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An analysis of British Airways Marketing Environment
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| Words: 4500 | Submitted: 24-Apr-2006
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DescriptionA macro, micro and internal analysis of British Airways. Including, PEST, PORTERS FIVE FORCES, VALUE CHAIN, PRODUCT LIFE CYCLE & SWOT ANALYSIS.
British Airways (BA) is the UK’s largest international scheduled airline, operating international and domestic scheduled and charter air services for the carriage of passengers, freight and mail and the provision of ancillary services. The airline flies to over 550 destinations globally and is considered to be a leader in the industry.
In order to profitably satisfy customer needs, an organisation must understand its external and internal situation including the customer, the market and its own capabilities. Furthermore, it needs to understand and adapt to the dynamic and uncontrollable factors of the environment in which it operates.
A marketing audit is in a number of ways the true starting point for the strategic marketing planning process, and is therefore, as Kotler (1999)has suggested ‘a comprehensive systematic, independent and periodic examination of a company’s-or business unit’s-marketing environment objectives, strategies and activities with a view to determining problem areas and opportunities. An analysis of the three key perspectives of a marketing audit; the 'macro-environment,' the 'micro-environment' and the 'internal environment will be carried out for BA.
2005 saw a new Chief Executive being appointed in BA; Willie Walsh, former head of Aer Lingus. The man with an excellent reputation for driving down costs has stressed his determination to realise his predecessors, Sir Rod Eddington’s, goal of a 10% operating margin.
The marketing environment is ever changing and therefore it is essential that a structured, detailed and continuous analysis of the principal dimensions of the environment is made.
3.1.1 Political and Legal Factors
The start of the millennium is turning out to be some of the most difficult times that the airline industry has ever faced. The events of terrorism attacks in September 11, 2001 in New York and July 7, 2005 in London along with the wars in Iraq have no doubt caused an unprecedented crisis and political instability. The events have caused the introduction of new security regulations from the EU and US that come into effect in summer 2006 and a fall in customer travelling confidence.
Governments have controlled where airlines can fly, and aspects of their product planning and pricing policies. In recent years, substantial regulatory reform has taken place, giving carriers more opportunity and increasing the market competition. Deregulated companies like BA require systems that enable decisions to be made quickly Open skies is an agreement which changes the regulatory landscapes significantly (appendix 1).
A significant legal factor affecting BA is the power of trade Unions. BA has suffered many strike actions (August 2004 and August 2005) and is aware of the implications that the trade unions can cause. Legal regulations on employee rights, customer rights and an upsurge in environmental and ecological issues are more factors that BA must consider.
3.1.2 Economic Factors
The demand for air travel is characterised by a very high income elasticity. Therefore, as the world economy grows, so the demand for air travel can be expected to increase too.
The political situation in Iraq has helped to drive oil prices to a record high and for BA, the oil price rise might add £100 million to their costs. In response, the cost of fuel surcharges is always at risk (appendix 2). BA is in the business of transporting people to and from worldwide destinations for both business and pleasure. If the international economy slows down, business trades less and fewer business people will use planes. Equally, people may choose less 'exciting' holidays.
3.1.3 Social Factors
The social and cultural influences on business vary from country to country however it is important that such factors are considered and include demographic and cultural aspects. These factors affect customer needs and the size of potential markets. Demographic changes have resulted in the development of the ‘grey’ market who are spending more on leisure and travelling. Lifestyles , tastes and fashions are all changing; customers require opportunities to visit new and interesting, often long-haul, destinations.
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