Business Operates in Macro and Micro Environment

PART A

Introduction

Business requires strategies to attain their goals and objectives. Strategies provide a framework through which both long and short term goals can be achieved (Camisón and Forés, 2015). It contains several methods and procedures, activities and many other things related to operation and functions of business. It is a blueprint of overall implementation and evaluation of strategies. it also includes resources and timescale of doing activities and through different approaches

Strategic context

It is very important to develop a strategy in order to attain goal. It provides a systematic way of performing activities. Strategies are developed for a time interval. There are certain levels of strategies which is as follows :-

• Corporate – this is first level strategy which is formed for a specific department with long term plan. It is a large scale strategy that defines value adding, portfolio issues, etc. it is developed for overall products and services provided by Virgin Atlantic. It gives direction to mission and vision.
• Business – this is second level that is formed for different markets and products. Generally, it is developed to support corporate strategy (Wang, Gray and Meister, 2014). Moreover, there are sub sets in this as well. They are low cost, focus, etc. it is directed towards attaining long term goals and objectives.
• Functional – it is low level formed to attain business strategy. They are basically implemented at operational divisions and is related to specific function like finance, HR, operations, etc. they are formed to attain short term goals for a particular time period.

strategies play a significant role in achieving goals and objectives. It enables manager to assign task and resources as per the schedule.

Business organization

Virgin Atlantic is a British Airline headquartered in Crawley, UK and operates in different countries. It was established in 1984 as British Atlantic Airways. The parent company holds 51% shares and rest 49% are held by Delta Air lines (Van Calster, D'Argembeau and Majerus, 2018). Airline main base is in London and Manchester. the destination include is America, Africa, Asia and middle east. There are many flights which runs in various schedule. Company has almost covered every major area by connecting capitals of each country.

Mission – to embrace the human spirit and let it fly.

Vision- Changing business for good

Goal – the goal is to provide smooth and safe travel services to people all around the world.

Objectives – To increase sale up to 12.5% in next five years.

Core competencies – it refers to products and services that are provided by company. Virgin Atlantic core competencies are as follows :-

• The high class and quality of services in long distance travel.
• Variety of services for different class and income level of people.

Environmental analysis

In today’s world business environment is constantly changing. So, businesses and industries are affected by its surrounding environment in which they operate. Any change in macro and micro affects business operation adversely. Also, the strategies developed are on basis of factors. Moreover, decisions are affected due to change in it (Jeucken and Bouma, 2017). Therefore, it is necessary to analyze those factors so that it becomes easy to develop strategies and impact can be minimized. The external factors of airline industry is as follows :-

PESTEL

• Political – it is related to political situation of a country. In this government develop and regulate laws and regulations related to industries. In many countries there are strict rules developed regarding the risk associated and safety of passengers. Thus, companies are adhered to follow these. Insecurity is a factor that has created negative impact. It has bounded aviation sector to operate in any country. Virgin Atlantic also has to follow those laws and regulations of different countries.
• Economic- it includes factors such as currency rate, tariff and trade policies, etc. that is regulated and controlled by government and central bank of a country. In recent times rise in fuel prices has put intense pressure on companies (Fortwengel, 2017). Other factors include competition for low cost carrier, operating costs, maintenance, etc. It has been difficult for them to earn and generate profits. They are now focusing on merging with other airlines. This has led to bankruptcies of airline companies. For example, in India Kingfisher and Air India. Virgin Atlantic ticket rate are not cheap as offered by competitors. So, it has resulted in decline in sales and profits.
• Social – in present times there has been a high change in taste and preference of people. Social factor is related to society and culture of country. In includes living standard, income level, class, needs, etc. now passengers prefer those airlines which provide extended services at low cost (PESTLE Analysis of Airline Industry. 2018.). This is reduced the number in business class travelers. Virgin Atlantic fares are high and people needs are changed. They want low fares for long destination. it is impacting company growth.
• Technological – As name depicts it is related to change or advancement in technology of nation. In today’s digital world there are numerous innovations in technology. It has allowed developing countries to utilize them for development (Kossmann, 2017). Passengers now prefer to check in from hand held devices. also, booking tickets from website has made it easy for them to travel. now, industry advertise products on social media platforms. The quality of services has improved resulting in retaining of customers. furthermore, technology has enabled in providing more safety measures to passengers. The air traffic control system has been updated resulting in less accidents and effective monitoring of air routes. Virgin Atlantic have not implemented hand held device check in system. Also, ticketing booking is not as quick as other. It is affecting their operations.
• Environmental- This is the most important factor that is related to change in environmental laws and regulations, CSR activities, etc. aviation industry is closely related to atmosphere. Companies have to protect environment by practicing green approaches. in this they can not compromise due to their accountability. The global industry has become more competitive and expensive. It has enforced government to impose strict regulations. This is affecting their growth and expansion. People are now more aware protecting climate. Virgin Atlantic is affected due to continuous change in laws in US and UK. Due to this their operations are impacted. Moreover, they are not involved in green practices.
• Legal – they are considered as rules, policies, standards, etc. related to particular industry. Many nations have changed their laws related to passenger safety and security. These are to be followed by airline companies (Flouris and Oswald, 2016). The responsibility of companies has increased. For any air crash they have to investigate and provide funds. Apart from this, several laws are made on how to treat passengers and what services are to be provided. The change in custom duty tax rate and other taxes are affecting industry. Virgin Atlantic have to develop policies according to laws of different nations. It is affecting their operations.

It can be analyzed that there is high influence of external factors on Virgin Atlantic, it has impacted on their growth. The profits are decreased and quality of service is not effective as well. Moreover, Virgin Atlantic change their policies with respect to countries. So, this is affected their operations. Company is competing with big players and due to rise in oil prices ROI has declined.

Porter’s five force model

It is also known as external factor within which business operates. But the scope of model in narrow than Pestel. It only focuses on customers, competitors, etc. through this, it is easy for company to analyze different elements. Aviation industry is been impacted due to many factors. It has created war between government and sector regarding laws and issues. The model is been described as below :-

• Threat of substitute– it is related to use of substitute in case of non availability of product. Virgin Atlantic industry belongs to transportation sector. So, people can use other modes of transportation to travel from one place to another. They may find it cheap and safe to travel via railways, roadways, etc. so, there are many substitutes that can be used in place of airplane.
• Threat of new entrants– it is very difficult to enter and operate in aviation sector as it requires a huge amount of capital and resources. Also, companies are bound to follow rules and regulations. Virgin Atlantic is already operating in different parts of world. In recent time many new companies have entered in airline industry (Bogers, Boyd and Hollensen, 2015). This has resulted in giving tough competition. but Virgin Atlantic is MNC so, there is no impact of new entrants on them.
• Bargaining power of suppliers– it refers to power of suppliers who are responsible for delivering goods and services to consumers. If there will be few suppliers more power they will hold and company has to be dependent on it. in aviation industry, fuel, aircraft and labor are provided by only few suppliers. Thus, Virgin Atlantic has to depend on them to fulfil their needs.
• Bargaining power of customers- it is similar to above factor. In this small customer base will hold more power to cut down prices (Jarach, 2017). Virgin Atlantic is having large customer base so change in price of tickets will not affect them. but on the other hand they have to maintain standard level of price by regulating. Besides this, any fluctuations in price and ticket booking channels will not prevent to book their tickets.
• Competitive rivalry- This reflects the level of competition that exists within industry. In airline sector there are many other companies that is providing variety of offers and services. also, fares are low and prices are set according to income level of customers. Virgin Atlantic is facing tough competition from rivals like Etihad, Fly Emirates, etc. this has resulted in reducing their customer base and revenue.

By analyzing this, it can be said that Virgin Atlantic is not highly affected by change in external factors. As it operates in different parts of world and provide high quality services at moderate prices. They enjoy a large customer base (Camisón and Forés, 2015). Moreover, the strict entry and exit barriers has restricted entry of new company. but there is high level of competition among companies already operating in industry.

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CONCLUSION

It has been concluded that Virgin Atlantic mission, vision, goals, etc. are interrelated to each other and is highly affected by internal and external factors. The airline industry is affected by change in any laws and regulations by government. Country like India has developed policies to allow FDI in it. the economic change is due to change in air fuel, ticket prices varies accordingly. Now, people more likely prefer to travel via airplane. They consider it as safe and quick mode of transportation. It is summarised that there are many barriers of entry and exit in aviation. This has restricted new entry. Also, there are many substitutes that can be used in place of airplane.

Students Also Like to Read: Operation Management Strategies

REFERENCES

• Bogers, M., Boyd, B. and Hollensen, S., 2015. Managing turbulence: business model development in a family-owned airline.California Management Review,58(1), pp.41-64
• Camisón, C. and Forés, B., 2015. Is tourism firm competitiveness driven by different internal or external specific factors?: New empirical evidence from Spain.Tourism Management,48, pp.477-499.
• Flouris, T.G. and Oswald, S.L., 2016.Designing and executing strategy in aviation management. Routledge.
• Fortwengel, J., 2017. Practice transfer in organizations: The role of governance mode for internal and external fit.Organization Science,28(4), pp.690-710.
• Jarach, D., 2017.Airport marketing: Strategies to cope with the new millennium environment. Routledge.

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