Analysis of the Macro and Micro Environment at British Airways Essay

British Airways is the largest foreign scheduled standard pressureline in the UK. The family was founded in 1919, and has taketinued to grow and stretch since privatisation in 1987, until the global niche get ahead in 2008. On 23rd January 2009 the UK was formally decl atomic number 18d to be in ecological niche quest two consecutive quarters in 2008 during which economic growth dropped (BBC, 2009). numerous military controles, including British Airways, bear found it increasingly difficult to survive in the issueing examination macroeconomic environment.The RecessionA break get come out often occur when pomposity grows rapidly goods become to a greater extent high-ticket(prenominal) at a time when consumers hit less money to sink. As consumers pop off less money, offer begins to exceed take away within the markets. This causes businesses to produce less of their goods, and so require less ply. The unemployment that results from this creates a postal service whereby battalion do not institutionalise the markets and put one over less money, so stanch disbursal, and then creating a vicious circle. UK unemployment figures up to March 2010 express that unemployment has risen to 8%, the highest figure since 1996.For rough(prenominal) great deal, air pass is a luxury good. This means that in times of unattack competentship, where the consumer is simplification their spending, air set off pull up stakes be an atomic number 18a that is very hard hit, as many people ar not taking holidays. For nigh consumers, air travel is for business purposes, as opposed to recreational. This area of the market has not been hit as hard, although many people are now flying in parsimony class, where they might previously fox flown in business or initiatory class. Business and prototypal class passengers fuddle played a large subroutine in BAs bread qualification, as they account for a large resi out-of-pocket of the unions net playac t.Low-cost, reckon airlines such as Ryan Air put on through comparatively well, producing profits in a market where very few businesses have been fitted to. Budget airlines are proviso an inferior good. This means that as consumer income ebbs, a demand for the service impart amplification as the service is seen to be much than affordable. Production Costs everyplace new-fashioned years the cost of dismiss has increased dramatically, and as each aerodrome has only one provoke supplier, BA is working within a special(a) market, where on that point is a lack of bell competition to drive the equipment casualty of open fire downwardly.With demand continuing to exceed the submit of fuel the equilibrium point of the provide and demand curve is continually changing, this allows the fuel suppliers to increase their be. As demand for air travel has dropped and yield costs have increased, BA has found that an increasing repress of flights are running with too few passe ngers to manufacture the flight profitable. However, if BA were to decrease the number of flights they would risk losing their slots at the major(ip) airports, which would be disastrous when the market begins to fragment up and demand for flights increases again.Willie Walsh, chief executive of BA, intends that a compromise must be found between surviving end-to-end this difficult climate, and growing the business so that it can prosper once the economy has recovered. Iberia Merger BA has recently write a conjugation with Spains Iberian Airlines. This provide promote the business to be one of the largest inter subject field providers of air travel. It is predicted that the merger impart allow the two companies to tho around ? 50 million per year, which will greatly make headway shareholders as the profit will be seen to increase, and likewise benefit customers as the synergy between the routes and aircraft apply should offer to a greater extent choice at a more competi tive price (Price, 2010). Government Policy As a result of the recent recession, the regime has taken steps to increase consumer spending. Increased consumer spending is necessary in instal to increase the UKs GDP (gross domestic product) and so ensure that the recovery from the recent recession will continue.Some of these insurance policy responses from the regime included glum VAT from 17. 5% to 15% as of December world-class 2008 (Finch, 2008). This was a move which was aimed at demoraliseing the price of goods and so encouraging the cosmos to spend more. This would start to regain consumer trust, and in any case start to put money backbone into the market. The major downside to this policy exchange is that due to a note governmental income from VAT, the government has been forced to increase the UKs interior(a) debt and run a larger budget deficit in order to take place national services running.There has been considerable debate as to how much this policy actual ly helped to bring the UK out of the recession, entirely it did sanction consumers to have more trustfulness in the government and the economy and to spend more money. By encouraging a high rate of consumer spending, the economy is kickoff to recover this is a positive marker for British Airways as it means that customers are beginning to increase again. As the consumer is get faith in the economy they are becoming more in all probability to pre-book a holiday as they have more money available to them.This cut in VAT has overly allowed companies such as BA to either increase their profit margins meagrely or lower their prices slightly (BBC, 2009). The Bank of England Since the start of the recent recession, the thrash has weakened considerably. With the UK economy struggling and consumers having borrowed hard before the recession, bills traders have fill the market with sterling, resulting in the pound displace in protect. In an judge to take monetary stability the Bank of England dropped the national interest rates from 5% down to as low as 0. 5% (Bank of England, no date).This also caused currency traders to attempt to trade their sterling to a currency returning a higher(prenominal) profitability, such as the Euro (Bank of England, 2010). However, this move was needed in order to attempt to keep ostentation low and encourage banks to continue to supply loans, overdrafts and mortgages. This was a move which was needed in order to try and maintain consumer trust, provided the weakening pound has made business increasingly difficult for international companies as importing goods needed to provide their rise up has increased indeed increasing their production costs, although it does make the service cheaper for foreign consumers. leading Theories Willie Walsh became CEO of British Airways in 2005 since then(prenominal) he has faced numerous challenges as the global economy has been hit hard by the recent recession. Walsh was brought in b y British Airways as CEO following his success as CEO of Aer Lingus, where he helped to bring the company out of the monetary difficulty that it suffered as a result of the terrorist attacks in 2001, by cutting 2000 jobs and finding new ways to cut costs (Saunders, 2008).In the current economic climate, where the effort has been severely hit by the recent recession, a leader is needed who is able to counterbalance to an ever-changing dynamic environment. Walsh has turn up his ability to do this, and has been quick to react with BA by cutting many jobs as the recession hit, and working out new ways in which the company can be run more efficiently, such as by reducing the number of aircraft and raising the efficiency of staff.This tendency of leadership is known as transformational leadership it relies upon a leader who has a invention of the direction he wishes the business to take, and has the ability to motivate and inspire his employees in order to attain this goal. Motivat ion Content and abut Theories Motivation theories have been developed so that leaders and managers can understand the possible action behind the different methods of motivating their workforce and then work out the near productive and efficient of these methods.It is a prevalent ruling that leaders are born(p) and not made this is supported to few extent by motivation theories as the best leaders will be more perceptive as to how change is extend toing his workforce, and the areas in which improvements could be made, as they will have a ingrained empathy. The best leaders will also be able to use this to the proceeds of their company they will be able to motivate their workforce to a higher work capacity level and so promote productivity. Motivation theories work on the basis that employees carry out work for a variety of reasons, which are burden in terms of their importance.Maslows power structure of Need (shown in the diagram below) suggests that at that place are 5 levels at which a person must be finish before they will perform at their optimal capacity, with the lower levels universe the first to be fulfilled and the most cardinal. BA has recently asked its employees to consider working gratis(predicate) for up to one month, in a bid to keep the company afloat. many another(prenominal) employees have resisted this change, with only 800 out of 40,000 staff asked agreeing to this. Other options were also put send to staff, including the option to take recreational hold or to work part-time these proved more popular with employees.A lessening in fee would affect employees at the bottom two levels on Maslows Hierarchy as with reduced income some may struggle to provide for their physiologic needs. This in turn will affect the employee at several levels up the pecking order they will feel less unspoilt within their job and society, and consequently on a higher more stirred up level. Content theories of motivation suggest that there are three main components which motivate people these are direction (what they want), book (how much they want it) and persistence (how further they will go to attain this). avocation on from his, it is assumed that people will work for bribes.These rewards can then be split into two main areas indispensable and extrinsic. Content theories place a higher emphasis upon the intrinsic ciphers, such as the internal drives which motivate people to work. Maslows Hierarchy of Need is one sample of this, and Herzbergs 2-factor guess is another. Herzbergs theory relies upon hygiene (extrinsic) and motivators (intrinsic) and suggests that extrinsic factors are important in preventing job dissatisfaction, whereas intrinsic factors are more concerned with self-respect and achievement, thus promoting job satisfaction.Process theories such as J Stacy Adams integrity theory, suggest that people are more productive when they perceive that they are receiving median(a) treatment, and will tend to act if they believe they are being un decorously do by when they compare themselves to others within their social network. roars Expectancy theory also works upon a basis of fair treatment, but focuses upon the workers belief that if they put more effort in, their extremity will improve, and their manager will reward them fairly, with a reward that is of value to the mortal worker.Managers must therefore identify the rewards that workers will place a high value upon, and attempt to minimise any hateful outcomes. British Airways needs to focus more upon employee satisfaction, particularly within this economic climate, as this will encourage workers to perform at a higher capacity and thus increase efficiency of the company. Threat of afterlife redundancies is a big motivating factor for many employees if process theory is applied, so that employees believe increased effort will lead to fair reward (ie. tutelage their job) they may be more likely to perform better.Mana gement of Change Theories regarding caution of change focus on minimising subway to change, as this is more likely to make the proposed change viable. Force field summary requires managers to assess the pros and cons of change, and the movement that will be needed to effect this change. For example, with BAs pay freeze and request for volunteer(a) work, there will be foeman to this change, based upon a fear of lower income, but, for some, the fear of redundancies and dismissal will outperform the risk of a month unpaid (BBC, 2009).Resistance to change is often cancel due to a fear of the unheard-of employees often fear that if they work at a higher capacity this will become the expected normality, which may be difficult to sustain, and can encourage workers to thus work at a lower performance level. Lewins 3-step change process identifies unfreezing (where the status quo is disturbed), movement (where new demeanour is adopted) and refreezing (where the new patterns are estab lished as normal) as the three stages. Unfreezing is perceived to be the most difficult to implement, as this is where a fear of the unknown will have the greatest impact.For managers to overcome this they must show empathy, communication and participation. Willie Walsh shows an example of this as he has ensured that all BA employees are kept well informed of all plans towards cost-cutting and voluntarily agreed to work for July without receiving his ? 61,000 monthly salary in a bid to encourage workers to do the same. This also uses process theories of motivation, as it encourages workers to feel that they are receiving fair treatment. unfortunately for BA, many employees feel that they are being treated unfairly, leading to numerous recent strikes, which have caused massive further losings to the company.