The Competitive Strategy Of British Airways Economics Essay

The Competitive Strategy Of British Airways Economics Es theorizeAny business has challenges from unlike elements like globalisation, cultivation and technology, socio and cultural factors, political factors and so on. To meet these challenges a clear strategy is very crucial for whatsoever organization. A strategy is a clear day-dream of what the organisation impart be based on a sustainable competitive advantage. Actually, strategy is a road map for hereafter directions and scope. It is a dour range plan for five years and more. It develops mission, objective and goals for an organisation. To develop an effective strategy any organisation must set an account with incompatible factors. environmental analysis, present analysis, strength, weakness, opportunities and so on be the factor through which a strategy can be developed.Are looking to buy fruits or services, they be looking for a wide range of products and services. They as well want easy accessibility and hope to bu y good quality products and services at a competitive price. They ar really important as they provide property for the business in order to be successful.Suppliers stock the business with the supplies the business needs, if they are late then it will cause a conflict between business and suppliers. Therefor it is vital that all the business suppliers are on clock. Suppliers are probably the third important part in a business, they provide the products/services and if they are not in time it poses to be a holy terror to the financial state of the business. On the other hand, suppliers arent that important in decision making because they are scared of losing their contract with British Airways.An scotchal system is broadly speaking defined as a countries plan for its services, goods, and the exact way in which its economic plan is carried out. Basically there are three major(ip)/different types of economic systems prevailing around the world and they areMarket parsimony In a merchandise placeplace economy, guinea pig and state organisations play a kidskin role. Instead consumers and their buying decisions drive the economy. In this type of economic system, the assumptions of the market play a major role in deciding the right bridle-path for a countrys economic development.Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-determination of prices for different commodities, and the amount of regulation controlling different industrial sectors.The absence of central planning is iodin of the major features of this economic system. Market decisions are mainly dominated by supply and demand, the role of the government in a market economy is to simply make authentic(p) that the market is stable enough to carry out its economic activities properly.Planned Economy A planned economy is also cognize as a command economy. The around important aspect of this type of economy is that all major decisions relat ed to the production, distribution, commodity and service prices, are all made by the government.The planned economy is government directed, and market forces have very little say in much(prenominal) an economy. This type of economy lacks the kind of tractableness that is present a market economy, and because of this, the planned economy reacts slower to limitings in consumer needs and dis go into patterns of supply and demand.On the other hand, a planned economy aims at using all visible(prenominal) resources for developing production instead of allocating the resources either for advertise or marketing.Mixed Economy A mixed economy combines elements of some(prenominal) the planned and the market economies in one cohesive system. This means that certain features from both market and planned economic systems are taken to form this type of economy. This system prevails in many countries where neither the government nor the business entities control the economic activities of t hat country both sectors play an important role in the economic decision making of the country. In a mixed economy there is flexibility in some areas and government control in others. Mixed economies include both chapiterist and genial economic policies and often arise in societies that prove to balance a wide range of political and economic views.http//www.economywatch.com/world_economic-indicators/typeBritish Airways operates in the Mixed economic system as British Airways was privatised on February 1987 and the government has less intervention as its a private company the only intervention that the government would have is only setting the prices of the air fines.What is sociable Welfare Social welfare is active how people, communicate and institutions in a society take action to provide certain minimum standards and certain opportunities. It is for the most part about helping people facing contingencies.Social welfare which British Airways does for its employees.Social W elfare Policy Is basically to improve and protect the standard of financial backing of the people or citizens as a whole. In the corroborate together Kingdom the Name Social Policy is used to apply to the policies that the government uses for welfare and social protection and the ways in which welfare is basically developed in a society. There are non-homogeneous social welfare policies that the United Kingdoms adopts and they areSocial welfare indemnity that British Airways has adopted/followsHealth and social protectionEmployment LawWork place regulationSocial memory boardSocial securityThe stupor that social welfare initiates on British Airways as well as the wider community is firstly that British Airways adopting the work place regulation is that it benefits the employees of British Airways and that the employees can work without any head aces as British Airways has provided all it employees with training in safety measures, plus rest time is given to the employees and t o the crew members of British Airways accommodation is given because the crew is prevalently flying for endless hours/ keen-sighted journeys. The workers are also made alert about the basic terms and conditions of the organisation which are basically ethics, code of conduct, and the responsibility of the organisation.The other social welfare form _or_ system of government which British Airways provides its employees is social security for its employees uniform to contribution benefits (Retirement pension, maternity allowances) and also non contributor benefits (social fund, functional tax benefits) to its employees, which gives the employees the freedom to do whatever in their personal life. The Employment Law in British Airways states and illustrates the normal working hours, conditions, and the acts of the organisation.What is Industrial PolicyIndustrial policy comprises all government interventions which consist ofDirected towards the supply side of the economy that consists of levyprises, industries, sectors).Aims to influence the industrial anatomical structure of the economy and its industrial changes.Industrial policy purposefully affects incentives to nominate specific goods or incentives to enter or government issue a specific goods market.It is not limited to manufacturing and includes all types of commercial economic activities.Industrial policy interventions have to be justified because if competitive markets worked adequately, any such intervention wouldDistort optimum allocation,Distort dynamic disputation and its benefits (innovation, flexibility, consumers sovereignty etc.).Privilege specific enterprises or industries or sectors at the expenses of others,Would disadvantage taxpayers and consumers. (An European industrial policy concepts and consequences, Oliver Budzinski).Industrial policy is concerned it is the government sponsored economic program in which the public and private sector coordinate their efforts to develop new technol ogies and industries. Government provides the financial support and capital to the private sector by direct subsidies, tax credits or government- run developmental blasphemes. Industries policy emphasise cooperation between government, banks, private enterprise, and employees to strengthen the national economy. http//encyclopedia2.thefreedictionary.comImpact of Industrial policy on British AirwaysIn the United Kingdoms the Industrial policy has affected a lot of industries but the Industry that suffered the most was the aviation industry including all the respiratory tracts even British Airways. Therefore British Airways has changed its strategy of working and has been successful as British Airways adopted new policies. integrity of the policy that states to reduce Co2 emissions by 15% by all air passages and British Airways has decided to reduce by 50% as they are working on creating a new kind of terminate which is known as bio diesel which is pollution free and environment f riendly.Fiscal Policy Government expense policies that influences macroeconomic conditions. These policies affect tax rates, interest rates and government spending in an effort to control the economy.Monetary Policy The action of a central, bank currency or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault or bank reserves.Impact of fiscal and monetary policy on airline industry as well as British AirwaysThe principles of economics tell us that governments can sometimes improve market outcomes. Methods of influencing market outcomes can come in the form of monetary and fiscal policies. Monetary policies influence shiftsin entireness demand for goods and services by increasing the money supply, reducing the equilibrium interest rates and stimulating investment spending or fall the money supply, raising equilibrium interest rates, lowering investment spending (Mankiw, 2004). Fiscal policies shift the aggregate demand curve by increasing or decreasing government spending or through the increase or decrease in taxes (Mankiw). Because these policies influence aggregate demand, the government uses such policies to try and bring stabilisation to the economy.Such polices affect different industries on many different levels. Some industries have positive effects and some negative. In analysing how monetary and fiscal policies affect the airline industry, we can look at how these policies affect employment, growth of the industry, and product prices.Many fiscal policies directed toward the airline industry have had profound effects. genius such policy is represented by the excise taxes and fees levied on air carriers. Such taxes and fees are deald by theGovernment to fund improvements of airports, provide security for the airlines and airports, allocate funding for the FAA, provide for services for transnational customers, and support operations at airpark facilities. These fees represent roughly 26% or $52 of a standard 200-dollar round-trip airline ticket (Air Transport Association, 2005). Current economic conditions of the airline industry are dismal, especially due to the tragic events of September 11th. The Air Transport Association (ATA) argues that such fiscal policy in these trying times hinder the air carriers ability to right themselves through a self-help policy. The ATA further explains that in an effort to energize the industry, such taxes and fees can account for the elimination of over 129,000 jobs, forced many carriers into bankruptcy, and, because consumers react heavily to price increases in this industry, hinder their ability to allocate monetary resource by raising ticket prices. With this current fiscal policy, air carriers have little manoeuvrability of funds to meet the demands of an operating bu dget.Mike Smith (personal communication, June 10, 2008), fountain owner of Pacific Crest Aviation in Big Bear Lake, CA, adds that governing agencies institute other fees to generate operating revenues for airports. On example of this is set down fees. Landing fees vary from airport to airport, but play a key role in the determination of where air carriers decide to base their operations. In attempts to stash away more funding through fiscal policy, Mr. Smith explains that the FAA continues to suggest the implementation of user fees. Still to be determined how such a fee would impact the airline industry present fiscal policies have air carriers screaming for reform.Deregulation is another fiscal policy that has considerably impacted areas of the airline industry. Since deregulating in 1979, the airline industry experienced substantial growth. With the emergence of new contest in the industry this created numerous amounts of jobs, drove ticket prices down, and expanded the avail able market for various air carriers. Through an industrial wide growth of over 200%, new carriers were able to open positions to thousands of new employees in various parts of the nation. Average ticket prices in 1979 remain relatively unchanged today. As an extremely competitive market emerged, the rally for passengers on each carriers flights kept ticket prices down as carrier created connecting flights through this new open sky policy reaching more consumers, minimizing opportunity cost, and offering competitive pricing.The air lane industry continues to be affected by the overall condition of the nations economy. When healthy spending exists and pleasure travel is frequent, air carriers are able to fill flights, conflagrate prices, and maintain a stable economic environment. However, when condition of the nations economy falls, so do the buying habits of the consumer. This is where the airline industry finds itself today. Struggling to fill flights in a slow economy and figh ting heavy fiscal policy.Recent monetary policies made by the federal government to improve market conditions are sure to have an effect, but how it will impact employment, growth, and prices in the airline industry are still unknown. The mostRecent monetary policy made by the government came in the form of economic stimulus checks. This in-flow of money into the economy in an attempt to stimulate the purchase of goods and services throughout the United States whitethorn help diminish the effects of our current sluggish economy. Little to no data exists to show how this has impacted any growth in the airline industry. So far, there seems to be little change in the spending habits of the consumer to travel via air. Because the economic position of the airline industry has been struggling for so long, improvements due to any single event may be impossible to track. Whether changes in fiscal policies, monetary policies, or internal carrier structure help to improve conditions in the ai rline industry, changes will happen slow and will reflect economic condition in the nations marketplace.By successfully managing opportunity cost, and adapting to an ever changing economic environment, airline industries can have economic success. However, the well-being of the nations economy will have a direct impact on the level of success experienced in the airline industry. During economic shortfalls in the nations economy, travellers will have fewer resources available to travel for pleasure. Contributing to the negative economic influences in the airline industry, future and existing policies targeting the airline industry will continue to hinder the industrys ability to recover losses in periods of economic hardships. http//www.taxreformpanel.govMakiw, N.G. (2004) Principles of economics (3rd edition). Chicago, 2 Thomson South-Western.PESTLE Analyses on British AirwaysPESTLE FactorsKey PointsImplications for British AirwaysPoliticalHeavy regulation (AEA, 2009).Increased secu rity due to past terrorist threats (DFT, 2008)Compliance is essential if British Airways wants to continue. competent security measures should be in place to ensure consumer confidence and competitive advantage in maintenance.EconomicGlobal economic crisis world growth is communicate to just over 2 per cent in 2009 (IMF, 2008). Pound weakness especially against the Euro.Oil prices declined by 50% since their peak retreating to 2007 levels. Decline in fuel prises the dollar strengthens (IMF, 2008).UK Consumer spending saw its sharpest decline for 13 years between July and September 2008 (Channel 4, 2008)Possible reduction in the amount of business travel as companies are cutting costs and using alternative means of communication such as telecom fencing. British Airways is vulnerable as a United Kingdom operating airline to a pitiable exchange rate.Fluctuation in oil prices and exchange rates will directly affect British Airways cost base.More intense competition.SocialThe United Ki ngdom has an aging population.Increasing UnemploymentPotential opportunities for growth as rareer generations have more time to spend on leisure activities such as international travel.Increased bargaining power as an employee.TechnologicalA recent survey revealed that 34% of online consumers plan to use price- comparison sites more in 2009 (NMA, 2009)Online booking services and check-in is becoming increasingly used by the airline industry.Increased consumer cognisance and therefore bargaining power.British Airways must ensure that they remain up to date with these technological advances whilst avoiding becoming overly reliant, as this may isolate certain consumer markets (i.e. the elderly) who dont feel comfortable using such technology.Environmental/EthicalNoise pollution controls and energy consumption controls.Cancellations of flights and loss of baggage.New legislation (e.g. climate change bill) enforcing tighter environmental regulation may increase operational costs each year.Such ethical issues could have a detrimental effect on personality if left unresolved.LegalCollusion and price fixing.Recognition of business deal union and industrial action e.g. cabin crew strikes.Open skies agreement.Restriction on mergers will have an impact on British Airways proposed alliance with American Airlines.Good employee relations are essential if British Airways wants to avoid industrial action and stop operations.Opportunity for British Airways and its competitors to freely transport aircrafts between the European Union and the United States.Part 3Investigate the behaviour of organizations and the market environment.What is OligopolyOligopoly is a market which is normally dominated by a few numbers of large suppliers. The degree of market concentration is very heights. Firms within an oligopoly produce branded products and also sometimes there is a barrier to new entries.Advantages as generalFirms or companies are able to reap economies of scale, due to large scale competition.Products cannot produce by individual firms on a small scale.There is an incentive to engage in research and development. They have the ability to earn super normal profits and capture large market share.Firms enjoy lower costs due to technological improvement. This results in higher profits which will improve the firms or companies capacity to withstand price war.http//www.blurtit.com/q2774865.htmlDisadvantages as generalFirms and companies are concerned with the activities of their competitors.If one firm or company reduces its prices the other companies would have to.How oligopoly has impacted the airline market and British AirwaysIn the late 1990s the European airline market was liberalised, lowering the barriers to entry.Traditional firms then faced competition as firms could enter the market more easily.New entrants used leased aircrafts to keep costs low.Firms have merged (such as Liberia Airways and British Airways did in 2000) to improve the firms horizon tal integration.What is monopolyA situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition. In such an industry structure, the manufacturer will often produce a volume that is less than the amount which would maximize social welfare. www.investwords.com/3112/monopoly.html.Advantages of monopoly as generalThere is no risk of overabundance production.There is sufficient capital for research.Price of goods are reduced.The market can be controlled.Disadvantages of monopoly as generalThe consumers are exploited.There is hardly and consumer choice.The price is high on products.As there is no competition it tracks to inefficiency.The labour is exploited as the price charged is higher than the marginal cost.How monopoly has impacted the airline market and British AirwaysThere is no competitio n which would make the airlines inefficient.As there is no choice the consumer would have to take that one airline only.As the ticket prices could be high the consumers would prefer to take a train to their destination if the consumers destination is in Europe and this would cause a loss for the company.What is perfect competitionAn ideal market structure characterized by a large number of small firms, identical products sold by all firms, freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology. This is one of four basic, market structures. The other three are monopoly, oligopoly, and monopolistic competition. Perfect competition is an idealized market structure that is not observed in the real world. While unrealistic, it does provide an excellent benchmark that can be used to analyse real world market structure. In particular, perfect competition efficiently allocates resources. http//www.amosweb.com.Advantages of perfect competition as g eneralOptimal allocation of resources.Competition encourages efficiency.Consumers charged a lower price. responsive to consumer wishes, change in demand, leads extra supply.Disadvantages of perfect competition as generalInsufficient profits for investment.Lack of product variety.Lack of competition over product design and specification.Unequal distribution of goods and income.Externalities .e.g. pollution.How perfect competition impacts airlines market and British AirwaysAs in the Airlines Industry there are many airlines and there is competition there can be either positive effects as well as negatives effects the positive effects of perfect competition is that the resources of the airlines is allocated to the fate as there is competition the other airlines as well as British Airways is encouraged to work harder to beat the competition and there for the airlines charge its customers with a lower cost to gather more of the customers. The negative effects of perfect competition is t hat sometimes the return on the investment can be poor there is noise pollution being created by the noise of the plane engines and can affect the society with air pollution as it can defile the society.Part 4Explain the significance of international trade wind and the European dimension for UK businesses.What is tradeTrade is the transfer of ownership of goods or services from one person to another person. Trade is also known as commerce or financial transaction or barter like in the old days. Trade can only take place in a market. A market is a place where buying and selling takes place it could be either in a shop, house or even the internet.Advantages of tradeCan increase international ties.Leads to specialisation and therefore increases efficiency.Increases standards of living.Disadvantages of tradeAs there is excess production it leads to pollution.Can lead to a possible economical imperialism.Can cause a balance of payment problem which can lead to international debt.Why is trade importantTo trade is important for a country because through trade a country gets its resources which it cant provide for itself, or its cheaper for a country to import than to produce locally. A country trades its resources to other countries that cannot produce them this means that its a big cycle where everyone trades until all the countries have what they simply need while making some money by selling what they dont need. The country basically does it for the development of the country so that its people can get their daily bread and butter, clothes and necessities which they need that their country does not have access to, and to even do business with other countries through trade.What is international tradeInternational trade is exchange of capital, goods, and services across overseas boarders or territories. It basically refers to exports of goods and services by firms to a overseas buyer also known as a importer. In most countries it represents a significant share of gross domestic product also known a (GDP).Advantages of international tradeImprove domestic competitiveness.Helps to gain global market share.Reduces the dependency on existing market.Increases chances to expand.Disadvantages of international tradeCan take a very long time to gain.Additional cost can be incurred.Payments come after long.Licenses are need and deal has to be done in regulations.Why is international trade importantInternational trade is important because it allows other countries to take advantage of something known as comparative advantage. Comparative advantage means that a country is able to produce something by giving less for something else they want. Therefore even if a country in not able to produce the scoop out quality product of anything, comparatively the countries can produce without giving up something. When countries take advantage of comparative advantage, the total output in the world increases and therefore everyone benefits from extra output and the refore international trade helps establish a higher standard of living.What is economic integrationEconomic integration is the elimination of duty and nontariff barriers to the flow of goods and services and the factors of production between a group of nations or various different parts of the same nation.