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Swot Analysis and Pestle Analysis of British Airways

Essay by   •  January 22, 2012  •  Case Study  •  1,809 Words (8 Pages)  •  6,544 Views

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British Airways is the United Kingdom's largest international scheduled airline flying to 148 destinations around the world. The airline is considered as one of the world's leading scheduled premium international airlines. The airline's principal place of business is Heathrow. Aside from scheduled passenger services, British Airways also operates a worldwide cargo business (British Airways 2009).

SWOT Analysis

SWOT analysis is a management tool that aids in the identification of organizational strengths, weaknesses, environmental opportunities, and threats (Jones and George, 2003). Through the SWOT analysis, the organization will be able to produce an organized inventory of factors that are potentially relevant to the firm's strategic situation (Saloner, et al 2008).

Strengths

One of the strengths of British Airways is its acquisition of modern, top of the line fleet of aircrafts. These aircrafts are aimed to improve the airline's product and service offerings thereby increasing the number of passengers. The acquisition of modern aircrafts also allows British Airways to go head to head with their major competitors and to service wider markets. The company's human resources is also considered as one of the company's strengths. As a progressive, high performing organization, British Airways recognizes that engaged employees are more committed to organizational values and more willing to embrace change and improve customer service.

Weaknesses

One of the weaknesses of the company is its weak marketing campaign and strategy to encourage repeat purchase and customer loyalty. There is a need for British Airways to come up with marketing strategies that will attract more passengers.

Opportunities

The completion of Terminal 5 is expected to strengthen and improve customer experience, continue to make the business more cost effective, grow British Airways' operations and make corporate responsibility a prominent part of the business. The company is also in the process f improving its products and services which is expected to attract more passengers.

Threats

One threat for British Airways is intense competition. The airline operates in highly competitive markets. British Airways face direct competition from other airlines on its routes, as well as from indirect flights, charter services and from other modes of transport. Some competitors have cost structures that are lower than British Airways' or have competitive advantages such as government support. Another threat is that the airline's suppliers, in which the airline is highly dependent, are in a high risk of business failure because of the present economic condition. The failure of a key supplier may cause significant disruption to the airline's operation. Safety and security is also a threat for British Airways. Failure to prevent or respond to a major safety or security incident could adversely impact the airline's operations and financial performance. Another significant threat is further deterioration in the global economy. If the global economy continues to decline, the financial position of British Airways will be affected.

PESTLE Analysis

The airline industry is highly competitive and regulations are heavily implemented. Aside from these, the airline industry also faces different challenges brought about by drastic changes in customer behaviour affected by different external factors such as economic condition.

The PESTLE analysis is used to identify forces in the macro-environment that are affecting the business at present and are likely to continue to affect the business in the future (Haberberg and Rieple 2008). The PESTLE analysis is used as tool for analyzing a company's macro-environment. Macro-environmental analysis is interested in factors in the wider environment that influence the demand for the product or service offered by a company; demand for the product or service; the manner in which the product or service is distributed; the price that is charged for the product or service; as well as the manner in which organizations compete with each other (Haberberg and Rieple 2008).

Political Analysis

The airline industry is highly regulated. The airline business in influenced and governed by tight regulatory controls. Almost every airline business operation and decision is influenced by regulations and policies. Regulations are applied in the routes that an airline chooses to fly, the business partners the airline works with, theairport slots it uses as well as the fare it sets and the infrastructure costs it pays. Another area which is heavily regulated in safety and security. In recent years, the environmental impacts of an airline is also subject for regulations and policies. Governments around the world introduced a range pf security measures in order to fight the threat of terrorism and illegal immigration. Airlines continue to engage with different governing bodies such as the European Union and national governments to ensure safety and security while causing minimal inconvenience to customers (British Airways 2008).

Safety Standards are strictly implemented in Europe by the European Union. The International Aviation Organization (ICAO) is one of the governing bodies concerned with safety standards. The European Union, being a regulatory body in Europe published a list of airlines that failed to meet the safety standards set by ICAO. Theseairlines are banned in Europe (Department of Transport 2009).

Economic Analysis

The airline business is highly sensitive to any economic downturn. Economic downturn causes business travel, which is considered as the bread-and-butter of the airline industry, to drop significantly. The global recession in 2008, has tremendous impacts on the airline industry. There are a number of factors that affected the business of British Airways - prices increases in oil and commodities, collapse of sterling, unprecedented financial crisis experienced by the United Kingdom. Consumer and business confidence

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