MGT501 Business Environment: Virgin Australia External Scan Report

This report provides a comprehensive analysis of the external environment impacting Virgin Australia, examining factors within the general, demographic, legal/political, socio-cultural, and economic landscapes. It evaluates the challenges and risks posed by these external forces, particularly within the Australian airline industry. The report further explores the application of various frameworks and strategies, including environmental scanning and risk management approaches, to address these challenges effectively. It also considers the impact of deregulation, economic fluctuations, and changing consumer preferences on Virgin Australia's strategic direction. The analysis concludes by emphasizing the importance of integrating risk management into strategic planning and utilizing tools like the Balanced Scorecard for effective communication and management. Desklib offers similar solved assignments for students.

Managing the External Environment 0
Title: Managing the External Environment
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Managing the External Environment 1
Executive Summary
This report summarizes the impact of external environment Virgin Australia airlines. A brief
description has been provided for general environment, demographic environment, legal/political
environment and socio-cultural environment. An overview has been provided on the application
and framework to effectively manage the challenges and risk factors faced by the firm and this is
followed by a conclusion.

Managing the External Environment 2
Contents
Introduction......................................................................................................................................3
A Critical Evaluation of External Environments on the Firm.........................................................4
Application of Frameworks and Strategies to Resolve the Challenges faced by the Firm..............6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

Managing the External Environment 3
Introduction
This report investigates and scrutinizes the external environment in which Virgin
Australia functions. With a view of achieving the objective, the complete report provides a
structural view of Australian Airline industry and theoretical frameworks and strategies which
impact the firm. The report is dedicated to the external environment which surrounds the Virgin
Australia by assessment of different trends. This is possible through the scanning as well as
monitoring. The periphery of an enterprise is very huge and it is quite difficult to capture the
snapshot of different airlines simultaneously. The reaction towards the changing market
environment is consistently the modification of theoretical frameworks and strategies. The report
makes an attempt to investigate the different measurement criteria. Virgin Australia is also called
as the Virgin Blue. This firm is the second largest Airline of Australia and it was co-founded in
the year 2000 through a popular British Business Richard Branson and Virgin Blue owner Brett
Godfrey.
A Critical Evaluation of External Environments on the Firm
General Environment
Virgin Blue operates in an environment which has an impact on the strategy and for
itself. There are certain crucial forces which can affect positively or negatively the firm and its
competitors which exist in the Australia airline industry (Kushwah, 2018).
Demographic Environment
Changes in demographic environment are very crucial for an airline industry as business
is conducted through luxurious and reasonable pricing service. Australia comprises not only

Managing the External Environment 4
growing people but ageing people as well. Out of 19 million people living in Australia, the
younger generation is represented by more than 6 million. This is known as the demographic
group which is reported to influence the spending pattern of Australia. With the enhancement of
reserved baby-boomers and people living in debt, these Australian customers will enhance the
level of consumption (Grier, 2014). In this demographic environment, Virgin Australia main
focus on gaining business through the offer of the major services in different cities within
Australia. Most of all the customers are young professionals and these are called as Generation
Y. There are business class people which are aged under 30 to 55 and represent the largest part
of the Australian population (Tidstrom, 2012).
Socio-Cultural Environment
There is a continuous trend for environmental concerns around the whole world and
Australia cannot be considered as an exception. These days, people look forward to eco-friendly
transportation and less carbon emitting technologies. The regional services and transport
department has shown an increasing trend for providing the leisure destinations and fulfilling the
needs for lifestyle and fun for Australians (Vydra, 2007). Furthermore, in today’s business
environment, timetables are taking over the service, but for a sensitive, business traveler,
scheduling is very important.
Legal/Political Environment
The Australian airline industry is massively regulated and is undergoing through
considerable changes from the past decade. There is a deregulation trend. According to the
Airline Deregulation Act 1991, it has been playing a role in the evolution of the domestic airline
industry and providing freedom for airline companies. These companies can set the own prices

Managing the External Environment 5
and strategies the routes (Certomà & Tornaghi, 2015). The government has not adopted the open
skies framework, but has accepted the policy through Qantas. According to the new standards,
there is longer check in progress and baggage checks. The access of airport terminals is restricted
unless passengers have the boarding pass. There are strict regulations which will have an impact
over the consumers and filling the airplane capacity and also have an impact over the customer
perception (Varghese, 2018). . During the initial stages, this company was started as the low cost
carrier. Later on, the company has focused on improvising the operational services and became
the new world carrier as it was described through the Virgin Blue itself. In year 2011, the
company has come up with a new strategic plan which introduces the new catering service, new
uniforms, new business class and remaining the new Virgin Australia. The airline has been rated
as the 4 star airlines through a research consultancy.
Economic Environment
The rate of the Australian dollar is expected to rise in the upcoming years and the stock
market will surge by ten percent. It can be a short term increase in unemployment and interest
rates can be lowered by 4 percent. According to the market watchers point out there will be pick
up jobs as the economy grows (Celata & Sanna, 2012). The Virgin Australia airline is largely
effected through the fall of interest rates and this will have an impact over the consumer
behavior. The markets are being held by the concerns through China, Spain, Greece and USA.
The Markets will start improving as it gets volatile patch in middle of year (Bekaert & Engstrom,
2017).

Managing the External Environment 6
Application of Frameworks and Strategies to Resolve the Challenges faced by
the Firm
Over the past two decades, there are different frameworks to manage the strategy risks and to
decide which model is appropriate for Virgin Australia. This largely depends on how the
organization operates. Every approach will be requiring the different structures and risk
management roles. The employees must be encourages to challenge the present assumptions and
risk info. The finding is that one size cannot fit with everyone. In order to counter the efforts of
authorities and regulatory associations is to standardize the role functions (Burrowes &
Hendricks, 2005).
1. Independent experts-Few organizations those like Virgin Australia push for
technological innovation. The company will face the intrinsic risk as pursing the complex
and long product development assignments. Most of the risk arises due to nature and this
can be changed slowly over a given time period. For these types of organizations, risk
management is handled at a given project level. The company Virgin Australia has
established the review board of independent experts that challenge the project engineers.
This also ensures the product development cycle takes place periodically and the review
board needs to meet on a quarterly basis (Moynihan, 2008). Environmental scanning is
must for monitoring, evaluating and dissemination of data for the key people working in
the corporation. The identification of strategic factors is must. There are external and
internal elements that can determine the future course of action for the firm. There are
few external variables which form the internal corporation like strengths and weaknesses
which are within the control of the top management. The simplest methodology of
environmental scanning is by SWOT Analysis and these are strategic factors for a given

Managing the External Environment 7
company. Evaluation and control are the two processes within which performance results
can be measured. These are the final and major elements of strategic management and
therefore stimulating the whole process of changing environment.
2. Facilitators-Most of the firms like water utilities and traditional energy operate in stable
market environments and have a relative customer demand. In these types of situations,
risk will stem through unrelated operational decisions across the complex organization
like Virgin Australia. The single staff members may not be having the knowledge of
performing the operational risks and firms need to deploy the risk management groups,
which will collect information through operating managers. The awareness of the
managers needs to be increased and decision makers must be provided with the complete
picture of the company risk profile (Ebrahimpour, Kabir & Yousefi, 2009).
3. Embedded experts-The airline industry poses a big challenge of volatile asset markets
and the impact of the decisions which is made on decentralized traders as well as
investment managers. The risk profile of workers can change dramatically with a major
movement in markets. For these companies like Virgin Australia require to follow an
embedded expert theory. The firms need to continuously monitor the risk profile and
working with line managers. The generation of new ideas, risks and innovation is
possible only through risk management and earning profits. The Virgin Australia has
adopted this model. The present environment is very dynamic and rapidly changing.
Modern businesses find very difficult to operate. Because of the uncertainties, constraints
and threats, the business firms are under great pressure and need to find out the ways for
the survival (Ebrahimpour, Kabir, Esteky & Yousefi, 2008).

Managing the External Environment 8
The best utility of strategic management is to explore the possible opportunities and
achieve an optimum level of performance by minimizing the threats. The company can maximize
its competitive advantage by merging with other firms. Strategy formulation and implementation
requires the observation and understanding the environmental variables. Business strategy
emphasizes on the firms product and services. This will further classify into opportunities and
threats. Threats can be casual or serious and strategic formulation always provide for the better
environment understanding.
Conclusion
Virgin Australia has a system which promotes the risk discussions. In a few cases, the
risk is predictable. The companies are quite familiar with the risks and the external environment.
Companies label and compartmentalize the risk along the business functions line. There are few
firms which compartmentalize the management theories behind the brand risk, supply chain risk,
IT risk and human resource risk. The organizations can disperse efficient risk management and
information. Good risks are integrative and confrontational. Very large businesses are derailed
through the combination of events that can force another in different ways. Managers need to
deploy the organization risk perspective by anchoring into strategic planning. This is an
integrative process which must be well-run. The companies can utilize the Balanced Scorecard
for strategic communication and management.

Managing the External Environment 9
References
Bekaert, G., & Engstrom, E. (2017). Asset Return Dynamics under Habits and Bad
Environment–Good Environment Fundamentals. Journal Of Political Economy, 125(3),
713-760.
Burrowes, A., & Hendricks, A. (2005). Independent financial experts: From wished for to wistful
thinking. Managerial Finance, 31(9), 52-62.
Celata, F., & Sanna, V. (2012). The post-political ecology of protected areas: nature, social
justice and political conflicts in the Galápagos Islands. Local Environment, 17(9), 977-
990.
Certomà, C., & Tornaghi, C. (2015). Political gardening. Transforming cities and political
agency. Local Environment, 20(10), 1123-1131.
Ebrahimpour, R., Kabir, E., & Yousefi, M. (2009). Improving mixture of experts for view-
independent face recognition using teacher-directed learning. Machine Vision And
Applications, 22(2), 421-432.
Ebrahimpour, R., Kabir, E., Esteky, H., & Yousefi, M. (2008). View-independent face
recognition with Mixture of Experts. Neurocomputing, 71(4-6), 1103-1107.
Grier, D. (2014). The External Environment. Computer, 47(11), 124-124.
Kushwah, R. (2018). Evaluating a Firm’s External Environment in Delhi. Journal Of Advances
And Scholarly Researches In Allied Education, 15(3), 234-237.
Moynihan, R. (2008). Key opinion leaders: independent experts or drug representatives in
disguise? BMJ, 336(7658), 1402-1403.
Tidstrom, A. (2012). Conflicts in business relationships in light of the external
environment. International Journal Of Business Environment, 5(2), 122.

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Varghese, M. (2018). Imagining the Political in a Post-Political Environment. Journal Of
Extreme Anthropology, 2(2).
Vydra, V. (2007). Degradation risk assessment of external envelopes: A practical engineering
approach. Building And Environment, 42(1), 344-348.