virgin
Atlantic face a competition and challenge from the various factors exist in external environment
and this directly affect the actions and decisions of entity. I learned all this knowledge with help
of Porter’s five force model (Baesens and et. al., 2014)
examine the threat of substitute or new player for Virgin Atlantic and at the same time I
analyzed that power of buyers is one of the factor that affect the business activities of Virgin
Atlantic.
CONCLUSION
From the above report it has been concluded that, providing a better business
environment is must so that company can perform their task in an appropriate manner. As per the
current market situation PEST and Porter’s 5 Force is an effective tool for analyzing the factors
that can act as a barrier. This will assist the organization in eliminating the problems as a result it
will increase the sales and profitability. Therefore, internal and external model is important in
order to know the possible adaptation of factors so as to have effective growth.

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