Internal Structure and Functions of the British Airways Company
The internal structure of British Airways is founded on a culture that esteems high corporate governance standards. The board of directors is held accountable in ensuring that shareholders interests are safeguarded. The board of governors offers entrepreneurial leadership to this company based on effective and prudent controls that ensure that risks are carefully evaluated and managed. The strategic aims of British Airways are set by the board and it also ensures that all the required human and financial resources are availed for achievement of the strategic aims or goals. Standards and values of this company are set by the board and it ensures that shareholders obligations are honoured and upheld by the management team. The companys performance is reviewed regularly by non executive and the executive directors. While most of the decisions are made by the top management, board of directors have the mandate of approving code share partnership as well as capital commitments that exceed ten million pounds. The board also makes decisions pertaining to divestment, investment and finances (British Airways, para 2).
Top management and directors of British Airways oversee the daily operations of the company. Their role is to constantly review the internal control system of this airline, to safeguard the companys assets and to maintain good and reliable accounting records. The human resource department is charged with the role of managing human resource or the staff including recruiting, training and determination of remuneration for lower rank employees. The remuneration of directors is decided by the board. All employees are expected to observe the business principles and code of ethics and conduct of this airline. The company also has a clearly defined organisational structure that shows the control responsibilities and authority of all managers and employees. Staff competence and professionalism are deemed essential and this has been made possible through the rigorous policies of recruitment and systems of performance appraisal put in place by the airline. Performance appraisal helps in determining the training needs of each employee. To enhance communication within the company and its environs, the company has put in place information systems that enable employees to check any new developments within the company. Department meetings are held at regular basis and team work is highly encouraged. An annual general meeting is held for all stakeholders of the airline (British Airways, para 6).
As mentioned earlier, British Airways, commonly abbreviated as BA, is the largest airline company in the United Kingdom. It operates both in domestic markets and internationally and also charters air services for passengers carriage, mail and freight as well as ancillary services provision. The airline also offers air travel services for holidays and leisure (Bladeknight, para 4).
External Analysis of British Airways Company (pest analysis)
In order for any organisation to satisfy the needs of its customers and be profitable, it must fully understand the internal and external environment it operates in. It also has to come up with adequate measures to enable it adapt to the uncontrollable and dynamic factors presented by the business environment surrounding it. The airline industry is highly competitive and it is characterised by continuously changing marketing environment. It is thus essential to continuously analyse the various principle dimensions that affect the competitive advantage of an organisation. PEST analysis looks at or evaluates the external environment of an organisation by considering four dimensions the political factors, economic factors, the social factors and the technological factors or dimension.
Political factors
Political environment refers to the governments role or influence of the operations of an organisation and how such influence impacts on the organisation. It also refers to the extent at which a countrys government interferes or intervenes in its economy. From the year 2000, the airline industry has experienced many difficulties owing to the rise of terrorism acts. The September 11 attacks of year 2001 in New York and subsequent London attacks in year 2005 as well as the Iraqi war have led to political instability and unprecedented crisis in the United Kingdom and around the world. An increase in terrorism attacks and terrorist threats led to formulation or introduction of stringent security regulations and rules from the European Union as well as the United States in the year 2006 (Oxford Information Services Ltd, para 3). The confidence of consumers or passengers also decreased following the attacks. Today, governments have a stake in pointing out the destinations of airline industries as well as in some of the pricing policies and product planning aspects in the aviation industry. Following the terrorism attacks in the United States and London, most of the airlines including British airlines cut their flights to some countries, especially those in the Middle East that were believed to support and hide terrorists. This in turn stirred up fear in both the United Kingdom and the United States and a decrease in public confidence in air travel. Apart from stoppage of flights to such destinations, the threat associated with terrorism attacks has led to tremendous losses of British airlines as it had to put more security measures and checks. In general, the political environment has had a great impact on the operations of British Airways Company for the past eight years, a situation that was brought about by a rise in terrorism attacks and threats in both the United Kingdom and the United States (Bladeknight, para 6).
Economic factors
Economic factors refer to the general economic factors associated with demand and supply of goods and services. The aviation industry is involved in provision of air transportation of people and goods. Air travel demand has high income elasticity. Growth in the world economy as such is expected to lead to an increase in demand for air transportation or travel. Following the political crisis in Iraq and other Middle East countries, oil prices increased and this has a direct impact on the operations of British Airways. An increase in oil prices would translate to an increase in the running costs of British Airways thus reducing the overall profitability of this company. An increase in fuel prices would also force BA to increase its charges for air travel and this would have a negative impact on demand for its services. Another economic factor facing British Airways is that the demand for its services is dependent on the domestic and international or global economic growth. A decline in either of this would lead to a decrease in business for the airline and vice versa. Also, the European capacity is greater than the demand for air travel services and this has led to an increase in rate wars and a decrease in yields for individual airline companies in this region. This problem can be reduced via the formation of alliances. Alliances can help airlines to take control of the air travel charges, lead to a reduction in competition and also lead to an increase in yields to an airline. Alliances also make it possible for code sharing among the airlines which can help in reducing or splitting the costs (Oxford Information Services Ltd, para 6).
Social factors
This refers to the cultural and social influences that impact on the operations of a business. These factors vary from one state to another and they have significant effect on the operations and productivity of an organisation. Cultural factors influence the needs of the customers and also the potential market size. Changes in demographic in the UK and other parts of the world have led to an emergence of a grey market characterised by an increase in travelling and leisure spending unlike in the past. Fashions and tastes are also continually changing and customers have different requirements and needs. Most of the people are today looking for new and exciting places to visit, usually on long haul destinations. This presents a good opportunity for British Airways to expand its operations and functions to cater for such emerging needs and demographic changes. Changes in human resource requirements and the increasing demands of highly qualified and experienced employees in the aviation industry also pose a major threat for BA and other airlines. To curb this problem, airlines should form code-share or alliances that would enable them to reduce operating costs related to human resource by utilising the staff on only one airline (Bladeknight, para 9).
Technological factors
Technology is one of the most essential tools that can help a company in creating a sustainable competitive advantage. However, for this to occur, a company must be ready to keep up with the ever changing and dynamic technological environment. In the aviation industry, technology is expensive and very dynamic. This can be very costly for airline companies including British Airways. To cut the costs associated with acquisition and dynamism of technology, airline industries in the UK should form alliances that would enable them to form joint investment ventures, for example the shared check-in systems (Oxford Information Services Ltd, para 9).
Conclusion
BA is among the fastest expanding airline companies in the aviation industry today. Much of its growth is attributed to its unique culture and leadership qualities, especially under the leadership of its chief executive officer Bob Ayling who brought many changes to the organisation. Despite the fact that British Airways Company was making good profit, Bob felt that it was necessary to implement some changes so as to create a sustainable competitive advantage. He reinvented training programmes for the staff of this airline and he did so by first constructing the Heathrow hotel which was meant to serve the staff members only. Bob also outsourced engineering, information technology and maintenance departments to developing countries. Other strategic plans have so far been implementing in this airline and they have contributed greatly to the shaping of the culture of British Airways as well as its overall performance.
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