Management Environment: British Airways
Introduction
This report involves analysis of the organisational structure of British Airways and its PEST analysis. Management and its organisation in a public limited company are vital for any company to be successful. There are different types of organisational structures, which are acceptable, in public limited companies.
One such structure is the vertical system where there are a few people at the top who make the company decisions. The number of persons increases at the middle level management and lower level positions. This kind of system is bureaucratic in nature. Horizontal structure is another form of organisation where there are few positions at the top and that increase in the next row.
There are few supervisors and many equals at the low level. The final structure is the divisional system which involves dividing functions and responsibilities based on specialty and geography. The public limited company to be analyzed in this report is British Airways, which uses the, horizontal structure (Henry, 2008).
The figure on the next page represents the organisational structure for British Airways.
Figure 1: Organisation structure of British Airways (British Airways, 2009).
The chief executive heads the organisational structure of British Airways, and below them, they have customers and operations executive, management board and those directly reporting to the chief executive. They are the brains behind decision making in the company. Below
The executive of the company, are those who are involved in implementing the decisions made by the executive. These include the communication, customers and investment departments (Rainey & Hal, 1997). The executive then passes the mantle to the next level that ensures the running of the company is smooth at the management level. The operators at this level ensure all the technicalities of the company are put in place. The low levels ensure that all the company activities are carried out to the letter to ensure effectiveness.
The breaking down of the management levels ensures that, supervisors have a few subordinates below them. This method is effective in that, the supervisors work closely with those below them a move which prove to be highly effective. The inclusion of the customers department in the company helps in better delivery of services because the representatives present the views of the customers.
The organisational structure of British Airways reduces the inefficiencies which would have occurred in the execution of duty. The structure ensures that all departments are represented in the top management. This ensures that information moves freely and efficiently through all the departments (Blau &Scheonherr, 1971).
The organisation of British Airways like any other company will suffer from different external pressures. The external environment of organisation affects the companies’ decision making and service delivery. The PEST analysis of the company identifies different factors which will affect British Airways’ organisational structure.
The factors include political and legal factors, economic factors, social and cultural factors. Political and legal factors that affect the company include terrorism which has been on the rise in the recent years. This has led to the introduction of new security measures by the government.
This has created fear among customers thus reducing their interest to travel leading to loss of market by the airline. There have been substantial regulatory reforms which have allowed many companies into the airline business thus increasing market competition. There is also delayed decision making in the public sector, which affects the airline (Goodsell & Charles, 1994).
British airways being a public limited company is subject to government funding, but this funding has reduced due privatisation of part of the company. This means that decision making is no longer with the management but with the owners of the company. A major legal factor which affects British Airways is power of trade unions.
The workers trade unions have persistently demanded higher wages and benefits to their members. This has resulted to strikes, for example, those held between August 2004 to August 2005 and which affected normal functioning of the company.
Economic factors will arise due to aspects such as the increase in prices of inputs of the airline business. The current insurgence in the Arab world in countries such as Libya, Iraq, and Egypt has driven the prices of fuel very high. This means that, the prices of air traveling will increase thus resulting to fewer people paying for services with British Airways. These will in turn reduce the profits leading to poor service delivery.
Another economic aspect is the economic recession which has hit the whole world. This has affected the airline in such a way that, it has to work with a slight budget. The number of customers has also reduced with most of them selecting the cheaper airlines and having fewer holidays.
The increased competition from other airlines both local and international has limited further expansion of British Airways due to reduction in yields. There is also high inflation which has increased the cost of living of citizens. This has forced them to cut down their budgets by for example opting for less travelling and leisure so as to save.
Social factors that affect the organization structures of the British airways are demographic, cultural changes and employer-employee relationship. These changes affect the size of the potential market together with the customer needs. The demographic changes have resulted to a grey generation who spend much on leisure and traveling. This means that the airline will have to out stretch it resources to cater for such a demand.
The cultural changes have resulted in changes in lifestyle, tastes and fashions. This has resulted to customer requirement to travel to exciting ventures which might be available at airlines destination. With such changes, the airline has been forced to venture in unfamiliar territory or loss of business. The employee-employer relationship has deteriorated in the recent past with the employees striking so as to have increased salaries and to oppose mass retrenchment. This has led to massive losses to the company (Brassington & Pettitt, 2007).
Technological changes are other aspects that affect British airways. The technology involved the airline sector is expensive and fast moving. The airline lacks the funds to install systems such as check-in-system which helps customers to access information about their travel plans online.
Technology plays a crucial role in airline control and therefore, should be of high quality to prevent disasters. This factor forces the airline to invest in it so as to beat the competition. Changing ad implementing up to date technology ahs however been very expensive for the company. With proper investment in technology, the airline would make the work of their employees and customers easier.
British airways has been successful to some extent. The company has registered success though with difficulties. These can be identified from the organizational structure and from the PEST analysis. Successes from the organizational structure are as follows:
Division of management into small parts makes execution and implementation of decisions made by the executive simpler. This is because a supervisor has only a few subordinates below him or her.
There is free communication between both employees and employers which have reduced on the strike actions resulting to better problem solving mechanism.
The organizational structure ensures that there is smooth running due to division of labor where an individual is aware of what is needed to be done (Golembiewski& Robert, 1962).
Successes based on PEST are as follows
Political factors have led to the increase in security which has turned to be an advantage because customers feel secure when they are traveling with BA. This has led to increase in number of customers and in turn led to a boom in the business. Increased competition has come as a success because BA has worked to improve on it service delivery so as to remain at the top.
In terms of the economic factors success is evident in the British Airways’ expansion through merger and privatization where the government has allowed an increase of individual shareholders into ownership of the business.
Success from social factors is that the airline has worked hard to expand so as to cater for the growing demand from customers due to increase in population. Technologically, BA has highly invested to ensure they keep the same pace with the growing and fast moving technology. This has led to fast delivery of service to customers (Bohte & Meier, 2001).
Failures
The organizational structure has led to delays in decision making and decision implementation (Wilson, 1989). This is as a result of many ranks in the structure where the real implementers are not involved in decision making. People on the ground are not involved in decision making a situation likely to lead in to opposition during implementation. Division of labor is not economical to any company because it limits flexibility in the field of work.
Failures as identified from PEST analysis are as follows:
- Politically the government delays the decision making process because it has to be involved.
- The company has failed to offer best salaries to its employees resulting to strikes which affect normal operation.
- Economically, the company has failed to work towards new ventures likely to increase profits.
- Socially, the company has failed to cater for the growing demand.
- Technologically the company has not invested enough in technology which serves to ensure efficient service delivery (Kotler, 2008).
Conclusion
In conclusion, organizational structure of a company is a key to its success. British Airways’ organizational structure has helped the company achieve a lot. However, the failures identified should be eliminated to increase the efficiency of the company. The company should work towards increasing investment in technology since it will help in improved service delivery. The pest analysis explains what should be done to achieve the desired status.
References
Blau, M. and Scheonherr, A., 1971. Structure of organization. New York: Basic books.
Bohte, J. and Meier K.., 2001.Structure and performance of public organizations: Task difficulty and span control. Rochester: Oakland university press
Brassington F. & Pettitt, S., 2007. Principles of marketing. London: Oxford university press.
British Airways, (2010). 2009Annual reports. Available at <www.britishairways.com/cms/global/microsites/ba_reports0809/our_business/w orkplace.html>
Golembiewski, T,. 1962.Behaviour and organization. Chicago: Rand-McNally.
Goodsell, C., 1994. The case of bureaucracy. New Jersey: Chatham House Publishers.
Henry, A., 2008. Understanding Strategic management. London: Oxford university press.
Kotler, P., 2008. Principles of marketing. New York: Nuvision.
Rainey, G., 1997. Understanding and managing public organization.San Francisco: Josey- Bass Publishers.
Wilson, Q., 1989. Bureaucracy. New York: Basic books.