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This report is based on case study of Heathrow Airport which is situated in London, United Kingdom. The study basically showcases the impact of major environmental factor on the strategic choices as made by the managers of an organisation (Lihitkar, 2013). In addition to this, the report will also depict about the use of various scenario planning techniques to consider the key drivers of change that will affect Heathrow Airport in future.
There are two types of environmental forces identified such as internal and external that can affect the working and operation of Heathrow Airport in an effective way. Internal environment are those forces that are controllable and affects the internal operation of the company (Nataraja and Al-Aali, 2011). On the other hand, external environment involves the forces that resides outside the company and affects the way it operates. On the basis of analysis of case, it is assessed that external environmental forces that are prevailing in the country are affecting the working of Heathrow Airport. In this respect, there are various external environmental forces identified that has affected the strategic direction and competitive advantage of Heathrow Airport (PEST Analysis: What is PESTLE Analysis?, 2014). This is assessed by the managers of an enterprise by using the tool like PESTEL analysis. This is being explained as below:
Political: The changing political condition of the country with respect to the increasing rate of taxation, directing changes in the fiscal policy along with imposing tariffs on trade etc are some of the factors that affect the operation of Heathrow Airport in negative way. As per the available literature, it has been found that the working of Heathrow Airport is mainly affected by the factor such as increased rate of taxation. It is because of this factor only organisation is influenced to charge high price from airline industry that are using the services of their runways (Grewal and et.al., 2011).
Legal: It involves government rules and regulations that possess its significant affect on the strategy of the company. As per the literature studies and cases, it has been analyzed that working of Heathrow Airport has been affected as government of UK has imposed restriction on the night flights. This has stopped the nigh operation at Heathrow Airport and because of this only it has now became no more 24 hour airport. This factor causes affect on the sales and profitability related condition of firm as because of it organisation is no more able to attract those customers towards the services that are interested in night flights (Hooper and Greenall, 2005).
Economic: The economic condition of the country relating to the inflation and deflation affect the strategy of the firm like Heathrow Airport. The working of Heathrow Airport is affected when economic condition of UK is going through with the condition like inflation. In the condition like inflation it became difficult activity for the manager of Heathrow Airport to attract large number of airline organisation towards their services as the situation has affected the purchasing power of enterprise buyers in a negative way (Levin, 2005).
Environmental: The environmental factor relating to the noise pollution is the major concern for the communities. This type of concern influences Heathrow Airport in terms of relocating the entire structure to the areas where such influence does not affect the members living in the society. This takes lots of time and money of an enterprise (Birdthistle and Fleming, 2005).
Technology: New innovation in the field of airport industry has affected the several process of Heathrow Airport (Hasan, 2013). For example, increased use of automatic self service devices such as all check in and ticketing at airport is to be carried out through online mode via mobile phone along with no manual handling from bag drop to plane as this has now atomized has influenced the airport authority to direct various kinds of changes in their airport process. However, such changes possess several benefits for the airport as it helps in simplifying the existing process of airport and enables them to deliver the fast services to the buyer. This will ultimately tends to results them in terms of increased profits and sales.
Social: This factor involve change in the taste and preferences of customers with respect to the increased demand of convenience influences the corporation like Heathrow Airport that is to carry out various variation in their existing service process. Customers are the major stakeholders of the company so it is very important for them to satisfy the varied needs and demands of their buyers in an effective way (Jensen, 2011). If organisation does not comply with the same in an effective way then it will tends to decreased profits and sales. It can also affect the competitive position of the firm.
Scenario planning techniques can be used by the managers Heathrow Airport with an aim to determine the key drivers of change that can affect the operation of an organisation in future. The aspect relating to the scenario planning can be defined as the concept that enables the managers of an enterprise to frame long terms plans for an organisation (Axson, 2011). With the help of scenario planning process managers of Heathrow Airport are able to direct their efforts in terms of assessing major driver of change that will affect the activity of airport in future. The scenario planning technique is enumerated as below:
Identification and analysis of change drivers: In the first step of scenario planning process managers of Heathrow Airport tends to direct their efforts in terms of assessing varied kind of drivers of change that may affect the working of an organisation in future. Change drivers can be regarded as the factor that shapes the future contextual environment. However, this can be identified by the managers of an enterprise after performing a thorough environmental analysis (Walsh, 2005). In this phase, manager will select all those factors that may impair the working of an enterprise in future. In this respect, there are numerous drivers of change identified that may impact the operation of Heathrow Airport. It comprises of following such as changing political condition of country, change in the tastes and preferences of customers, introduction of new technology along with legal laws and regulations. These are the major drivers of change which usually affect the working of the enterprise like Heathrow Airport (Talloo, 2007).
Identification of predetermined elements and critical uncertainties: After determining the major drivers of change in this phase, managers of Heathrow Airport have to direct their effort in terms forming decision with respect to selecting most important driver of change. This decision can be taken by them by dividing the identified drivers of change into two aspects such as certain and uncertain drivers (Berman and et.al., 2009). These factors can be counted under certain drivers such as introduction of new laws and regulations in order to regulate the working of airport in an efficient manner. Rest other identified factors will reside in the category of most uncertain drivers that may bring changes within Heathrow Airport in future. It comprises of changing technological environment of the country, varied taste and preference of the consumers along with the fluctuating political situation of the country etc.
Identifying the key drivers of change: It is the last step of the scenario planning process where key drivers are analyzed after segregating the assessed factors of change into two most important criteria such as certain and uncertain factor. Here in this phase managers of an organisation such as Heathrow Airport have to direct their efforts in terms of selecting that factors that is most uncertain for an enterprise. As per the reviews of available literatures it has been found out that changing technological environment of the country along with varied tastes and preferences of customers are being considered as the most major factor that impair the working of Heathrow Airport in most effective way (Lindelöf Dettwiler and Löfsten, 2006). This is because, every day new changes and revolution is being seen in the field of technology which is influencing the corporation like Heathrow Airport to direct various kinds of changes in their existing services. In the similar way, large number of uncertainty is also being seen in the preferences of the customers. Thus it can be said that technology and social factor are being counted as the key drivers which may bring changes in the operation of Heathrow Airport in future.
Environmental forces that are affecting the Heathrow Airport are identified and analyzed by using the framework like porters five forces model (What does Porter’s 5 forces show, 2014). With the help of this framework, five basic competitive forces of an organisation can be used to identify the external forces that are affecting the working of the company in an effective way. Heathrow Airport external environment comprises of following such as competitors, suppliers and buyers etc. They are collectively known as stakeholders.
Threat of new entrant: Threat of new entrant is low for the Heathrow Airport because of the presence of these factors such as large investment is required for the development of new airport. In addition to this, managers of an enterprise have to go through with various types of legal procedures on account of getting approval of any new development. From this it can be said that, the operation of Heathrow Airport will be affected by the threat of allowing many other competitors in the field of airport industry (Kew and Stredwick, 2005).
Threat of substitute: The transport services like road and rail can be counted under the category of substitute for the airport industry. The threat of substitute for the Heathrow Airport is high because of the expensive pricing structure followed by airline industry. This type of situation raises many alternatives in front of the customers and leads enterprise like Heathrow Airport in terms of decreased profits and sales.
Bargaining power of supplier: Heathrow Airport possesses less bargaining power of supplier because of the presence of many suppliers in the areas where organisation is operating their operation (Goyal and Goyal, 2013).
Bargaining power of buyer: The bargaining power of Heathrow Airport buyers is low as there power is influenced by the charging practices of airport which basically depends on the economic condition of the country. Such type of satiations affects the pricing related strategies as made by the managers of Heathrow Airport.
Rivalry among existing airports: Heathrow airport is situated in the area which provides convenience to many customers. It is because of the presence of this factor only organisation does not face that much of rivalry from the existing airport situated at London (Parkin, 2012). Overall, it can be said that competitor are not counted under major forces that affect the working of an enterprise in an effective way. However, they possess significant affect on the profitability related condition of airport by introducing new types of schemes in their airport.
As per the available literature reviews it has been assessed that in the industry life cycle stage Heathrow Airport resides at maturity stage. This stage showcases that organisation has marked their effective presence in the field of airport industry (Prasad, 2010). In order to maintain in this stage corporation has to comply with more effective pricing and marketing related strategy. It is by adopting an effective pricing and marketing policy only organisations are able to direct their efforts in terms of attaining the competitive advantages in the external environment of the country.
Attributing all the facts from the report it can be concluded that, by using an effective environmental analysis tools like PESTEL, Scenario planning, Porter’s five forces model along with industry life cycle etc an efficient decision can be taken by the managers of an enterprise. In addition to this, on analyzing the situation prevailing on the business environment of the country various strategies can be formed by the corporation.
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