Introduction

External Environment Analysis of British Airways will be analysed in this report by applying appropriate theories. The writer of this report has been appointed to a major consultancy firm in London as a Strategy Analyst. The writer has evaluated the strategic choice of an organization. British Airways has been chosen in this report to evaluate the strategies of the company. The vision, mission, purpose and objectives of BA have been evaluated to indicate how these factors help the company to achieve its strategic directions. VRIO analysis has been conducted to identify the internal strengths and capabilities of the company which will help the company to make better plans to utilize its capabilities and strengthen its position. PESTLE analysis has been evaluated to show the impact of the external factors on BA and Porter’s five forces model has been also evaluated to get a clear idea of the competition in the UK airline industry.

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Purpose and vision of British Airways:

Clear purpose and vision refer to the desire of an organization that a company targets to achieve in the long run within a time frame (Center, 2016). Having a clear vision and purpose helps the company to remember the reason why the company is established and define its long and short-term goals. Clear purpose and vision help employees to achieve their strategic directions, which imply the actions that are taken to achieve the goals of an organization.

The purpose and vision of BA are to become the world’s leading global premium airline at every level of passenger’s journey (Career Trend, 2019). This purpose and vision of BA encouraged the company to deliver top-quality service and fulfil customers’ demands which are the strategic directions of BA. It shows that the purpose and vision of BA have made strategic direction accomplishment easier.

Mission of British Airways:

A clear mission tells what an organization do for their customers (Dermol, 2012). When employees know the mission statement that their organization has and what they want to do for their customers, it makes achieving strategic direction easier for employees. They can take significant actions to fulfil the company’s mission that makes the achievement of strategic direction easier.

The mission of BA is to make their customers confident about their services and fly with them without any worry; furthermore, the company wants to take care of the world (Mission Statement Academy, 2020). To fulfil the mission BA has started online booking services, special safety and hygiene steps to stop the spreading of COVID-19 and appointed a new customer service team at Heathrow airport. All these steps make customers’ journeys easier with BA and make them more confident about their services, which assists BA in achieving its strategic direction.

Business objectives of British Airways:

It explains what steps an organization plans to achieve a specific aim (Pina, Romao, and Oliveira, 2013). Companies become capable of monitoring employees’ work and the progress they are making by comparing their business objectives and employees’ performances. Employees can evaluate their own performance on the basis of the business objective which helps them to achieve strategic direction effectively and fulfil the business objectives of the company.

Objectives of BA are ensuring cooperation among colleagues to deliver the best customer service, training front-line leaders, upgrading first-class cabins for customers with entertainment facilities, using the latest Boeing and Airbus aircraft, and educating ramp and baggage employees to ensure safety and others (Career Trend, 2019). These clear objectives of BA help them to increase customer satisfaction and create an outstanding image in their mind that makes them one of the leading airlines of the world and number one in the UK airlines industry.

VRIO Analysis of British Airways:

Kim, Lee, and Shin (2015) have revealed that the VRIO framework is the tool which identifies the internal resources and capabilities which assist companies in ensuring maximum utilization of all resources and capabilities to make their competitive advantage stronger. VRIO analysis of British Airlines will help them to find out the resources and capabilities of the company, and it will help BA to enhance their competitive advantage through utilizing their internal capabilities and resources with full potential.

Valuable: Employees are one of the most valuable internal resources of British Airways because the employees are well-experienced and highly trained; therefore they bring productive output to the company (Employee Relations Blog, 2020). The employees are loyal and they deliver the best services to the 46.8 million passengers of BA which enhances their competitive advantage by retaining customers more than their competitors (Statista: 1, 2020). In VRIO analysis it is found that the financial resources of BA are highly valuable because it allows to invest in potential projects and utilize available external scopes that help companies to foster business growth. The distribution network of BA is also valuable which helps the company to reach their services to more customers and ensures that BA will generate higher revenue by keeping its services available to more customers. The patent of the company is also valuable because competitors cannot copy BA’s services which reinforce the competitive advantage of the company.

Rare: It is found that the employees of BA are rare resources of the company for the reason that they are highly trained and experienced and the company have invests much to train the employees and pay fair compensation that makes the employees more promising (Airways, 2017). Therefore, BA employees deliver best outcomes than other aviation companies. Very few airlines in the UK have strong financial resources that are possessed by BA; therefore the financial resources are rare. Patents of BA is also rare because competitors do not have these types of patent and the company can maintain the exclusiveness of their services which assists them in creating an outstanding image in customers’ mind that few companies can create. The distribution network is also a rare resource because few competitors have better distribution networks than BA and the company invested a huge amount in building stronger distribution. As a result, BA is capable of generating higher revenue than other companies in the UK and the global aviation industry.

Imitable: Employees of BA are imitable because other companies can make their employees highly trained by investing in training and developing programmes and paying fair compensation (Madar, 2015). Even competitors can attract the employees of BA by providing better employee benefits. The financial resources of BA are inimitable because it requires huge investment, and companies have to gain higher revenue continuously than BA generates; therefore competitors cannot imitate their financial resources easily and it makes the company stronger in the industry. The patent of BA is also inimitable because patent laws do not permit competitors to copy their business strategies or services. As a result, BA was able to maintain its uniqueness in the industry and more customers get attracted to its services than other airlines. The distribution network of the company is also inimitable for the reason that it also needs higher investment and a long time to develop. Competitors have to invest huge amounts and need a long time to develop distribution networks like BA and generate higher revenue like them.

Organized: BA’s financial resources are well organized, and the company make a proper plan to utilize the resource tactically (Grundy, and Moxon, 2013). With organized financial resources, BA can invest in potential sectors or projects that make them profitable and utilize the available opportunities that strengthen their competitive advantage. It is found that distribution network of the company is also well organized which helps them to make sure the availability of their services in the 70 countries where they have services through covering 170 destinations (Routes Online, 2020). Therefore, customers get BA’s services available always, and it encourages them to purchase more services from the company that fosters their revenue. BA has an organized management and control system that assists the company in maximizing output by using resources and capabilities. As a result, BA has become one of the leading airline companies in the world among its competitors.

PESTLE Analysis of British Airways:

Policy (2018) has revealed that PESTLE analysis is the tool which is used to analyse the external environments of companies and identify the impact of the environments to take necessary steps to reduce the impact of the environments. PESTLE of BA will find out the impact of the external environments on their operations and the company will be able to handle the impact of the environments to ensure flawless execution.

B2U, 2016

Political Environment: Political environment refers to the impact of the political environment within an organization, and it can take initiatives to minimize the impact of the environment. BA operates business in 70 countries including the local country UK and the political environment of both local and host countries influences their business operations (Routes Online, 2020). For instance, Brexit will reduce the GDP of the UK by about 5% after ten years of Brexit because the business deals with the EU will not remain (Rand Europe, 2020). Investors of the EU will not invest in UK companies after Brexit and people will travel less from the UK to Europe which increased because of the business deals between the countries. As a result, revenue of BA will reduce, and the profit level will decrease after some years of Brexit.

Economic Environment: Economic environment analyses the impact of economic factors on companies that helps companies to take steps and reduce the impacts. COVID-19 has affected the operations of BA negatively and the company is facing losses because of the pandemic. For instance, BA is retiring its Boeing 747 which covers 10% of all its fleet because of the drop in its sales for COVID-19 (Euro News, 2020). The great drop in sales has reduced profit level of BA, and it will take time to recover the loss.

Social Environment: Social environment refers to the influence of social factors within a company, and companies can minimize the influences of the environment. People have become more careful about COVID-19 and know that the disease is infectious; therefore people of the UK have stopped visiting other countries or areas which reduced the sales of BA, and people from other countries have also stopped visiting the UK and other countries (Sky UK, 2020). People will avoid travelling for next two or three years because of the disease which will reduce the sales of BA in great numbers. As a result, BA will face a crisis in the upcoming years.

Technological Environment: Technological environment refers to the effects of technological factors to a company and shows companies the ways to handle the effects of the factors.  BA has utilized the technological advancement of the UK and updated itself. For instance, BA has online booking and customers can book tickets from anywhere they want which saves customers’ time and energy going out to book tickets (British Airways: 2, 2020). As a result, sales of BA have increased because people can book tickets when they need them.

Legal Environment: Legal environment shows the impact of legal factors and encourages an organization to maintain all the laws and regulations of an organization. BA maintains all the laws and regulations to avoid legal complexities in the UK. For instance, BA is maintain all the health-related laws of the UK which are related to COVID-19. BA ensures tip-to-tail and key surfaces are disinfected and keeps face masks, sanitisation and HEPA-filtered air to ensure the health and safety of the customers (British Airways: 2, 2020). Customers who have emergencies can travel safely that is encouraging people to purchase BA’s services to make their journey safer.

Ecological Environment: Ecological environment shows the negative impact of an organization toward the environment and encourages them to reduce environmental impact in order to save the environment. BA has a sustainable business plan to reduce its environmental impact and save the environment. For instance, BA has committed to achieving 0 emissions of carbon by 2050 (British Airways: 3, 2020). The company is operating their business in a sustainable way to achieve the target and save the environment which creates an outstanding image of BA within customers’ mind and make them more loyal.

Porter’s five forces model analysis of British Airways:

Dälken (2014) revealed in his research that Porter’s five forces model is the framework that companies use to analyse the competition of the industry they operate the business and it helps them to take effective steps to make their position stronger in the competition. BA will be capable of understanding its competitive position in the UK airline industry by conducting Porter’s five forces model. It will assist the company in taking the significant initiative to enhance its competitive advantage through understanding the competition of the market.

Threat of new entrants: Lower: Threats of new entrants refers to the influence of new companies to an organization. BA has lower risks of new entrants because it has many legal restrictions to enter in UK aviation. Companies need a huge investment to enter in the market because new companies do not have. For instance, BA invests £6.5bn to increase customer satisfaction by providing new services and the investment is a huge investment for new companies furthermore cannot invest the huge amount (British Airways: 1, 2020). Because of the unavailability of a distribution network, new entrants will not be able to generate higher revenue in the UK, and they will need many years with higher investment to develop a distribution network like BA. It seems that new entrants will not be capable of delivering the best services like BA and replacing them in the UK aviation industry.

The threat of substitutes: Medium: Substitutes refer to the alternative products or services of an organization’s products or services and threat of substitutes refers to the impact of the substitutes on an organization. There are many substitutes are available for BA’s services such as trains, buses, private cars, ships and others (Greener Kirkcaldy, 2020). These substitutes cost lower than BA for that reason customers choose the substitute of BA in order to save money but the substitutes are time-consuming because these make journeys longer. The customers who care about time select BA instead of selecting the substitutes whose are the targeted customers of the company. It seems that substitutes have medium influence on BA’s business.

Bargaining power of buyers: Higher: This segment shows the dominance of buyers in an organization’s operations. The bargaining power of customers is higher in front of BA because they have many other choices to select from instead of the company. Buyers find out the airlines that provide better services with lower costs and switching costs is zero which enhances buyers’ power highly. Buyers get cheaper air tickets, including many opportunities if they purchase air tickets from travel agents which makes best deal for customers (International Travel Network, 2019). Therefore, customers choose the airline which is chosen by their travel agents which refers to the higher bargaining power of buyers.

Bargaining power of suppliers: Higher: Bargaining power of suppliers refers to the power of suppliers to dominate a business and suppliers become more powerful when they are fewer in amount than buyers (Dälken, 2014). The number of good suppliers of aeroplanes is less which makes their power higher toward BA. The company have to maintain good and constructive relationships with its suppliers to keep them loyal and keep their prices within control because the suppliers deliver the latest aircrafts for the company. BA also maintain constructive relationships with their fuel suppliers to maintain the flow of fuel.

Competitive rivalry: Medium: Vrigin Atlantic, Emirates, EasyJet, Qantas, and Qatar Airways are the top competitors of BA in the UK market. Among these competitors, BA possesses a leading position with 57% positive opinion of customers, and Virgin Atlantic possess the second leading position with 50% positive opinion (Statista: 2, 2020). It seems that Virgin Atlantic is competing strongly with BA, and other companies are also taking steps to enhance their reputation. The competitors will not be able to beat BA if the company maintain the quality of their services and customer satisfaction.

Strategies of BA and their effectiveness:

Strategies	What are features?	Outcomes of the strategies
Better pricing strategy	BA provides services at fair prices to its competitors and provides complementary services for both the first and economic class.	This strategy attracts more customers toward the company than other airlines. Customers get complementary services in both first and economic class which makes them highly satisfied and it increases the revenue of BA.
The introduced new customer service team	This team is developed to take care of customers’ needs which fulfil customers’ requirements (Careers, 2020).	Customers can inform their problems to the customer care team of BA at Heathrow airport, which solves their problems. It increases customers’ loyalty by preventing the problems they face and ensuring repurchasing of customers.
Keep stakeholders satisfied	Customers, employees, suppliers and shareholders are the key stakeholders of BA and the company takes steps to keep them satisfied. For instance, employees get fair compensation and all facilities, maintain constructive relation with suppliers and pay a fair price, deliver the best services to customers and ensure a high return on shareholder investment.	Employees stay satisfied and loyal toward BA and work hard proactively that makes the company capable of making them the leading aviation company of UK. Suppliers get fair payment, and constructive relation with them helps BA to get the latest aircraft which are energy efficient and reduces fuel costs. Customers get the best services that make them loyal and encourage them to buy BA’s services and it increases the profit level of the company. Shareholders get a high return on their investment which encourages them to invest more in BA and the company can expand their business by utilizing the investment. As a result, BA gets outstanding business growth.
Environment audit strategy	This strategy of BA helps them to observe their environmental performance and position.	Environmental audit strategy encouraged BA to take steps to save the environment, and the company has become committed to making 0 carbon emissions by 2050 (British Airways: 3, 2020). As a result, BA has become able to save the environment and it enhances its reputation which also boosts BA’s revenue.

Recommendations:

The customer care team of BA is developed for Heathrow airport which takes care of the customers from check-in to departure. These types of teams should be developed for the 200 destinations in 70 countries where BA has services (Routes Online, 2020). It will ensure best services for all the customers of the company which will make all the customers highly satisfied and loyal. As a result, they will choose BA for their journey every time, and the company will be the number one aviation industry in the world.

Conclusion

BA is the number aviation industry in the UK and one of the leading companies across the world. Financial resources, employees, patents and distribution channels of the company are the key strengths of the company which helps them to enhance its competitive advantage. BA has 57% positive reviews from UK customers which makes them number one within the UK aviation industry Virgin Atlantic has 50% positive reviews other companies are also taking significant steps to have more customers and replace BA (Statista: 2, 2019). The company have to maintain the quality of its services to hold on to the leading position in the UK market.

References

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B2U, 2016. Scanning the Environment: PESTEL Analysis. Retrieved from: https://www.business-to-you.com/scanning-the-environment-pestel-analysis/ [Assessed on: 19 July 2020]

British Airways: 1, 2020. BRITISH AIRWAYS’ INVESTMENT FOR CUSTOMERS. Retrieved from: https://mediacentre.britishairways.com/factsheets/details/86/Factsheets-3/43 [Assessed on: 18 July 2020]

British Airways: 2, 2020. British Airways flights. Retrieved from: https://www.britishairways.com/en-us/flights-and-holidays/flights [Assessed on: 19 July 2020]

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