Analyse the Macro Environment of British Airways` Electronic Commerce

Analyse the Macro Environment of British Airways` Electronic Commerce

Every company in the airline industry is greatly influenced by a large number of macroeconomic factors, over which the company has no control - Analyse the Macro Environment of British Airways` Electronic Commerce introduction. The factors of the macroeconomic environment in many ways determine the organization’s success, because they have a deep impact on all of the company’s activities.

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Macro environment of e-commerce is influenced by most of the macro factors which have an impact on traditional operations. However, it is slightly different from macro environment of regular operations because it is more dependent on various technological changes and competitors’ innovations. Besides, macro environment of e-commerce is greatly influenced by international factors, because users of Internet are located all over the world and they can buy many products and services online.

British Airways largely depends on macroeconomic conditions not only in the UK which is its domestic market, but also in other countries of the world, because it has customers in various countries. Online services are gaining more and more importance in the operations of the company due to their increasing revenues. British Airways’ performance is greatly influenced by any events which take place in different countries, such as changes of government, downturn of economy, changes in consumers’ preferences and their level of income, change in consumers’ demographics. The company needs to devote maximum attention to the analysis of all of these factors because they have significant influence on tourism and people’s desire to travel by airplane.

PESTEL analysis for British Airways e-commerce is represented in table 1. It is crucial for understanding of the impact of macro environment in which the company functions. The major factors of macroeconomic environment which have a deep impact on the operations of the company include political, economic, social, technological, environmental, and legal factors. These factors need to be taken into consideration by the management of the company. Factors which are connected with e-commerce and would not be present in traditional business models are highlighted.

Political:

o  Current legislation regulating airlines;

o  European/international legislation development;

o  Government policies regulating airlines;

o  Wars in certain parts of the world;

o  Political prohibition of travelling to certain countries.

Economic:

o  Changes in taxation which could affect the price of airline tickets;

o  Change in the exchange rate of ₤;

o  Changes in the price of oil;

o  Changes in price of Internet in various countries;

o  Changes in consumer income;

o  European economy trends which could decrease the number of passengers travelling by airplanes;

o  Appearance of new competitors offering similar services.

Social:

o  Current lifestyles of consumers and possible changes in them;

o  Consumer buying patterns;

o  Consumer demographics;

o  Consumer travelling patterns;

o  Terrorism;

o  Number of Internet users;

o  Number of consumers shopping for airplane tickets online;

o  Number of crimes connected with e-commerce (number of hackers)

Technological:

o  Competing technology development in airlines;

o  Innovation potential of competitors in airline e-business;

o  Introduction of new technologies in e-commerce;

o  Introduction of new software and hardware to the market;

o  E-security.
Environmental:

o  Ecology;

o  Pollution conditions.

Legal:

o  Developments in price legislation;

o  Developments in legislation regulating e-commerce and online shopping.

Table 1. PESTEL analysis.

Political factors all have a very deep impact on the e-marketing strategy of British airways. Flights to countries in which political situation is unstable or where a war starts might be cancelled, and these destinations can lose their attraction to customers for a long while. Therefore, it is important for British Airways to concentrate on the most popular destinations of the world and target those customers who are interested in travelling there.

Among the social factors, the number of Internet users and particularly the number of consumers shopping for tickets online are one of the major factors which determine the success of British Airways’ e-marketing strategy. The company seeks to target these people by a personal approach, which includes attention to every customer according to his level of income and his interests. Terrorism is a crucial social factor which greatly influences the number of people willing to travel by airplane. After 9/11 many people stopped travelling by airplane because they were afraid that the airplane would be hijacked by terrorists. This tendency greatly influenced British Airways’ profits. Another crucial social factor is change in consumers’ preferences. British Airways’ management needs to analyze the preferences of consumers all the time in order fine-tune its e-marketing strategy. Changes in consumers’ demographics also influence the company’s e-commerce strategy.

 In economic factors, the most important ones for British Airways’ e-commerce are the price of Internet in various countries and partially the level of income. If the price of Internet decreases in a particular country or if the level of income increases, more people will be expected to travel and use Internet to buy tickets.

Among legal factors, e-commerce operations of British Airways can be largely influenced by developments in legislation regulating e-commerce and online shopping. Environmental factors have a deep impact on the company’s ability to carry passengers. In case of introduction of a stricter environmental regime, the company might have to cut on the number of flights.

Even though all of the mentioned factors have a large influence on the e-commerce operations of British Airways, technological factors are the crucial ones. Innovation potential of competitors in airline e-business, introduction of new technologies in e-commerce and new software and hardware to the market all have a deep impact on the success of the company in the market. British Airways is currently the leader in all of the e-marketing innovations and it pioneers all of the innovative products and services. However, the company needs to take into consideration the fact that other companies might also come up with some innovative tools, which will threaten British Airways’ leadership in the market. The impact of a revolutionary innovation coming from a competitor can be very dangerous in e-commerce because these innovations have an impact of leverage on the company’s profits.

It is important to mark that technological factors of macro environment have enabled the company to become the leader of the industry. British Airways has been successful in winning a large share of the online market due to its revolutionary innovation: it was the first airline to offer online check-in. Even though other companies started offering the same services online in a while, British Airways managed to get a dominating position in the online market due to its innovation. The company was also a pioneer is offering one-stop services to small and middle-sized businesses, by personalizing their online experience. Besides that, British Airways has conducted a large number of online campaigns to attract new customers, such as a campaign jointly with DoubleClick: “British Airways and internet agency, DoubleClick, have signed a landmark on-line advertising deal, spanning 14 countries and four continents with a potential monthly global audience of over 33 million” (DoubleClick Here for British Airways.  Accessed on April 27, 2006 at URL: http://www.britishairways.com/travel/bapress/public/en_gb )

In conclusion, it is necessary to mention that British Airways is a top player in the world airline market due to its well-balanced marketing and e-marketing strategy. By taking advantage of technological factors of the macro environment, the company managed to obtain a large share of the market and achieve success. It is very important for British Airways to analyze macro environment and update its strategies according to changes in political, economic, social, technological, environmental, and legal factors. British Airways is currently a leader when it comes to e-commerce and a pioneer of most existing tools. It is crucial for the company to ensure that it remains a pioneer in the market and does not let competitors take the initiative.

Bibliography.

1.      Cunningham Michael J. B2B (2001): How to Build a Profitable E-Commerce Strategy. Perseus Publishing (Current Publisher: Perseus Publishing).

2.      DoubleClick Here for British Airways.  Accessed on April 27, 2006 at URL: http://www.britishairways.com/travel/bapress/public/en_gb

3.      Greco Alan J., Ragins Edna Johnson (2003). Customer Relationship Management and E-Business: More Than a Software Solution. Journal Title: Review of Business. Volume: 24. Issue: 1.

4.      Orr Bill (2002). EPN Wants to Be the Payments Backbone of E-Commerce. Journal Title: ABA Banking Journal. Volume: 94. Issue: 12.

5.      Parrish Deidra-Ann (1998). Technology for Business: Set Up Shop on the Web. Black Enterprise. Volume: 29. Issue: 1. August 1998.

6.      Vikas Agrawal, Arjona Luis D., Lemmens Ron (2001). E-Performance: The Path to Rational Exuberance. The McKinsey Quarterly.

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